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[Federal Register Volume 76, Number 137 (Monday, July 18, 2011)]
[Proposed Rules]
[Pages 42170-42393]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-16949]

[[Page 42169]]

Vol. 76

Monday,

No. 137

July 18, 2011

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

42 CFR Parts 410, 411, 416 et al.

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Medicare and Medicaid Programs: Hospital Outpatient Prospective 
Payment; Ambulatory Surgical Center Payment; Hospital Value-Based 
Purchasing Program; Physician Self-Referral; and Provider Agreement 
Regulations on Patient Notification Requirements; Proposed Rule

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

[[Page 42170]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410, 411, 416, 419, 489, and 495

[CMS-1525-P]
RIN 0938-AQ26

Medicare and Medicaid Programs: Hospital Outpatient Prospective 
Payment; Ambulatory Surgical Center Payment; Hospital Value-Based 
Purchasing Program; Physician Self-Referral; and Provider Agreement 
Regulations on Patient Notification Requirements

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise the Medicare hospital 
outpatient prospective payment system (OPPS) to implement applicable 
statutory requirements and changes arising from our continuing 
experience with this system. In this proposed rule, we describe the 
proposed changes to the amounts and factors used to determine the 
payment rates for Medicare hospital outpatient services paid under the 
OPPS. These proposed changes would be applicable to services furnished 
on or after January 1, 2012.
    In addition, this proposed rule would update the revised Medicare 
ambulatory surgical center (ASC) payment system to implement applicable 
statutory requirements and changes arising from our continuing 
experience with this system. In this proposed rule, we set forth the 
proposed relative payment weights and payment amounts for services 
furnished in ASCs, specific HCPCS codes to which these proposed changes 
would apply, and other proposed ratesetting information for the CY 2012 
ASC payment system. These proposed changes would be applicable to 
services furnished on or after January 1, 2012.
    We are proposing to revise the requirements for the Hospital 
Outpatient Quality Reporting (IQR) Program, add new requirements for 
ASC Quality Reporting System, and make additional changes to provisions 
of the Hospital Inpatient Value-Based Purchasing (VBP) Program.
    We also are proposing to allow eligible hospitals and CAHs 
participating in the Medicare Electronic Health Record (EHR) Incentive 
Program to meet the clinical quality measure reporting requirement of 
the EHR Incentive Program for payment year 2012 by participating in the 
2012 Medicare EHR Incentive Program Electronic Reporting Pilot.
    In addition, we are proposing to make changes to the rules 
governing the whole hospital and rural provider exceptions to the 
physician self-referral prohibition for expansion of facility capacity 
and changes to provider agreement regulations on patient notification 
requirements.

DATES: Comment Period: To be assured consideration, comments on all 
sections of this proposed rule must be received at one of the addresses 
provided in the ADDRESSES section no later than 5 p.m. EST on August 
30, 2011.

ADDRESSES: In commenting, please refer to file code CMS-1525-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (no duplicates, 
please):
    1. Electronically. You may (and we encourage you to) submit 
electronic comments on this regulation to http://www.regulations.gov. 
Follow the instructions under the ``submit a comment'' tab.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1525-P, P.O. Box 8013, 
Baltimore, MD 21244-1850.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments via 
express or overnight mail to the following address ONLY: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-1525-P, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:
    a. For delivery in Washington, DC-- Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal Government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD-- Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call the telephone number (410) 786-7195 in advance to schedule 
your arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by following the 
instructions at the end of the ``Collection of Information 
Requirements'' section in this document.
    For information on viewing public comments, we refer readers to the 
beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION, CONTACT: 
Paula Smith, (410) 786-0378, Hospital outpatient prospective payment 
issues.
Char Thompson, (410) 786-0378, Ambulatory surgical center issues.
Michele Franklin, (410) 786-4533, and Jana Lindquist, (410) 786-4533, 
Partial hospitalization and community mental health center issues.
James Poyer, (410) 786-2261, Reporting of Hospital Outpatient Quality 
Reporting (OQR) and ASC Quality Reporting Program issues.
Teresa Schell, (410) 786-8651, Physician Ownership and Investment in 
Hospitals issues.
Georganne Kuberski, (410) 786-0799, Patient Notification Requirements 
issues.
James Poyer, (410) 786-2261, and Ernessa Brawley (410) 786-2075, 
Hospital Value-Based Purchasing (VBP) Program issues.

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have

[[Page 42171]]

been received: http://www.regulations.gov. Follow the search 
instructions on that Web site to view public comments.
    Comments received timely will also be available for public 
inspection, generally beginning approximately 3 weeks after publication 
of the rule, at the headquarters of the Centers for Medicare & Medicaid 
Services, 7500 Security Boulevard, Baltimore, MD 21244, on Monday 
through Friday of each week from 8:30 a.m. to 4 p.m. EST. To schedule 
an appointment to view public comments, phone 1-800-743-3951.

Electronic Access

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

Addenda Available Only Through the Internet on the CMS Web Site

    In the past, a majority of the Addenda referred to throughout the 
preamble of our OPPS/ASC proposed and final rules were published in the 
Federal Register as part of the annual rulemakings. However, beginning 
with this CY 2012 rule, all of the Addenda will no longer appear in the 
Federal Register as part of the annual OPPS/ASC proposed and final 
rules to decrease administrative burden and reduce costs associated 
with publishing lengthy tables. Instead, these Addenda will be 
published and available only on the CMS Web site. The Addenda relating 
to the OPPS are available at: http://www.cms.hhs.gov/HospitalOutpatientPPS. The Addenda relating to the ASC payment system 
are available at: http://www/cms.hhs.gov/ASCPayment/. For complete 
details on the availability of the Addenda referenced in this proposed 
rule, we refer readers to section XVII. Readers who experience any 
problems accessing any of the Addenda that are posted on the CMS Web 
site identified above should contact Charles Braver at (410) 786-0378.

Alphabetical List of Acronyms Appearing in This Federal Register 
Document

ACEP American College of Emergency Physicians
AHA American Hospital Association
AHIMA American Health Information Management Association
AHRQ Agency for Healthcare Research and Quality
AMA American Medical Association
AMP Average Manufacturer Price
AOA American Osteopathic Association
APC Ambulatory Payment Classification
ARRA American Recovery and Reinvestment Act of 2009, Pub. L. 111-5
ASC Ambulatory Surgical Center
ASP Average Sales Price
AWP Average Wholesale Price
BBA Balanced Budget Act of 1997, Pub. L. 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Balanced Budget Refinement Act of 1999, Pub. L. 
106-113
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000, Pub. L. 106-554
BLS Bureau of Labor Statistics
CAH Critical Access Hospital
CAP Competitive Acquisition Program
CBSA Core-Based Statistical Area
CCN CMS Certification Number
CCR Cost-to-Charge Ratio
CDC Centers for Disease Control
CERT Comprehensive Error Rate Testing
CLFS Clinical Laboratory Fee Schedule
CMHC Community Mental Health Center
CMS Centers for Medicare & Medicaid Services
CPT [Physicians'] Current Procedural Terminology, Fourth Edition, 
2009, copyrighted by the American Medical Association
CQM Clinical Quality Measure
CR Cardiac Rehabilitation
CY Calendar Year
DFO Designated Federal Official
DHS Designated Health Service
DRA Deficit Reduction Act of 2005, Pub. L. 109-171
DSH Disproportionate Share Hospital
EACH Essential Access Community Hospital
E/M Evaluation and Management
EHR Electronic Health Record
ESRD End-Stage Renal Disease
FACA Federal Advisory Committee Act, Pub. L. 92-463
FAR Federal Acquisition Regulations
FDA Food and Drug Administration
FFS Fee-for-Service
FSS Federal Supply Schedule
FY Fiscal Year
GAO Government Accountability Office
HAC Hospital-Acquired Condition
HAI Healthcare-Associated Infection
HCAHPS Hospital Consumer Assessment of Healthcare Providers and 
Systems
HCERA Health Care and Education Reconciliation Act of 2010, Pub. L. 
111-152
HCP Healthcare Personnel
HCPCS Healthcare Common Procedure Coding System
HCRIS Hospital Cost Report Information System
HHA Home Health Agency
HIPAA Health Insurance Portability and Accountability Act of 1996, 
Pub. L. 104-191
HOPD Hospital OutPatient Department
Hospital OQR Hospital Outpatient Quality Reporting
ICR Intensive Cardiac Rehabilitation
IDE Investigational Device Exemption
IHS Indian Health Service
I/OCE Integrated Outpatient Code Editor
IOL Intraocular Lens
IPPS [Hospital] Inpatient Prospective Payment System
MAC Medicare Administrative Contractor
MedPAC Medicare Payment Advisory Commission
MIEA-TRHCA Medicare Improvements and Extension Act under Division B, 
Title I of the Tax Relief Health Care Act of 2006, Pub. L. 109-432
MIPPA Medicare Improvements for Patients and Providers Act of 2008, 
Pub. L. 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Pub. L. 108-173
MMEA Medicare and Medicaid Extenders Act of 2010, Pub. L. 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Pub. L. 
110-173
MPFS Medicare Physician Fee Schedule
MSA Metropolitan Statistical Area
NCCI National Correct Coding Initiative
NHSN National Healthcare Safety Network
NCD National Coverage Determination
NQF National Quality Forum
NTIOL New Technology Intraocular Lens
OIG [HHS] Office of the Inspector General
OMB Office of Management and Budget
OPD [Hospital] Outpatient Department
OPPS [Hospital] Outpatient Prospective Payment System
OQR Outpatient Quality Reporting
PBD Provider-Based Department
PHP Partial Hospitalization Program
PPI Producer Price Index
PPS Prospective Payment System
PR Pulmonary Rehabilitation
PRA Paperwork Reduction Act
QAPI Quality Assessment and Performance Improvement
QIO Quality Improvement Organization
RAC Recovery Audit Contractor
RFA Regulatory Flexibility Act
Hospital IQR Hospital Inpatient Quality Reporting
Hospital OQR Hospital Outpatient Quality Reporting
RHHI Regional Home Health Intermediary
SBA Small Business Administration
SCH Sole Community Hospital
SDP Single Drug Pricer
SI Status Indicator
TEP Technical Expert Panel
TOPs Transitional Outpatient Payments
VBP Value-Based Purchasing
WAC Wholesale Acquisition Cost

    In this document, we address two payment systems under the Medicare 
program: The Hospital Outpatient Prospective Payment System (OPPS) and 
the Ambulatory Surgical Center (ASC) payment system. In addition, we 
are proposing to make changes to the rules governing limitations on 
certain physician referrals to hospitals in which physicians have an 
ownership or investment interest, the provider agreement regulations on 
patient notification requirements, and the rules governing the Hospital 
Inpatient Value-Based Purchasing (VBP) Program. The provisions relating 
to the OPPS are included in sections I. through XII. and

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section XIV. and sections XVII. through XXI. of this proposed rule. 
Addenda A, B, C, D1, D2, E, L, M, and N, which relate to the OPPS, are 
referenced in section XVII. of this proposed rule and are available via 
the Internet on the CMS Web site at the URL indicated in section XVII. 
The provisions related to the ASC payment system are included in 
sections XIII., XIV., and XVII. through XXI. of this proposed rule. 
Addenda AA, BB, DD1, DD2, and EE, which relate to the ASC payment 
system, are referenced in section XVII. of this proposed rule and are 
available via the Internet on the CMS Web site at the URL indicated in 
section XVII. The provisions relating to physician referrals to 
hospitals in which physicians have an ownership or investment interest 
and to the provider agreement regulations on patient notification 
requirements are included in section XV., and the provisions relating 
to the Hospital Inpatient VBP Program are included in section XVI. of 
this proposed rule.

Table of Contents

I. Background and Summary of the CY 2012 OPPS/ASC Proposed Rule
    A. Legislative and Regulatory Authority for the Hospital 
Outpatient Perspective Payment System
    B. Excluded OPPS Services and Hospitals
    C. Prior Rulemaking
    D. Advisory Panel on Ambulatory Payment Classification (APC) 
Groups
    1. Authority of the APC Panel
    2. Establishment of the APC Panel
    3. APC Panel Meetings and Organizational Structure
    E. Summary of the Major Contents of This Proposed Rule
    1. Proposed Updates Affecting OPPS Payments
    2. Proposed OPPS Ambulatory Payment Classification (APC) Group 
Policies
    3. Proposed OPPS Payment for Devices
    4. Proposed OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    5. Proposed Estimate of OPPS Transitional Pass-Through Spending 
for Drugs, Biologicals, Radiopharmaceuticals, and Devices
    6. Proposed OPPS Payment for Hospital Outpatient Visits
    7. Proposed Payment for Partial Hospitalization Services
    8. Proposed Procedures That Would Be Paid Only as Inpatient 
Procedures
    9. Proposed OPPS Policy Changes Relating to Supervision of 
Hospital Outpatient Services
    10. Proposed OPPS Payment Status and Comment Indicators
    11. OPPS Policy and Payment Recommendations
    12. Proposed Updates to the Ambulatory Surgical Center (ASC) 
Payment System
    13. Reporting Quality Data for Annual Payment Rate Updates
    14. Proposed Changes to EHR Incentive Program for Eligible 
Hospitals and CAHs Regarding Electronic Submission of Clinical 
Quality Measures (CQMs)
    15. Proposed Changes to Provisions Relating to Physician Self-
Referral Prohibition and Provider Agreement Regulations on Patient 
Notification Requirements
    16. Proposed Changes to the Hospital IQR Program Hospital 
Inpatient VBP Program
    17. Economic and Federalism Analyses
    F. Public Comments Received on the CY 2011 OPPS/ASC Final Rule 
With Comment Period
II. Proposed Updates Affecting OPPS Payments
    A. Proposed Recalibration of APC Relative Weights
    1. Database Construction
    a. Database Source and Methodology
    b. Proposed Use of Single and Multiple Procedure Claims
    c. Proposed Calculation and Use of Cost-to-Charge Ratios (CCRs)
    2. Proposed Data Development Process and Calculation of Median 
Costs
    a. Claims Preparation
    b. Splitting Claims and Creation of ``Pseudo'' Single Procedure 
Claims
    (1) Splitting Claims
    (2) Creation of ``Pseudo'' Single Procedure Claims
    c. Completion of Claim Records and Median Cost Calculations
    d. Proposed Calculation of Single Procedure APC Criteria-Based 
Median Costs
    (1) Device-Dependent APCs
    (2) Blood and Blood Products
    (3) Allergy Tests (APCs 0370 and 0381)
    (4) Hyperbaric Oxygen Therapy (APC 0659)
    (5) Payment for Ancillary Outpatient Services When Patient 
Expires (APC 0375)
    (6) Endovascular Revascularization of the Lower Extremity (APCs 
0083, 0229, and 0319)
    (7) Non-Congenital Cardiac Catheterization (APC 0080)
    (8) Cranial Neurostimulator and Electrodes (APC 0318)
    (9) Brachytherapy Sources
    e. Proposed Calculation of Composite APC Criteria-Based Median 
Costs
    (1) Extended Assessment and Management Composite APCs (APCs 8002 
and 8003)
    (2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC 
(APC 8001)
    (3) Cardiac Electrophysiologic Evaluation and Ablation Composite 
APC (APC 8000)
    (4) Mental Health Services Composite APC (APC 0034)
    (5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 
8007, and 8008)
    (6) Cardiac Resynchronization Therapy Composite APC (APCs 0108, 
0418, 0655, and 8009)
    3. Proposed Changes to Packaged Services
    a. Background
    b. Packaging Issues
    (1) CMS Presentation of Findings Regarding Expanded Packaging at 
the February 28-March 1, 2011 APC Panel
    (2) Packaging Recommendations of the APC Panel at Its February 
28-March 1, 2011 Meeting
    (3) Other Packaging Proposals for CY 2012
    4. Proposed Calculation of OPPS Scaled Payment Weights
    B. Proposed Conversion Factor Update
    C. Proposed Wage Index Changes
    D. Proposed Statewide Average Default CCRs
    E. Proposed OPPS Payment to Certain Rural and Other Hospitals
    1. Hold Harmless Transitional Payment Changes Made by Pub. L. 
110-275 (MIPPA)
    2. Proposed Adjustment for Rural SCHs and EACHs under Section 
1833(t)(13)(B) of the Act
    F. Proposed OPPS Payments to Certain Cancer Hospitals Described 
by Section 1886(d)(1)(B)(v) of the Act
    1. Background
    2. Study of Cancer Hospital Costs Relative to Other Hospitals
    3. CY 2011 Proposed Payment Adjustment for Certain Cancer 
Hospitals
    4. Proposed CY 2011 Cancer Hospital Payment Adjustment That Was 
Not Finalized
    5. Proposed Payment Adjustment for Certain Cancer Hospitals for 
CY 2012
    G. Proposed Hospital Outpatient Outlier Payments
    1. Background
    2. Proposed Outlier Calculation
    3. Proposed Outlier Reconciliation
    H. Proposed Calculation of an Adjusted Medicare Payment From the 
National Unadjusted Medicare Payment
    I. Proposed Beneficiary Copayments
    1. Background
    2. Proposed OPPS Copayment Policy
    3. Proposed Calculation of an Adjusted Copayment Amount for an 
APC Group
III. Proposed OPPS Ambulatory Payment Classification (APC) Group 
Policies
    A. Proposed OPPS Treatment of New CPT and Level II HCPCS Codes
    1. Proposed Treatment of New Level II HCPCS Codes and Category I 
CPT Vaccine Codes and Category III CPT Codes for Which We Are 
Soliciting Public Comment in this CY 2012 Proposed Rule
    2. Proposed Process for New Level II HCPCS Codes and Category I 
and Category III CPT Codes for Which We Will Be Soliciting Public 
Comments on the CY 2012 OPPS/ASC Final Rule With Comment Period
    B. Proposed OPPS Changes--Variations Within APCs
    1. Background
    2. Application of the 2 Times Rule
    3. Proposed Exceptions to the 2 Times Rule
    C. Proposed New Technology APCs
    1. Background
    2. Proposed Movement of Procedures From New Technology APCs to 
Clinical APCs
    D. Proposed OPPS APC-Specific Policies
    1. Revision/Removal of Neurostimulator Electrodes (APC 0687)
    2. Computed Tomography of Abdomen and Pelvis (APCs 0331 and 
0334)
    3. Placement of Amniotic Membrane (APCs 0233 and 0244)

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    4. Upper Gastrointestinal Services (APCs 0141, 0419, and 0422)
    5. Pulmonary Rehabilitation (APC 0102)
    6. Insertion/Replacement/Repair of AICD Leads, Generator, and 
Pacing Electrodes (APC 0108)
IV. Proposed OPPS Payment for Devices
    A. Proposed Pass-Through Payments for Devices
    1. Expiration of Transitional Pass-Through Payments for Certain 
Devices
    a. Background
    b. Proposed CY 2012 Policy
    2. Proposed Provisions for Reducing Transitional Pass-Through 
Payments To Offset Costs Packaged Into APC Groups
    a. Background
    b. Proposed CY 2012 Policy
    B. Proposed Adjustment to OPPS Payment for No Cost/Full Credit 
and Partial Credit Devices
    1. Background
    2. Proposed APCs and Devices Subject to the Adjustment Policy
V. Proposed OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    A. Proposed OPPS Transitional Pass-Through Payment for 
Additional Costs of Drugs, Biologicals, and Radiopharmaceuticals
    1. Background
    2. Proposed Drugs and Biologicals With Expiring Pass-Through 
Status in CY 2012
    3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With 
New or Continuing Pass-Through Status in CY 2012
    4. Proposed Provisions for Reducing Transitional Pass-Through 
Payments for Diagnostic Radiopharmaceuticals and Contrast Agents To 
Offset Costs Packaged into APC Groups
    a. Background
    b. Proposed Payment Offset Policy for Diagnostic 
Radiopharmaceuticals
    c. Proposed Payment Offset Policy for Contrast Agents
    B. Proposed OPPS Payment for Drugs, Biologicals, and 
Radiopharmaceuticals Without Pass-Through Status
    1. Background
    2. Proposed Criteria for Packaging Payment for Drugs, 
Biologicals, and Radiopharmaceuticals
    a. Background
    b. Proposed Cost Threshold for Packaging of Payment for HCPCS 
Codes That Describe Certain Drugs, Nonimplantable Biologicals, and 
Therapeutic Radiopharmaceuticals (``Threshold-Packaged Drugs'')
    c. Proposed Packaging Determination for HCPCS Codes That 
Describe the Same Drug or Biological But Different Dosages
    d. Proposed Packaging of Payment for Diagnostic 
Radiopharmaceuticals, Contrast Agents, and Implantable Biologicals 
(``Policy-Packaged'' Drugs and Devices)
    3. Proposed Payment for Drugs and Biologicals Without Pass-
Through Status That Are Not Packaged
    a. Proposed Payment for Specified Covered Outpatient Drugs 
(SCODs) and Other Separately Payable and Packaged Drugs and 
Biologicals
    b. Proposed Payment Policy
    c. Proposed Payment Policy for Therapeutic Radiopharmaceuticals
    4. Proposed Payment for Blood Clotting Factors
    5. Proposed Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes, But Without OPPS Hospital 
Claims Data
VI. Proposed Estimate of OPPS Transitional Pass-Through Spending for 
Drugs, Biologicals, Radiopharmaceuticals, and Devices
    A. Background
    B. Proposed Estimate of Pass-Through Spending
VII. Proposed OPPS Payment for Hospital Outpatient Visits
    A. Background
    B. Proposed Policies for Hospital Outpatient Visits
    1. Clinic Visits: New and Established Patient Visits
    2. Emergency Department Visits
    3. Visit Reporting Guidelines
VIII. Proposed Payment for Partial Hospitalization Services
    A. Background
    B. Proposed PHP APC Update for CY 2012
    C. Proposed Separate Threshold for Outlier Payments to CMHCs
IX. Proposed Procedures That Would Be Paid Only as Inpatient 
Procedures
    A. Background
    B. Proposed Changes to the Inpatient List
X. Proposed Policies on the Supervision Standards for Outpatient 
Services in Hospitals and CAHs
    A. Background
    B. Issues Regarding the Supervision of Hospital Outpatient 
Therapeutic Services Raised by Hospitals and Other Stakeholders
    1. Independent Review Process
    2. Conditions of Payment and Hospital Outpatient Therapeutic 
Services Described by Different Benefit Categories
    C. Proposed Policies on Supervision Standards for Outpatient 
Therapeutic Services in Hospitals and CAHs
    1. Selection of Review Entity
    2. Review Process
    3. Evaluation Criteria
    4. Conditions of Payment and Hospital Outpatient Therapeutic 
Services Described by Different Benefit Categories
    5. Technical Corrections to the Supervision Standards for 
Hospital Outpatient Therapeutic Services Furnished in Hospitals or 
CAHs
    6. Summary
XI. Proposed OPPS Payment Status and Comment Indicators
    A. Proposed OPPS Payment Status Indicator Definitions
    1. Proposed Payment Status Indicators To Designate Services That 
Are Paid Under the OPPS
    2. Proposed Payment Status Indicators To Designate Services That 
Are Paid Under a Payment System Other Than the OPPS
    3. Proposed Payment Status Indicators To Designate Services That 
Are Not Recognized Under the OPPS But That May Be Recognized by 
Other Institutional Providers
    4. Proposed Payment Status Indicators To Designate Services That 
Are Not Payable by Medicare on Outpatient Claims
    B. Proposed Comment Indicator Definitions
XII. OPPS Policy and Payment Recommendations
    A. MedPAC Recommendations
    B. APC Panel Recommendations
    C. OIG Recommendations
XIII. Proposed Updates to the Ambulatory Surgical Center (ASC) 
Payment System
    A. Background
    1. Legislative Authority for the ASC Payment System
    2. Prior Rulemaking
    3. Policies Governing Changes to the Lists of Codes and Payment 
Rates for ASC Covered Surgical Procedures and Covered Ancillary 
Services
    B. Proposed Treatment of New Codes
    1. Proposed Process for Recognizing New Category I and Category 
III CPT Codes and Level II HCPCS Codes
    2. Proposed Treatment of New Level II HCPCS Codes and Category 
III CPT Codes Implemented in April and July 2011
    3. Proposed Process for New Level II HCPCS Codes and Category I 
and Category III CPT Codes for Which We Will Be Soliciting Public 
Comments in the CY 2012 OPPS/ASC Final Rule With Comment Period
    C. Proposed Update to the List of ASC Covered Surgical 
Procedures and Covered Ancillary Services
    1. Covered Surgical Procedures
    a. Proposed Additions to the List of ASC Covered Surgical 
Procedures
    b. Proposed Covered Surgical Procedures Designated as Office-
Based
    (1) Background
    (2) Proposed Changes for CY 2012 to Covered Surgical Procedures 
Designated as Office-Based
    c. Proposed ASC Covered Surgical Procedures Designated as 
Device-Intensive
    (1) Background
    (2) Proposed Changes to List of Covered Surgical Procedures 
Designated as Device-Intensive for CY 2012
    d. ASC Treatment of Surgical Procedures Proposed for Removal 
from the OPPS Inpatient List for CY 2012
    2. Covered Ancillary Services
    D. Proposed ASC Payment for Covered Surgical Procedures and 
Covered Ancillary Services
    1. Proposed Payment for Covered Surgical Procedures
    a. Background
    b. Proposed Update to ASC-Covered Surgical Procedure Payment 
Rates for CY 2012
    c. Proposed Adjustment to ASC Payments for No Cost/Full Credit 
and Partial Credit Devices
    d. Proposed Payment for the Cardiac Resynchronization Therapy 
Composite
    2. Proposed Payment for Covered Ancillary Services
    a. Background
    b. Proposed Payment for Covered Ancillary Services for CY 2012

[[Page 42174]]

    E. New Technology Intraocular Lenses (NTIOLs)
    1. NTIOL Cycle and Evaluation Criteria
    2. NTIOL Application Process for Payment Adjustment
    3. Requests To Establish New NTIOL Classes for CY 2012 and 
Deadline for Public Comments
    4. Proposed Payment Adjustment
    F. Proposed ASC Payment and Comment Indicators
    1. Background
    2. Proposed ASC Payment and Comment Indicators
    G. ASC Policy and Payment Recommendations
    H. Calculation of the Proposed ASC Conversion Factor and the 
Proposed ASC Payment Rates
    1. Background
    2. Proposed Calculation of the ASC Payment Rates
    a. Updating the ASC Relative Payment Weights for CY 2012 and 
Future Years
    b. Updating the ASC Conversion Factor With Application of a 
Productivity Adjustment to the Update Factor
    3. Display of Proposed CY 2012 ASC Payment Rates
XIV. Hospital Outpatient Quality Reporting Program Updates and ASC 
Quality Reporting
    A. Background
    1. Overview
    2. Statutory History of Hospital Outpatient Quality Reporting 
(Hospital OQR) Program
    3. Technical Specification Updates and Data Publication
    a. Maintenance of Technical Specifications for Quality Measures
    b. Publication of Hospital OQR Program Data
    B. Proposed Revision to Measures Previously Adopted for the 
Hospital OQR Program for the CY 2012, CY 2013, and CY 2014 Payment 
Determinations
    1. Background
    2. Proposed Revision to Hospital OQR Program Measures Previously 
Adopted for the CY 2013 Payment Determination
    C. Proposed New Quality Measures for the CY 2014 and CY 2015 
Payment Determinations
    1. Considerations in Expanding and Updating Quality Measures 
Under Hospital OQR Program
    2. Proposed New Hospital OQR Program Quality Measures for the CY 
2014 Payment Determination
    a. Proposed New National Healthcare Safety Network (NHSN) 
Healthcare Associated Infection (HAI) Measure for the CY 2014 
Payment Determination: Surgical Site Infection (NQF 0299)
    b. Proposed New Chart--Abstracted Measures for CY 2014 Payment 
Determination
    (1) Diabetes: Hemoglobin A1c Management (NQF 0059)
    (2) Diabetes Measure Pair: A. Lipid Management: Low Density 
Lipoprotein Cholesterol (LDL-C) 0064)
    (3) Diabetes: Blood Pressure Management (NQF 0061)
    (4) Diabetes: Eye Exam (NQF 0055)
    (5) Diabetes: Urine Protein Screening (NQF 0062)
    (6) Cardiac Rehabilitation: Patient Referral From an Outpatient 
Setting (NQF 0643)
    c. Proposed New Structural Measures
    (1) Safe Surgery Checklist Use
    (2) Submission of Hospital Outpatient Department Volume for 
Selected Outpatient Surgical Procedures
    3. Proposed Hospital OQR Program Measures for the CY 2015 
Payment Determination
    a. Proposed Retention of CY 2014 Hospital OQR Measures for the 
CY 2015 Payment Determination
    b. Proposed New NHSN HAI Measure for the CY 2015 Payment 
Determination
    D. Possible Quality Measures Under Consideration for Future 
Inclusion in the Hospital OQR Program
    E. Proposed Payment Reduction for Hospitals That Fail To Meet 
the Hospital OQR Requirements for the CY 2012 Payment Update
    1. Background
    2. Proposed Reporting Ratio Application and Associated 
Adjustment Policy for CY 2012
    F. Extraordinary Circumstances Extension or Waiver for CY 2012 
and Subsequent Years
    G. Proposed Requirements for Reporting of Hospital OQR Data for 
CY 2013 and Subsequent Years
    1. Administrative Requirements for CY 2013 and Subsequent Years
    2. Form, Manner, and Timing of Data Submission for CY 2013 and 
Subsequent Years
    a. Proposed CY 2013 and CY 2014 Data Submission Requirements for 
Chart-Abstracted Data Submission
    b. Proposed Encounter Threshold for Allowance of Sampling for CY 
2013 and Subsequent Years
    c. Proposed Population and Sampling Data Requirements Beginning 
With the CY 2013 Payment Determination
    d. Proposed Claims-Based Measure Data Requirements for the CY 
2013 Payment Determination
    e. Proposed Structural Measure Data Requirements for the CY 2013 
and CY 2014 Payment Determinations
    f. Proposed Data Submission Deadlines for the Proposed NHSN HAI 
Surgical Site Infection Measure for the CY 2014 Payment 
Determination
    g. Proposed Data Submission Requirements for ED--Patient Left 
Before Being Seen Measure Data for the CY 2013 and CY 2014 Payment 
Determinations
    3. Hospital OQR Validation Requirements for Chart-Abstracted 
Data Submitted Directly to CMS: Proposed Data Validation Approach 
for the CY 2013 Payment Determination
    a. Randomly Selected Hospitals
    b. Proposed Use of Targeting Criteria for Data Validation 
Selection for CY 2013
    (1) Background
    (2) Proposed Targeting Criteria for Data Validation Selection 
for CY 2013
    c. Encounter Selection
    d. Validation Score Calculation
    4. Additional Data Validation Conditions Under Consideration for 
CY 2014 and Subsequent Years
    H. Proposed Hospital OQR Reconsideration and Appeals Procedures 
for CY 2013 and Subsequent Years
    I. Electronic Health Records (EHRs)
    J. 2012 Medicare EHR Incentive Program Electronic Reporting 
Pilot for Hospitals and CAHs
    1. Background
    2. Proposed Medicare EHR Incentive Program Electronic Reporting 
Pilot for Eligible Hospitals and CAHs
    3. CQM Reporting Under the Electronic Reporting Pilot
    K. Proposed ASC Quality Reporting Program
    1. Background
    2. ASC Quality Reporting Program Measure Selection
    a. Proposed Timetable for Selecting ASC Quality Measures
    b. Considerations in the Selection of Measures for the ASC 
Quality Reporting Program
    3. Proposed Quality Measures for ASCs for CY 2014 Payment 
Determination
    a. Proposed Claims-Based Measures Requiring Submission of 
Quality Data Codes (QDCs) Beginning January 1, 2012
    (1) Patient Burns (NQF 0263)
    (2) Patient Falls (NQF 0266)
    (3) Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, 
Wrong Implant (NQF 0267)
    (4) Hospital Transfer/Admission (NQF 0265)
    (5) Prophylactic IV Antibiotic Timing (NQF 0264)
    (6) Ambulatory Patient with Appropriate Method of Surgical Hair 
Removal (NQF 0515)
    (7) Prophylactic Antibiotic Selection for Surgical Patients (NQF 
0528)
    b. Surgical Site Infection Rate (NQF 0299)
    4. Proposed ASC Quality Measures for the CY 2015 Payment 
Determination
    a. Retention of Measures Adopted for the CY 2014 Payment 
Determination in the CY 2015 Payment Determination
    b. Proposed Structural Measures for the CY 2015 Payment 
Determination
    (1) Safe Surgery Checklist Use
    (2) ASC Facility Volume Data on Selected ASC Surgical Procedures
    5. Proposed ASC Quality Measures for the CY 2016 Payment 
Determination
    a. Retention of Measures Adopted for the CY 2015 Payment 
Determination in the CY 2016 Payment Determination
    b. Proposed HAI Measure: Influenza Vaccination Coverage among 
Healthcare Personnel (HCP) (NQF 0431)
    6. ASC Measure Topics for Future Considerations
    7. Technical Specification Updates and Data Publication for the 
CY 2014 Payment Determination
    a. Maintenance of Technical Specifications for Quality Measures
    b. Publication of ASC Quality Reporting Program Data
    8. Proposed Requirements for Reporting of ASC Quality Data for 
the CY 2014 Payment Determination

[[Page 42175]]

    a. Proposed Data Collection and Submission Requirements for the 
Proposed Claims-Based Measures
    b. Proposed Data Submission Deadlines for the Proposed Surgical 
Site Infection Rate Measure
XV. Proposed Changes to Whole Hospital and Rural Provider Exceptions 
to the Physician Self-Referral Prohibition: Exception for Expansion 
of Facility Capacity; and Proposed Changes to Provider Agreement 
Regulations on Patient Notification Requirements
    A. Background
    B. Changes Made by the Affordable Care Act
    1. Changes Relating to Exception to Ownership and Investment 
Prohibition (Section 6001(a) of the Affordable Care Act)
    2. Provisions of Section 6001(a)(3) of the Affordable Care Act
    C. Proposed Changes Relating to the Process for an Exception to 
the Prohibition on Expansion of Facility Capacity
    1. Applicable Hospital
    a. Percentage Increase in Population
    b. Inpatient Admissions
    c. Nondiscrimination
    d. Bed Capacity
    e. Bed Occupancy
    2. High Medicaid Facility
    a. Number of Hospitals in County
    b. Inpatient Admissions
    c. Nondiscrimination
    3. Procedures for Submitting a Request
    4. Community Input
    5. Permitted Increase
    a. Amount of Permitted Increase
    b. Location of Permitted Increase
    6. Decisions
    7. Limitation on Review
    8. Frequency of Request
    D. Proposed Changes Related to Provider Agreement Regulations on 
Patient Notification Requirements
XVI. Additional Proposals for the Hospital Inpatient Value-Based 
Purchasing (Hospital VBP) Program
    A. Hospital VBP Program
    1. Legislative Background
    2. Overview of the Hospital Inpatient VBP Program Final Rule
    3. Proposed Additional FY 2014 Hospital VBP Program Measures
    4. Proposed Minimum Number of Cases and Measures for the Outcome 
Domain for the FY 2014 Hospital VBP Program
    a. Background
    b. Proposed Minimum Number of Cases for Mortality Measures, AHRQ 
Composite Measures, and HAC Measures
    c. Proposed Minimum Number of Measures for Outcome Domain
    5. Proposed Performance Periods and Baseline Periods for FY 2014 
Measures
    a. Proposed Clinical Process of Care Domain and Patient 
Experience of Care Domain Performance Periods and Baseline Periods
    b. Proposed Outcome Domain Performance Periods and Baseline 
Periods
    6. Proposed Performance Standards for the FY 2014 Hospital VBP 
Program
    a. Background
    (1) Mortality Measures
    (2) Proposed Medicare Spending per Beneficiary
    b. Proposed Clinical Process of Care and Patient Experience of 
Care FY 2014 Performance Standards
    c. AHRQ Measures
    d. HAC Measures
    7. Proposed FY 2014 Hospital VBP Program Scoring Methodology
    a. Proposed FY 2014 Domain Scoring Methodology
    b. Proposed HAC Measure Scoring Methodology
    8. Ensuring HAC Reporting Accuracy
    9. Proposed Domain Weighting for FY 2014 Hospital VBP Program
    B. Proposed Review and Correction Process under the Hospital VBP 
Program
    1. Background
    2. Proposed Review and Correction of Data Submitted to the QIO 
Clinical Warehouse on Chart-Abstracted Process of Care Measures and 
Measure Rates
    3. Proposed Review and Correction Process for Hospital Consumer 
Assessment of Healthcare Providers and Systems (HCAHPS)
    a. Phase One: Review and Correction of HCAHPS Data Submitted to 
the QIO Clinical Warehouse
    b. Phase Two: Review and Correction of the HCAHPS Scores for the 
Hospital VBP Program
XVII. Files Available to the Public via the Internet
    A. Information in Addenda Related to the Proposed CY 2012 
Hospital OPPS
    B. Information in Addenda Related to the Proposed CY 2012 ASC 
Payment System
XVIII. Collection of Information Requirements
    A. Legislative Requirements for Solicitation of Comments
    B. Requirements in Regulation Text
    1. ICRs Regarding Basic Commitments of Providers (Sec.  489.20)
    2. ICRs Regarding Exceptions Process Related to the Prohibition 
of Expansion of Facility Capacity (Sec.  411.362)
    C. Proposed Associated Information Collections Not Specified in 
Regulatory Text
    1. Hospital Outpatient Quality Reporting (Hospital OQR) Program
    2. Hospital OQR Program Measures for the CY 2012, CY 2013, CY 
2014, and CY 2015 Payment Determinations
    a. Previously Adopted Hospital OQR Program Measures for the CY 
2012, CY 2013, and CY 2014 Payment Determinations
    b. Additional Proposed Hospital OQR Program Measures for CY 2014
    c. Proposed Hospital OQR Program Measures for CY 2015
    3. Proposed Hospital OQR Program Validation Requirements for CY 
2013
    4. Proposed Hospital OQR Program Reconsideration and Appeals 
Procedures
    5. ASC Quality Reporting Program
    6. Proposed 2012 Medicare EHR Incentive Program Electronic 
Reporting Pilot for Hospitals and CAHs
    7. Additional Topics
XIX. Response to Comments
XX. Economic Analysis
    A. Regulatory Impact Analysis
    1. Introduction
    2. Statement of Need
    3. Overall Impacts for Proposed OPPS and ASC Provisions
    4. Detailed Economic Analysis
    a. Effects of Proposed OPPS Changes in This Proposed Rule
    (1) Limitations of Our Analysis
    (2) Estimated Effects of This Proposed Rule on Hospitals
    (3) Estimated Effects of This Proposed Rule on CMHCs
    (4) Estimated Effect of This Proposed Rule on Beneficiaries
    (5) Estimated Effects on Other Providers
    (6) Estimated Effects on the Medicare and Medicaid Programs
    (7) Alternative Considered
    b. Effects of Proposed ASC Payment System Changes in This 
Proposed Rule
    (1) Limitations of Our Analysis
    (2) Estimated Effects of This Proposed Rule on Payments to ASCs
    (3) Estimated Effect of This Proposed Rule on Beneficiaries
    (4) Alternatives Considered
    c. Accounting Statements and Tables
    d. Effect of Proposed Requirements for the Hospital Outpatient 
Quality Reporting (OQR) Program
    e. Effects of Proposed Changes to Physician Self-Referral 
Regulations
    f. Effects of Proposed Changes to Provider Agreement Regulations 
on Patient Notification Requirements
    g. Effect of Additional Proposed Changes to the Hospital VBP 
Program Requirements
    h. Effects of Proposed Medicare EHR Incentive Program Reporting 
Pilot
    B. Regulatory Flexibility Act (RFA) Analysis
    C. Unfunded Mandates Reform Act Analysis
    D. Conclusion
XXI. Federalism Analysis

Regulation Text

I. Background and Summary of the CY 2012 OPPS/ASC Proposed Rule

A. Legislative and Regulatory Authority for the Hospital Outpatient 
Prospective Payment System

    When Title XVIII of the Social Security Act (the Act) was enacted, 
Medicare payment for hospital outpatient services was based on 
hospital-specific costs. In an effort to ensure that Medicare and its 
beneficiaries pay appropriately for services and to encourage more 
efficient delivery of care, the Congress mandated replacement of the 
reasonable 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,

[[Page 42176]]

2000. Implementing regulations for the OPPS are located at 42 CFR part 
419.
    The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999 (BBRA) (Pub. L. 106-113) made major changes in the hospital OPPS. 
The following Acts made additional changes to the OPPS: the Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 
(BIPA) (Pub. L. 106-554); the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA) (Pub. L. 108-173); the Deficit 
Reduction Act of 2005 (DRA) (Pub. L. 109-171), enacted on February 8, 
2006; the Medicare Improvements and Extension Act under Division B of 
Title I of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA) 
(Pub. L. 109-432), enacted on December 20, 2006; the Medicare, 
Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173), 
enacted on December 29, 2007; the Medicare Improvements for Patients 
and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), enacted on July 
15, 2008; and most recently the Patient Protection and Affordable Care 
Act (Pub. L. 111-148), enacted on March 23, 2010, as amended by the 
Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), 
enacted on March 30, 2010. (These two public laws are collectively 
known as the Affordable Care Act, and most recently the Medicare and 
Medicaid Extenders Act of 2010 (MMEA, Pub. L. 111-309).)
    Under the OPPS, we pay for hospital outpatient services on a rate-
per-service basis that varies according to the ambulatory payment 
classification (APC) group to which the service is assigned. We use the 
Healthcare Common Procedure Coding System (HCPCS) (which include 
certain Current Procedural Terminology (CPT) codes) to identify and 
group the services within each APC group. The OPPS includes payment for 
most hospital outpatient services, except those identified in section 
I.B. of this proposed rule. Section 1833(t)(1)(B) of the Act provides 
for payment under the OPPS for hospital outpatient services designated 
by the Secretary (which includes partial hospitalization services 
furnished by community mental health centers (CMHCs)) and hospital 
outpatient services that are furnished to inpatients who have exhausted 
their Part A benefits, or who are otherwise not in a covered Part A 
stay.
    The OPPS rate is an unadjusted national payment amount that 
includes the Medicare payment and the beneficiary copayment. This rate 
is divided into a labor-related amount and a nonlabor-related amount. 
The 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 for an item or service within the same APC group 
(referred to as the ``2 times rule''). In implementing this provision, 
we generally use the median cost of the item or service assigned to an 
APC group.
    For new technology items and services, special payments under the 
OPPS may be made in one of two ways. Section 1833(t)(6) of the Act 
provides for temporary additional payments, which we refer to as 
``transitional 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 
data to appropriately assign them to a clinical APC group, we have 
established special APC groups based on costs, which we refer to as New 
Technology APCs. These New Technology APCs are designated by cost bands 
which allow us to provide appropriate and consistent payment for 
designated new procedures that are not yet reflected in our claims 
data. Similar to pass-through payments, an assignment to a New 
Technology APC is temporary; that is, we retain a service within a New 
Technology APC until we acquire sufficient data to assign it to a 
clinically appropriate APC group.

B. Excluded OPPS Services and Hospitals

    Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to 
designate the hospital outpatient services that are paid under the 
OPPS. While most hospital outpatient services are payable under the 
OPPS, section 1833(t)(1)(B)(iv) of the Act excludes payment for 
ambulance, physical and occupational therapy, and 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 services include, for example, the professional services 
of physicians and nonphysician practitioners paid under the Medicare 
Physician Fee Schedule (MPFS); laboratory services paid under the 
Clinical Laboratory Fee Schedule (CLFS); services for beneficiaries 
with end-stage renal disease (ESRD) that are paid under the ESRD 
composite rate; and services and procedures that require an inpatient 
stay that are paid under the hospital inpatient prospective payment 
system (IPPS). We set forth the services that are excluded from payment 
under the OPPS in 42 CFR 419.22 of the regulations.
    Under Sec.  419.20(b) of the regulations, we specify the types of 
hospitals and entities that are excluded from payment under the OPPS. 
These excluded entities include: Maryland hospitals, but only for 
services that are paid under a cost containment waiver in accordance 
with section 1814(b)(3) of the Act; critical access hospitals (CAHs); 
hospitals located outside of the 50 States, the District of Columbia, 
and Puerto Rico; and Indian Health Service (IHS) hospitals.

C. Prior Rulemaking

    On April 7, 2000, we published in the Federal Register a final rule 
with comment period (65 FR 18434) to implement a prospective payment 
system for hospital outpatient services. The hospital OPPS was first 
implemented for services furnished on or after August 1, 2000. Section 
1833(t)(9) of the Act requires the Secretary to review certain 
components of the OPPS, not less often than annually, and to revise the 
groups, relative payment weights, and other adjustments that take into 
account changes in medical practices, changes in technologies, and the 
addition of new services, new cost data, and other relevant information 
and factors.
    Since initially implementing the OPPS, we have published final 
rules in the Federal Register annually to implement statutory 
requirements and changes arising from our continuing experience with 
this system. These rules can be viewed on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/. The CY 2011 OPPS/ASC final rule 
with comment period appears in the November 24,

[[Page 42177]]

2010 Federal Register (75 FR 71800). In that final rule with comment 
period, we revised the OPPS to update the payment weights and 
conversion factor for services payable under the CY 2011 OPPS on the 
basis of claims data from January 1, 2009, through December 31, 2009, 
and to implement certain provisions of the Affordable Care Act. In 
addition, we responded to public comments received on the provisions of 
the CY 2010 final rule with comment period (74 FR 60316) pertaining to 
the APC assignment of HCPCS codes identified in Addendum B to that rule 
with the new interim (``NI'') comment indicator, and public comments 
received on the August 3, 2010 OPPS/ASC proposed rule for CY 2011 (75 
FR 46170).

D. Advisory Panel on Ambulatory Payment Classification (APC) Groups

1. Authority of the Advisory Panel on Ambulatory Payment Classification 
(APC) Groups (the APC Panel)
    Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of 
Public Law 106-113, and redesignated by section 202(a)(2) of Public Law 
106-113, requires that we consult with an outside panel of experts to 
review the clinical integrity of the payment groups and their weights 
under the OPPS. The Act further specifies that the panel will act in an 
advisory capacity. The APC Panel, discussed under section I.D.2. of 
this proposed rule, fulfills these requirements. The APC Panel is not 
restricted to using data compiled by CMS, and it may use data collected 
or developed by organizations outside the Department in conducting its 
review.
2. Establishment of the APC Panel
    On November 21, 2000, the Secretary signed the initial charter 
establishing the APC Panel. This expert panel, which may be composed of 
up to 15 representatives of providers (currently employed full-time, 
not as consultants, in their respective areas of expertise) subject to 
the OPPS, reviews clinical data and advises CMS about the clinical 
integrity of the APC groups and their payment weights. The APC Panel is 
technical in nature, and it is governed by the provisions of the 
Federal Advisory Committee Act (FACA). Since its initial chartering, 
the Secretary has renewed the APC Panel's charter five times: on 
November 1, 2002; on November 1, 2004; on November 21, 2006; on 
November 2, 2008 and November 12, 2010. The current charter specifies, 
among other requirements, that: the APC Panel continues to be technical 
in nature; is governed by the provisions of the FACA; may convene up to 
three meetings per year; has a Designated Federal Official (DFO); and 
is chaired by a Federal Official designated by the Secretary.
    The current APC Panel membership and other information pertaining 
to the APC Panel, including its charter, Federal Register notices, 
membership, meeting dates, agenda topics, and meeting reports, can be 
viewed on the CMS Web site at: http://www.cms.hhs.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp#TopOfPage.
3. APC Panel Meetings and Organizational Structure
    The APC Panel first met on February 27 through March 1, 2001. Since 
the initial meeting, the APC Panel has held multiple meetings, with the 
last meeting taking place on February 28-March 1, 2011. Prior to each 
meeting, we publish a notice in the Federal Register to announce the 
meeting and, when necessary, to solicit nominations for APC Panel 
membership and to announce new members.
    The APC Panel has established an operational structure that, in 
part, includes the use of three subcommittees to facilitate its 
required APC review process. The three current subcommittees are the 
Data Subcommittee, the Visits and Observation Subcommittee, and the 
Subcommittee for APC Groups and Status Indicator (SI) Assignments 
(previously known as the Packaging Subcommittee).
    The Data Subcommittee is responsible for studying the data issues 
confronting the APC Panel and for recommending options for resolving 
them. The Visits and Observation Subcommittee reviews and makes 
recommendations to the APC Panel on all technical issues pertaining to 
observation services and hospital outpatient visits paid under the OPPS 
(for example, APC configurations and APC payment weights). The 
Subcommittee for APC Groups and SI Assignments advises the Panel on the 
following issues: the appropriate SIs to be assigned to HCPCS codes, 
including but not limited to whether a HCPCS code or a category of 
codes should be packaged or separately paid; and the appropriate APCs 
to be assigned to HCPCS codes regarding services for which separate 
payment is made.
    Each of these subcommittees was established by a majority vote from 
the full APC Panel during a scheduled APC Panel meeting, and the APC 
Panel recommended that the subcommittees continue at the February/March 
2011 APC Panel meeting. We accept those recommendations of the APC 
Panel. All subcommittee recommendations are discussed and voted upon by 
the full APC Panel.
    Discussions of the other recommendations made by the APC Panel at 
the February/March 2011 APC Panel meeting are included in the sections 
of this proposed rule that are specific to each recommendation. For 
discussions of earlier APC Panel meetings and recommendations, we refer 
readers to previously published hospital OPPS/ASC proposed and final 
rules, the CMS Web site mentioned earlier in this section, and the FACA 
database at: http://fido.gov/facadatabase/public.asp.

E. Summary of the Major Contents of This CY 2012 OPPS/ASC Proposed Rule

    In this proposed rule, we set forth proposed changes to the 
Medicare hospital OPPS for CY 2012 to implement statutory requirements 
and changes arising from our continuing experience with the system. In 
addition, we set forth proposed changes to the revised Medicare ASC 
payment system for CY 2012, including proposed updated payment weights, 
covered surgical procedures, and covered ancillary items and services 
based on the proposed OPPS update. In addition, we are proposing to 
make changes to the rules governing limitations on certain physician 
referrals to hospitals in which physicians have an ownership or 
investment interest, provider agreement regulations on patient 
notification requirements, and the rules governing the Hospital 
Inpatient Value-Based Purchasing (VBP) Program.
    The following is a summary of the major changes that we are 
proposing to make for CY 2012:
1. Proposed Updates Affecting OPPS Payments
    In section II. of this proposed rule, we set forth--
     The methodology used to recalibrate the proposed APC 
relative payment weights.
     The proposed changes to packaged services.
     The proposed update to the conversion factor used to 
determine payment rates under the OPPS. In this section, we are 
proposing changes in the amounts and factors for calculating the full 
annual update increase to the conversion factor.
     The proposed retention of our current policy to use the 
IPPS wage indices to adjust, for geographic wage differences, the 
portion of the OPPS payment rate and the copayment

[[Page 42178]]

standardized amount attributable to labor-related cost.
     The proposed update of statewide average default CCRs.
     The proposed application of hold harmless transitional 
outpatient payments (TOPs) for certain small rural hospitals, extended 
by section 3121 of the Affordable Care Act.
     The proposed payment adjustment for rural SCHs.
     The proposed calculation of the hospital outpatient 
outlier payment.
     The calculation of the proposed national unadjusted 
Medicare OPPS payment.
     The proposed beneficiary copayments for OPPS services.
2. Proposed OPPS Ambulatory Payment Classification (APC) Group Policies
    In section III. of this proposed rule, we discuss--
     The proposed additions of new HCPCS codes to APCs.
     The proposed establishment of a number of new APCs.
     Our analyses of Medicare claims data and certain 
recommendations of the APC Panel.
     The application of the 2 times rule and proposed 
exceptions to it.
     The proposed changes to specific APCs.
     The proposed movement of procedures from New Technology 
APCs to clinical APCs.
3. Proposed OPPS Payment for Devices
    In section IV. of this proposed rule, we discuss the proposed pass-
through payment for specific categories of devices and the proposed 
adjustment for devices furnished at no cost or with partial or full 
credit.
4. Proposed OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    In section V. of this proposed rule, we discuss the proposed CY 
2012 OPPS payment for drugs, biologicals, and radiopharmaceuticals, 
including the proposed payment for drugs, biologicals, and 
radiopharmaceuticals with and without pass-through status.
5. Proposed Estimate of OPPS Transitional Pass-Through Spending for 
Drugs, Biologicals, Radiopharmaceuticals, and Devices
    In section VI. of this proposed rule, we discuss the estimate of CY 
2012 OPPS transitional pass-through spending for drugs, biologicals, 
and devices.
6. Proposed OPPS Payment for Hospital Outpatient Visits
    In section VII. of this proposed rule, we set forth our proposed 
policies for the payment of clinic and emergency department visits and 
critical care services based on claims data.
7. Proposed Payment for Partial Hospitalization Services
    In section VIII. of this proposed rule, we set forth our proposed 
payment for partial hospitalization services, including the proposed 
separate threshold for outlier payments for CMHCs.
8. Proposed Procedures That Would Be Paid Only as Inpatient Procedures
    In section IX. of this proposed rule, we discuss the procedures 
that we are proposing to remove from the inpatient list and assign to 
APCs for payment under the OPPS.
9. Proposed Policies on Supervision Standards for Outpatient Services 
in Hospitals and CAHs
    In section X. of this proposed rule, we discuss proposed policy 
changes relating to the supervision of outpatient services furnished in 
hospitals and CAHs.
10. Proposed OPPS Payment Status and Comment Indicators
    In section XI. of this proposed rule, we discuss our proposed 
changes to the definitions of status indicators assigned to APCs and 
present our proposed comment indicators.
11. OPPS Policy and Payment Recommendations
    In section XII. of this proposed rule, we address recommendations 
made by the Medicare Payment Advisory Commission (MedPAC) in its March 
2011 report to Congress, by the Office of Inspector General (OIG), and 
by the APC Panel regarding the OPPS for CY 2012.
12. Proposed Updates to the Ambulatory Surgical Center (ASC) Payment 
System
    In section XIII. of this proposed rule, we discuss the proposed 
updates of the revised ASC payment system and payment rates for CY 
2012.
13. Reporting Quality Data for Annual Payment Rate Updates
    In section XIV. of this proposed rule, we discuss the proposed 
measures for reporting hospital outpatient quality data for the OPD fee 
schedule increase factor for CY 2013 and subsequent calendar years; set 
forth the requirements for data collection and submission; and discuss 
the reduction to the OPPS OPD fee schedule increase factor for 
hospitals that fail to meet the Hospital OQR Program requirements. We 
also discuss proposed measures for reporting ASC quality data for the 
annual payment update factor for CYs 2014, 2015, and 2016; and set 
forth the requirements for data collection and submission for the 
annual payment update.
14. Proposed Changes to EHR Incentive Program for Eligible Hospitals 
and CAHs Regarding Electronic Submission of Clinical Quality Measures 
(CQMs)
    In section XIV.J. of this proposed rule, we are proposing to allow 
eligible hospitals and CAHs participating in the Medicare EHR Incentive 
Program to meet the CQM reporting requirement of the EHR Incentive 
Program for payment year 2012 by participating in the 2012 Medicare EHR 
Incentive Program Electronic Reporting Pilot.
15. Proposed Changes to Provisions Relating to Physician Self-Referral 
Prohibition and Provider Agreement Regulations on Patient Notification 
Requirements
    In section XV. of this proposed rule, we present our proposed 
exception process for expansion of facility capacity under the whole 
hospital and rural provider exceptions to the physician self-referral 
law, and proposed changes to the provider agreement regulations on 
patient notification requirements.
16. Additional Proposed Changes Relating to the Hospital Inpatient VBP 
Program
    In section XVI. of this proposed rule, we present our proposed 
requirements for the FY 2014 Hospital Inpatient VBP Program.
17. Economic and Federalism Analyses
    In sections XX. and XXI. of this proposed rule, we set forth an 
analysis of the regulatory and federalism impacts that the proposed 
changes would have on affected entities and beneficiaries.

F. Public Comments Received on the CY 2011 OPPS/ASC Final Rule With 
Comment Period

    We received approximately 43 timely pieces of correspondence on the 
CY 2011 OPPS/ASC final rule with comment period that appeared in the 
Federal Register on November 24, 2010 (75 FR 71800), some of which 
contained multiple comments on the interim APC assignments and/or 
status indicators of HCPCS codes identified with comment indicator 
``NI'' in Addendum B to that final rule with comment period. We will

[[Page 42179]]

present summaries of those public comments on topics open to comment in 
the CY 2012 OPPS/ASC final rule with comment period and our responses 
to them under appropriate headings.

II. Proposed Updates Affecting OPPS Payments

A. Proposed Recalibration of APC Relative Weights

1. Database Construction
a. Database Source and Methodology
    Section 1833(t)(9)(A) of the Act requires that the Secretary review 
and revise the relative payment weights for APCs at least annually. In 
the April 7, 2000 OPPS final rule with comment period (65 FR 18482), we 
explained in detail how we calculated the relative payment weights that 
were implemented on August 1, 2000 for each APC group.
    For the CY 2012 OPPS, we are proposing to recalibrate the APC 
relative payment weights for services furnished on or after January 1, 
2012, and before January 1, 2013 (CY 2012), using the same basic 
methodology that we described in the CY 2011 OPPS/ASC final rule with 
comment period. That is, we are proposing to recalibrate the relative 
payment weights for each APC based on claims and cost report data for 
hospital outpatient department (HOPD) services, using the most recent 
available data to construct a database for calculating APC group 
weights. For the purpose of recalibrating the proposed APC relative 
payment weights for CY 2012, we used approximately 138 million final 
action claims (claims for which all disputes and adjustments have been 
resolved and payment has been made) for hospital outpatient department 
services furnished on or after January 1, 2010, and before January 1, 
2011. (For exact counts of claims used, we refer readers to the claims 
accounting narrative under supporting documentation for this proposed 
rule on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/HORD/.)
    Of the 138 million final action claims for services provided in 
hospital outpatient settings used to calculate the proposed CY 2012 
OPPS payment rates for this proposed rule, approximately 105 million 
claims were the type of bill potentially appropriate for use in setting 
rates for OPPS services (but did not necessarily contain services 
payable under the OPPS). Of the 105 million claims, approximately 3 
million claims were not for services paid under the OPPS or were 
excluded as not appropriate for use (for example, erroneous cost-to-
charge ratios (CCRs) or no HCPCS codes reported on the claim). From the 
remaining approximately 102 million claims, we created approximately 
100 million single records, of which approximately 67 million were 
``pseudo'' single or ``single session'' claims (created from 
approximately 23 million multiple procedure claims using the process we 
discuss later in this section). Approximately 888,000 claims were 
trimmed out on cost or units in excess of 3 standard 
deviations from the geometric mean, yielding approximately 99 million 
single bills for median setting. As described in section II.A.2. of 
this proposed rule, our data development process is designed with the 
goal of using appropriate cost information in setting the APC relative 
weights. The bypass process is described in section II.A.1.b. of this 
proposed rule. This section discusses how we develop ``pseudo'' single 
procedure claims (as defined below), with the intention of using more 
appropriate data from the available claims. In some cases, the bypass 
process allows us to use some portion of the submitted claim for cost 
estimation purposes, while the remaining information on the claim 
continues to be unusable. Consistent with the goal of using appropriate 
information in our data development process, we are proposing to only 
use claims (or portions of each claim) that are appropriate for 
ratesetting purposes. Ultimately, we were able to use for CY 2012 
ratesetting some portion of approximately 94 percent of the CY 2010 
claims containing services payable under the OPPS.
    The proposed APC relative weights and payments for CY 2012 in 
Addenda A and B to this proposed rule (which are referenced in section 
XVII. of this proposed rule and available via the Internet on the CMS 
Web site) were calculated using claims from CY 2010 that were processed 
before January 1, 2011, and continue to be based on the median hospital 
costs for services in the APC groups. Under the proposed methodology, 
we select claims for services paid under the OPPS and match these 
claims to the most recent cost report filed by the individual hospitals 
represented in our claims data. We continue to believe that it is 
appropriate to use the most current full calendar year claims data and 
the most recently submitted cost reports to calculate the median costs 
underpinning the APC relative payment weights and the CY 2012 payment 
rates.
b. Proposed Use of Single and Multiple Procedure Claims
    For CY 2012, in general, we are proposing to continue to use single 
procedure claims to set the medians on which the APC relative payment 
weights would be based, with some exceptions as discussed below in this 
section. We generally use single procedure claims to set the median 
costs for APCs because we believe that the OPPS relative weights on 
which payment rates are based should be derived from the costs of 
furnishing one unit of one procedure and because, in many 
circumstances, we are unable to ensure that packaged costs can be 
appropriately allocated across multiple procedures performed on the 
same date of service.
    It is generally desirable to use the data from as many claims as 
possible to recalibrate the APC relative payment weights, including 
those claims for multiple procedures. As we have for several years, we 
are proposing to continue to use date of service stratification and a 
list of codes to be bypassed to convert multiple procedure claims to 
``pseudo'' single procedure claims. Through bypassing specified codes 
that we believe do not have significant packaged costs, we are able to 
use more data from multiple procedure claims. In many cases, this 
enabled us to create multiple ``pseudo'' single procedure claims from 
claims that were submitted as multiple procedure claims spanning 
multiple dates of service, or claims that contained numerous separately 
paid procedures reported on the same date on one claim. We refer to 
these newly created single procedure claims as ``pseudo'' single 
procedure claims. The history of our use of a bypass list to generate 
``pseudo'' single procedure claims is well documented, most recently in 
the CY 2011 OPPS/ASC final rule with comment period (75 FR 71811 
through 71822). In addition, for CY 2008, we increased packaging and 
created the first composite APCs. We have continued our packaging 
policies and the creation of composite APCs for CY 2009, 2010, and 
2011, and we are proposing to continue them for CY 2012. Increased 
packaging and creation of composite APCs also increased the number of 
bills that we were able to use for median calculation by enabling us to 
use claims that contained multiple major procedures that previously 
would not have been usable. Further, for CY 2009, we expanded the 
composite APC model to one additional clinical area, multiple imaging 
services (73 FR 68559 through 68569), which also increased

[[Page 42180]]

the number of bills we were able to use to calculate APC median costs. 
We have continued the composite APCs for multiple imaging services for 
CYs 2010 and 2011, and we are proposing to continue to create them for 
CY 2012. We refer readers to section II.A.2.e. of this proposed rule 
for discussion of the use of claims to establish median costs for 
composite APCs.
    We are proposing to continue to apply these processes to enable us 
to use as much claims data as possible for ratesetting for the CY 2012 
OPPS. This methodology enabled us to create, for this proposed rule, 
approximately 67 million ``pseudo'' single procedure claims, including 
multiple imaging composite ``single session'' bills (we refer readers 
to section II.A.2.e.(5) of the proposed rule for further discussion), 
to add to the approximately 33 million ``natural'' single procedure 
claims. For this proposed rule, ``pseudo'' single procedure and 
``single session'' procedure bills represented approximately 67 percent 
of all single procedure bills used to calculate median costs.
    For CY 2012, we are proposing to bypass 460 HCPCS codes for CY 2012 
that are identified in Addendum N to this proposed rule (which is 
referenced in section XVII. of this proposed rule and available via the 
Internet on the CMS Web site). Since the inception of the bypass list, 
which is the list of codes to be bypassed to convert multiple procedure 
claims to ``pseudo'' single procedure claims, we have calculated the 
percent of ``natural'' single bills that contained packaging for each 
HCPCS code and the amount of packaging on each ``natural'' single bill 
for each code. Each year, we generally retain the codes on the previous 
year's bypass list and use the updated year's data (for CY 2012, data 
available for the February 28-March 1, 2011 APC Panel meeting from CY 
2010 claims processed through September 30, 2010, and CY 2009 claims 
data processed through June 30, 2010, used to model the payment rates 
for CY 2011) to determine whether it would be appropriate to propose to 
add additional codes to the previous year's bypass list. For CY 2012, 
we are proposing to continue to bypass all of the HCPCS codes on the CY 
2011 OPPS bypass list because they continue to meet the established 
empirical criteria for the bypass list. We updated HCPCS codes on the 
CY 2011 bypass list that were mapped to new HCPCS codes for CY 2012 
ratesetting by evaluating data for the replacement codes under the 
empirical criteria described below and also removing the HCPCS codes 
that we are proposing to be deleted for CY 2012, which are listed in 
Table 1 of this proposed rule. We also are proposing to remove HCPCS 
codes that are not separately paid under the OPPS because the purpose 
of the bypass list is to obtain more data for those codes relevant to 
ratesetting. None of these deleted codes were ``overlap bypass codes'' 
(those HCPCS codes that are both on the bypass list and are members of 
the multiple imaging composite APCs). We also are proposing to add to 
the bypass list for CY 2012 all HCPCS codes not on the CY 2011 bypass 
list that, using either the CY 2011 final rule data (CY 2009 claims) or 
the February 28-March 1, 2011 APC Panel data (first 9 months of CY 2010 
claims), met the empirical criteria for the bypass list that are 
summarized below. The entire list proposed for CY 2012 (including the 
codes that remain on the bypass list from prior years) is open to 
public comment. Because we must make some assumptions about packaging 
in the multiple procedure claims in order to assess a HCPCS code for 
addition to the bypass list, we assumed that the representation of 
packaging on ``natural'' single procedure claims for any given code is 
comparable to packaging for that code in the multiple procedure claims. 
The proposed criteria for the bypass list are:
     There are 100 or more ``natural'' single procedure claims 
for the code. This number of single procedure claims ensures that 
observed outcomes are sufficiently representative of packaging that 
might occur in the multiple claims.
     Five percent or fewer of the ``natural'' single procedure 
claims for the code have packaged costs on that single procedure claim 
for the code. This criterion results in limiting the amount of 
packaging being redistributed to the separately payable procedures 
remaining on the claim after the bypass code is removed and ensures 
that the costs associated with the bypass code represent the cost of 
the bypassed service.
     The median cost of packaging observed in the ``natural'' 
single procedure claims is equal to or less than $55. This criterion 
also limits the amount of error in redistributed costs. During the 
assessment of claims against the bypass criteria, we do not know the 
dollar value of the packaged cost that should be appropriately 
attributed to the other procedures on the claim. Therefore, ensuring 
that redistributed costs associated with a bypass code are small in 
amount and volume protects the validity of cost estimates for low cost 
services billed with the bypassed service.
    In response to comments to the CY 2010 OPPS/ASC proposed rule 
requesting that the packaged cost threshold be updated, we considered 
whether it would be appropriate to update the $50 packaged cost 
threshold for inflation when examining potential bypass list additions. 
As discussed in the CY 2010 OPPS/ASC final rule with comment period (74 
FR 60328), the real value of this packaged cost threshold criterion has 
declined due to inflation, making the packaged cost threshold more 
restrictive over time when considering additions to the bypass list. 
Therefore, adjusting the threshold by the market basket would prevent 
continuing decline in the threshold's real value. For CY 2011, based on 
CY 2009 claims data, we proposed to apply the final market basket of 
3.6 percent published in the CY 2009 OPPS/ASC final rule with comment 
period (73 FR 26584) to the $50 packaged cost threshold used in the CY 
2010 OPPS/ASC final rule with comment period (74 FR 60325). This 
calculation led us to a proposed packaged cost threshold for bypass 
list additions for CY 2011 of $50 ($51.80 rounded to $50). We stated 
that we believe that applying the market basket from the year of claims 
data to the packaged cost threshold, rounded to the nearest $5 
increment, would appropriately account for the effects of inflation 
when considering additions to the bypass list because the market basket 
increase percentage reflects the extent to which the price of inputs 
for hospital services has increased compared to the price of inputs for 
hospital services in the prior year. We are proposing for CY 2012, 
based on the same rationale described for the CY 2011 OPPS/ASC final 
rule with comment period (75 CFR 71812), to continue to update the 
packaged cost threshold by the market basket. By applying the final CY 
2011 market basket increase of 1.85 percent to the prior non-rounded 
dollar threshold of $51.80 (75 FR 71812), we determined that the 
threshold increases for CY 2012 to $55 ($52.76 rounded to $55, the 
nearest $5 increment). Therefore, we are proposing to set the median 
packaged cost threshold on the CY 2010 claims at $55 for a code to be 
considered for addition to the CY 2012 OPPS bypass list.
     The code is not a code for an unlisted service.
    In addition, we are proposing to continue to include, on the bypass 
list, HCPCS codes that CMS medical advisors believe have minimal 
associated packaging based on their clinical assessment of the complete 
CY 2012 OPPS proposal. Some of these

[[Page 42181]]

codes were identified by CMS medical advisors and some were identified 
in prior years by commenters with specialized knowledge of the 
packaging associated with specific services. We also are proposing to 
continue to include on the bypass list certain HCPCS codes in order to 
purposefully direct the assignment of packaged costs to a companion 
code where services always appear together and where there would 
otherwise be few single procedure claims available for ratesetting. For 
example, we have previously discussed our reasoning for adding HCPCS 
code G0390 (Trauma response team associated with hospital critical care 
service) and the CPT codes for additional hours of drug administration 
to the bypass list (73 FR 68513 and 71 FR 68117 through 68118).
    As a result of the multiple imaging composite APCs that we 
established in CY 2009, the program logic for creating ``pseudo'' 
single procedure claims from bypassed codes that are also members of 
multiple imaging composite APCs changed. When creating the set of 
``pseudo'' single procedure claims, claims that contain ``overlap 
bypass codes'' (those HCPCS codes that are both on the bypass list and 
are members of the multiple imaging composite APCs) were identified 
first. These HCPCS codes were then processed to create multiple imaging 
composite ``single session'' bills, that is, claims containing HCPCS 
codes from only one imaging family, thus suppressing the initial use of 
these codes as bypass codes. However, these ``overlap bypass codes'' 
were retained on the bypass list because, at the end of the ``pseudo'' 
single processing logic, we reassessed the claims without suppression 
of the ``overlap bypass codes'' under our longstanding ``pseudo'' 
single process to determine whether we could convert additional claims 
to ``pseudo'' single procedure claims. (We refer readers to section 
II.A.2.b. of this proposed rule for further discussion of the treatment 
of ``overlap bypass codes.'') This process also created multiple 
imaging composite ``single session'' bills that could be used for 
calculating composite APC median costs. ``Overlap bypass codes'' that 
are members of the proposed multiple imaging composite APCs are 
identified by asterisks (*) in Addendum N to this proposed rule (which 
is referenced in section XVII. of this proposed rule and available via 
the Internet on the CMS Web site).
    Addendum N to this proposed rule includes the proposed list of 
bypass codes for CY 2012. The list of bypass codes contains codes that 
were reported on claims for services in CY 2010 and, therefore, 
includes codes that were in effect in 2010 and used for billing but 
were deleted for CY 2011. We retained these deleted bypass codes on the 
proposed CY 2012 bypass list because these codes existed in CY 2010 and 
were covered OPD services in that period, and CY 2010 claims data are 
used to calculate 2012 payment rates. Keeping these deleted bypass 
codes on the bypass list potentially allowed us to create more 
``pseudo'' single procedure claims for ratesetting purposes. ``Overlap 
bypass codes'' that were members of the proposed multiple imaging 
composite APCs are identified by asterisks (*) in the third column of 
Addendum N to this proposed rule. HCPCS codes that we are proposing to 
add for CY 2012 are identified by asterisks (*) in the fourth column of 
Addendum N.
    Table 1 below contains the list of codes that we are proposing to 
remove from the CY 2012 bypass list because these codes were either 
deleted from the HCPCS before CY 2010 (and therefore were not covered 
OPD services in CY2010) or were not separately payable codes under the 
proposed CY 2012 OPPS because these codes are not used for ratesetting 
(and therefore would not need to be bypassed). None of these proposed 
deleted codes were ``overlap bypass'' codes.

Table 1--HCPCS Codes Proposed To Be Removed From the CY 2012 Bypass List
------------------------------------------------------------------------
           HCPCS Code                     HCPCS Short descriptor
------------------------------------------------------------------------
29220...........................  Strapping of low back
78350...........................  Bone mineral, single photon
90816...........................  Psytx, hosp, 20-30 min
90818...........................  Psytx, hosp, 45-50 min
90826...........................  Intac psytx, hosp, 45-50 min
99241...........................  Office consultation
99242...........................  Office consultation
99243...........................  Office consultation
99244...........................  Office consultation
99245...........................  Office consultation
0144T...........................  CT heart wo dye; qual calc
------------------------------------------------------------------------

c. Proposed Calculation and Use of Cost-to-Charge Ratios (CCRs)
    For CY 2012, we are proposing to continue to use the hospital-
specific overall ancillary and departmental CCRs to convert charges to 
estimated costs through application of a revenue code-to-cost center 
crosswalk. To calculate the APC median costs on which the proposed CY 
2012 APC payment rates are based, we calculated hospital-specific 
overall ancillary CCRs and hospital-specific departmental CCRs for each 
hospital for which we had CY 2010 claims data from the most recent 
available hospital cost reports, in most cases, cost reports beginning 
in CY 2009. For the CY 2012 OPPS proposed rates, we used the set of 
claims processed during CY 2010. We applied the hospital-specific CCR 
to the hospital's charges at the most detailed level possible, based on 
a revenue 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/HospitalOutpatientPPS/03_crosswalk.asp#TopOfPage.
    To ensure the completeness of the revenue code-to-cost center 
crosswalk, we reviewed changes to the list of revenue codes for CY 2010 
(the year of the claims data we used to calculate the proposed CY 2012 
OPPS payment rates). For CY 2010, the National Uniform Billing 
Committee added revenue codes 860 (Magnetoencephalography (MEG); 
general classification) and 861 (Magnetoencephalography (MEG)). For 
purposes of applying a CCR to charges reported under revenue codes 860 
and 861, we are proposing to use nonstandard Medicare cost report cost 
center 3280 (Electrocardiogram (EKG) and Electroencephalography (EEG)) 
as the primary cost center and to use standard cost center 5400 
(Electroencephalography (EEG)) as the secondary cost center. We believe 
that MEG, which evaluates brain activity, is similar to EEG, which also 
evaluates brain activity, and that the few hospitals that furnish MEG 
are likely to furnish it in the same department of the hospital in 
which they furnish EEG services. Therefore, we believe that the CCRs 
that we apply to the EEG revenue codes are more likely to result in a 
more accurate estimated cost for MEG than would the application of the 
hospital-specific overall ancillary CCR. For hospitals that report 
charges under revenue code 860 or 861 but do not report costs on their 
cost report under cost center 3280 or 5400, we are proposing to apply 
the hospital-specific overall CCR to the charges reported under revenue 
code 860 or 861 for purposes of estimating the cost of these services. 
We note that revenue codes with effective dates in CY 2011 are not 
relevant to this process because these new revenue codes were not 
applicable to claims for services furnished during CY 2010.
    In accordance with our longstanding policy, we calculated CCRs for 
the standard and nonstandard cost centers accepted by the electronic 
cost report database. In general, the most detailed level at which we 
calculated CCRs was the hospital-specific departmental level.

[[Page 42182]]

For a discussion of the hospital-specific overall ancillary CCR 
calculation, we refer readers to the CY 2007 OPPS/ASC final rule with 
comment period (71 FR 67983 through 67985). One longstanding exception 
to this general methodology for calculation of CCRs used for converting 
charges to costs on each claim is the calculation of median blood 
costs, as discussed in section II.A.2.d.(2) of this proposed rule and 
which has been our standard policy since the CY 2005 OPPS.
    For the CCR calculation process, we used the same general approach 
that we used in developing the final APC rates for CY 2007 and 
thereafter, using the revised CCR calculation that excluded the costs 
of paramedical education programs and weighted the outpatient charges 
by the volume of outpatient services furnished by the hospital. We 
refer readers to the CY 2007 OPPS/ASC final rule with comment period 
for more information (71 FR 67983 through 67985). We first limited the 
population of cost reports to only those for hospitals that filed 
outpatient claims in CY 2010 before determining whether the CCRs for 
such hospitals were valid.
    We then calculated the CCRs for each cost center and the overall 
ancillary CCR for each hospital for which we had claims data. We did 
this using 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 2009. For this proposed rule, we are using the most 
recently submitted cost reports to calculate the CCRs to be used to 
calculate median costs for the proposed CY 2012 OPPS payment rates. If 
the most recent available cost report was submitted but not settled, we 
looked at the last settled cost report to determine the ratio of 
submitted to settled cost using the overall ancillary CCR, and we then 
adjusted the most recent available submitted, but not settled, cost 
report using that ratio. We then calculated both an overall ancillary 
CCR and cost center-specific CCRs for each hospital. We used the 
overall ancillary CCR referenced in this section II.A.1.c. of this 
proposed rule for all purposes that require use of an overall ancillary 
CCR. We are proposing to continue this longstanding methodology for the 
calculation of median costs for CY 2012.
    Since the implementation of the OPPS, some commenters have raised 
concerns about potential bias in the OPPS cost-based weights due to 
``charge compression,'' which is the practice of applying a lower 
charge markup to higher cost services and a higher charge markup to 
lower cost services. As a result, the cost-based weights may reflect 
some aggregation bias, undervaluing high-cost items and overvaluing 
low-cost items when an estimate of average markup, embodied in a single 
CCR, is applied to items of widely varying costs in the same cost 
center.
    To explore this issue, in August 2006, we awarded a contract to RTI 
International (RTI) to study the effects of charge compression in 
calculating the IPPS cost-based relative weights, particularly with 
regard to the impact on inpatient diagnosis-related group (DRG) 
payments, and to consider methods to better capture the variation in 
cost and charges for individual services when calculating costs for the 
IPPS relative weights across services in the same cost center. RTI 
issued a report in March 2007 with its findings on charge compression, 
which is available on the CMS Web site at: http://www.cms.gov/reports/downloads/Dalton.pdf. Although this report was focused largely on 
charge compression in the context of the IPPS cost-based relative 
weights, because several of the findings were relevant to the OPPS, we 
discussed that report in the CY 2008 OPPS/ASC proposed rule (72 FR 
42641 through 42643) and discussed those findings again in the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66599 through 66602).
    In August 2007, we contracted with RTI to evaluate the cost 
estimation process for the OPPS relative weights because its 2007 
report had concentrated on IPPS DRG cost-based relative weights. The 
results of RTI's analyses had implications for both the OPPS APC cost-
based relative weights and the IPPS MS-DRG (Medicare severity) cost-
based relative weights. The RTI final report can be found on RTI's Web 
site at: http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf. For a complete 
discussion of the RTI recommendations, public comments, and our 
responses, we refer readers to the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68519 through 68527).
    We addressed the RTI finding that there was aggregation bias in 
both the IPPS and the OPPS cost estimation of expensive and inexpensive 
medical supplies in the FY 2009 IPPS final rule. Specifically, we 
finalized our proposal for both the OPPS and IPPS to create one cost 
center for ``Medical Supplies Charged to Patients'' and one cost center 
for ``Implantable Devices Charged to Patients,'' essentially splitting 
the then current CCR for ``Medical Supplies and Equipment'' into one 
CCR for low-cost medical supplies and another CCR for high-cost 
implantable devices in order to mitigate some of the effects of charge 
compression. Accordingly, in Transmittal 20 of the Provider 
Reimbursement Manual, Part II (PRM-II), Chapter 36, Form CMS-2552-96, 
which was issued in July 2009, we created a new subscripted Line 55.01 
on Worksheet A for the ``Implantable Devices Charged to Patients'' cost 
center. This new subscripted cost center, placed under the standard 
line for ``Medical Supplies Charged to Patients,'' is available for use 
for cost reporting periods beginning on or after May 1, 2009. A 
subscripted cost center is the addition of a separate new cost center 
line and description which bears a logical relationship to the standard 
cost center line and is located immediately following a standard cost 
center line. Subscripting a cost center line adds flexibility and cost 
center expansion capability to the cost report. For example, Line 55 of 
Worksheet A on Form CMS 2552-96 (the Medicare hospital cost report) is 
``Medical Supplies Charged to Patients.'' The additional cost center, 
which isolates the costs of ``Implantable Medical Supplies Charged to 
Patients'', was created by adding subscripted Line 55.01 to Worksheet A 
and is defined as capturing the costs and charges billed with the 
following UB-04 revenue codes: 0275 (Pacemaker); 0276 (Intraocular 
lens); 0278 (other implants); and 0624 (FDA investigations devices) (73 
FR 48458).
    In preparation for the FY 2012 IPPS proposed rule and this CY 2012 
OPPS proposed rule, we have assessed the availability of data in the 
``Implantable Devices Charged to Patients'' cost center. In order to 
develop a robust analysis regarding the use of cost data from the 
``Implantable Devices Charged to Patients'' cost center, we believe 
that it is necessary to have a critical mass of cost reports filed with 
data in this cost center. The cost center for ``Implantable Devices 
Charged to Patients'' is effective for cost reporting periods beginning 
on or after May 1, 2009. We have checked the availability of CY 2009 
cost reports in the December 31, 2010 quarter ending update of HCRIS, 
which is the latest upload of CY 2009 cost report data that we could 
use for this proposed rule. We have determined that there are only 437 
hospitals that have completed the ``Implantable Devices Charged to 
Patients'' cost center (out of approximately 3,500 IPPS hospitals). We 
do not believe this is a sufficient

[[Page 42183]]

amount of data from which to generate a meaningful analysis. Therefore, 
we are not proposing to use data from the ``Implantable Devices Charged 
to Patients'' cost center to create a distinct CCR for Implantable 
Devices Charged to Patients for use in calculating the OPPS relative 
weights for CY 2012. We will reassess the availability of data for the 
``Implantable Devices Charged to Patients'' cost center for the CY 2013 
OPPS rulemaking cycle. Because there is approximately a 3-year lag in 
the availability of cost report data for IPPS and OPPS ratesetting 
purposes in a given calendar year, we believe we may be able to use 
data from the revised Medicare hospital cost report form to estimate 
costs from charges for implantable devices for the CY 2013 OPPS 
relative weights. For a complete discussion of the rationale for the 
creation of the new cost center for ``Implantable Devices Charged to 
Patients,'' public comments, and our responses, we refer readers to the 
FY 2009 IPPS final rule (73 FR 48458 through 45467).
    In the CY 2009 OPPS/ASC final rule with comment period, we 
indicated that we would be making some other OPPS-specific changes in 
response to the RTI report recommendations. Specifically, these changes 
included modifications to the cost reporting software and the addition 
of three new nonstandard cost centers. With regard to modifying the 
cost reporting preparation software in order to offer additional 
descriptions for nonstandard cost centers to improve the accuracy of 
reporting for nonstandard cost centers, we indicated that the change 
would be made for the next release of the cost report software. These 
changes have been made to the cost reporting software with the 
implementation of CMS Transmittal 21, under Chapter 36 of the PRM-II, 
available on the CMS Web site at: http://www.cms.hhs.gov/Manuals/PBM/ PBM/, 
which is effective for cost reporting periods ending on or after 
October 1, 2009.
    We also indicated that we intended to add new nonstandard cost 
centers for ``Cardiac Rehabilitation,'' ``Hyperbaric Oxygen Therapy,'' 
and ``Lithotripsy.'' We note that, in January 2010, CMS issued 
Transmittal 21 which updated the PRM-II, Chapter 36, Form CMS-2552-96. 
One of the updates in this transmittal established nonstandard cost 
centers for ``Cardiac Rehabilitation,'' ``Hyperbaric Oxygen Therapy,'' 
and ``Lithotripsy'' for use on Worksheet A. These three new nonstandard 
cost centers became available for cost reporting periods ending on or 
after October 1, 2009, and are included in the revenue code to cost 
center crosswalk we are proposing to use for calculating payment rates 
for CY 2012 OPPS. Specifically, the nonstandard cost centers are: 3120 
(Cardiac Catheterization Laboratory); 3230 (CAT Scan); 3430 (Magnetic 
Resonance Imaging (MRI)). The revenue code to cost center crosswalk 
that we are proposing to use for purposes of estimating the median 
costs of items and services for the CY 2012 OPPS is available for 
review and continuous comment (outside of comment on this proposed 
rule) on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/03_crosswalk.asp#TopOfPage.
    Furthermore, in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 
through 50080), we finalized our proposal to create new standard cost 
centers for ``Computed Tomography (CT),'' ``Magnetic Resonance Imaging 
(MRI),'' and ``Cardiac Catheterization,'' and to require that hospitals 
report the costs and charges for these services under new cost centers 
on the revised Medicare cost report Form CMS 2552-10. As we discussed 
in the FY 2009 IPPS/LTCH PPS and CY 2009 OPPS/ASC proposed and final 
rules, RTI found that the costs and charges of CT scans, MRI, and 
cardiac catheterization differ significantly from the costs and charges 
of other services included in the standard associated cost center. RTI 
also concluded that both the IPPS and OPPS relative weights would 
better estimate the costs of those services if CMS were to add standard 
costs centers for CT scans, MRI, and cardiac catheterization in order 
for hospitals to report separately the costs and charges for those 
services and in order for CMS to calculate unique CCRs to estimate the 
cost from charges on claims data. (We refer readers to the FY 2011 
IPPS/LTCH PPS final rule (75 FR 50075 through 50080) for a more 
detailed discussion on the reasons for the creation of standard cost 
centers for CT scans, MRI, and cardiac catheterization.) The new 
standard cost centers for MRI, CT scans, and cardiac catheterization 
are effective for cost report periods beginning on or after May 1, 
2010, on the revised cost report Form CMS-2552-10. CMS issued the new 
hospital cost report Form CMS-2552-10 on December 30, 2010. The new 
cost report form can be accessed at the CMS Web site at: https://www.cms.gov/Manuals/PBM/itemdetail.asp?filterType=none&filterByDID=-99&sortByDID=1&sortOrder=ascending&itemID=CMS021935&intNumPerPage=10. 
Once at this Web site, users should double click on ``Chapter 40.''
    We believe that improved cost report software, the incorporation of 
new standard and nonstandard cost centers, and the elimination of 
outdated requirements will improve the accuracy of the cost data 
contained in the electronic cost report data files and, therefore, the 
accuracy of our cost estimation processes for the OPPS relative 
weights. We will continue our standard practice of examining ways in 
which we can improve the accuracy of our cost estimation processes.
2. Proposed Data Development Process and Calculation of Median Costs
    In this section of this proposed rule, we discuss the use of claims 
to calculate proposed OPPS payment rates for CY 2012. The hospital OPPS 
page on the CMS Web site on which this proposed rule is posted provides 
an accounting of claims used in the development of the proposed payment 
rates at: http://www.cms.gov/HospitalOutpatientPPS. The accounting of 
claims used in the development of this proposed rule is included on the 
CMS Web site under supplemental materials for this CY 2012 OPPS/ASC 
proposed rule. That accounting provides additional detail regarding the 
number of claims derived at each stage of the process. In addition, 
below in this section we discuss the file of claims that comprises the 
data set that is available for purchase under a CMS data use agreement. 
Our CMS Web site, http://www.cms.gov/HospitalOutpatientPPS, includes 
information about purchasing the ``OPPS Limited Data Set,'' which now 
includes the additional variables previously available only in the OPPS 
Identifiable Data Set, including ICD-9-CM diagnosis codes and revenue 
code payment amounts. This file is derived from the CY 2010 claims that 
were used to calculate the proposed payment rates for the CY 2012 OPPS.
    We used the methodology described in sections II.A.2.a. through 
II.A.2.e. of this proposed rule to calculate the median costs we use to 
establish the relative weights used in calculating the proposed OPPS 
payment rates for CY 2012 shown in Addenda A and B to this proposed 
rule (which are referenced in section XVII. of this proposed rule and 
available via the Internet on the CMS Web site). We refer readers to 
section II.A.4. of this proposed rule for a discussion of the 
conversion of APC median costs to scaled payment weights.
    a. Claims Preparation
    For this proposed rule, we used the CY 2010 hospital outpatient 
claims

[[Page 42184]]

processed before January 1, 2011, to calculate the median costs of APCs 
that underpin the proposed relative weights for CY 2012. To begin the 
calculation of the relative weights for CY 2012, we pulled all claims 
for outpatient services furnished in CY 2010 from the national claims 
history file. This is not the population of claims paid under the OPPS, 
but all outpatient claims (including, for example, critical access 
hospital (CAH) claims and hospital claims for clinical laboratory 
services for persons who are neither inpatients nor outpatients of the 
hospital).
    We then excluded claims with condition codes 04, 20, 21, and 77 
because these are claims that providers submitted to Medicare knowing 
that no payment would be made. For example, providers submit claims 
with a condition code 21 to elicit an official denial notice from 
Medicare and document that a service is not covered. We then excluded 
claims for services furnished in Maryland, Guam, the U.S. Virgin 
Islands, American Samoa, and the Northern Mariana Islands because 
hospitals in those geographic areas are not paid under the OPPS, and, 
therefore, we do not use claims for services furnished in these areas 
in ratesetting.
    We divided the remaining claims into the three groups shown below. 
Groups 2 and 3 comprise the 105 million claims that contain hospital 
bill types paid under the OPPS.
    1. Claims that were not bill types 12X, 13X (hospital bill types), 
14X (laboratory specimen bill types), or 76X (CMHC bill types). Other 
bill types are not paid under the OPPS and, therefore, these claims 
were not used to set OPPS payment.
    2. Claims that were bill types 12X, 13X or 14X. Claims with bill 
types 12X and 13X are hospital outpatient claims. Claims with bill type 
14X are laboratory specimen claims, of which we use a subset for the 
limited number of services in these claims that are paid under the 
OPPS.
    3. Claims that were bill type 76X (CMHC).
    To convert charges on the claims to estimated cost, we multiplied 
the charges on each claim by the appropriate hospital-specific CCR 
associated with the revenue code for the charge as discussed in section 
II.A.1.c. of this proposed rule. We then flagged and excluded CAH 
claims (which are not paid under the OPPS) and claims from hospitals 
with invalid CCRs. The latter included claims from hospitals without a 
CCR; those from hospitals paid an all-inclusive rate; those from 
hospitals with obviously erroneous CCRs (greater than 90 or less than 
0.0001); and those from hospitals with overall ancillary CCRs that were 
identified as outliers (3 standard deviations from the geometric mean 
after removing error CCRs). In addition, we trimmed the CCRs at the 
cost center (that is, departmental) level by removing the CCRs for each 
cost center as outliers if they exceeded +/-3 standard deviations from 
the geometric mean. We used a four-tiered hierarchy of cost center 
CCRs, which is the revenue 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 and comment 
on the CMS Web site: http://www.cms.gov/HospitalOutpatientPPS. Revenue 
codes that we do not use to set medians or to model impacts are 
identified with an ``N'' in the revenue code-to-cost center crosswalk.
    We applied the CCRs as described above to claims with bill type 
12X, 13X, or 14X, excluding all claims from CAHs and hospitals in 
Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the 
Northern Mariana Islands and claims from all hospitals for which CCRs 
were flagged as invalid.
    We identified claims with condition code 41 as partial 
hospitalization services of hospitals and moved them to another file. 
We note that the separate file containing partial hospitalization 
claims is included in the files that are available for purchase as 
discussed above.
    We then excluded claims without a HCPCS code. We moved to another 
file claims that contained nothing but influenza and pneumococcal 
pneumonia (PPV) vaccines. Influenza and PPV vaccines are paid at 
reasonable cost and, therefore, these claims are not used to set OPPS 
rates.
    We next copied line-item costs for drugs, blood, and brachytherapy 
sources to a separate file (the lines stay on the claim, but are copied 
onto another file). No claims were deleted when we copied these lines 
onto another file. These line-items are used to calculate a per unit 
mean and median cost and a per day mean and median cost for drugs and 
nonimplantable biologicals, therapeutic radiopharmaceutical agents, and 
brachytherapy sources, as well as other information used to set payment 
rates, such as a unit-to-day ratio for drugs.
    In the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60517), we first adopted a policy to redistribute some portion of total 
cost of packaged drugs and biologicals to the separately payable drugs 
and biologicals as acquisition and pharmacy overhead and handling 
costs. As discussed further in section V.B.3. of this proposed rule, we 
are proposing to continue this policy for CY 2012. Therefore, we used 
the line-item cost data for drugs and biologicals for which we had a 
HCPCS code with ASP pricing information to calculate the ASP+X values, 
first for all drugs and biologicals with HCPCS codes, whether 
separately paid or packaged, and then for separately payable drugs and 
biologicals and for packaged drugs and biologicals, respectively, by 
taking the ratio of total claim cost for each group relative to total 
ASP dollars (per unit of each drug or biological HCPCS code's April 
2011 ASP amount multiplied by total units for each drug or biological 
in the CY 2010 claims data). These values are ASP+11 percent (for all 
drugs and biologicals with HCPCS codes, whether separately paid or 
packaged), ASP-2 percent (for drugs and biologicals that are separately 
paid), and ASP+188 percent (for drugs and biologicals that have HCPCS 
codes and that are packaged), respectively. As we discuss in section 
V.B.3. of this proposed rule, we are proposing to redistribute $161 
million of the total cost in our claims data for coded packaged drugs 
and biologicals with an ASP to payment for separately payable drugs and 
biologicals. We also are proposing to redistribute an additional $54 
million from the cost of uncoded packaged drugs billed under pharmacy 
revenue code series 025X (Pharmacy (also see 063X, an extension of 
025X)), 026X (IV Therapy), and 063X (Pharmacy--Extension of 025X). This 
total excludes the cost of diagnostic and therapeutic 
radiopharmaceuticals because they are not reported under pharmacy 
revenue codes or under the pharmacy cost center on the hospital cost 
report. Our CY 2012 proposal to redistribute $215 million in estimated 
costs from coded and uncoded packaged drugs to separately payable drugs 
represents the $200 million in total packaged drug costs

[[Page 42185]]

redistributed from the CY 2011 OPPS/ASC final rule with comment period 
(75 FR 71967), updated by the PPI for Pharmaceuticals for Human Use.
    Redistributing a total of $161 million in pharmacy overhead cost 
from packaged drugs and biologicals reduces the $705 million cost of 
packaged drugs and biologicals with HCPCS codes and ASPs to $544 
million, approximately a 23-percent reduction. Redistributing $54 
million from the cost of uncoded packaged drugs and biologicals reduces 
the $502 million cost of uncoded drugs and biologicals to $448 million, 
approximately an 11-percent reduction. To implement our proposed CY 
2012 policy to redistribute $161 million from the pharmacy overhead 
cost of coded packaged drugs and biologicals to separately payable 
drugs and biologicals and $54 million from the cost of uncoded packaged 
drugs, we multiplied the cost of each packaged drug or biological with 
a HCPCS code and ASP pricing information in our CY 2010 claims data by 
0.77, and we multiplied all uncoded packaged pharmacy drug costs in our 
CY 2010 claims data, excluding those for diagnostic 
radiopharmaceuticals, by 0.89. We also added the redistributed $215 
million to the total cost of separately payable drugs and biologicals 
in our CY 2010 claims data, which increased the relationship between 
the total cost for separately payable drugs and biologicals and ASP 
dollars for the same drugs and biologicals from ASP-2 percent to ASP+4 
percent. We refer readers to section V.B.3. of this proposed rule for a 
complete discussion of our proposed policy to pay for separately paid 
drugs and biologicals and pharmacy overhead for CY 2012.
    We then removed line-items that were not paid during claim 
processing, presumably for a line-item rejection or denial. The number 
of edits for valid OPPS payment in the Integrated Outpatient Code 
Editor (I/OCE) and elsewhere has grown significantly in the past few 
years, especially with the implementation of the full spectrum of 
National Correct Coding Initiative (NCCI) edits. To ensure that we are 
using valid claims that represent the cost of payable services to set 
payment rates, we removed line-items with an OPPS status indicator that 
were not paid during claims processing in the claim year, but have a 
status indicator of ``S,'' ``T,'' ``V,'' or ``X'' in the proposed 
year's payment system. This logic preserves charges for services that 
would not have been paid in the claim year but for which some estimate 
of cost is needed for the proposed year, such as services newly 
proposed to come off the inpatient list for CY 2011 that were assigned 
status indicator ``C'' in the claim year. It also preserves charges for 
packaged services so that the costs can be included in the cost of the 
services with which they are reported, even if the CPT codes for the 
packaged services were not paid because the service is part of another 
service that was reported on the same claim or the code otherwise 
violates claims processing edits.
    For CY 2012, we are proposing to continue the policy we implemented 
for CY 2011 to exclude line-item data for pass-through drugs and 
biologicals (status indicator ``G'' for CY 2010) and nonpass-through 
drugs and biologicals (status indicator ``K'' for CY 2010) where the 
charges reported on the claim for the line were either denied or 
rejected during claims processing. Removing lines that were eligible 
for payment but were not paid ensures that we are using appropriate 
data. The trim avoids using cost data on lines that we believe were 
defective or invalid because those rejected or denied lines did not 
meet the Medicare requirements for payment. For example, edits may 
reject a line for a separately paid drug because the number of units 
billed exceeded the number of units that would be reasonable and, 
therefore, is likely a billing error (for example, a line reporting 55 
units of a drug for which 5 units is known to be a fatal dose). As with 
our trimming in the CY 2011 OPPS/ASC final rule with comment period (75 
FR 71828) of line items with a status indicator of ``S,'' ``T,'' ``V,'' 
or ``X,'' we believe that unpaid line-items represent services that are 
invalidly reported and, therefore, should not be used for ratesetting. 
We believe that removing lines with valid status indicators that were 
edited and not paid during claims processing increases the accuracy of 
the single bills used to determine the mean unit costs for use in the 
ASP+X calculation described in section V.B.3. of this proposed rule 
with comment period.

    b. Splitting Claims and Creation of ``Pseudo'' Single Procedure 
Claims
(1) Splitting Claims
    We then split the remaining claims into five groups: single majors; 
multiple majors; single minors; multiple minors; and other claims. 
(Specific definitions of these groups follow below.) For CY 2012, we 
are proposing to continue our current policy of defining major 
procedures as any HCPCS code having a status indicator of ``S,'' ``T,'' 
``V,'' or ``X;'' defining minor procedures as any code having a status 
indicator of ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' ``R,'' ``U,'' or ``N,'' 
and classifying ``other'' procedures as any code having a status 
indicator other than one that we have classified as major or minor. For 
CY 2012, we are proposing to continue assigning status indicator ``R'' 
to blood and blood products; status indicator ``U'' to brachytherapy 
sources; status indicator ``Q1'' to all ``STVX-packaged codes;'' status 
indicator ``Q2'' to all ``T-packaged codes;'' and status indicator 
``Q3'' to all codes that may be paid through a composite APC based on 
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. We are proposing to treat these 
codes in the same manner for data purposes for CY 2012 as we have 
treated them since CY 2008. Specifically, we are proposing to continue 
to evaluate whether the criteria for separate payment of codes with 
status indicator ``Q1'' or ``Q2'' are met in determining whether they 
are treated as major or minor codes. Codes with status indicator ``Q1'' 
or ``Q2'' are carried through the data either with status indicator 
``N'' as packaged or, if they meet the criteria for separate payment, 
they are given the status indicator of the APC to which they are 
assigned and are considered as ``pseudo'' single procedure claims for 
major codes. Codes assigned status indicator ``Q3'' are paid under 
individual APCs unless they occur in the combinations that qualify for 
payment as composite APCs and, therefore, they carry the status 
indicator of the individual APC to which they are assigned through the 
data process and are treated as major codes during both the split and 
``pseudo'' single creation process. The calculation of the median costs 
for composite APCs from multiple procedure major claims is discussed in 
section II.A.2.e. of this proposed rule.
    Specifically, we divided the remaining claims into the following 
five groups:
    1. Single Procedure Major Claims: Claims with a single separately 
payable procedure (that is, status indicator ``S,'' ``T,'' ``V,'' or 
``X,'' which includes codes with status indicator ``Q3''); claims with 
one unit of a status indicator ``Q1'' code (``STVX-packaged'') where 
there was no code with status indicator ``S,'' ``T,'' ``V,'' or ``X'' 
on the same claim on the same date; or claims with one unit of a status 
indicator ``Q2'' code (``T-packaged'') where there was no code with a 
status indicator ``T'' on the same claim on the same date.

[[Page 42186]]

    2. Multiple Procedure Major Claims: Claims with more than one 
separately payable procedure (that is, status indicator ``S,'' ``T,'' 
``V,'' or ``X,'' which includes codes with status indicator ``Q3''), or 
multiple units of one payable procedure. These claims include those 
codes with a status indicator ``Q2'' code (``T-packaged'') where there 
was no procedure with a status indicator ``T'' on the same claim on the 
same date of service but where there was another separately paid 
procedure on the same claim with the same date of service (that is, 
another code with status indicator ``S,'' ``V,'' or ``X''). We also 
include, in this set, claims that contained one unit of one code when 
the bilateral modifier was appended to the code and the code was 
conditionally or independently bilateral. In these cases, the claims 
represented more than one unit of the service described by the code, 
notwithstanding that only one unit was billed.
    3. Single Procedure Minor Claims: Claims with a single HCPCS code 
that was assigned status indicator ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' 
``R,'' ``U,'' or ``N'' and not status indicator ``Q1'' (``STVX-
packaged'') or status indicator ``Q2'' (``T-packaged'') code.
    4. Multiple Procedure Minor Claims: Claims with multiple HCPCS 
codes that are assigned status indicator ``F,'' ``G,'' ``H,'' ``K,'' 
``L,'' ``R,'' ``U,'' or ``N;'' claims that contain more than one code 
with status indicator ``Q1'' (``STVX-packaged'') or more than one unit 
of a code with status indicator ``Q1'' but no codes with status 
indicator ``S,'' ``T,'' ``V,'' or ``X'' on the same date of service; or 
claims that contain more than one code with status indicator ``Q2'' (T-
packaged), or ``Q2'' and ``Q1,'' or more than one unit of a code with 
status indicator ``Q2'' but no code with status indicator ``T'' on the 
same date of service.
    5. Non-OPPS Claims: Claims that contain no services payable under 
the OPPS (that is, all status indicators other than those listed for 
major or minor status). These claims were excluded from the files used 
for the OPPS. Non-OPPS claims have codes paid under other fee 
schedules, for example, durable medical equipment or clinical 
laboratory tests, and do not contain a code for a separately payable or 
packaged OPPS service. Non-OPPS claims include claims for therapy 
services paid sometimes under the OPPS but billed, in these non-OPPS 
cases, with revenue codes indicating that the therapy services would be 
paid under the Medicare Physician Fee Schedule (MPFS).
    The claims listed in numbers 1, 2, 3, and 4 above are included in 
the data file that can be purchased as described above. Claims that 
contain codes to which we have assigned status indicators ``Q1'' 
(``STVX-packaged'') and ``Q2'' (``T-packaged'') appear in the data for 
the single major file, the multiple major file, and the multiple minor 
file used in this proposed rule. Claims that contain codes to which we 
have assigned status indicator ``Q3'' (composite APC members) appear in 
both the data of the single and multiple major files used in this 
proposed rule, depending on the specific composite calculation.
(2) Creation of ``Pseudo'' Single Procedure Claims
    To develop ``pseudo'' single procedure claims for this proposed 
rule, we examined both the multiple procedure major claims and the 
multiple procedure minor claims. We first examined the multiple major 
procedure claims for dates of service to determine if we could break 
them into ``pseudo'' single procedure claims using the dates of service 
for all lines on the claim. If we could create claims with single major 
procedures by using dates of service, we created a single procedure 
claim record for each separately payable procedure on a different date 
of service (that is, a ``pseudo'' single).
    We also used the bypass codes listed in Addendum N to this proposed 
rule (which is referenced in section XVII. of this proposed rule and 
available via the Internet on the CMS Web site) and discussed in 
section II.A.1.b. of this proposed rule to remove separately payable 
procedures which we determined contained limited or no packaged costs 
or that were otherwise suitable for inclusion on the bypass list from a 
multiple procedure bill. As discussed above, we ignore the ``overlap 
bypass codes,'' that is, those HCPCS codes that are both on the bypass 
list and are members of the multiple imaging composite APCs, in this 
initial assessment for ``pseudo'' single procedure claims. The proposed 
CY 2012 ``overlap bypass codes'' are listed in Addendum N to this 
proposed rule (which is referenced in section XVII. of this proposed 
rule and available via the Internet on the CMS Web site). When one of 
the two separately payable procedures on a multiple procedure claim was 
on the bypass list, we split the claim into two ``pseudo'' single 
procedure claim records. The single procedure claim record that 
contained the bypass code did not retain packaged services. The single 
procedure claim record that contained the other separately payable 
procedure (but no bypass code) retained the packaged revenue code 
charges and the packaged HCPCS code charges. We also removed lines that 
contained multiple units of codes on the bypass list and treated them 
as ``pseudo'' single procedure claims by dividing the cost for the 
multiple units by the number of units on the line. Where one unit of a 
single, separately payable procedure code remained on the claim after 
removal of the multiple units of the bypass code, we created a 
``pseudo'' single procedure claim from that residual claim record, 
which retained the costs of packaged revenue codes and packaged HCPCS 
codes. This enabled us to use claims that would otherwise be multiple 
procedure claims and could not be used.
    We then assessed the claims to determine if the criteria for the 
multiple imaging composite APCs, discussed in section II.A.2.e.(5) of 
this proposed rule, were met. Where the criteria for the imaging 
composite APCs were met, we created a ``single session'' claim for the 
applicable imaging composite service and determined whether we could 
use the claim in ratesetting. For HCPCS codes that are both 
conditionally packaged and are members of a multiple imaging composite 
APC, we first assessed whether the code would be packaged and, if so, 
the code ceased to be available for further assessment as part of the 
composite APC. Because the packaged code would not be a separately 
payable procedure, we considered it to be unavailable for use in 
setting the composite APC median cost. Having identified ``single 
session'' claims for the imaging composite APCs, we reassessed the 
claim to determine if, after removal of all lines for bypass codes, 
including the ``overlap bypass codes,'' a single unit of a single 
separately payable code remained on the claim. If so, we attributed the 
packaged costs on the claim to the single unit of the single remaining 
separately payable code other than the bypass code to create a 
``pseudo'' single procedure claim. We also identified line-items of 
overlap bypass codes as a ``pseudo'' single procedure claim. This 
allowed us to use more claims data for ratesetting purposes.
    We also examined the multiple procedure minor claims to determine 
whether we could create ``pseudo'' single procedure claims. 
Specifically, where the claim contained multiple codes with status 
indicator ``Q1'' (``STVX-packaged'') on the same date of service or 
contained multiple units of a single code with status indicator ``Q1,'' 
we selected the status indicator ``Q1'' HCPCS code that had the highest 
CY

[[Page 42187]]

2011 relative weight, set the units to one on that HCPCS code to 
reflect our policy of paying only one unit of a code with a status 
indicator of ``Q1.'' We then packaged all costs for the following into 
a single cost for the ``Q1'' HCPCS code that had the highest CY 2011 
relative weight to create a ``pseudo'' single procedure claim for that 
code: Additional units of the status indicator ``Q1'' HCPCS code with 
the highest CY 2011 relative weight; other codes with status indicator 
``Q1''; and all other packaged HCPCS codes and packaged revenue code 
costs. We changed the status indicator for the selected code from the 
data status indicator of ``N'' to the status indicator of the APC to 
which the selected procedure was assigned for further data processing 
and considered this claim as a major procedure claim. We used this 
claim in the calculation of the APC median cost for the status 
indicator ``Q1'' HCPCS code.
    Similarly, where a multiple procedure minor claim contained 
multiple codes with status indicator ``Q2'' (``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 
2011 relative weight, set the units to one on that HCPCS code to 
reflect our policy of paying only one unit of a code with a status 
indicator of ``Q2.'' We then packaged all costs for the following into 
a single cost for the ``Q2'' HCPCS code that had the highest CY 2011 
relative weight to create a ``pseudo'' single procedure claim for that 
code: Additional units of the status indicator ``Q2'' HCPCS code with 
the highest CY 2011 relative weight; other codes with status indicator 
``Q2''; and other packaged HCPCS codes and packaged revenue code costs. 
We changed the status indicator for the selected code from a data 
status indicator of ``N'' to the status indicator of the APC to which 
the selected code was assigned, and we considered this claim as a major 
procedure claim.
    Where a multiple procedure minor claim contained multiple codes 
with status indicator ``Q2'' (``T-packaged'') and status indicator 
``Q1'' (``STVX-packaged''), we selected the T-packaged status indicator 
``Q2'' HCPCS code that had the highest relative weight for CY 2011 and 
set the units to one on that HCPCS code to reflect our policy of paying 
only one unit of a code with a status indicator of ``Q2.'' We then 
packaged all costs for the following into a single cost for the 
selected (``T packaged'') HCPCS code to create a ``pseudo'' single 
procedure claim for that code: Additional units of the status indicator 
``Q2'' HCPCS code with the highest CY 2011 relative weight; other codes 
with status indicator ``Q2''; codes with status indicator ``Q1'' 
(``STVX-packaged''); and other packaged HCPCS codes and packaged 
revenue code costs. We favor status indicator ``Q2'' over ``Q1'' HCPCS 
codes because ``Q2'' HCPCS codes have higher CY 2011 relative weights. 
If a status indicator ``Q1'' HCPCS code had a higher CY 2011 relative 
weight, it would become the primary code for the simulated single bill 
process. We changed the status indicator for the selected status 
indicator ``Q2'' (``T-packaged'') code from a data status indicator of 
``N'' to the status indicator of the APC to which the selected code was 
assigned and we considered this claim as a major procedure claim.
    We then applied our process for creating ``pseudo'' single 
procedure claims to the conditionally packaged codes that do not meet 
the criteria for packaging, which enabled us to create single procedure 
claims from them, where they meet the criteria for single procedure 
claims. Conditionally packaged codes are identified using status 
indicators ``Q1'' and ``Q2,'' and are described in section XI.A.1. of 
this proposed rule.
    Lastly, we excluded those claims that we were not able to convert 
to single procedure claims even after applying all of the techniques 
for creation of ``pseudo'' single procedure claims to multiple 
procedure major claims and to multiple procedure minor claims. As has 
been our practice in recent years, we also excluded claims that 
contained codes that were viewed as independently or conditionally 
bilateral and that contained the bilateral modifier (Modifier 50 
(Bilateral procedure)) because the line-item cost for the code 
represented the cost of two units of the procedure, notwithstanding 
that hospitals billed the code with a unit of one.
    We are proposing to continue to apply this methodology for the 
purpose of creating pseudo single procedure claims for CY 2012 OPPS.
c. Completion of Claim Records and Median Cost Calculations
    We then packaged the costs of packaged HCPCS codes (codes with 
status indicator ``N'' listed in Addendum B to this proposed rule 
(which is referenced in section XVII. of this proposed rule and 
available via the Internet on the CMS Web site) and the costs of those 
lines for codes with status indicator ``Q1'' or ``Q2'' when they are 
not separately paid), and the costs of the services reported under 
packaged revenue codes in Table 2 below that appeared on the claim 
without a HCPCS code into the cost of the single major procedure 
remaining on the claim.
    As noted in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation 
that CMS should review the final list of packaged revenue codes for 
consistency with OPPS policy and ensure that future versions of the I/
OCE edit accordingly. As we have in the past, we will continue to 
compare the final list of packaged revenue codes that we adopt for CY 
2012 to the revenue codes that the I/OCE will package for CY 2012 to 
ensure consistency.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68531), we replaced the NUBC standard abbreviations for the revenue 
codes listed in Table 2 of the CY 2009 OPPS/ASC proposed rule with the 
most current NUBC descriptions of the revenue code categories and 
subcategories to better articulate the meanings of the revenue codes 
without changing the proposed list of revenue codes. In the CY 2010 
OPPS/ASC final rule with comment period (74 FR 60362 through 60363), we 
finalized changes to the packaged revenue code list based on our 
examination of the updated NUBC codes and public comment to the CY 2010 
proposed list of packaged revenue codes. For CY 2012, as we did for CY 
2011, we reviewed the changes to revenue codes that were effective 
during CY 2010 for purposes of determining the charges reported with 
revenue codes but without HCPCS codes that we would propose to package 
for the CY 2012 OPPS. We believe that the charges reported under the 
revenue codes listed in Table 2 below continue to reflect ancillary and 
supportive services for which hospitals report charges without HCPCS 
codes. Therefore, for CY 2012, we are proposing to continue to package 
the costs that we derive from the charges reported without HCPCS code 
under the revenue codes displayed in Table 2 below for purposes of 
calculating the median costs on which the CY 2012 OPPS are based.

[[Page 42188]]

                                                    Table 2--Proposed CY 2012 Packaged Revenue Codes
--------------------------------------------------------------------------------------------------------------------------------------------------------
                  Revenue code                                                                  Description
--------------------------------------------------------------------------------------------------------------------------------------------------------
0250............................................  Pharmacy; General Classification.
0251............................................  Pharmacy; Generic Drugs.
0252............................................  Pharmacy; Non-Generic Drugs.
0254............................................  Pharmacy; Drugs Incident to Other Diagnostic Services.
0255............................................  Pharmacy; Drugs Incident to Radiology.
0257............................................  Pharmacy; Non-Prescription.
0258............................................  Pharmacy; IV Solutions.
0259............................................  Pharmacy; Other Pharmacy.
0260............................................  IV Therapy; General Classification.
0261............................................  IV Therapy; Infusion Pump.
0262............................................  IV Therapy; IV Therapy/Pharmacy Svcs.
0263............................................  IV Therapy; IV Therapy/Drug/Supply Delivery.
0264............................................  IV Therapy; IV Therapy/Supplies.
0269............................................  IV Therapy; Other IV Therapy.
0270............................................  Medical/Surgical Supplies and Devices; General Classification.
0271............................................  Medical/Surgical Supplies and Devices; Non-sterile Supply.
0272............................................  Medical/Surgical Supplies and Devices; Sterile Supply.
0275............................................  Medical/Surgical Supplies and Devices; Pacemaker.
0276............................................  Medical/Surgical Supplies and Devices; Intraocular Lens.
0278............................................  Medical/Surgical Supplies and Devices; Other Implants.
0279............................................  Medical/Surgical Supplies and Devices; Other Supplies/Devices.
0280............................................  Oncology; General Classification.
0289............................................  Oncology; Other Oncology.
0343............................................  Nuclear Medicine; Diagnostic Radiopharmaceuticals.
0344............................................  Nuclear Medicine; Therapeutic Radiopharmaceuticals.
0370............................................  Anesthesia; General Classification.
0371............................................  Anesthesia; Anesthesia Incident to Radiology.
0372............................................  Anesthesia; Anesthesia Incident to Other DX Services.
0379............................................  Anesthesia; Other Anesthesia.
0390............................................  Administration, Processing and Storage for Blood and Blood Components; General Classification.
0392............................................  Administration, Processing and Storage for Blood and Blood Components; Processing and Storage.
0399............................................  Administration, Processing and Storage for Blood and Blood Components; Other Blood Handling.
0621............................................  Medical Surgical Supplies--Extension of 027X; Supplies Incident to Radiology.
0622............................................  Medical Surgical Supplies--Extension of 027X; Supplies Incident to Other DX Services.
0623............................................  Medical Supplies--Extension of 027X, Surgical Dressings.
0624............................................  Medical Surgical Supplies--Extension of 027X; FDA Investigational Devices.
0630............................................  Pharmacy--Extension of 025X; Reserved.
0631............................................  Pharmacy--Extension of 025X; Single Source Drug.
0632............................................  Pharmacy--Extension of 025X; Multiple Source Drug.
0633............................................  Pharmacy--Extension of 025X; Restrictive Prescription.
0681............................................  Trauma Response; Level I Trauma.
0682............................................  Trauma Response; Level II Trauma.
0683............................................  Trauma Response; Level III Trauma.
0684............................................  Trauma Response; Level IV Trauma.
0689............................................  Trauma Response; Other.
0700............................................  Cast Room; General Classification.
0710............................................  Recovery Room; General Classification.
0720............................................  Labor Room/Delivery; General Classification.
0721............................................  Labor Room/Delivery; Labor.
0732............................................  EKG/ECG (Electrocardiogram); Telemetry.
0762............................................  Specialty Services; Observation Hours.
0801............................................  Inpatient Renal Dialysis; Inpatient Hemodialysis.
0802............................................  Inpatient Renal Dialysis; Inpatient Peritoneal Dialysis (Non-CAPD).
0803............................................  Inpatient Renal Dialysis; Inpatient Continuous Ambulatory Peritoneal Dialysis (CAPD).
0804............................................  Inpatient Renal Dialysis; Inpatient Continuous Cycling Peritoneal Dialysis (CCPD).
0809............................................  Inpatient Renal Dialysis; Other Inpatient Dialysis.
0810............................................  Acquisition of Body Components; General Classification.
0819............................................  Inpatient Renal Dialysis; Other Donor.
0821............................................  Hemodialysis--Outpatient or Home; Hemodialysis Composite or Other Rate.
0824............................................  Hemodialysis--Outpatient or Home; Maintenance--100%.
0825............................................  Hemodialysis--Outpatient or Home; Support Services.
0829............................................  Hemodialysis--Outpatient or Home; Other OP Hemodialysis.

[[Page 42189]]

 
0942............................................  Other Therapeutic Services (also see 095X, an extension of 094x); Education/Training.
0943............................................  Other Therapeutic Services (also see 095X, an extension of 094X), Cardiac Rehabilitation.
0948............................................  Other Therapeutic Services (also see 095X, an extension of 094X), Pulmonary Rehabilitation.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    In accordance with our longstanding policy, we are proposing to 
continue to exclude: (1) Claims that had zero costs after summing all 
costs on the claim; and (2) claims containing packaging flag number 3. 
Effective for services furnished on or after July 1, 2004, the I/OCE 
assigned packaging flag number 3 to claims on which hospitals submitted 
token charges less than $1.01 for a service with status indicator ``S'' 
or ``T'' (a major separately payable service under the OPPS) for which 
the fiscal intermediary or MAC was required to allocate the sum of 
charges for services with a status indicator equaling ``S'' or ``T'' 
based on the relative weight of the APC to which each code was 
assigned. We do not believe that these charges, which were token 
charges as submitted by the hospital, are valid reflections of hospital 
resources. Therefore, we deleted these claims. We also deleted claims 
for which the charges equaled the revenue center payment (that is, the 
Medicare payment) on the assumption that, where the charge equaled the 
payment, to apply a CCR to the charge would not yield a valid estimate 
of relative provider cost. We are proposing to continue these processes 
for the CY 2012 OPPS.
    For the remaining claims, we then standardized 60 percent of the 
costs of the claim (which we have previously determined to be the 
labor-related portion) for geographic differences in labor input costs. 
We made this adjustment by determining the wage index that applied to 
the hospital that furnished the service and dividing the cost for the 
separately paid HCPCS code furnished by the hospital by that wage 
index. The claims accounting that we provide for the proposed and final 
rule contains the formula we use to standardize the total cost for the 
effects of the wage index. As has been our policy since the inception 
of the OPPS, we are proposing to use the 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 median costs.
    In accordance with our longstanding practice, we also excluded 
single and pseudo single procedure claims for which the total cost on 
the claim was outside 3 standard deviations from the geometric mean of 
units for each HCPCS code on the bypass list (because, as discussed 
above, we used claims that contain multiple units of the bypass codes).
    After removing claims for hospitals with error CCRs, claims without 
HCPCS codes, claims for immunizations not covered under the OPPS, and 
claims for services not paid under the OPPS, approximately 102 million 
claims were left. Using these 102 million claims, we created 
approximately 100 million single and ``pseudo'' single procedure 
claims, of which we used slightly more than 99.5 million single bills 
(after trimming out approximately 888,000 claims as discussed above in 
this section) in the proposed CY 2012 median development and 
ratesetting.
    We used these claims to calculate the proposed CY 2012 median costs 
for each separately payable HCPCS code and each APC. The comparison of 
HCPCS code-specific and APC medians determines the applicability of the 
2 times rule. Section 1833(t)(2) of the Act provides that, subject to 
certain exceptions, the items and services within an APC group cannot 
be considered comparable with respect to the use of resources if the 
highest median (or mean cost, if elected by the Secretary) for an item 
or service in the group is more than 2 times greater than the lowest 
median cost for an item or service within the same group (the 2 times 
rule). We note that, for purposes of identifying significant HCPCS for 
examination in the 2 times rule, we consider codes that have more than 
1,000 single major claims or codes that have both greater than 99 
single major claims and contribute at least 2 percent of the single 
major claims used to establish the APC median cost to be significant 
(75 FR 71832). This longstanding definition of when a HCPCS code is 
significant for purposes of the 2 times rule was selected because we 
believe that a subset of 1,000 claims is negligible within the set of 
approximately 100 million single procedure or single session claims we 
use for establishing median costs. Similarly, a HCPCS code for which 
there are fewer than 99 single bills and which comprises less than 2 
percent of the single major claims within an APC will have a negligible 
impact on the APC median. Unlisted codes are not used in establishing 
the percent of claims contributing to the APC, nor are their costs used 
in the calculation of the APC median. Finally, we reviewed the median 
costs for the services for which we are proposing to pay separately 
under this proposed rule, and we reassigned HCPCS codes to different 
APCs where it was necessary to ensure clinical and resource homogeneity 
within the APCs. Section III. of this proposed rule includes a 
discussion of many of the HCPCS code assignment changes that resulted 
from examination of the median costs and for other reasons. The APC 
medians were recalculated after we reassigned the affected HCPCS codes. 
Both the HCPCS code-specific medians and the APC medians were weighted 
to account for the inclusion of multiple units of the bypass codes in 
the creation of ``pseudo'' single procedure claims.
    As we discuss in sections II.A.2.d. and II.A.2.e. and in section 
VIII.B. of this proposed rule, in some cases, APC median costs are 
calculated using variations of the process outlined above. 
Specifically, section II.A.2.d. of this proposed rule addresses the 
proposed calculation of single APC criteria-based median costs. Section 
II.A.2.e. of this proposed rule discusses the proposed calculation of 
composite APC criteria-based median costs. Section VIII.B. of this 
proposed rule addresses the methodology for calculating the proposed 
median costs for partial hospitalization services.
    APC Panel Recommendations Regarding Data Development: At the 
February 28-March 1, 2011 APC Panel Meeting, we provided the APC Panel 
Data Subcommittee with a list of all APCs fluctuating by greater than 
10 percent when comparing the CY 2011

[[Page 42190]]

OPPS final rule median costs based on CY 2009 claims processed through 
June 30, 2010, to those based on CY 2010 OPPS/ASC final rule data (CY 
2008 claims processed through June 30, 2009). We included explanatory 
data where possible to allow the Data Subcommittee to focus on APC 
median changes that required more investigation, based on its request 
(75 FR 71834). The APC Panel Data Subcommittee reviewed the 
fluctuations in the APC median costs but did not express particular 
concerns with the median cost changes.
    We also provided the APC Panel Data Subcommittee with a summary of 
cost and CCR data related to the Myocardial Positron Emission 
Tomography (PET) imaging APC, APC 0307, as well as the associated 
diagnostic radiopharmaceutical, Rb82 rubidium, based on a request for 
data related to the decline in the APC median cost from the CY 2010 
OPPS final rule to the CY 2011 OPPS proposed rule. The Data 
Subcommittee noted a decline in the CCRs associated with the HCPCS 
codes in APC 0307, as well as declines in the line-item costs of the 
associated diagnostic radiopharmaceutical.
    At the February 28-March 1, 2011 APC Panel Meeting, the APC Panel 
made a number of recommendations related to the data process. The 
Panel's recommendations and our responses follow.
    Recommendation 1: The Panel commends the CMS staff for responding 
to the data requests of the Data Subcommittee.
    CMS Response to Recommendation 1: We appreciate this 
recommendation.
    Recommendation 2: The Panel recommends that the work of the Data 
Subcommittee continue.
    CMS Response to Recommendation 2: We are accepting this 
recommendation.
    Recommendation 3: The Panel recommends that Agatha Nolen, D.Ph., 
M.S., F.A.S.H.P., serve as acting chairperson for the winter 2011 
meeting of the Data Subcommittee.
    CMS Response to Recommendation 3: We are accepting this 
recommendation.
d. Proposed Calculation of Single Procedure APC Criteria-Based Median 
Costs
(1) Device-Dependent APCs
    Device-dependent APCs are populated by HCPCS codes that usually, 
but not always, require that a device be implanted or used to perform 
the procedure. For a full history of how we have calculated payment 
rates for device-dependent APCs in previous years and a detailed 
discussion of how we developed the standard 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).
    For CY 2012, we are proposing to use the standard methodology for 
calculating median costs for device-dependent APCs that was finalized 
in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71834 
through 71837). (We refer readers to sections II.D.6. and II.A.e.6. of 
this proposed rule for detailed explanations of the proposed 
nonstandard methodology regarding cardiac resynchronization therapy.) 
This methodology utilizes claims data that generally represent the full 
cost of the required device. Specifically, we are proposing to 
calculate the median costs for device-dependent APCs for CY 2012 using 
only the subset of single procedure claims from CY 2010 claims data 
that pass the procedure-to-device and device-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, supplier, or practitioner, or where a full credit was 
received; and do not contain the ``FC'' modifier signifying that the 
hospital received partial credit for the device. The procedure-to-
device edits require that when a particular procedural HCPCS code is 
billed, the claim must also contain an appropriate device code, while 
the device-to-procedure edits require that a claim that contains one of 
a specified set of device codes also contain an appropriate procedure 
code. We continue to believe the standard methodology for calculating 
median costs for device-dependent APCs gives us the most appropriate 
median costs for device-dependent APCs in which the hospital incurs the 
full cost of the device.
    Table 3 below lists the APCs for which we are proposing to use our 
standard device-dependent APC ratesetting methodology (as explained in 
the CY 2011 OPPS/ASC final rule with comment period (75 FR 71834 
through 71837)) for CY 2012. We note that there are five proposed 
device-dependent APC title changes and one proposed deletion for CY 
2012. As discussed in detail in section II.A.2.d.(6) of this proposed 
rule, we are proposing to change the title of APC 0083 from ``Coronary 
or Non-Coronary Angioplasty and Percutaneous Valvuloplasty'' to ``Level 
I Endovascular Revascularization of the Lower Extremity''; the title of 
APC 0229 from ``Transcatheter Placement of Intravascular Shunt and 
Stents'' to ``Level II Endovascular Revascularization of the Lower 
Extremity''; and the title of APC 0319 from ``Endovascular 
Revascularization of the Lower Extremity'' to ``Level III Endovascular 
Revascularization of the Lower Extremity.'' We also are proposing to 
change the title of APC 0040 from ``Percutaneous Implantation of 
Neurostimulator Electrodes'' to ``Level I Implantation/Revision/
Replacement of Neurostimulator Electrodes,'' and the title of APC 0061 
from ``Laminectomy, Laparoscopy, or Incision for Implantation of 
Neurostimulator Electrodes'' to ``Level II Implantation/Revision/
Replacement of Neurostimulator Electrodes,'' as discussed in section 
III.D.1. of this proposed rule. In addition, as discussed in section 
II.A.2.e.(6) of this proposed rule, we are proposing to delete APC 0418 
(Insertion of Left Ventricular Pacing Electrode) for CY 2012.
    As we discuss in detail in section III.D.6. of this proposed rule, 
we are proposing to limit the payment for services that are assigned to 
APC 0108 to the proposed IPPS standardized payment amount for MS-DRG 
227 (Cardiac Defibrillator Implant without Cardiac Catheterization and 
without Medical Complications and Comorbidities) because we do not 
believe that it would be equitable to pay more under the OPPS for 
services assigned to APC 0108 than under the IPPS. In other words, we 
are proposing to pay APC 0108 at the lesser of the APC 0108 median cost 
or the IPPS standardized payment rate for MS-DRG 227. We are proposing 
to continue to apply the device edits and other standard features of 
the device-dependent APCs to APC 0108, but we are proposing to limit 
the payment amount under the OPPS to the amount of payment established 
for MS-DRG 227 under the IPPS.
    We refer readers to Addendum A to this proposed rule (which is 
referenced in section XVII. of this proposed rule and available via the 
Internet on the CMS Web site) for the proposed payment rates for these 
APCs for CY 2012.

[[Page 42191]]

                                                     Table 3--Proposed CY 2012 Device-Dependent APCS
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                        Proposed  CY 2012
        Proposed CY 2012 APC            status  indicator                                     Proposed CY 2012 APC title
--------------------------------------------------------------------------------------------------------------------------------------------------------
0039...............................  S                        Level I Implantation of Neurostimulator Generator.
0040...............................  S                        Level I Implantation/Revision/Replacement of Neurostimulator Electrodes.
0061...............................  S                        Level II Implantation/Revision/Replacement of Neurostimulator Electrodes.
0082...............................  T                        Coronary or Non-Coronary Atherectomy.
0083...............................  T                        Level I Endovascular Revascularization of the Lower Extremity.
0084...............................  S                        Level I Electrophysiologic Procedures.
0085...............................  T                        Level II Electrophysiologic Procedures.
0086...............................  T                        Level III Electrophysiologic Procedures.
0089...............................  T                        Insertion/Replacement of Permanent Pacemaker and Electrodes.
0090...............................  T                        Insertion/Replacement of Pacemaker Pulse Generator.
0104...............................  T                        Transcatheter Placement of Intracoronary Stents.
0106...............................  T                        Insertion/Replacement of Pacemaker Leads and/or Electrodes.
0107...............................  T                        Insertion of Cardioverter-Defibrillator.
0108 *.............................  T                        Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing Electrodes.
0115...............................  T                        Cannula/Access Device Procedures.
0202...............................  T                        Level VII Female Reproductive Procedures.
0227...............................  T                        Implantation of Drug Infusion Device.
0229...............................  T                        Level II Endovascular Revascularization of the Lower Extremity.
0259...............................  T                        Level VII ENT Procedures.
0293...............................  T                        Level V Anterior Segment Eye Procedures.
0315...............................  S                        Level II Implantation of Neurostimulator Generator.
0318...............................  S                        Implantation of Cranial Neurostimulator Pulse Generator and Electrode.
0319...............................  T                        Level III Endovascular Revascularization of the Lower Extremity.
0384...............................  T                        GI Procedures with Stents.
0385...............................  S                        Level I Prosthetic Urological Procedures.
0386...............................  S                        Level II Prosthetic Urological Procedures.
0425...............................  T                        Level II Arthroplasty or Implantation with Prosthesis.
0427...............................  T                        Level II Tube or Catheter Changes or Repositioning.
0622...............................  T                        Level II Vascular Access Procedures.
0623...............................  T                        Level III Vascular Access Procedures.
0648...............................  T                        Level IV Breast Surgery.
0652...............................  T                        Insertion of Intraperitoneal and Pleural Catheters.
0653...............................  T                        Vascular Reconstruction/Fistula Repair with Device.
0654...............................  T                        Insertion/Replacement of a Permanent Dual Chamber Pacemaker.
0655...............................  T                        Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker.
0656...............................  T                        Transcatheter Placement of Intracoronary Drug-Eluting Stents.
0674...............................  T                        Prostate Cryoablation.
0680...............................  S                        Insertion of Patient Activated Event Recorders.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* OPPS CY 2012 payment for APC 0108 is proposed to be paid at the lesser of the APC 0108 median cost or the standardized payment rate for MS-DRG 227
  under the IPPS. We refer readers to section III.D.6. of this proposed rule for more information.

(2) Blood and Blood Products
    Since the implementation of the OPPS in August 2000, we have made 
separate payments for blood and blood products through APCs rather than 
packaging payment for them into payments for the procedures with which 
they are administered. Hospital payments for the costs of blood and 
blood products, as well as for the costs of collecting, processing, and 
storing blood and blood products, are made through the OPPS payments 
for specific blood product APCs.
    For CY 2012, we are proposing to continue to establish payment 
rates for blood and blood products using our blood-specific CCR 
methodology, which utilizes actual or simulated CCRs from the most 
recently available hospital cost reports to convert hospital charges 
for blood and blood products to costs. This methodology has been our 
standard ratesetting methodology for blood and blood products since CY 
2005. It was developed in response to data analysis indicating that 
there was a significant difference in CCRs for those hospitals with and 
without blood-specific cost centers, and past public comments 
indicating that the former OPPS policy of defaulting to the overall 
hospital CCR for hospitals not reporting a 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 are 
proposing to continue to simulate blood CCRs for each hospital that 
does not report a blood cost center by calculating the ratio of the 
blood-specific CCRs to hospitals' overall CCRs for those hospitals that 
do report costs and charges for blood cost centers. We would then apply 
this mean ratio to the overall CCRs of hospitals not reporting costs 
and charges for blood cost centers on their cost reports in order to 
simulate blood-specific CCRs for those hospitals. We calculated the 
median costs upon which the proposed CY 2012 payment rates for blood 
and blood products are based using the actual blood-specific CCR for 
hospitals that reported costs and charges for a blood cost center and a 
hospital-specific

[[Page 42192]]

simulated blood-specific CCR for hospitals that did not report costs 
and charges for a blood cost center.
    We continue to believe the hospital-specific, blood-specific CCR 
methodology best responds to the absence of a blood-specific CCR for a 
hospital than alternative methodologies, such as defaulting to the 
overall hospital CCR or applying an average blood-specific CCR across 
hospitals. Because this methodology takes into account the unique 
charging and cost accounting structure of each hospital, we believe 
that it yields more accurate estimated costs for these products. We 
believe that continuing with this methodology in CY 2012 would result 
in median costs for blood and blood products that appropriately reflect 
the relative estimated costs of these products for hospitals without 
blood cost centers and, therefore, for these blood products in general.
    We refer readers to Addendum B to this proposed rule (which is 
referenced in section XVII. of this proposed rule and available via the 
Internet on the CMS Web site) for the proposed CY 2012 payment rates 
for blood and blood products (which are identified with status 
indicator ``R''). For a more detailed discussion of the blood-specific 
CCR methodology, we refer readers to the CY 2005 OPPS proposed rule (69 
FR 50524 through 50525). For a full history of OPPS payment for blood 
and blood products, we refer readers to the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66807 through 66810).
(3) Allergy Tests (APCs 0370 and 0381)
    We are proposing to continue with our methodology of 
differentiating single allergy tests (``per test'') from multiple 
allergy tests (``per visit'') by assigning these services to two 
different APCs to provide accurate payments for these tests in CY 2012. 
Multiple allergy tests are currently assigned to APC 0370 (Allergy 
Tests), with a median cost calculated based on the standard OPPS 
methodology. For CY 2012, we are proposing to continue to use the 
standard OPPS methodology to set the APC payment rate for APC 0370, 
which has a proposed APC median cost of approximately $97 based on 283 
claims.
    We provided billing guidance in CY 2006 in Transmittal 804 (issued 
on January 3, 2006) specifically clarifying that hospitals should 
report charges for the CPT codes that describe single allergy tests to 
reflect charges ``per test'' rather than ``per visit'' and should bill 
the appropriate number of units (as defined in the CPT code descriptor) 
of these CPT codes to describe all of the tests provided. Services 
assigned to APC 0381 (Single Allergy Tests) reflect the CPT codes that 
describe single allergy tests in which CPT instructions direct 
providers to specify the number of tests performed, whereas the 
procedures in APC 0370 describe multiple allergy tests per encounter; 
therefore, for these procedures, only one unit of the service is billed 
even if multiple tests are performed. Our CY 2010 claims data available 
for this proposed rule for APC 0381 do not reflect improved and more 
consistent hospital billing practices of ``per test'' for single 
allergy tests. The median cost of APC 0381 calculated for this proposed 
rule according to the standard single claims OPPS methodology, is 
approximately $51, significantly higher than the CY 2011 OPPS/ASC final 
rule median cost of approximately $33 that was calculated according to 
the ``per unit'' methodology, and greater than we would expect for 
these procedures that are to be reported ``per test'' with the 
appropriate number of units. Some claims for single allergy tests still 
appear to provide charges that represent a ``per visit'' charge, rather 
than a ``per test'' charge. Therefore, consistent with our payment 
policy for single allergy tests since CY 2006, we calculated a proposed 
``per unit'' median cost for APC 0381, based upon 601 claims containing 
multiple units or multiple occurrences of a single CPT code. The 
proposed CY 2012 median cost for APC 0381 using the ``per unit'' 
methodology is approximately $34. For a full discussion of the ``per 
unit'' methodology for APC 0381, we refer readers to the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66737).
(4) Hyperbaric Oxygen Therapy (APC 0659)
    Since the implementation of OPPS in August 2000, the OPPS has 
recognized HCPCS code C1300 (Hyperbaric oxygen under pressure, full 
body chamber, per 30-minute interval) for hyperbaric oxygen therapy 
(HBOT) provided in the hospital outpatient setting. In the CY 2005 
final rule with comment period (69 FR 65758 through 65759), we 
finalized a ``per unit'' median cost calculation for APC 0659 
(Hyperbaric Oxygen) using only claims with multiple units or multiple 
occurrences of HCPCS code C1300 because delivery of a typical HBOT 
service requires more than 30-minutes. We observed that claims with 
only a single occurrence of the code were anomalies, either because 
they reflected terminated sessions or because they were incorrectly 
coded with a single unit. In the same rule, we also established that 
HBOT would not generally be furnished with additional services that 
might be packaged under the standard OPPS APC median cost methodology. 
This enabled us to use claims with multiple units or multiple 
occurrences. Finally, we also used each hospital's overall CCR to 
estimate costs for HCPCS code C1300 from billed charges rather than the 
CCR for the respiratory therapy or other departmental cost centers. Our 
rationale for using the hospital's overall CCR can be found in the CY 
2005 OPPS final rule with comment period (69 FR 65758 through 65759). 
The public comments on the CY 2005 OPPS proposed rule effectively 
demonstrated that hospitals report the costs and charges for HBOT in a 
wide variety of cost centers. Since CY 2005, we have used this 
methodology to estimate the median cost for HBOT. The median costs of 
HBOT using this methodology have been relatively stable for several 
years.
    For CY 2012, we are proposing to continue using the same 
methodology to estimate a ``per unit'' median cost for HCPCS code 
C1300. This methodology results in a proposed APC median cost of 
approximately $107 using 370,519 claims with multiple units or multiple 
occurrences for HCPCS code C1300 for CY 2012.
(5) Payment for Ancillary Outpatient Services When Patient Expires (APC 
0375)
    In the November 1, 2002 final rule with comment period (67 FR 
66798), we discussed the creation of the new HCPCS modifier ``-CA'' to 
address situations where a procedure on the OPPS inpatient list must be 
performed to resuscitate or stabilize a patient (whose status is that 
of an outpatient) with an emergent, life-threatening condition, and the 
patient dies before being admitted as an inpatient. HCPCS modifier ``-
CA'' is defined as a procedure payable only in the inpatient setting 
when performed emergently on an outpatient who expires prior to 
admission. In Transmittal A-02-129, issued on January 3, 2003, we 
instructed hospitals on the use of this modifier. For a complete 
description of the history of the policy and the development of the 
payment methodology for these services, we refer readers to the CY 2007 
OPPS final rule with comment period (71 FR 68157 through 68158).
    For CY 2012, we are proposing to continue to use our established 
ratesetting methodology for calculating the median cost of APC 0375 
(Ancillary Outpatient Services When Patient Expires) and to continue to 
make one payment under APC 0375 for the

[[Page 42193]]

services that meet the specific conditions for using HCPCS modifier ``-
CA.'' That is, we are proposing to calculate the relative payment 
weight for APC 0375 by using all claims reporting a status indicator 
``C'' (inpatient procedures)appended with HCPCS modifier ``-CA.'' For 
the history and detailed explanation of the methodology, we refer 
readers to the CY 2004 OPPS final rule (68 FR 63467 through 63468), We 
continue to believe that this established ratesetting methodology 
results in the most appropriate aggregate median cost for the ancillary 
services provided in these unusual clinical situations.
    We believe that hospitals are reporting the HCPCS modifier ``-CA'' 
according to the policy initially established in CY 2003. We note that 
the claims frequency for APC 0375 has been relatively stable over the 
past few years. We note that the median cost for APC 0375 has decreased 
based on the CY 2010 OPPS claims data used for the development of the 
proposed rates for CY 2012 compared to that for CY 2011. Variation in 
the median cost for APC 0375 is expected because of the small number of 
claims and because the specific cases are grouped by the presence of 
the HCPCS modifier ``-CA'' appended to an inpatient only procedure and 
not according to the standard APC criteria of clinical and resource 
homogeneity. Cost variation for APC 0375 from year to year is 
anticipated and acceptable as long as hospitals continue judicious 
reporting of the HCPCS modifier ``-CA.'' Table 4 below shows the number 
of claims, and the median costs for APC 0375 for CYs 2007, 2008, 2009, 
2010, and 2011, and the proposed median cost for APC 0375 for CY 2012. 
For CY 2012, we are proposing a median cost of approximately $5,711 for 
APC 0375 based on 155 claims.

TABLE 4--Claims for Ancillary Outpatient Services When Patient Expires (-
                 CA Modifier) for CYs 2007 Through 2012
------------------------------------------------------------------------
                                                 Number of    APC median
           Prospective payment year                claims        cost
------------------------------------------------------------------------
CY 2007.......................................          260       $3,549
CY 2008.......................................          183        4,945
CY 2009.......................................          168        5,545
CY 2010.......................................          182        5,911
CY 2011.......................................          168        6,304
CY 2012.......................................          155       5,711*
------------------------------------------------------------------------
*Proposed median cost.
 

(6) Endovascular Revascularization of the Lower Extremity (APCs 0083, 
0229, and 0319)
    For the CY 2011 update, the AMA's CPT Editorial Panel created 16 
new CPT codes in the Endovascular Revascularization section of the 2011 
CPT code book to describe endovascular revascularization procedures of 
the lower extremity performed for occlusive disease. In the CY 2011 
OPPS/ASC final rule with comment period (75 FR 71841 through 71845), we 
discussed the process and methodology by which we assigned the new CY 
2011 endovascular revascularization CPT codes to APCs that we believe 
are comparable with respect to clinical characteristics and resources 
required to furnish the services. Specifically, we were able to use the 
existing CY 2009 hospital outpatient claims data and most recent cost 
report data to create simulated medians for 12 of the 16 new separately 
payable codes for CY 2011. Because the endovascular revascularization 
CPT codes are new for CY 2011, we used our CY 2009 single and 
``pseudo'' single claims data to simulate the new CY 2011 CPT code 
definitions. As shown in Table 7 of the CY 2011 OPPS/ASC final rule 
with comment period (75 FR 71844), many of the new endovascular 
revascularization CPT codes were previously reported using a 
combination of CY 2009 CPT codes. In order to simulate median costs, we 
selected claims that we believe meet the definition for each of the new 
endovascular revascularization CPT codes. Table 7 showed the criteria 
we applied to select a claim to be used in the calculation of the 
median cost for the new codes (shown in Column A). As we stated in the 
CY 2011 OPPS/ASC final rule with comment period (75 FR 71842), we 
developed these criteria based on our clinicians' understanding of 
services that were reported by CY 2009 CPT codes that, in various 
combinations, reflect the services provided that are described by the 
new CPT codes for CY 2011.
    After determining the simulated median costs for the procedures, we 
assigned each CPT code to appropriate APCs based on their clinical 
homogeneity and resource use. Of the 16 new codes, we assigned 9 CPT 
codes to APC 0083 (Coronary or Non-Coronary Angioplasty and 
Percutaneous Valvuloplasty) and 5 CPT codes to APC 0229 (Transcatheter 
Placement of Intravascular Shunts), and created new APC 0319 
(Endovascular Revascularization of the Lower Extremity) for 2 CPT 
codes. Table 8 of the CY 2011 OPPS/ASC final rule with comment period 
displayed their final CY 2011 APC assignments and CPT median costs (75 
FR 71845). We noted that because these CPT codes are new for CY 2011, 
they are identified with comment indicator ``NI'' in Addendum B to the 
CY 2011 OPPS/ASC final rule with comment period to identify them as a 
new interim APC assignment for the new year and subject to public 
comment. We specifically requested public comment on our methodology 
for simulating the median costs for these new CY 2011 CPT codes in 
addition to public comments on the payment rates themselves (75 FR 
71845).
    At its February 28-March 1, 2011 meeting, the APC Panel recommended 
that CMS provide data to allow the Panel to investigate and monitor the 
APC weights for the lower extremity revascularization procedures in 
light of CPT coding changes for CY 2011. We are accepting the APC 
Panel's recommendation and will provide additional data to the Panel at 
an upcoming meeting.
    For CY 2012, we are proposing to continue with the CY 2011 
methodology that was described previously in this section in 
determining the APC assignments for the CPT codes that describe 
endovascular revascularization of the lower extremity. The predecessor 
endovascular revascularization CPT codes were in existence prior to CY 
2011 and were assigned to APCs based on claims data and cost report 
data. Given that these data are available for the services described by 
the predecessor endovascular revascularization CPT codes, we are 
proposing to continue for CY 2012 to use the existing hospital 
outpatient claims and cost report data from the previous endovascular 
revascularization CPT codes to simulate an estimated median cost for 
the new endovascular revascularization CPT codes in determining the 
appropriate APC assignments. As has been our practice since the 
implementation of the OPPS in 2000, we review our latest claims data 
for ratesetting and, if necessary, revise the APC assignments for the 
upcoming year. In this case, review of the procedures with significant 
claims data in APC 0083 showed a 2 times rule violation. Specifically, 
APC 0083, as it was initially configured, showed that the range of the 
CPT median costs for the procedures with significant claims data was 
approximately between $3,252 (for CPT code 35476 (Transluminal balloon 
angioplasty, percutaneous; venous)) and $7,174 (for CPT code 37221 
(Revascularization, endovascular, open or percutaneous, iliac artery, 
unilateral, initial vessel; with

[[Page 42194]]

transluminal stent placement(s), includes angioplasty within the same 
vessel, when performed)), resulting in a 2 times rule violation. 
Because of its median cost, we believe that CPT code 37221 would be 
more appropriately placed in APC 0229, which had an initial estimated 
median cost of approximately $8,606, based on the clinical and resource 
characteristics of other procedures also assigned to APC 0229. 
Therefore, for CY 2012, we are proposing to revise the APC assignment 
for CPT code 37221, from APC 0083 to APC 0229, to accurately reflect 
the cost and clinical feature of the procedure. This proposed 
reassignment of CPT code 37221 from APC 0083 to APC 0029 eliminates the 
2 times rule violation for APC 0083 noted above. Based on this 
reconfiguration, the CY 2010 claims data available for this proposed 
rule were used to calculate a median cost of approximately $4,683 for 
APC 0083, approximately $8,218 for APC 0229, and approximately $14,556 
for APC 0319. All three proposed median costs for CY 2012 are 
significantly greater than the CY 2011 OPPS/ASC final rule median costs 
of approximately $3,740 for APC 0083, approximately $7,940 for APC 
0229, and approximately $13,751 for APC 0319.
    In addition, we are proposing to revise the APC titles for APCs 
0083, 0229, and 0319 to better describe the procedures assigned to 
these APCs. Specifically, we are proposing to revise the APC title for 
APC 0083 from ``Coronary or Non-Coronary Angioplasty and Percutaneous 
Valvuloplasty'' to ``Level I Endovascular Revascularization of the 
Lower Extremity''; for APC 0229, from ``Transcatheter Placement of 
Intravascular Shunt and Stents'' to ``Level II Endovascular 
Revascularization of the Lower Extremity''; and for APC 0319, from 
``Endovascular Revascularization of the Lower Extremity'' to ``Level 
III Endovascular Revascularization of the Lower Extremity.''
    We are soliciting public comments on the proposed status indicators 
and APC assignments for the endovascular revascularization of the lower 
extremity CPT codes. Table 5 below lists the endovascular 
revascularization of the lower extremity CPT codes along with their 
proposed status indicator and APC assignments for CY 2012.

              Table 5--Proposed APCS To Which Endovascular Revascularization of the Lower Extremity CPT Codes Would Be Assigned for CY 2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                            Proposed CY
         CY 2011 HCPCS code               CY 2011 short descriptor             CY 2011 SI          CY 2011 APC     Proposed CY 2012 SI       2012 APC
--------------------------------------------------------------------------------------------------------------------------------------------------------
37220...............................  Iliac revasc....................  T                                  0083  T                                  0083
37221...............................  Iliac revasc w/stent............  T                                  0083  T                                  0229
37222...............................  Iliac revasc add-on.............  T                                  0083  T                                  0083
37223...............................  Iliac revasc w/stent add-on.....  T                                  0083  T                                  0083
37224...............................  Fem/popl revas w/tla............  T                                  0083  T                                  0083
37225...............................  Fem/popl revas w/ather..........  T                                  0229  T                                  0229
37226...............................  Fem/popl revasc w/stent.........  T                                  0229  T                                  0229
37227...............................  Fem/popl revasc stnt & ather....  T                                  0319  T                                  0319
37228...............................  Tib/per revasc w/tla............  T                                  0083  T                                  0083
37229...............................  Tib/per revasc w/ather..........  T                                  0229  T                                  0229
37230...............................  Tib/per revasc w/stent..........  T                                  0229  T                                  0229
37231...............................  Tib/per revasc stent & ather....  T                                  0319  T                                  0319
37232...............................  Tib/per revasc add-on...........  T                                  0083  T                                  0083
37233...............................  Tibper revasc w/ather add-on....  T                                  0229  T                                  0229
37234...............................  Revsc opn/prq tib/pero stent....  T                                  0083  T                                  0083
37235...............................  Tib/per revasc stnt & ather.....  T                                  0083  T                                  0083
--------------------------------------------------------------------------------------------------------------------------------------------------------

(7) Non-Congenital Cardiac Catheterization (APC 0080)
    For CY 2011, the AMA CPT Editorial Panel deleted 19 non-congenital 
cardiac catheterization-related CPT codes and replaced them with 20 new 
CPT codes in the Cardiac Catheterization and Injection-Related section 
of the 2011 CPT Code Book to describe more precisely the specific 
services provided during cardiac catheterization procedures. In 
particular, the CPT Editorial Panel deleted 19 non-congenital cardiac 
catheterization-related CPT codes from the 93500 series and created 14 
new CPT codes in the 93400 series and 6 in the 93500 series. We 
discussed these coding changes in detail in the CY 2011 OPPS/ASC final 
rule with comment period, along with the process by which we assigned 
the new CPT codes to APCs that we believe are comparable with respect 
to clinical characteristics and resources required to furnish the 
cardiac catheterization services described by the new CPT codes (75 FR 
71846 through 71849). As discussed in the final rule with comment 
period, we were able to use the existing CY 2009 hospital outpatient 
claims data and the most recent cost report data to create simulated 
medians for the new separately payable CPT codes for CY 2011. 
Specifically, to estimate the hospital costs associated with the 20 new 
non-congenital cardiac catheterization-related CPT codes based on their 
CY 2011 descriptors, we used claims and cost report data from CY 2009. 
Because of the substantive coding changes associated with the new non-
congenital cardiac catheterization-related CPT codes for CY 2011, we 
used our CY 2009 single and ``pseudo'' single claims data to simulate 
the new CY 2011 CPT code definitions. We stated that many of the new 
CPT codes were previously reported using multiple CY 2009 CPT codes, 
and we provided a crosswalk of the new CY 2011 cardiac catheterization 
CPT codes mapped to the CY 2009 cardiac catheterization CPT codes in 
Table 11 of the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71849). Table 11 showed the criteria we applied to select a claim to be 
used in the calculation of the median cost for the new codes (shown in 
column A). As we stated in the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 71847 through 71848), we developed these criteria based 
on our clinicians' understanding of services that were reported by CY 
2009 CPT codes that, in various combinations, reflect the services 
provided that are described in the new CPT codes. We used approximately 
175,000 claims for the new non-congenital catheterization-related CPT 
codes, together with the single and ``pseudo'' single procedure claims 
for the remaining congenital

[[Page 42195]]

catheterization-related CPT codes in APC 0080, to calculate CPT level 
median costs and the median cost for APC 0080 of approximately $2,698. 
We noted that, because the CPT codes listed in Table 11 are new for CY 
2011, they were identified with comment indicator ``NI'' in Addendum B 
of that final rule with comment period to identify them as subject to 
public comment. We specifically requested public comment on our 
methodology for simulating the median costs for these new CY 2011 CPT 
codes, in addition to public comments on the payment rates themselves 
(75 FR 71848).
    For CY 2012, we are proposing to continue with the CY 2011 
methodology in determining the APC assignments for the cardiac 
catheterization CPT codes. The predecessor cardiac catheterization CPT 
codes were in existence prior to CY 2011 and were assigned to APC 0080 
based on claims data and cost report data. Given that these data are 
available for the services described by the predecessor cardiac 
catheterization CPT codes, for CY 2012, we are proposing to continue to 
use the existing hospital outpatient claims and cost report data from 
the predecessor cardiac catheterization CPT codes to simulate an 
estimated median cost for the new cardiac catheterization CPT codes in 
determining the appropriate APC assignments. As has been our practice 
since the implementation of the OPPS in 2000, we review our latest 
claims data for ratesetting and, if necessary, revise the APC 
assignments for the upcoming year. Based on analysis of the CY 2010 
claims data available for this proposed rule, the proposed median cost 
for APC 0080 is approximately $2,822 for CY 2012, which is slightly 
greater than the median cost of approximately $2,698 for the CY 2011 
OPPS/ASC final rule with comment period. For CY 2012, we are not 
proposing any changes to the CY 2011 APC assignments of any of the 
codes assigned to APC 0080 because the claims data available for this 
proposed rule support continuation of these APC assignments.
    We are soliciting public comments on the proposed status indicators 
and the APC assignments for the CY 2012 cardiac catheterization CPT 
codes. Table 6 below lists the CY 2011 cardiac catheterization CPT 
codes along with their proposed status indicators, APC assignments, and 
payment rates for CY 2012.

                     Table 6--Proposed APCs To Which Non- Congenital Cardiac Catheterization CPT Codes Would Be Assigned for CY 2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                            Proposed CY
         CY 2011 HCPCS Code               CY 2011 short descriptor             CY 2011 SI          CY 2011 APC     Proposed CY 2012 SI       2012 APC
--------------------------------------------------------------------------------------------------------------------------------------------------------
93451...............................  Right heart cath................  T                                  0080  T                                  0080
93452...............................  Left hrt cath w/ventrclgrphy....  T                                  0080  T                                  0080
93453...............................  R&l hrt cath w/ventriclgrphy....  T                                  0080  T                                  0080
93454...............................  Coronary artery angio s&i.......  T                                  0080  T                                  0080
93455...............................  Coronary art/grft angio s&i.....  T                                  0080  T                                  0080
93456...............................  R hrt coronary artery angio.....  T                                  0080  T                                  0080
93457...............................  R hrt art/grft angio............  T                                  0080  T                                  0080
93458...............................  L hrt artery/ventricle angio....  T                                  0080  T                                  0080
93459...............................  L hrt art/grft angio............  T                                  0080  T                                  0080
93460...............................  R&l hrt art/ventricle angio.....  T                                  0080  T                                  0080
93461...............................  R&l hrt art/ventricle angio.....  T                                  0080  T                                  0080
93462...............................  L hrt cath trnsptl puncture.....  T                                  0080  T                                  0080
93463...............................  Drug admin & hemodynmic meas....  N                                    NA  N                                    NA
93464...............................  Exercise w/hemodynamic meas.....  N                                    NA  N                                    NA
93563...............................  Inject congenital card cath.....  N                                    NA  N                                    NA
93564...............................  Inject hrt congntl art/grft.....  N                                    NA  N                                    NA
93565...............................  Inject l ventr/atrial angio.....  N                                    NA  N                                    NA
93566...............................  Inject r ventr/atrial angio.....  N                                    NA  N                                    NA
93567...............................  Inject suprvlv aortography......  N                                    NA  N                                    NA
93568...............................  Inject pulm art hrt cath........  N                                    NA  N                                    NA
--------------------------------------------------------------------------------------------------------------------------------------------------------

(8) Cranial Neurostimulator and Electrodes (APC 0318)
    For CY 2011, the AMA CPT Editorial Panel created a new CPT code 
64568 (Incision for implantation of cranial nerve (e.g., vagus nerve) 
neurostimulator electrode array and pulse generator) and indicates that 
it describes the services formerly included in the combinations of (1) 
CPT code 64573 (Incision for implantation of neurostimulator 
electrodes; cranial nerve) and CPT code 61885 (Insertion or replacement 
of cranial neurostimulator pulse generator or receiver, direct or 
inductive coupling; with connection to a single electrode array); or 
(2) CPT code 64573 and CPT code 61886 (Insertion or replacement of 
cranial neurostimulator pulse generator or receiver, direct or 
inductive coupling; with connection to two or more electrode arrays). 
As we discussed in the CY 2011 OPPS/ASC final rule with comment period 
(75 FR 71850), our standard process for assigning new CPT codes to APCs 
is to assign the code to the APC that we believe contains services that 
are comparable with respect to clinical characteristics and resources 
required to furnish the service. A new CPT code is given a comment 
indicator of ``NI'' to identify it as a new interim APC assignment for 
the first year and the APC assignment for the new code is then open to 
public comment. In some, but not all, cases, we are able to use the 
existing data from established codes to simulate an estimated median 
cost for the new code to guide us in the assignment of the new code to 
an APC. For CY 2011, in the case of the new neurostimulator electrode 
and pulse generator implantation CPT code, we were able to use the 
existing CY 2009 claims and most current cost report data to create a 
simulated median cost.
    Specifically, to estimate the hospital costs of CPT code 64568 
based on its CY 2011 descriptor, we used CY 2009 claims and the most 
recent cost report data, using the single and ``pseudo'' single claims 
within this data set to simulate the definition of this service. We 
selected claims with CPT code 64573 on which CPT code 61885 or 61886 
was also present and consistent

[[Page 42196]]

with the description of the new CPT code 64568. We treated the summed 
costs on these claims as if they were a single procedure claim for CPT 
code 64568. We created an estimated median cost of approximately 
$22,562 for CPT code 64568 from 298 single claims to set a final 
payment rate for CY 2011 for the new code. We created APC 0318 
(Implantation of Cranial Neurostimulator Pulse Generator and Electrode) 
for CY 2011, to which CPT code 64568 is the only procedure assigned. 
APC 0225 (Implantation of Neurostimulator Electrodes, Cranial Nerve), 
which contained only the predecessor CPT code 64573, was deleted 
effective January 1, 2011. We noted that, because CPT code 64568 is new 
for CY 2011, it was identified with comment indicator ``NI'' in 
Addendum B of the CY 2011 OPPS/ASC final rule with comment period to 
identify it as subject to public comment. We specifically requested 
public comment on our methodology for simulating the median costs for 
this new CY 2011 CPT code, in addition to public comments on the 
payment rate itself (75 FR 71850).
    For CY 2012, we are proposing to use the same methodology we used 
in CY 2011 to estimate the hospital costs of CPT code 64568. We created 
an estimated median cost of approximately $24,267 for CPT code 64568 
from 332 single claims to set a proposed payment rate for APC 0318 for 
CY 2012. We are proposing to maintain CPT code 64568 as the only code 
assigned to APC 0318 for CY 2012. We continue to request public comment 
on our proposed methodology for simulating the median cost for this CPT 
code introduced in CY 2011, in addition to public comments on the 
proposed payment rate itself.
(9) Brachytherapy Sources
(A) Background
    Section 1833(t)(2)(H) of the Act, as added by section 621(b)(2)(C) 
of Public Law 108-173 (MMA), mandated the creation of additional groups 
of covered OPD services that classify devices of brachytherapy 
consisting of a seed or seeds (or radioactive source) (``brachytherapy 
sources'') separately from other services or groups of services. The 
additional groups must reflect the number, isotope, and radioactive 
intensity of the brachytherapy sources furnished and include separate 
groups for palladium-103 and iodine-125 sources.
    Section 1833(t)(16)(C) of the Act, as added by section 621(b)(1) of 
Public Law 108-173, established payment for brachytherapy sources 
furnished from January 1, 2004 through December 31, 2006, based on a 
hospital's charges for each brachytherapy source furnished adjusted to 
cost. Under section 1833(t)(16)(C) of the Act, charges for the 
brachytherapy sources may not be used in determining any outlier 
payments under the OPPS for that period in which payment is based on 
charges adjusted to cost. Consistent with our practice under the OPPS 
to exclude items paid at cost from budget neutrality consideration, 
these items were excluded from budget neutrality for that time period 
as well.
    Subsequent to the MMA, various amendments to the Act were made that 
resulted in the extension of the payment period for brachytherapy 
sources based on a hospital's charges adjusted to cost through December 
31, 2009. The CY 2011 OPPS/ASC final rule with comment period 
summarizes these amendments to the Act and our proposals to pay for 
brachytherapy sources at prospective payment rates based on their 
source specific median costs from CY 2007 through CY 2009 (75 FR 71977 
through 71981).
    In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60533 
through 60537), we adopted for CY 2010 the general OPPS prospective 
payment methodology for brachytherapy sources, consistent with section 
1833(t)(2)(C) of the Act, with payment rates based on source-specific 
median costs. For CY 2011, we continued to use the general OPPS 
prospective payment methodology for brachytherapy sources, consistent 
with section 1833(t)(2)(C) of the Act (75 FR 71980). We also finalized 
our proposals to continue the policy we first implemented in the CY 
2010 OPPS/ASC final rule with comment period (74 FR 60537 and 75 FR 
71980) regarding payment for new brachytherapy sources for which we 
have no claims data, based on the same reasons we discussed in the 2008 
OPPS/ASC final rule with comment period (72 FR 66786; which was 
superseded by section 142 of Pub. L. 110-275). That policy is intended 
to enable us to assign future new HCPCS codes for new brachytherapy 
sources to their own APCs, with prospective payment rates set based on 
our consideration of external data and other relevant information 
regarding the expected costs of the sources to hospitals.
    Consistent with our policy regarding APC payments made on a 
prospective basis, for CYs 2010 and 2011, we finalized proposals to 
subject brachytherapy sources to outlier payments under section 
1833(t)(5) of the Act, and also to subject brachytherapy source payment 
weights to scaling for purposes of budget neutrality (75 FR 71980 
through 71981 and 75 FR 60537). Hospitals could receive outlier 
payments for brachytherapy sources if the costs of furnishing 
brachytherapy sources meet the criteria for outlier payment. In 
addition, as noted in the CY 2010 and CY 2011 OPPS/ASC final rules with 
comment period (74 FR 60534 and 75 FR 71978 and 71979, respectively), 
implementation of prospective payments for brachytherapy sources 
provided opportunities for eligible hospitals to receive additional 
payments in CY 2010 and CY 2011 under certain circumstances through the 
7.1 percent rural adjustment, as described in section II.E. of this 
final rule with comment period.
(B) Proposed OPPS Payment Policy
    As we have stated previously (72 FR 66780, 73 FR 41502, 74 FR 60533 
through 60534, and 75 FR 71978), we believe that adopting the general 
OPPS prospective payment methodology for brachytherapy sources is 
appropriate for a number of reasons. The general OPPS payment 
methodology uses median costs based on claims data to set the relative 
payment weights for hospital outpatient services. This payment 
methodology results in more consistent, predictable, and equitable 
payment amounts per source across hospitals by eliminating some of the 
extremely high and low payment amounts resulting from payment based on 
hospitals' charges adjusted to cost. We believe that the OPPS 
prospective payment methodology, as opposed to payment based on 
hospitals' charges adjusted to cost, would also provide hospitals with 
incentives for efficiency in the provision of brachytherapy services to 
Medicare beneficiaries. Moreover, this approach is consistent with our 
payment methodology for the vast majority of items and services paid 
under the OPPS.
    For CY 2012, we are proposing to use the median costs from CY 2010 
claims data for setting the proposed CY 2012 payment rates for 
brachytherapy sources, as we are proposing for most other items and 
services that will be paid under the CY 2012 OPPS. We are proposing to 
continue the other payment policies for brachytherapy sources we 
finalized and first implemented in the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60537). We are proposing to pay for the stranded 
and non-stranded NOS codes, HCPCS codes C2698 and C2699, at a rate 
equal to the lowest stranded or non-stranded prospective payment rate 
for such sources, respectively, on a per source basis (as opposed, for 
example, to a per mCi), which is based on the policy we established in 
the CY 2008 OPPS/ASC final rule with comment

[[Page 42197]]

period (72 FR 66785). The proposed payment methodology for NOS sources 
would provide payment to a hospital for new sources and, at the same 
time, encourage interested parties to quickly bring new sources to our 
attention so that specific coding and payment could be established.
    We also are proposing to continue the policy we first implemented 
in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60537) 
regarding payment for new brachytherapy sources for which we have no 
claims data, based on the same reasons we discussed in the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66786; which was 
superseded for a period of time by section 142 of Public Law 110-275). 
That policy is intended to enable us to assign new HCPCS codes for new 
brachytherapy sources to their own APCs, with prospective payment rates 
set based on our consideration of external data and other relevant 
information regarding the expected costs of the sources to hospitals.
    Consistent with our policy regarding APC payments made on a 
prospective basis, as we did for CY 2011, we are proposing to subject 
brachytherapy sources to outlier payments under section 1833(t)(5) of 
the Act, and also to subject brachytherapy source payment weights to 
scaling for purposes of budget neutrality. Hospitals can receive 
outlier payments for brachytherapy sources if the costs of furnishing 
brachytherapy sources meet the criteria for outlier payment. In 
addition, as noted in the CY 2010 and CY 2011 OPPS/ASC final rules with 
comment period (74 FR 60534 and 75 FR 71978 through 71979, 
respectively), implementation of prospective payments for brachytherapy 
sources would provide opportunities for eligible hospitals to receive 
additional payments in CY 2012 under certain circumstances through the 
7.1 percent rural adjustment, as described in section II.E. of this 
proposed rule.
    Therefore, we are proposing to pay for brachytherapy sources at 
prospective payment rates based on their source-specific median costs 
for CY 2012. We refer readers to Addendum B to this proposed rule 
(which is referenced in section XVII. of this proposed rule and 
available via the Internet on the CMS Web site) for the proposed CY 
2012 payment rates for brachytherapy sources, identified with status 
indicator ``U.'' For more detailed discussion of the legislative 
history surrounding brachytherapy sources and our proposed and final 
policies for CY 2004 through CY 2011, we refer readers to the CY 2011 
OPPS/ASC final rule with comment period (75 FR 71977 through 71981).
    We continue to invite hospitals and other parties to submit 
recommendations to us for new HCPCS codes to describe new brachytherapy 
sources consisting of a radioactive isotope, including a detailed 
rationale to support recommended new sources. Such recommendations 
should be directed to the Division of Outpatient Care, Mail Stop C4-05-
17, Centers for Medicare and Medicaid Services, 7500 Security 
Boulevard, Baltimore, MD 21244. We will continue to add new 
brachytherapy source codes and descriptors to our systems for payment 
on a quarterly basis.
e. Proposed Calculation of Composite APC Criteria-Based Median Costs
    As discussed in the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66613), we believe it is important that the OPPS enhance 
incentives for hospitals to provide only necessary, high quality care 
and to provide that care as efficiently as possible. For CY 2008, we 
developed composite APCs to provide a single payment for groups of 
services that are typically performed together during a single clinical 
encounter and that result in the provision of a complete service. 
Combining payment for multiple independent services into a single OPPS 
payment in this way enables hospitals to manage their resources with 
maximum flexibility by monitoring and adjusting the volume and 
efficiency of services themselves. An additional advantage to the 
composite APC model is that we can use data from correctly coded 
multiple procedure claims to calculate payment rates for the specified 
combinations of services, rather than relying upon single procedure 
claims which may be low in volume and/or incorrectly coded. Under the 
OPPS, we currently have composite APC policies for extended assessment 
and management services, low dose rate (LDR) prostate brachytherapy, 
cardiac electrophysiologic evaluation and ablation services, mental 
health services, and multiple imaging services. We refer readers to the 
CY 2008 OPPS/ASC final rule with comment period for a full discussion 
of the development of the composite APC methodology (72 FR 66611 
through 66614 and 66650 through 66652).
    For CY 2012, we are proposing to continue, with some modifications, 
our established composite APC policies for extended assessment and 
management, LDR prostate brachytherapy, cardiac electrophysiologic 
evaluation and ablation, mental health services, and multiple imaging 
services, as discussed in sections II.A.2.e.(1), II.A.2.e.(2), 
II.A.2.e.(3), II.A.2.e.(4), and II.A.2.e.(5), respectively, of this 
proposed rule. We also are proposing to create a new composite APC for 
cardiac resynchronization therapy services, as discussed in section 
II.A.2.e.(6) of this proposed rule.
(1) Extended Assessment and Management Composite APCs (APCs 8002 and 
8003)
    For CY 2012, we are proposing to continue to include composite APC 
8002 (Level I Extended Assessment and Management Composite) and 
composite APC 8003 (Level II Extended Assessment and Management 
Composite) in the OPPS. For CY 2008, we created these two composite 
APCs to provide payment to hospitals in certain circumstances when 
extended assessment and management of a patient occur (an extended 
visit). In most circumstances, observation services are supportive and 
ancillary to the other services provided to a patient. In the 
circumstances when observation care is provided in conjunction with a 
high level visit or direct referral and is an integral part of a 
patient's extended encounter of care, payment is made for the entire 
care encounter through one of two composite APCs as appropriate.
    As defined for the CY 2008 OPPS, composite APC 8002 describes an 
encounter for care provided to a patient that includes a high level 
(Level 5) clinic visit or direct referral for observation services in 
conjunction with observation services of substantial duration (72 FR 
66648 through 66649). Composite APC 8003 describes an encounter for 
care provided to a patient that includes a high level (Level 4 or 5) 
Type A emergency department visit, a high level (Level 5) Type B 
emergency department visit, or critical care services in conjunction 
with observation services of substantial duration. HCPCS code G0378 
(Observation services, per hour) is assigned status indicator ``N,'' 
signifying that its payment is always packaged. As noted in the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66648 through 66649), 
the Integrated Outpatient Code Editor (I/OCE) evaluates every claim 
received to determine if payment through a composite APC is 
appropriate. If payment through a composite APC is inappropriate, the 
I/OCE, in conjunction with the OPPS Pricer, determines the appropriate 
status indicator, APC, and payment for every code on a claim. The 
specific criteria that must be met for the two extended assessment and

[[Page 42198]]

management composite APCs to be paid are provided below in the 
description of the claims that were selected for the calculation of the 
proposed CY 2012 median costs for these composite APCs. We are not 
proposing to change these criteria for the CY 2012 OPPS.
    When we created composite APCs 8002 and 8003 for CY 2008, we 
retained as general reporting requirements for all observation services 
those criteria related to physician order and evaluation, 
documentation, and observation beginning and ending time as listed in 
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66812). 
These are more general requirements that encourage hospitals to provide 
medically reasonable and necessary care and help to ensure the proper 
reporting of observation services on correctly coded hospital claims 
that reflect the full charges associated with all hospital resources 
utilized to provide the reported services. We also issued guidance 
clarifying the correct method for reporting the starting time for 
observation services (sections 290.2.2 through 290.5 in the Medicare 
Claims Processing Manual (Pub. 100-4), Chapter 4, through Transmittal 
1745, Change Request 6492, issued May 22, 2009 and implemented July 6, 
2009). We are not proposing to change these reporting requirements for 
the CY 2012 OPPS.
    For CY 2012, we are proposing to continue the extended assessment 
and management composite APC payment methodology for APCs 8002 and 
8003. We continue to believe that the composite APCs 8002 and 8003 and 
related policies provide the most appropriate means of paying for these 
services. We are proposing to calculate the median costs for APCs 8002 
and 8003 using all single and ``pseudo'' single procedure claims for CY 
2010 that meet the criteria for payment of each composite APC.
    Specifically, to calculate the proposed median costs for composite 
APCs 8002 and 8003, we selected single and ``pseudo'' single procedure 
claims that met each of the following criteria:
    1. Did not contain a HCPCS code to which we have assigned status 
indicator ``T'' that is reported with a date of service 1 day earlier 
than the date of service associated with HCPCS code G0378. (By 
selecting these claims from single and ``pseudo'' single claims, we had 
already assured that they would not contain a code for a service with 
status indicator ``T'' on the same date of service.);
    2. Contained eight or more units of HCPCS code G0378; and
    3. Contained one of the following codes:
     In the case of composite APC 8002, HCPCS code G0379 
(Direct referral of patient for hospital observation care) on the same 
date of service as HCPCS code G0378; or CPT code 99205 (Office or other 
outpatient visit for the evaluation and management of a new patient 
(Level 5)); or CPT code 99215 (Office or other outpatient visit for the 
evaluation and management of an established patient (Level 5)) provided 
on the same date of service or one day before the date of service for 
HCPCS code G0378.
     In the case of composite APC 8003, CPT code 99284 
(Emergency department visit for the evaluation and management of a 
patient (Level 4)); CPT code 99285 (Emergency department visit for the 
evaluation and management of a patient (Level 5)); CPT code 99291 
(Critical care, evaluation and management of the critically ill or 
critically injured patient; first 30-74 minutes); or HCPCS code G0384 
(Level 5 hospital emergency department visit provided in a Type B 
emergency department) provided on the same date of service or one day 
before the date of service for HCPCS code G0378. (As discussed in 
detail in the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68684), we added HCPCS code G0384 to the eligibility criteria for 
composite APC 8003 for CY 2009.)
    As discussed further in section VII. of this proposed rule, and 
consistent with our CY 2008, CY 2009, CY 2010, and CY 2011 final 
policies, when calculating the median costs for the clinic, Type A 
emergency department visit, Type B emergency department visit, and 
critical care APCs (0604 through 0617 and 0626 through 0630), we 
utilize our methodology that excludes those claims for visits that are 
eligible for payment through the two extended assessment and management 
composite APCs, that is APC 8002 or APC 8003. We believe that this 
approach results in the most accurate cost estimates for APCs 0604 
through 0617 and 0626 through 0630 for CY 2012.
    At its February 28-March 1, 2011 meeting, the APC Panel recommended 
that CMS consider expanding the extended assessment and management 
composite APCs for CY 2012. We are accepting this recommendation.
    Consistent with our acceptance of the APC Panel's recommendation, 
we have examined various ways of potentially expanding the current 
extended assessment and management composite APCs to further limit the 
possibility that total beneficiary copayments would exceed the 
inpatient deductible during extended observation encounters. At this 
time, we have decided not to pursue for CY 2012 the expanded extended 
assessment and management composite APCs that we analyzed because, 
while the composites that we modeled would serve to further limit the 
number of beneficiaries with copayments that exceeded the inpatient 
deductible, the modeled composites also had the effect of possibly 
increasing copayments by a small amount for the majority of 
beneficiaries undergoing extended observation. In addition, expanded 
assessment and management composite APCs do not address certain 
concerns about extended observation services raised by stakeholders at 
CMS' observation listening session last year (that is, observation time 
not counting towards the 3-day prior hospitalization requirement for 
the skilled nursing facility benefit). We will continue our efforts to 
model other composite structures for a possible new extended assessment 
and management composite structure for CY 2013.
    In summary, for CY 2012, we are proposing to continue to include 
composite APCs 8002 and 8003 in the OPPS. We are proposing to continue 
the extended assessment and management composite APC payment 
methodology and criteria that we finalized for CYs 2009, 2010, and 
2011. We also are proposing to calculate the median costs for APCs 8002 
and 8003 using the same methodology that we used to calculate the 
medians for composite APCs 8002 and 8003 for the CY 2008 OPPS (72 FR 
66649). That is, we used all single and ``pseudo'' single procedure 
claims from CY 2010 that met the criteria for payment of each composite 
APC and applied the standard packaging and trimming rules to the claims 
before calculating the proposed CY 2012 median costs. The proposed CY 
2012 median cost resulting from this methodology for composite APC 8002 
is approximately $395, which was calculated from 16,770 single and 
``pseudo'' single bills that met the required criteria. The proposed CY 
2012 median cost for composite APC 8003 is approximately $735, which 
was calculated from 225,874 single and ``pseudo'' single bills that met 
the required criteria.
(2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001)
    LDR prostate brachytherapy is a treatment for prostate cancer in 
which hollow needles or catheters are inserted into the prostate, 
followed by permanent implantation of radioactive sources into the 
prostate through the needles/catheters. At least two CPT

[[Page 42199]]

codes are used to report the composite treatment service because there 
are separate codes that describe placement of the needles/catheters and 
the application of the brachytherapy sources: CPT code 55875 
(Transperineal placement of needles or catheters into prostate for 
interstitial radioelement application, with or without cystoscopy) and 
CPT code 77778 (Interstitial radiation source application; complex). 
Generally, the component services represented by both codes are 
provided in the same operative session in the same hospital on the same 
date of service to the Medicare beneficiary being treated with LDR 
brachytherapy for prostate cancer. As discussed in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66653), OPPS payment rates for 
CPT code 77778, in particular, had fluctuated over the years. We were 
frequently informed by the public that reliance on single procedure 
claims to set the median costs for these services resulted in use of 
mainly incorrectly coded claims for LDR prostate brachytherapy because 
a correctly coded claim should include, for the same date of service, 
CPT codes for both needle/catheter placement and application of 
radiation sources, as well as separately coded imaging and radiation 
therapy planning services (that is, a multiple procedure claim).
    In order to base payment on claims for the most common clinical 
scenario, and to further our goal of providing payment under the OPPS 
for a larger bundle of component services provided in a single hospital 
encounter, beginning in CY 2008, we began providing a single payment 
for LDR prostate brachytherapy when the composite service, reported as 
CPT codes 55875 and 77778, is furnished in a single hospital encounter. 
We based the payment for composite APC 8001 (LDR Prostate Brachytherapy 
Composite) on the median cost derived from claims for the same date of 
service that contain both CPT codes 55875 and 77778 and that do not 
contain other separately paid codes that are not on the bypass list. In 
uncommon occurrences in which the services are billed individually, 
hospitals have continued to receive separate payments for the 
individual services. We refer readers to the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66652 through 66655) for a full history 
of OPPS payment for LDR prostate brachytherapy and a detailed 
description of how we developed the LDR prostate brachytherapy 
composite APC.
    For CY 2012, we are proposing to continue paying for LDR prostate 
brachytherapy services using the composite APC methodology proposed and 
implemented for CY 2008 through CY 2011. That is, we are proposing to 
use CY 2010 claims on which both CPT codes 55875 and 77778 were billed 
on the same date of service with no other separately paid procedure 
codes (other than those on the bypass list) to calculate the payment 
rate for composite APC 8001. Consistent with our CY 2008 through CY 
2011 practice, we are proposing not to use the claims that meet these 
criteria in the calculation of the median costs for APCs 0163 (Level IV 
Cystourethroscopy and Other Genitourinary Procedures) and 0651 (Complex 
Interstitial Radiation Source Application), the APCs to which CPT codes 
55875 and 77778 are assigned, respectively. The median costs for APCs 
0163 and 0651 would continue to be calculated using single and 
``pseudo'' single procedure claims. We believe that this composite APC 
contributes to our goal of creating hospital incentives for efficiency 
and cost containment, while providing hospitals with the most 
flexibility to manage their resources. We also continue to believe that 
data from claims reporting both services required for LDR prostate 
brachytherapy provide the most accurate median cost upon which to base 
the composite APC payment rate.
    Using partial year CY 2010 claims data available for this CY 2012 
proposed rule, we were able to use 556 claims that contained both CPT 
codes 55875 and 77778 to calculate the median cost upon which the 
proposed CY 2012 payment for composite APC 8001 is based. The proposed 
median cost for composite APC 8001 for CY 2012 is approximately $3,364. 
This is an increase compared to the CY 2011 final median cost for this 
composite APC of approximately $3,195 based on 849 single bill claims 
from a full year of CY 2009 claims data. The proposed CY 2012 median 
cost for this composite APC is slightly less than $3,555, the sum of 
the proposed median costs for APCs 0163 and 0651 ($2,658 + $897), the 
APCs to which CPT codes 55875 and 77778 map if one service is billed on 
a claim without the other. We believe the proposed CY 2012 median cost 
for composite APC 8001 of approximately $3,364, calculated from claims 
we believe to be correctly coded, would result in a reasonable and 
appropriate payment rate for this service in CY 2012.
(3) Cardiac Electrophysiologic Evaluation and Ablation Composite APC 
(APC 8000)
    Cardiac electrophysiologic evaluation and ablation services 
frequently are performed in varying combinations with one another 
during a single episode of care in the hospital outpatient setting. 
Therefore, correctly coded claims for these services often include 
multiple codes for component services that are reported with different 
CPT codes and that, prior to CY 2008, were always paid separately 
through different APCs (specifically, APC 0085 (Level II 
Electrophysiologic Evaluation), APC 0086 (Ablate Heart Dysrhythm 
Focus), and APC 0087 (Cardiac Electrophysiologic Recording/Mapping)). 
As a result, there would never be many single bills for cardiac 
electrophysiologic evaluation and ablation services, and those that are 
reported as single bills would often represent atypical cases or 
incorrectly coded claims. As described in the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66655 through 66659), the APC Panel and 
the public expressed persistent concerns regarding the limited and 
reportedly unrepresentative single bills available for use in 
calculating the median costs for these services according to our 
standard OPPS methodology.
    Effective January 1, 2008, we established APC 8000 (Cardiac 
Electrophysiologic Evaluation and Ablation Composite) to pay for a 
composite service made up of at least one specified electrophysiologic 
evaluation service and one specified electrophysiologic ablation 
service. Calculating a composite APC for these services allowed us to 
utilize many more claims than were available to establish the 
individual APC median costs for these services, and we also saw this 
composite APC as an opportunity to advance our stated goal of promoting 
hospital efficiency through larger payment bundles. In order to 
calculate the median cost upon which the payment rate for composite APC 
8000 is based, we used multiple procedure claims that contained at 
least one CPT code from group A for evaluation services and at least 
one CPT code from group B for ablation services reported on the same 
date of service on an individual claim. Table 9 in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66656) identified the CPT codes 
that are assigned to groups A and B. For a full discussion of how we 
identified the group A and group B procedures and established the 
payment rate for the cardiac electrophysiologic evaluation and ablation 
composite APC, we refer readers to the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66655 through 66659). Where a service in group A 
is furnished on a date of service that is different from the date of 
service

[[Page 42200]]

for a code in group B for the same beneficiary, payments are made under 
the appropriate single procedure APCs and the composite APC does not 
apply.
    For CY 2012, we are proposing to continue to pay for cardiac 
electrophysiologic evaluation and ablation services using the composite 
APC methodology proposed and implemented for CY 2008 through CY 2011. 
Consistent with our CY 2008 through CY 2011 practice, we are proposing 
not to use the claims that meet the composite payment criteria in the 
calculation of the median costs for APC 0085 and APC 0086, to which the 
CPT codes in both groups A and B for composite APC 8000 are otherwise 
assigned. Median costs for APCs 0085 and 0086 would continue to be 
calculated using single procedure claims. We continue to believe that 
the composite APC methodology for cardiac electrophysiologic evaluation 
and ablation services is the most efficient and effective way to use 
the claims data for the majority of these services and best represents 
the hospital resources associated with performing the common 
combinations of these services that are clinically typical. 
Furthermore, this approach creates incentives for efficiency by 
providing a single payment for a larger bundle of major procedures when 
they are performed together, in contrast to continued separate payment 
for each of the individual procedures.
    For CY 2012, using a partial year of CY 2010 claims data available 
for this proposed rule, we were able to use 11,156 claims containing a 
combination of group A and group B codes and calculate a proposed 
median cost of approximately $11,598 for composite APC 8000. This is an 
increase compared to the CY 2011 final median cost for this composite 
APC of approximately $10,673 based on a full year of CY 2009 claims 
data. We believe the proposed median cost of $11,598 calculated from a 
high volume of correctly coded multiple procedure claims would result 
in an accurate and appropriate proposed payment for cardiac 
electrophysiologic evaluation and ablation services when at least one 
evaluation service is furnished during the same clinical encounter as 
at least one ablation service.
    Table 7 below list the groups of procedures upon which we based 
proposed composite APC 8000 for CY 2012.

 Table 7--Proposed Groups of Cardiac Electrophysiologic Evaluation and Ablation Procedures Upon Which Composite
                                                APC 8000 is Based
----------------------------------------------------------------------------------------------------------------
                                                                        Proposed
Codes used in combinations: At least one in Group A   CY 2011  CPT     single code       Proposed CY  2012 SI
                 and one in Group B                       Code         CY 2012 APC           (composite)
----------------------------------------------------------------------------------------------------------------
Group A:
    Comprehensive electrophysiologic evaluation               93619            0085  Q3
     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.
    Comprehensive electrophysiologic evaluation               93620            0085  Q3
     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.
 Group B:
    Intracardiac catheter ablation of                         93650            0085  Q3
     atrioventricular node function,
     atrioventricular conduction for creation of
     complete heart block, with or without
     temporary pacemaker placement.
    Intracardiac catheter ablation of                         93651            0086  Q3
     arrhythmogenic focus; for treatment of
     supraventricular tachycardia by ablation of
     fast or slow atrioventricular pathways,
     accessory atrioventricular connections or
     other atrial foci, singly or in combination.
    Intracardiac catheter ablation of                         93652            0086  Q3
     arrhythmogenic focus; for treatment of
     ventricular tachycardia.
----------------------------------------------------------------------------------------------------------------

(4) Mental Health Services Composite APC (APC 0034)
    For CY 2012, we are proposing to continue our longstanding policy 
of limiting the aggregate payment for specified less resource-intensive 
mental health services furnished on the same date to the payment for a 
day of partial hospitalization, which we consider to be the most 
resource-intensive of all outpatient mental health treatment for CY 
2012. We refer readers to the April 7, 2000 OPPS final rule with 
comment period (65 FR 18452 through 18455) for the initial discussion 
of this longstanding policy. We continue to believe that the costs 
associated with administering a partial hospitalization program 
represent the most resource-intensive of all outpatient mental health 
treatment. Therefore, we do not believe that we should pay more for a 
day of individual mental health services under the OPPS than the 
partial hospitalization per diem payment.
    As discussed in detail in section VIII. of this proposed rule, for 
CY 2012, we are proposing to continue using a provider-specific two 
tiered payment approach for partial hospitalization services that 
distinguishes payment made for services furnished in a CMHC from 
payment made for services furnished in a hospital. Specifically, we are 
proposing one APC for partial hospitalization program days with three 
services furnished in a CMHC (APC 0172, (Level I Partial 
Hospitalization (3 services) for CMHCs) and one APC for days with four 
or more services furnished in a CMHC (APC 0173, Level II Partial 
Hospitalization (4 or more services) for CMHCs). We are proposing that 
the payment rates for these two APCs be based upon the median per diem 
costs calculated using data only from CMHCs. Similarly, we are 
proposing one APC for partial hospitalization program days with three 
services furnished in a hospital (APC 0175, Level I Partial 
Hospitalization (3 services) for Hospital-Based PHPs), and one APC for 
days with four or more services furnished in a hospital (APC 0176, 
Level II Partial Hospitalization (4 or more services) for Hospital-
Based PHPs). We are proposing that the payment rates for these two APCs 
be based on the median per diem costs calculated using data only from 
hospitals.
    Because our longstanding policy of limiting the aggregate payment 
for specified less resource-intensive mental health services furnished 
on the same date to the payment rate for the most

[[Page 42201]]

resource-intensive of all outpatient mental health treatment, we are 
proposing to continue to set the CY 2012 payment rate for APC 0034 
(Mental Health Services Composite) at the same rate as we are proposing 
for APC 0176, which is the maximum partial hospitalization per diem 
payment. We believe this APC payment rate would provide the most 
appropriate payment for composite APC 0034, taking into consideration 
the intensity of the mental health services and the differences in the 
HCPCS codes for mental health services that could be paid through this 
composite APC compared with the HCPCS codes that could be paid through 
partial hospitalization APC 0176. When the aggregate payment for 
specified mental health services provided by one hospital to a single 
beneficiary on one date of service based on the payment rates 
associated with the APCs for the individual services exceeds the 
maximum per diem partial hospitalization payment, we are proposing that 
those specified mental health services would be assigned to APC 0034. 
We are proposing that APC 0034 would have the same payment rate as APC 
0176 and that the hospital would continue to be paid one unit of APC 
0034. The I/OCE currently determines, and we are proposing for CY 2012 
that it would continue to determine, whether to pay these specified 
mental health services individually or to make a single payment at the 
same rate as the APC 0176 per diem rate for partial hospitalization for 
all of the specified mental health services furnished by the hospital 
on that single date of service.
(5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 
8008)
    Prior to CY 2009, hospitals received a full APC payment for each 
imaging service on a claim, regardless of how many procedures were 
performed during a single session using the same imaging modality. 
Based on extensive data analysis, we determined that this practice 
neither reflected nor promoted the efficiencies hospitals can achieve 
when performing multiple imaging procedures during a single session (73 
FR 41448 through 41450). As a result of our data analysis, and in 
response to ongoing recommendations from MedPAC to improve payment 
accuracy for imaging services under the OPPS, we expanded the composite 
APC model developed in CY 2008 to multiple imaging services. Effective 
January 1, 2009, we provide a single payment each time a hospital bills 
more than one imaging procedure within an imaging family on the same 
date of service. We utilize three imaging families based on imaging 
modality for purposes of this methodology: (1) Ultrasound; (2) computed 
tomography (CT) and computed tomographic angiography (CTA); and (3) 
magnetic resonance imaging (MRI) and magnetic resonance angiography 
(MRA). The HCPCS codes subject to the multiple imaging composite policy 
and their respective families are listed in Table 13 of the CY 2011 
OPPS/ASC final rule with comment period (75 FR 71859 through 71860).
    While there are three imaging families, there are five multiple 
imaging composite APCs due to the statutory requirement at section 
1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging 
services provided with and without contrast. While the ultrasound 
procedures included in the policy do not involve contrast, both CT/CTA 
and MRI/MRA scans can be provided either with or without contrast. The 
five multiple imaging composite APCs established in CY 2009 are:
     APC 8004 (Ultrasound Composite);
     APC 8005 (CT and CTA without Contrast Composite);
     APC 8006 (CT and CTA with Contrast Composite);
     APC 8007 (MRI and MRA without Contrast Composite); and
     APC 8008 (MRI and MRA with Contrast Composite).
    We define the single imaging session for the ``with contrast'' 
composite APCs as having at least one or more imaging procedures from 
the same family performed with contrast on the same date of service. 
For example, if the hospital performs an MRI without contrast during 
the same session as at least one other MRI with contrast, the hospital 
will receive payment for APC 8008, the ``with contrast'' composite APC.
    Hospitals continue to use the same HCPCS codes to report imaging 
procedures, and the I/OCE determines when combinations of imaging 
procedures qualify for composite APC payment or map to standard (sole 
service) APCs for payment. We make a single payment for those imaging 
procedures that qualify for composite APC payment, as well as any 
packaged services furnished on the same date of service. The standard 
(noncomposite) APC assignments continue to apply for single imaging 
procedures and multiple imaging procedures performed across families. 
For a full discussion of the development of the multiple imaging 
composite APC methodology, we refer readers to the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68559 through 68569).
    At its February 2010 meeting, the APC Panel recommended that CMS 
continue providing analysis on an ongoing basis of the impact on 
beneficiaries of the multiple imaging composite APCs as data become 
available. In the CY 2011 OPPS/ASC proposed rule, we indicated that we 
were accepting this recommendation and would provide the requested 
analysis to the APC Panel at a future meeting (75 FR 46212). At the 
February 28-March 1, 2011 APC Panel meeting, CMS staff provided an 
updated analysis of the multiple imaging composite APCs to the Panel, 
comparing partial year CY 2010 imaging composite cost and utilization 
data to comparable CY 2009 data in order to meet the APC Panel request 
that we provide analysis of the impact on beneficiaries of the multiple 
imaging composite APCs.
    For CY 2012, we are proposing to continue paying for all multiple 
imaging procedures within an imaging family performed on the same date 
of service using the multiple imaging composite payment methodology. 
The proposed CY 2012 payment rates for the five multiple imaging 
composite APCs (APC 8004, APC 8005, APC 8006, APC 8007, and APC 8008) 
are based on median costs calculated from the partial year CY 2010 
claims available for this proposed rule that qualified for composite 
payment under the current policy (that is, those claims with more than 
one procedure within the same family on a single date of service). To 
calculate the proposed median costs, we used the same methodology that 
we used to calculate the final CY 2011 median costs for these composite 
APCs. That is, we removed any HCPCS codes in the OPPS imaging families 
that overlapped with codes on our bypass list (``overlap bypass 
codes'') to avoid splitting claims with multiple units or multiple 
occurrences of codes in an OPPS imaging family into new ``pseudo'' 
single claims. The imaging HCPCS codes that we removed from the bypass 
list for purposes of calculating the proposed multiple imaging 
composite APC median costs appear in Table 9 of this proposed rule. (We 
note that, consistent with our proposal in section II.A.1.b. of this 
proposed rule to add CPT code 71550 (Magnetic resonance (e.g., proton) 
imaging, chest (e.g., for evaluation of hilar and mediastinal 
lymphadenopathy); without contrast material(s)) to the list of bypass 
codes for CY 2012, we also are proposing to add CPT code 71550 to the 
list of proposed OPPS imaging family services overlapping with HCPCS 
codes on the

[[Page 42202]]

proposed CY 2012 bypass list.) We integrated the identification of 
imaging composite ``single session'' claims, that is, claims with 
multiple imaging procedures within the same family on the same date of 
service, into the creation of ``pseudo'' single procedure claims to 
ensure that claims were split in the ``pseudo'' single process into 
accurate reflections of either a composite ``single session'' imaging 
service or a standard sole imaging service resource cost. Like all 
single bills, the new composite ``single session'' claims were for the 
same date of service and contained no other separately paid services in 
order to isolate the session imaging costs. Our last step after 
processing all claims through the ``pseudo'' single process was to 
reassess the remaining multiple procedure claims using the full bypass 
list and bypass process in order to determine if we could make other 
``pseudo'' single bills. That is, we assessed whether a single 
separately paid service remained on the claim after removing line-items 
for the ``overlap bypass codes.''
    As discussed in detail in section III.D.2. of this proposed rule, 
we are proposing to establish two APCs to which we would propose to 
assign the codes created for CY 2011 by the AMA's CPT Editorial Board 
for combined abdominal and pelvis CT services. Specifically, we are 
proposing to create new APC 0331 (Combined Abdominal and Pelvis CT 
Without Contrast), to which we are proposing to assign CPT code 74176 
(Computed tomography, abdomen and pelvis; without contrast material); 
and we are proposing to create new APC 0334 (Combined Abdominal and 
Pelvis CT With Contrast), to which we are proposing to assign CPT codes 
74177 (Computed tomography, abdomen and pelvis; with contrast 
material(s)) and 74178 (Computed tomography, abdomen and pelvis; 
without contrast material in one or both body regions, followed by 
contrast material(s) and further sections in one or both body regions) 
for the CY 2012 OPPS. As noted and listed in section III.D.2. of this 
proposed rule, we selected claims of predecessor codes of new CPT codes 
74176, 74177, and 74178 to calculate the costs of proposed new APCs 
0331 and 0334, respectively. Therefore, we are proposing not to use 
those claims listed in Table 21 in section III.D.2. of this proposed 
rule in calculating the costs of APCs 8005 and 8006.
    We were able to identify 1 million ``single session'' claims out of 
an estimated 2 million potential composite cases from our ratesetting 
claims data, or approximately half of all eligible claims, to calculate 
the proposed CY 2012 median costs for the multiple imaging composite 
APCs. We list in Table 8 below the HCPCS codes that would be subject to 
the proposed multiple imaging composite policy, the approximate 
proposed median costs for the imaging composite APCs, and their 
respective families for CY 2012. The HCPCS codes listed in Table 8 are 
assigned status indicated ``Q3''' in Addendum B to this proposed rule 
(which is referenced in section XVII. of this proposed rule and 
available via the Internet on the CMS Web site) to identify their 
status as potentially payable through a composite APC. Their proposed 
composite APC assignment is identified in Addendum M to this proposed 
rule (which is referenced in section XVII. of this proposed rule and 
available via the Internet on the CMS Web site). Table 9 below lists 
the OPPS imaging family services that overlap with HCPCS codes on the 
proposed CY 2012 bypass list.

 Table 8--Proposed OPPS Imaging Families and Multiple Imaging Procedure
                             Composite APCs
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                          Family 1--Ultrasound
------------------------------------------------------------------------
         Proposed CY 2012 APC 8004                Proposed CY 2012
(Ultrasound Composite)....................  Approximate APC Median Cost
                                             = $197
------------------------------------------------------------------------
76604.....................................  Us exam, chest.
76700.....................................  Us exam, abdom, complete.
76705.....................................  Echo exam of abdomen.
76770.....................................  Us exam abdo back wall,
                                             comp.
76775.....................................  Us exam abdo back wall, lim.
76776.....................................  Us exam k transpl w/Doppler.
76831.....................................  Echo exam, uterus.
76856.....................................  Us exam, pelvic, complete.
76870.....................................  Us exam, scrotum.
76857.....................................  Us exam, pelvic, limited.
------------------------------------------------------------------------
             Family 2--CT and CTA With and Without Contrast
------------------------------------------------------------------------
         Proposed CY 2012 APC 8005                Proposed CY 2012
(CT and CTA Without Contrast Composite)*..  Approximate APC Median Cost
                                             = $445
------------------------------------------------------------------------
70450.....................................  Ct head/brain w/o dye.
70480.....................................  Ct orbit/ear/fossa w/o dye.
70486.....................................  Ct maxillofacial w/o dye.
70490.....................................  Ct soft tissue neck w/o dye.
71250.....................................  Ct thorax w/o dye.
72125.....................................  Ct neck spine w/o dye.
72128.....................................  Ct chest spine w/o dye.
72131.....................................  Ct lumbar spine w/o dye.
72192.....................................  Ct pelvis w/o dye.
73200.....................................  Ct upper extremity w/o dye.
73700.....................................  Ct lower extremity w/o dye.
74150.....................................  Ct abdomen w/o dye.
74261.....................................  Ct colonography, w/o dye.
74176.....................................  Ct angio abd & pelvis.
------------------------------------------------------------------------
         Proposed CY 2012 APC 8006                Proposed CY 2012
(CT and CTA With Contrast Composite)......  Approximate APC Median Cost
                                             = $744
------------------------------------------------------------------------
70487.....................................  Ct maxillofacial w/dye.
70460.....................................  Ct head/brain w/dye.
70470.....................................  Ct head/brain w/o & w/dye.
70481.....................................  Ct orbit/ear/fossa w/dye.
70482.....................................  Ct orbit/ear/fossa w/o & w/
                                             dye.
70488.....................................  Ct maxillofacial w/o & w/
                                             dye.
70491.....................................  Ct soft tissue neck w/dye.
70492.....................................  Ct sft tsue nck w/o & w/dye.
70496.....................................  Ct angiography, head.
70498.....................................  Ct angiography, neck.
71260.....................................  Ct thorax w/dye.
71270.....................................  Ct thorax w/o & w/dye.
71275.....................................  Ct angiography, chest.
72126.....................................  Ct neck spine w/dye.
72127.....................................  Ct neck spine w/o & w/dye.
72129.....................................  Ct chest spine w/dye.
72130.....................................  Ct chest spine w/o & w/dye.
72132.....................................  Ct lumbar spine w/dye.
72133.....................................  Ct lumbar spine w/o & w/dye.
72191.....................................  Ct angiograph pelv w/o & w/
                                             dye.
72193.....................................  Ct pelvis w/dye.
72194.....................................  Ct pelvis w/o & w/dye.
73201.....................................  Ct upper extremity w/dye.
73202.....................................  Ct uppr extremity w/o & w/
                                             dye.
73206.....................................  Ct angio upr extrm w/o & w/
                                             dye.
73701.....................................  Ct lower extremity w/dye.
73702.....................................  Ct lwr extremity w/o & w/
                                             dye.
73706.....................................  Ct angio lwr extr w/o & w/
                                             dye.
74160.....................................  Ct abdomen w/dye.
74170.....................................  Ct abdomen w/o & w/dye.
74175.....................................  Ct angio abdom w/o & w/dye.
74262.....................................  Ct colonography, w/dye.
75635.....................................  Ct angio abdominal arteries.
74177.....................................  Ct angio abd & pelv w/
                                             contrast.
74178.....................................  Ct angio abd & pelv 1+
                                             regns.
------------------------------------------------------------------------
* If a ``without contrast'' CT or CTA procedure is performed during the
 same session as a ``with contrast'' CT or CTA procedure, the I/OCE will
 assign APC 8006 rather than APC 8005..
------------------------------------------------------------------------
             Family 3--MRI and MRA With and Without Contrast
------------------------------------------------------------------------
         Proposed CY 2012 APC 8007                Proposed CY 2012
(MRI and MRA Without Contrast Composite)*.  Approximate APC Median Cost
                                             = $718
------------------------------------------------------------------------
70336.....................................  Magnetic image, jaw joint.

[[Page 42203]]

 
70540.....................................  Mri orbit/face/neck w/o dye.
70544.....................................  Mr angiography head w/o dye.
70547.....................................  Mr angiography neck w/o dye.
70551.....................................  Mri brain w/o dye.
70554.....................................  Fmri brain by tech.
71550.....................................  Mri chest w/o dye.
72141.....................................  Mri neck spine w/o dye.
72146.....................................  Mri chest spine w/o dye.
72148.....................................  Mri lumbar spine w/o dye.
72195.....................................  Mri pelvis w/o dye.
73218.....................................  Mri upper extremity w/o dye.
73221.....................................  Mri joint upr extrem w/o
                                             dye.
73718.....................................  Mri lower extremity w/o dye.
73721.....................................  Mri jnt of lwr extre w/o
                                             dye.
74181.....................................  Mri abdomen w/o dye.
75557.....................................  Cardiac mri for morph.
75559.....................................  Cardiac mri w/stress img.
C8901.....................................  MRA w/o cont, abd.
C8904.....................................  MRI w/o cont, breast, uni.
C8907.....................................  MRI w/o cont, breast, bi.
C8910.....................................  MRA w/o cont, chest.
C8913.....................................  MRA w/o cont, lwr ext.
C8919.....................................  MRA w/o cont, pelvis.
C8932.....................................  MRA, w/o dye., spinal canal.
C8935.....................................  MRA, w/o dye., upper extr.
------------------------------------------------------------------------
         Proposed CY 2012 APC 8008                Proposed CY 2012
(MRI and MRA with Contrast Composite).....  Approximate APC Median Cost
                                             = $1,032
------------------------------------------------------------------------
70549.....................................  Mr angiograph neck w/o & w/
                                             dye.
70542.....................................  Mri orbit/face/neck w/dye.
70543.....................................  Mri orbt/fac/nck w/o & w/
                                             dye.
70545.....................................  Mr angiography head w/dye.
70546.....................................  Mr angiograph head w/o & w/
                                             dye.
70548.....................................  Mr angiography neck w/dye.
70552.....................................  Mri brain w/dye.
70553.....................................  Mri brain w/o & w/dye.
71551.....................................  Mri chest w/dye.
71552.....................................  Mri chest w/o & w/dye.
72142.....................................  Mri neck spine w/dye.
72147.....................................  Mri chest spine w/dye.
72149.....................................  Mri lumbar spine w/dye.
72156.....................................  Mri neck spine w/o & w/dye.
72157.....................................  Mri chest spine w/o & w/dye.
72158.....................................  Mri lumbar spine w/o & w/
                                             dye.
72196.....................................  Mri pelvis w/dye.
72197.....................................  Mri pelvis w/o & w/dye.
73219.....................................  Mri upper extremity w/dye.
73220.....................................  Mri uppr extremity w/o & w/
                                             dye.
73222.....................................  Mri joint upr extrem w/dye.
73223.....................................  Mri joint upr extr w/o & w/
                                             dye.
73719.....................................  Mri lower extremity w/dye.
73720.....................................  Mri lwr extremity w/o & w/
                                             dye.
73722.....................................  Mri joint of lwr extr w/dye.
73723.....................................  Mri joint lwr extr w/o & w/
                                             dye.
74182.....................................  Mri abdomen w/dye.
74183.....................................  Mri abdomen w/o & w/dye.
75561.....................................  Cardiac mri for morph w/dye.
75563.....................................  Card mri w/stress img & dye.
C8900.....................................  MRA w/cont, abd.
C8902.....................................  MRA w/o fol w/cont, abd.
C8903.....................................  MRI w/cont, breast, uni.
C8905.....................................  MRI w/o fol w/cont, brst,
                                             un.
C8906.....................................  MRI w/cont, breast, bi.
C8908.....................................  MRI w/o fol w/cont, breast.
C8909.....................................  MRA w/cont, chest.
C8911.....................................  MRA w/o fol w/cont, chest.
C8912.....................................  MRA w/cont, lwr ext.
C8914.....................................  MRA w/o fol w/cont, lwr ext.
C8918.....................................  MRA w/cont, pelvis.
C8920.....................................  MRA w/o fol w/cont, pelvis.
C8931.....................................  MRA, w/dye., spinal canal.
C8933.....................................  MRA, w/o & w/dye., spinal
                                             canal.
C8934.....................................  MRA, w/dye., upper
                                             extremity.
C8936.....................................  MRA, w/o & w/dye., upper
                                             extr.
------------------------------------------------------------------------
* If a ``without contrast'' MRI or MRA procedure is performed during the
 same session as a ``with contrast'' MRI or MRA procedure, the I/OCE
 will assign APC 8008 rather than 8007..
------------------------------------------------------------------------

  Table 9--Proposed OPPS Imaging Family Services Overlapping With HCPCS
                Codes on the Proposed CY 2012 Bypass List
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                          Family 1--Ultrasound
------------------------------------------------------------------------
76700............................  Us exam, abdom, complete.
76705............................  Echo exam of abdomen.
76770............................  Us exam abdo back wall, comp.
76775............................  Us exam abdo back wall, lim.
76776............................  Us exam k transpl w/Doppler.
76856............................  Us exam, pelvic, complete.
76870............................  Us exam, scrotum.
76857............................  Us exam, pelvic, limited.
------------------------------------------------------------------------
             Family 2--CT and CTA with and without contrast
------------------------------------------------------------------------
70450............................  Ct head/brain w/o dye.
70480............................  Ct orbit/ear/fossa w/o dye.
70486............................  Ct maxillofacial w/o dye.
70490............................  Ct soft tissue neck w/o dye.
71250............................  Ct thorax w/o dye.
72125............................  Ct neck spine w/o dye.
72128............................  Ct chest spine w/o dye.
72131............................  Ct lumbar spine w/o dye.
72192............................  Ct pelvis w/o dye.
73200............................  Ct upper extremity w/o dye.
73700............................  Ct lower extremity w/o dye.
74150............................  Ct abdomen w/o dye.
------------------------------------------------------------------------
             Family 3--MRI and MRA with and without contrast
------------------------------------------------------------------------
70336............................  Magnetic image, jaw joint.
70544............................  Mr angiography head w/o dye.
70551............................  Mri brain w/o dye.
71550............................  Mri chest w/o dye.
72141............................  Mri neck spine w/o dye.
72146............................  Mri chest spine w/o dye.
72148............................  Mri lumbar spine w/o dye.
73218............................  Mri upper extremity w/o dye.
73221............................  Mri joint upr extrem w/o dye.
73718............................  Mri lower extremity w/o dye.
73721............................  Mri jnt of lwr extre w/o dye.
------------------------------------------------------------------------

(6) Cardiac Resynchronization Therapy Composite APC (APCs 0108, 0418, 
0655, and 8009)
    Cardiac resynchronization therapy (CRT) uses electronic devices to 
sequentially pace both sides of the heart to improve its output. CRT 
utilizes a pacing electrode implanted in combination with either a 
pacemaker or an implantable cardioverter defibrillator (ICD). CRT 
performed by the implantation of an ICD along with a pacing electrode 
is referred to as ``CRT-D.'' CRT performed by the implantation of a 
pacemaker along with a pacing electrode is referred to as ``CRT-P.''
    CRT-D procedures are described by combinations of CPT codes for the 
insertion of pulse generators and the insertion of the leads associated 
with ICDs, along with the insertion of the pacing electrode. For the 
implantation of a pulse generator, hospitals may use CPT code 33240 
(Insertion of single or dual chamber pacing cardioverter-defibrillator 
pulse generator), which is the only CPT code assigned to APC 0107 
(Insertion of Cardioverter-Defibrillator) for CY 2011. For the 
implantation of a pulse generator and leads, hospitals may use CPT code 
33249 (Insertion or repositioning of electrode lead(s) for single or 
dual chamber pacing cardioverter-defibrillator and insertion of pulse 
generator), which is the only CPT code assigned to APC 0108 (Insertion/
Replacement/Repair of Cardioverter-Defibrillator Leads) for CY 2011.
    For CRT-P, hospitals may use CPT codes 33206 (Insertion or 
replacement of permanent pacemaker with transvenous electrode(s); 
atrial) and 33207 (Insertion or replacement of permanent pacemaker with 
transvenous electrode(s); ventricular), which are

[[Page 42204]]

assigned to APC 0089 (Insertion/Replacement of Permanent Pacemaker and 
Electrodes) for CY 2011. Hospitals also may use CPT code 33208 
(Insertion or replacement of permanent pacemaker with transvenous 
electrode(s); atrial and ventricular), for the implantation of a 
pacemaker with leads, which is assigned to APC 0655 (Insertion/
Replacement/Conversion of a Permanent Dual Chamber Pacemaker).
    When CRT-P is provided, hospitals would report CPT code 33206, 
33207, or 33208 codes for ICD or pacemaker insertion, along with CPT 
code 33225 (Insertion of pacing electrode, cardiac venous system, for 
left ventricular pacing, at time of insertion of pacing cardioverter-
defibrillator or pacemaker pulse generator (including upgrade to dual 
chamber system)), for implantation of the pacing electrode, which is 
assigned to APC 0418 (Insertion of Left Ventricular Pacing Electrode) 
for CY 2011.
    A number of commenters who responded to prior OPPS proposed rules, 
as well as public presenters to the APC Panel, have recommended that 
CMS establish new composite APCs for CRT-D, citing significant 
fluctuations in the median cost for CPT code 33225 and the payment rate 
for APC 0418. The commenters and presenters have pointed out that, 
because the definition of CPT code 33225 specifies that the pacing 
electrode is inserted at the same time as an ICD or pacemaker, CMS 
would not have many valid single or pseudo single claims upon which to 
calculate an accurate median cost. These commenters and presenters also 
asserted that claims data for these services demonstrate that the 
percentage of single claims available for use in CRT ratesetting is 
very low compared to the total number of claims submitted for CRT-D or 
CRT-P services. The APC Panel at its February and August 2009 meetings 
recommended that CMS evaluate the implications of the creation of a new 
composite APC for CRT-D and recommended that CMS reconsider creating a 
composite APC or group of composite APCs for CRT-D and CRT-P. While we 
did not propose any new composite APCs for CY 2010 or CY 2011, we 
accepted both of these APC Panel recommendations (75 FR 71852).
    In response to the APC Panel recommendations and the comments we 
have received, we have evaluated the implications of creating four 
composite APCs for CRT, which would include the ICD and pacemaker 
insertion procedures listed previously in this section (described by 
CPT codes 33240, 33249, 33206, 33207, and 33208) performed in 
combination with the insertion of a pacing electrode (described by CPT 
code 33225). Table 10 below outlines the four potential composite APCs 
that we modeled. Specifically, we provide a description of each 
potential composite APC, the combination of CPT codes that we used to 
define the potential composite APC, the frequency of claims that met 
the definition of the potential composite APC that could be used to 
calculate a median cost for the potential composite APC, and the median 
cost calculated for the potential composite APC. Table 10 below 
contains the results from our calculations for the four potential 
composite APCs using CY 2010 claims data available for this proposed 
rule, that is, those claims processed between January 1 and December 
31, 2010.

                                       Table 10--Potential Composite APCs
----------------------------------------------------------------------------------------------------------------
                                                                                                       CY 2012
 Potential composite                Description                Component    CPT codes     CY 2010      payment
         APC                                                      APCs                   frequency     estimate
----------------------------------------------------------------------------------------------------------------
A....................  Cardiac Resynchronization Therapy--           0418        33225           21      $35,623
                        ICD Pulse Generator and Leads.               0107        33240
B....................  Cardiac Resynchronization Therapy--           0418        33225        2,358       38,854
                        ICD Pulse Generator.                         0108        33249
C....................  Cardiac Resynchronization Therapy--           0418        33225           84       17,306
                        Pacemaker Pulse Generator, and Leads         0089        33206
                        (Atrial or Ventricular).                                 33207
D....................  Cardiac Resynchronization Therapy--           0418        33225          314       18,705
                        Pacemaker Pulse Generator, and Leads         0655        33208
                        (Atrial and Ventricular).
----------------------------------------------------------------------------------------------------------------

    For CY 2012, under the authority of section 1833(t)(1)(B) of the 
Act, we are proposing to create a new composite APC 8009 (Cardiac 
Resynchronization Therapy with Defibrillator Composite), listed as 
potential composite APC ``B'' in Table 10 above, for CRT-D services. 
This proposed composite APC is the only modeled composite in the study 
as shown above in Table 10, with significant claims volume, and would 
combine a procedure currently in APC 0418 with a procedure currently in 
APC 0108 (Insertion/Replacement/Repair of Cardioverter-Defibrillator 
Leads) when performed on the same date of service. Specifically, we are 
proposing to create composite APC 8009, which would be used when CPT 
33249 and CPT 33225 are performed on the same day, in order to 
recognize the inherent challenges in calculating accurate median costs 
for CPT code 33225 based on single procedure claims utilized in 
standard OPPS ratesetting methodology, and to address commenters' 
concerns regarding the fluctuations in median costs for APC 0418. We 
believe a composite payment methodology is appropriate for these 
services and would result in more accurate payment for these services 
because such a methodology is specifically designed to provide payment 
for two or more procedures when they are provided in the same 
encounter, thus enabling us to use more claims data and to use claims 
data that more accurately represents the full cost of the services when 
they are furnished in the same encounter. We also believe that there is 
sufficient claims volume for CPT 33249 and CPT 33225 provided in the 
same encounter to warrant creation of the composite APC. In addition, 
we believe that the claims volume for CPT 33249 and CPT 33225 is 
sufficient to demonstrate that these services are commonly performed 
together. While the other combinations of CRT procedures listed in 
Table 10 may also be performed together, we are not proposing to 
implement composite APCs for these services because of the low 
frequency with which CPT code 33225 is reported with other CPT codes 
for ICD and pacemaker insertion in the claims data. As we have stated 
previously (74 FR 60392), because of the complex claims processing and 
ratesetting logic involved, in the past, we have explored composite 
APCs only for combinations of services that are commonly performed 
together. Because

[[Page 42205]]

of the low frequency of the other combinations of CRT procedures listed 
in Table 10, we do not consider them to be commonly performed together.
    Under the authority of section 1833(t)(2)(E) of the Act, we also 
are proposing to cap the payment rate for composite APC 8009 at the 
most comparable Medicare-severity diagnosis-related group (MS-DRG) 
payment rate established under the IPPS that would be provided to acute 
care hospitals for providing CRT-D services to hospital inpatients. 
Specifically, we are proposing to pay APC 8009 at the lesser of the APC 
8009 median cost or the IPPS payment rate for MS-DRG 227 (Cardiac 
Defibrillator Implant without Cardiac Catheterization without Major 
Complication or Comorbidity), as adopted in the FY 2012 IPPS/LTCH PPS 
final rule. We would establish the OPPS payment amount at the FY 2012 
IPPS standardized payment amount for MS-DRG 227. In the FY 2012 IPPS/
LTCH proposed rule, this amount is $26,364.93. We calculated the 
standardized payment rate for MS-DRG 227 ($26,364.93) by multiplying 
the normalized weight from Table 5 of the FY 2012 IPPS/LTCH PPS 
proposed rule (5.1370) by the sum of the nonlablor and labor-related 
shares of the proposed FY 2012 IPPS operating standardized amount 
(nonwage-adjusted) ($5,132.36) which were obtained from Table 1B. For 
further detail on the calculation of the IPPS proposed FY 2012 payments 
rates, we refer readers to the FY 2012 IPPS/LTCH PPS proposed rule (76 
FR 26028 through 26029).
    We consider the standardized payment rate for MS-DRG 227 to 
represent appropriate payment for a comparable package of services 
furnished to outpatients. We believe that, because this MS-DRG includes 
defibrillator implantation for those inpatients without major 
complications or comorbidities, it represents the payment made for 
hospital inpatients who are most similar to patients who would receive 
CRT-D on an outpatient basis, because hospital outpatients are 
generally less sick than hospital inpatients and because patients who 
had complications or comorbitities would be most likely to be admitted 
to inpatient status to receive CRT-D therapy. Similar to the proposed 
payment rate for composite APC 8009, the proposed payment rate for MS-
DRG 227 includes the device costs associated with CRT-D along with the 
service costs associated with CPT codes 33249 and 33225, which are the 
procedures that are reported for implanting those devices. We believe 
that we should not pay more for these services under the proposed OPPS 
composite APC payment than under the IPPS because the OPPS payment 
would, by definition, include fewer items and services than the 
corresponding IPPS MS-DRG payment. For example, the IPPS MS-DRG payment 
includes payment for drugs and diagnostic tests that would be 
separately payable under the OPPS. A payment cap is necessary, 
therefore, to ensure that we do not create an inappropriate payment 
incentive to provide CRT-D services in one setting of care over another 
by paying more for CRT-D in the outpatient setting compared to the 
inpatient setting. We also believe that limiting payment for CRT-D 
services under the OPPS to the IPPS MS-DRG payment will ensure 
appropriate and equitable payment to hospitals because patients who 
receive these services in the hospital outpatient setting are not as 
sick as patients who have been admitted to receive this same service in 
the hospital inpatient setting. Therefore, we expect it would be less 
costly to provide care for these patients, who would also spend less 
time in the facility. For more detail and how this payment rate was 
calculated, we refer readers to section III. D. 6 of this proposed 
rule.
    In order to ensure that hospitals correctly code for CRT services 
in the future, we are proposing to create claim processing edits that 
would return claims to providers unless CPT code 33225 is billed in 
conjunction with one of the following CPT codes, as specified by AMA in 
the CPT code book:
     33206 (Insertion or replacement of permanent pacemaker 
with transvenous electrode(s); atrial);
     33207 (Insertion or replacement of permanent pacemaker 
with transvenous electrode(s); ventricular);
     33208 (Insertion or replacement of permanent pacemaker 
with transvenous electrode(s); atrial and ventricular);
     33212 (Insertion or replacement of pacemaker pulse 
generator only; single chamber, atrial or ventricular);
     33213 (Insertion or replacement of pacemaker pulse 
generator only; dual chamber, atrial or ventricular);
     33214 (Upgrade of implanted pacemaker system, conversion 
of single chamber system to dual chamber system (includes removal of 
previously placed pulse generator, testing of existing lead, insertion 
of new lead, insertion of new pulse generator));
     33216 (Insertion of a single transvenous electrode, 
permanent pacemaker or cardioverter-defibrillator);
     33217 (Insertion of 2 transvenous electrodes, permanent 
pacemaker or cardioverter-defibrillator);
     33222 (Revision or relocation of skin pocket for 
pacemaker), 33233 (Removal of permanent pacemaker pulse generator);
     33234 (Removal of transvenous pacemaker electrode(s); 
single lead system, atrial or ventricular);
     33235 (Removal of transvenous pacemaker electrode(s); dual 
lead system, atrial or ventricular);
     33240 (Insertion of single or dual chamber pacing 
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).
    Finally, in order to reduce the extent to which payment rates for 
the two services currently assigned to APC 0418, described by CPT codes 
33224 and 33225, might continue to fluctuate, we also are proposing to 
move CPT 33225 from APC 0418 to APC 0108. We believe that moving these 
codes to APCs that have higher volumes of services to which they are 
more similar in clinical characteristics and median costs will increase 
the stability of the payments for these services from year to year. In 
general, a higher volume of services across multiple procedures within 
an APC results in more stable APC median costs and, therefore, in the 
payment rate from one year to the next. We also are proposing to change 
the name of APC 0108 from ``Insertion/Replacement/Repair of 
Cardioverter-Defibrillator Leads'' to ``Insertion/Replacement/Repair of 
AICD Leads, Generator, and Pacing Electrodes.'' Similarly, we are 
proposing to move CPT 33224 from APC 0418 to APC 0655 and to change the 
name of APC 0655 from ``Insertion/Replacement/Conversion of a Permanent 
Dual Chamber Pacemaker'' to ``Insertion/Replacement/Conversion of a 
Permanent Dual Chamber Pacemaker or Pacing Electrode.'' We believe that 
moving CPT code 33224 into APC 0655 will promote stability in payment 
for CPT code 33224 because CPT code 33224 would then be in an APC with 
similar median costs but with a higher volume of services and, 
therefore, will benefit from the stability in APC median cost and 
payment rate that generally results as the volume of services within an 
APC increases. Because these proposed actions would result in APC 0418 
containing no CPT codes, we are proposing to delete APC 0418.
    In summary, for CY 2012, we are proposing to create a composite for 
CRT-D services billed with CPT code 33225 and CPT code 33249 on the 
same date of service (Composite APC 8009

[[Page 42206]]

(Cardiac Resynchronization Therapy--ICD Pulse Generator and Leads)), 
for which we are proposing that payment would be capped at the IPPS 
payment rate for MS-DRG 227. In other words, we would pay APC 8009 at 
the lesser of the APC 8009 median cost or the IPPS standardized payment 
for MS-DRG 227. We also are proposing to implement claims processing 
edits that would return to providers incorrectly coded claims on which 
a pacing electrode insertion (CPT code 33225) is billed without an ICD 
or pacemaker insertion. Finally, we are proposing to delete APC 0418, 
and to redistribute its component CPT codes (33225 and 33224) to APCs 
0108 and 0655. The proposed changes would all be made in a budget 
neutral manner, in the same way that payment for other composite APCs 
and the reassignment of codes to APCs are budget neutral within the 
OPPS. We refer readers to section II.A.4 of this proposed rule for a 
discussion of the scaling of payment weights for budget neutrality.
3. Proposed Changes to Packaged Services
a. Background
    The OPPS, like other prospective payment systems, relies on the 
concept of averaging, where the payment may be more or less than the 
estimated cost of providing a service or bundle of services for a 
particular patient, but with the exception of outlier cases, the 
payment is adequate to ensure access to appropriate care. Packaging 
payment for multiple interrelated services into a single payment 
creates incentives for providers to furnish services in the most 
efficient way by enabling hospitals to manage their resources with 
maximum flexibility, thereby encouraging long-term cost containment. 
For example, where there are a variety of supplies that could be used 
to furnish a service, some of which are more expensive than others, 
packaging encourages hospitals to use the least expensive item that 
meets the patient's needs, rather than to routinely use a more 
expensive item. Packaging also encourages hospitals to negotiate 
carefully with manufacturers and suppliers to reduce the purchase price 
of items and services or to explore alternative group purchasing 
arrangements, thereby encouraging the most economical health care. 
Similarly, packaging encourages hospitals to establish protocols that 
ensure that necessary services are furnished, while carefully 
scrutinizing the services ordered by practitioners to maximize the 
efficient use of hospital resources. Packaging payments into larger 
payment bundles promotes the stability of payment for services over 
time. Finally, packaging also may reduce the importance of refining 
service-specific payment because there is more opportunity for 
hospitals to average payment across higher cost cases requiring many 
ancillary services and lower cost cases requiring fewer ancillary 
services. For these reasons, packaging payment for services that are 
typically ancillary and supportive to a primary service has been a 
fundamental part of the OPPS since its implementation in August 2000.
    We assign status indicator ``N'' to those HCPCS codes that we 
believe are always integral to the performance of the primary modality; 
therefore, we always package their costs into the costs of the 
separately paid primary services with which they are billed. Services 
assigned status indicator ``N'' are unconditionally packaged.
    We assign status indicator ``Q1'' (``STVX-Packaged Codes''), ``Q2'' 
(``T-Packaged Codes''), or ``Q3'' (Codes that may be paid through a 
composite APC) to each conditionally packaged HCPCS code. An ``STVX-
packaged code'' describes a HCPCS code whose payment is packaged when 
one or more separately paid primary services with the status indicator 
of ``S,'' ``T,'' ``V,'' or ``X'' are furnished in the hospital 
outpatient encounter. A ``T-packaged code'' describes a code whose 
payment is packaged when one or more separately paid surgical 
procedures with the status indicator of ``T'' are provided during the 
hospital outpatient encounter. ``STVX-packaged codes'' and ``T-packaged 
codes'' are paid separately in those uncommon cases when they do not 
meet their respective criteria for packaged payment. ``STVX-packaged 
codes'' and ``T-packaged codes'' are conditionally packaged. We refer 
readers to section XI.A.1. of this proposed rule and Addenda D1 (which 
is referenced in section XVII. of this proposed rule and available via 
the Internet on the CMS Web site) with other Addenda, for a complete 
listing of proposed status indicators and the meaning of each.
    We use the term ``dependent service'' to refer to the HCPCS codes 
that represent services that are typically ancillary and supportive to 
a primary diagnostic or therapeutic modality. We use the term 
``independent service'' to refer to the HCPCS codes that represent the 
primary therapeutic or diagnostic modality into which we package 
payment for the dependent service. In future years, as we consider the 
development of larger payment groups that more broadly reflect services 
provided in an encounter or episode-of-care, it is possible that we 
might propose to bundle payment for a service that we now refer to as 
``independent.''
    Hospitals include HCPCS codes and charges for packaged services on 
their claims, and the estimated costs associated with those packaged 
services are then added to the costs of separately payable procedures 
on the same claims in establishing payment rates for the separately 
payable services. We encourage hospitals to report all HCPCS codes that 
describe packaged services that were provided, unless the CPT Editorial 
Panel or CMS provide other guidance. The appropriateness of the OPPS 
payment rates depends on the quality and completeness of the claims 
data that hospitals submit for the services they furnish to our 
Medicare beneficiaries.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66610 
through 66659), we adopted the packaging of payment for items and 
services in seven categories into the payment for the primary 
diagnostic or therapeutic modality to which we believe these items and 
services are typically ancillary and supportive. The seven categories 
are: (1) Guidance services; (2) image processing services; (3) 
intraoperative services; (4) imaging supervision and interpretation 
services; (5) diagnostic radiopharmaceuticals; (6) contrast media; and 
(7) observation services. We specifically chose these categories of 
HCPCS codes for packaging because we believe that the items and 
services described by the codes in these categories are typically 
ancillary and supportive to a primary diagnostic or therapeutic 
modality and, in those cases, are an integral part of the primary 
service they support.
    In addition, in the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66650 through 66659), we finalized additional packaging for the 
CY 2008 OPPS, which included the establishment of new composite APCs 
for CY 2008, specifically APC 8000 (Cardiac Electrophysiologic 
Evaluation and Ablation Composite), APC 8001 (LDR Prostate 
Brachytherapy Composite), APC 8002 (Level I Extended Assessment & 
Management Composite), and APC 8003 (Level II Extended Assessment & 
Management Composite). In the CY 2009 OPPS/ASC final rule with comment 
period (73 FR 68559 through 68569), we expanded the composite APC model 
to one new clinical area--multiple imaging services. We created five 
multiple imaging composite APCs for payment in CY 2009 that incorporate 
statutory requirements to differentiate between

[[Page 42207]]

imaging services provided with contrast and without contrast as 
required by section 1833(t)(2)(G) of the Act. The multiple imaging 
composite APCs are: (1) APC 8004 (Ultrasound Composite); (2) APC 8005 
(CT and CTA without Contrast Composite); (3) APC 8006 (CT and CTA with 
Contrast Composite); (4) APC 8007 (MRI and MRA without Contrast 
Composite); and (5) APC 8008 (MRI and MRA with Contrast Composite). We 
discuss composite APCs in more detail in section II.A.2.e. of this 
proposed rule.
    We recognize that decisions about packaging and bundling payment 
involve a balance between ensuring that payment is adequate to enable 
the hospital to provide quality care and establishing incentives for 
efficiency through larger units of payment. Therefore, we invite public 
comments regarding our packaging proposals for the CY 2012 OPPS.
b. Packaging Issues
(1) CMS Presentation of Findings Regarding Expanded Packaging at the 
February 28-March 1, 2011 APC Panel Meeting
    In deciding whether to package a service or pay for a code 
separately, we have historically considered a variety of factors, 
including whether the service is normally provided separately or in 
conjunction with other services; how likely it is for the costs of the 
packaged code to be appropriately mapped to the separately payable 
codes with which it was performed; and whether the expected cost of the 
service is relatively low.
    As discussed in section I.D. of this proposed rule, the APC Panel 
advises CMS on the clinical integrity of payment groups and their 
weights, and the APC Panel has had a Packaging Subcommittee that is now 
renamed the Subcommittee for APC Groups and Status Indicator (SI) 
Assignments to reflect that its function has expanded to include 
assisting CMS with assignment of HCPCS codes to APCs. As part of its 
function, the APC Panel studies and makes recommendations on issues 
pertaining to services that are not separately payable under the OPPS, 
but whose payments are bundled or packaged into APC payments. The APC 
Panel has considered packaging issues at several earlier meetings. For 
discussions of earlier APC Panel meetings and recommendations, we refer 
readers to previously published hospital OPPS/ASC proposed and final 
rules on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/HORD/list.asp.
(2) Packaging Recommendations of the APC Panel at Its February 28-March 
1, 2011 Meeting
    During the February 28-March 1, 2011 APC Panel meeting, the APC 
Panel accepted the report of the Subcommittee for APC Groups and Status 
Indicator (SI) Assignment, heard several public presentations related 
to packaged services, discussed the deliberations of the subcommittee, 
and made five recommendations related to packaging and to the function 
of the subcommittee. The Report of the February 28-March 1, 2011 
meeting of the APC Panel may be found at the Web site at: http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.
    To summarize, the APC Panel made five recommendations regarding the 
packaging of payment under the CY 2012 OPPS. Below we present each of 
these five packaging recommendations and our responses to those 
recommendations. One recommendation that evolved from the discussions 
of the APC Groups and Status Indicator Subcommittee that is specific to 
HCPCS codes is discussed in section III.D. of this proposed rule.
    APC Panel Recommendation 4: That HCPCS code 31627 (Bronchoscopy, 
rigid or flexible, including fluoroscopic guidance, when performed; 
with computer-assisted, image-guided navigation (List separately in 
addition to code for primary procedure[s])) continue to be assigned a 
status indicator of ``N.'' The Panel further recommended that CMS 
continue to collect claims data for HCPCS code 31627.
    CMS Response to Recommendation 4: HCPCS code 31627 was new for CY 
2010, and we assigned a new interim status indicator of ``N'' in our CY 
2010 OPPS/ASC final rule with comment period based on our policy of 
packaging guidance and intraoperative services that are ancillary and 
dependent upon an independent separately paid procedure. At the APC 
Panel's February 2010 meeting, the manufacturer of the electromagnetic 
navigation bronchoscopy (ENB) technology, one of several technologies 
that can be used to perform the service described by HCPCS code 31627, 
asserted that use of the ENB technology during a bronchoscopy procedure 
enables access to distal lesions that are otherwise not accessible 
without use of the ENB technology. The manufacturer also stated that 
without separate payment for the ENB technology, hospitals would likely 
not adopt the technology and the population that would likely benefit 
from the ENB technology would not have access to this technology. In 
response to the manufacturer's presentation at the February 2010 Panel 
meeting, the APC Panel asked CMS to consider whether HCPCS code 31627 
should be packaged or paid separately; and if it should be paid 
separately, the APC Panel asked CMS to investigate the appropriate APC 
assignment. The report of the February 2010 APC Panel meeting is 
available at http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.
    We stated in the CY 2011 OPPS/ASC proposed rule (75 FR 46223) that 
we considered and analyzed the information available to us for HCPCS 
code 31627 and believed that the code described a procedure that is 
supportive of and ancillary to the primary diagnostic or therapeutic 
modality. Therefore, we proposed to package payment for HCPCS code 
31627. We stated that, by proposing to package payment for this 
procedure, we would be treating it in the same manner as similar 
computer-assisted, navigational diagnostic procedures that are 
supportive of and ancillary to a primary diagnostic or therapeutic 
modality.
    At its August 23-24, 2010 meeting, the APC Panel listened to 
discussions regarding whether HCPCS code 31627 should remain packaged 
for CY 2011. After hearing presentations from the public, the APC Panel 
recommended that CMS continue to package payment for HCPCS code 31627 
into payment for the major separately paid procedure with which it is 
performed and asked that CMS bring claims data on the cost of HCPCS 
code 31627 to the APC Panel's winter 2011 meeting for review. After 
consideration of all of the information provided by commenters on this 
issue, and hearing the discussion of the issue by the APC Panel at its 
August 23-24, 2010 meeting, we accepted the APC Panel's recommendation 
to continue to package payment for HCPCS code 31627 into the payment 
for the major separately paid procedure with which it is reported for 
CY 2011. In addition, we also accepted the APC Panel's recommendation 
that CMS bring claims data [for HCPCS code 31627 to the winter 2011 APC 
Panel meeting. The report of the August 2010 APC Panel meeting is 
available at http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.
    At its meeting on February 28-March 1, 2011, the APC Panel listened 
to a public presentation in which the manufacturer of the ENB 
technology requested that HCPCS code 31627 be paid separately on the 
basis that the cost

[[Page 42208]]

of the technology is substantially higher than the OPPS payment for APC 
0076 (Level I Endoscopy Lower Airway), the APC to which most 
bronchoscopy codes are assigned and into which payment for HCPCS code 
31627 is packaged. The manufacturer stated that if CMS does not pay 
HCPCS code 31627 separately, hospitals will not furnish the procedure 
to hospital outpatients.
    In response to the request of the APC Panel at its August 2010 
meeting, we presented the available data on HCPCS code 31627 that could 
be derived from the hospital outpatient claims that were paid under the 
OPPS for services on and after January 1, 2010 through and including 
September 30, 2010, as processed through the CMS common working file by 
December 31, 2010. Specifically, using the limited set of APC Panel 
data, CMS found that 119 hospitals billed for 573 units of HCPCS code 
31627, and that HCPCS code 31627 had a median cost of approximately 
$329 per unit. We also found that HCPCS code 31627 is reported on 0 to 
4 percent of the claims for bronchoscopy codes with which CPT guidance 
states that it is permissible to report HCPCS code 31627, with the 
exception of HCPCS code 31626 (Bronchoscopy, rigid or flexible, 
including fluoroscopic guidance, when performed; with placement of 
fiducial markers, single or multiple). HCPCS code 31627 was reported on 
approximately 52% of claims for HCPCS code 31626 in the APC Panel data. 
The APC Panel considered this information in its formulation of 
Recommendation 4 that CMS continue to package payment for HCPCS code 
31627 into the payment for the bronchoscopy code with which HCPCS code 
31627 is reported. Subsequent to the APC Panel meeting, examination and 
analysis of the CY 2012 proposed rule data found that 149 hospitals 
reported 867 units of HCPCS code 31627, and that HCPCS code 31627 has a 
proposed rule median cost of approximately $344 per unit.
    After considering the public presentation and the information 
presented by CMS staff, the APC Panel recommended that HCPCS code 31627 
continue to be assigned a status indicator of ``N.'' The Panel further 
recommended that CMS continue to collect claims data for HCPCS code 
31627. We are proposing to accept both of the APC Panel's 
recommendations for the CY 2012 OPPS. Specifically, we are proposing to 
assign HCPCS code 31627 to status indicator ``N'' for the CY 2012 OPPS 
and, therefore, are proposing to package payment for the procedure into 
payment for the bronchoscopy to which we believe that it is ancillary 
and supportive. As with all packaged items and services, the cost we 
calculate for CPT code 31627 will be added to the costs on the single 
bill for the bronchoscopy code with which the service reported by CPT 
code 31627 is furnished, and therefore, the cost of CPT code 31627 will 
be incorporated into the payment for the APC to which that bronchoscopy 
code is assigned. We continue to believe that HCPCS code 31627, for 
which there are several different technologies, describes a service 
that is supportive and ancillary to the primary bronchoscopy procedure 
with which it must be reported, as defined by CPT. HCPCS code 31627 
describes a computer assisted image guided navigation service that is 
not furnished without a bronchoscopy. As defined by CPT, HCPCS code 
31627 may only be furnished in addition to a bronchocsopy service and 
therefore we believe that it is ancillary and supportive to the 
bronchsocopy service with which it must be reported. We agree to 
provide further claims information on HCPCS code 31627 to the APC Panel 
when it becomes available.
    APC Panel Recommendation 5: That CMS consider a more appropriate 
APC assignment for HCPCS code 31626 (Bronchoscopy, rigid or flexible, 
including fluoroscopic guidance, when performed; with placement of 
fiducial markers), the most common code with which HCPCS code 31627 was 
billed in 2010.
    CMS Response to Recommendation 5: We are accepting this 
recommendation, and therefore are proposing to reassign HCPCS code 
31626 (which has a proposed CY 2012 APC median cost of approximately 
$2,708) from APC 0076 (which has a proposed CY 2012 APC median cost of 
approximately $751) to APC 0415 (Level II Endoscopy Lower Airway), 
which has a proposed CY 2012 APC median cost of approximately $2,007. 
We agree with the APC Panel that it appears that the proposed APC 
median cost of HCPCS code 31626 of $2,708 justifies placement in an APC 
that has a median cost that is more similar to the APC median cost for 
this code. We believe that APC 0415 is the most appropriate clinically 
similar APC because the proposed CY 2012 median cost for APC 0415 of 
$2,007 is more similar in clinical resource for HCPCS code 31626 than 
the proposed CY 2012 median cost for APC 0076 of $715.
    APC Panel Recommendation 6: That Judith Kelly, R.H.I.T., R.H.I.A., 
C.C.S., continue to chair the APC Groups and Status Indicator (SI) 
Assignments Subcommittee for 2011.
    CMS Response to Recommendation 6: We are accepting the APC Panel's 
recommendation that Judith Kelly, R.H.I.T., R.H.I.A., C.C.S. continue 
to chair the APC Groups and Status Indicator Assignments Subcommittee 
for 2011.
    APC Panel Recommendation 7: That CMS furnish the results of its 
investigation of claims that contain the following unconditionally 
packaged codes without separately paid procedures:
     HCPCS code G0177 (Training and educational services 
related to the care and treatment of patient's disabling mental health 
problems per session (45 minutes or more));
     HCPCS code G0378 (Hospital observation service, per hour);
     HCPCS code 75940 (Percutaneous placement of IVC filter, 
radiological supervision and interpretation);
     HCPCS code 76937 (Ultrasound guidance for vascular access 
requiring ultrasound evaluation of potential access sites, 
documentation of selected vessel patency, concurrent realtime 
ultrasound visualization of vascular needle entry, with permanent 
recording and reporting (List separately in addition to code for 
primary procedure)).
    CMS Response to Recommendation 7: We are accepting the APC Panel's 
recommendation that CMS furnish the results of its investigation of 
claims that contain the unconditionally packaged codes: HCPCS code 
G0177, HCPCS code G0378, HCPCS code 75940, and HCPCS code 76937 at a 
future APC Panel meeting.
    APC Panel Recommendation 8: That the work of the APC Groups and 
Status Indicator (SI) Assignments Subcommittee continue.
    CMS Response to Recommendation 8: We are accepting the APC Panel's 
recommendation that the work of the APC Groups and Status Indicator 
Assignments Subcommittee continue.
(3) Other Packaging Proposals for CY 2012
    The HCPCS codes for which we are proposing that payment be packaged 
into payment for the separately paid procedures with which the codes 
are reported either unconditionally (for which we are proposing to 
continue to assign status indicator ``N''), or conditionally (for which 
we are proposing to continue to assign status indicators ``Q1'', 
``Q2'', or ``Q3'') are displayed in Addendum B of this proposed rule 
(which is referenced in section XVIII. of this proposed rule and 
available via the Internet on the CMS Web site). The supporting 
documents

[[Page 42209]]

for this CY 2012 OPPS/ASC proposed rule, including but not limited to 
Addendum B, are available at http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD. To view the proposed status indicators by 
HCPCS code in Addendum B, select CMS 1525-P and then select the folder 
labeled ``2012 OPPS Proposed Rule Addenda'' from the list of supporting 
files. Open the zipped file and select Addendum B, which is available 
as both an Excel file and a text file.
    The proposed continuation of our standard policy regarding 
packaging of drugs and biologicals, implantable biologicals, contrast 
agents and diagnostic radiopharmaceuticals is discussed in section V.B. 
of this proposed rule. We note that an implantable biological that is 
surgically inserted or implanted through a surgical incision or a 
natural orifice is commonly referred to throughout this proposed rule 
as an ``implantable biological.''
    The proposed creation of a new composite APC for CY 2012 for 
payment of the insertion of cardiac resynchronization devices is 
discussed in section II.A.2.e.(6) of this proposed rule.
4. Proposed Calculation of OPPS Scaled Payment Weights
    Using the APC median costs discussed in sections II.A.1. and 
II.A.2. of this proposed rule, we calculated the proposed relative 
payment weights for each APC for CY 2012 shown in Addenda A and B to 
this proposed rule (which are referenced in section XVIII. of this 
proposed rule and available via the Internet on the CMS Web site). In 
years prior to CY 2007, we standardized all the relative payment 
weights to APC 0601 (Mid Level Clinic Visit) because mid-level clinic 
visits were among the most frequently performed services in the 
hospital outpatient setting. We assigned APC 0601 a relative payment 
weight of 1.00 and divided the median cost for each APC by the median 
cost for APC 0601 to derive the relative payment weight for each APC.
    Beginning with the CY 2007 OPPS (71 FR 67990), we standardized all 
of the relative payment weights to APC 0606 (Level 3 Clinic Visits) 
because we deleted APC 0601 as part of the reconfiguration of the 
clinic visit APCs. We selected APC 0606 as the base because APC 0606 
was the mid-level clinic visit APC (that is, Level 3 of five levels). 
Therefore, for CY 2012, to maintain consistency in using a median for 
calculating unscaled weights representing the median cost of some of 
the most frequently provided services, we are proposing to continue to 
use the median cost of the mid-level clinic visit APC (APC 0606) to 
calculate unscaled weights. Following our standard methodology, but 
using the proposed CY 2012 median cost for APC 0606, for CY 2012 we 
assigned APC 0606 a relative payment weight of 1.00 and divided the 
median cost of each APC by the proposed median cost for APC 0606 to 
derive the proposed unscaled relative payment weight for each APC. The 
choice of the APC on which to base the proposed relative weights for 
all other APCs does not affect the payments made under the OPPS because 
we scale the weights for budget neutrality.
    Section 1833(t)(9)(B) of the Act requires that APC reclassification 
and recalibration changes, wage index changes, and other adjustments be 
made in a budget neutral manner. Budget neutrality ensures that the 
estimated aggregate weight under the OPPS for CY 2012 is neither 
greater than nor less than the estimated aggregate weight that would 
have been made without the changes. To comply with this requirement 
concerning the APC changes, we are proposing to compare the estimated 
aggregate weight using the CY 2011 scaled relative weights to the 
estimated aggregate weight using the proposed CY 2012 unscaled relative 
weights. For CY 2011, we multiplied the CY 2011 scaled APC relative 
weight applicable to a service paid under the OPPS by the volume of 
that service from CY 2010 claims to calculate the total weight for each 
service. We then added together the total weight for each of these 
services in order to calculate an estimated aggregate weight for the 
year. For CY 2012, we performed the same process using the proposed CY 
2012 unscaled weights rather than scaled weights. We then calculated 
the weight scaler by dividing the CY 2011 estimated aggregate weight by 
the proposed CY 2012 estimated aggregate weight. The service-mix is the 
same in the current and prospective years because we use the same set 
of claims for service volume in calculating the aggregate weight for 
each year. For a detailed discussion of the weight scaler calculation, 
we refer readers to the OPPS claims accounting document available on 
the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/. We 
included payments to CMHCs in our comparison of estimated unscaled 
weight in CY 2012 to estimated total weight in CY 2011 using CY 2010 
claims data, holding all other components of the payment system 
constant to isolate changes in total weight. Based on this comparison, 
we adjusted the unscaled relative weights for purposes of budget 
neutrality. The proposed CY 2012 unscaled relative payment weights were 
adjusted by multiplying them by a proposed weight scaler of 1.4647 to 
ensure that the proposed CY 2012 relative weights are budget neutral.
    Section 1833(t)(14) of the Act provides the payment rates for 
certain ``specified covered outpatient drugs.'' That section states 
that ``Additional expenditures resulting from this paragraph shall not 
be taken into account in establishing the conversion factor, weighting 
and other adjustment factors for 2004 and 2005 under paragraph (9) but 
shall be taken into account for subsequent years.'' Therefore, the cost 
of those specified covered outpatient drugs (as discussed in section 
V.B.3. of this proposed rule) was included in the proposed budget 
neutrality calculations for the CY 2012 OPPS.
    The proposed scaled relative payment weights listed in Addenda A 
and B to this proposed rule (which are referenced in section XVII. of 
this proposed rule and available via the Internet on the CMS Web site) 
incorporate the proposed recalibration adjustments discussed in 
sections II.A.1. and II.A.2. of this proposed rule.

B. Proposed Conversion Factor Update

    Section 1833(t)(3)(C)(ii) of the Act requires us to update the 
conversion factor used to determine payment rates under the OPPS on an 
annual basis by applying the OPD fee schedule increase factor. For 
purposes of section 1833(t)(3)(C)(iv) of the Act, subject to sections 
1833(t)(17) and 1833(t)(3)(F) of the Act, the OPD fee schedule increase 
factor is equal to the hospital inpatient market basket percentage 
increase applicable to hospital discharges under section 
1886(b)(3)(B)(iii) of the Act. In the FY 2012 IPPS/LTCH PPS proposed 
rule (76 FR 25949), consistent with current law, based on IHS Global 
Insight, Inc.'s first quarter 2011 forecast of the FY 2012 market 
basket increase, we proposed that the FY 2012 IPPS market basket update 
would be 2.8 percent. However, sections 1833(t)(3)(F) and 
1833(t)(3)(G)(ii) of the Act, as added by section 3401(i) of the Pub. 
L. 111-148 and as amended by section 10319(g) of such law and further 
amended by section 1105(e) of Public Law 111-152, provide adjustments 
to the OPD fee schedule update for CY 2012.
    Specifically, section 1833(t)(3)(F) requires that the OPD fee 
schedule increase factor under subparagraph (C)(iv) be reduced by the 
adjustments described in section 1833(t)(3)(F) of the

[[Page 42210]]

Act. Specifically, section 1833(t)(3)(F)(i) of the Act requires that 
the OPD fee schedule increase factor under subparagraph (C)(iv) be 
reduced by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act for 2012 and subsequent years. Section 
1886(b)(3)(B)(xi)(II) of the Act defines the productivity adjustment as 
equal to the 10-year moving average of changes in annual economy-wide, 
private nonfarm business multifactor productivity (MFP) (as projected 
by the Secretary for the 10-year period ending with the applicable 
fiscal year, year, cost reporting period, or other annual period) (the 
``MFP adjustment''). We refer readers to the FY 2012 IPPS/LTCH PPS 
proposed rule (76 FR 25949 through 25951) for a discussion of the 
calculation of the MFP adjustment. The proposed MFP adjustment for FY 
2012 is estimated to be 1.2 percentage points.
    We are proposing to reduce the OPD fee schedule increase factor for 
CY 2012 by the proposed MFP adjustment of 1.2 percentage points for FY 
2012. Since the OPD fee schedule increase factor is based on the IPPS 
hospital inpatient market basket percentage increase, we believe that 
it is appropriate to apply the same MFP adjustment that is used to 
reduce the IPPS market basket increase to the OPD fee schedule increase 
factor. Consistent with the FY 2012 IPPS/LTCH PPS proposed rule, we are 
also proposing that if more recent data are subsequently available (for 
example, a more recent estimate of the market basket and MFP 
adjustment), we would use such data, if appropriate, to determine the 
FY 2012 market basket update and MFP adjustment in the CY 2012 final 
rule. We believe that it is appropriate to apply the MFP adjustment, 
which is calculated on a fiscal year basis, to the OPD fee schedule 
increase factor, which is used to update the OPPS payment rates on a 
calendar year basis, because we believe that it is appropriate for the 
numbers associated with both components of the calculation (the 
underlying OPD fee schedule increase factor and the productivity 
adjustment) to be aligned so that changes in market conditions are 
aligned.
    In addition, section 1833(t)(3)(F)(ii) of the Act requires that the 
OPD fee schedule increase factor under subparagraph (C)(iv) be reduced 
by the adjustment described in subparagraph (G) for each of 2010 
through 2019. For CY 2012, section 1833(t)(3)(G)(ii) of the Act 
provides a 0.1 percentage point reduction to the OPD fee schedule 
increase factor under subparagraph (C)(iv). Therefore, we are proposing 
to apply a 0.1 percentage point reduction to the OPD fee schedule 
increase factor.
    We note that section 1833(t)(F) of the Act provides that 
application of this subparagraph may result in the increase factor 
under subparagraph (C)(iv) being less than 0.0 for a year, and may 
result in payment rates under the payment system under this subsection 
for a year being less than such payment rates for the preceding year. 
As described in further detail below, we are proposing an OPD fee 
schedule increase factor of 1.5 percent for the CY 2012 OPPS (2.8 
percent, which is the proposed estimate of the hospital market basket 
increase, less the proposed 1.2 percentage points MFP adjustment, less 
the 0.1 percentage point additional adjustment).
    We are proposing to revise 42 CFR 419.32 to reflect the requirement 
in section 1833(t)(3)(F)(i) of the Act that, for CY 2012, we reduce the 
OPD fee schedule increase factor by the multifactor productivity 
adjustment as determined by CMS, and to reflect the requirement in 
section 1833(t)(3)(G)(ii) of the Act, as required by section 
1833(t)(3)(F)(ii) of the Act, that we reduce the OPD fee schedule 
increase factor by 0.1 percentage point for CY 2012. We also are 
proposing to amend Sec.  419.32 (iv)(A) to indicate that the hospital 
inpatient market basket percentage increase applicable under section 
1886(b)(3)(B)(iii) of the Act is further reduced by the adjustments 
necessary to satisfy the requirements in sections 1833(t)(3)(F) and 
(t)(3)(G) of the Act.
    Hospitals that fail to meet the reporting requirements of the 
Hospital OQR Program would continue to be subject to a further 
reduction of additional 2.0 percentage points from the OPD fee schedule 
increase factor adjustment to the conversion factor that would be used 
to calculate the OPPS payment rates made for their services as required 
by section 1833(t)(17) of the Act. For a complete discussion of the 
Hospital OQR requirements and the payment reduction for hospitals that 
fail to meet those requirements, we refer readers to section XIV. of 
this proposed rule.
    To set the OPPS conversion factor for CY 2012, we are proposing to 
increase the CY 2011 conversion factor of $68.876 by 1.5 percent. In 
accordance with section 1833(t)(9)(B) of the Act, we are proposing to 
further adjust the conversion factor for CY 2012 to ensure that any 
revisions we make to the updates for a revised wage index and rural 
adjustment are made on a budget neutral basis. We calculated a proposed 
overall budget neutrality factor of 1.0003 for wage index changes by 
comparing total estimated payments from our simulation model using the 
FY 2012 IPPS proposed wage indices to those payments using the current 
(FY 2011) IPPS wage indices, as adopted on a calendar year basis for 
the OPPS. For CY 2012, we are not proposing to make a change to our 
rural adjustment policy. Therefore, the proposed budget neutrality 
factor for the rural adjustment would be 1.0000. For CY 2012, we are 
proposing a cancer hospital payment adjustment policy, as discussed in 
section II.F. of this proposed rule, and, therefore, we applied a 
proposed budget neutrality adjustment of 0.9927 to adjust the 
conversion factor for that proposed policy. We calculated the proposed 
cancer hospital budget neutrality factor of 0.9927 by comparing total 
estimated payments from our simulation model for CY 2012 including the 
proposed payment adjustment for cancer hospitals to total estimated 
payments from our simulation model for CY 2012 without the proposed 
payment adjustment for cancer hospitals.
    For this proposed rule, we estimate that pass-through spending for 
both drugs and biologicals and devices for CY 2012 would equal 
approximately $64.5 million, which represents 0.15 percent of total 
projected CY 2012 OPPS spending. Therefore, the conversion factor would 
also be adjusted by the difference between the 0.15 percent estimate of 
pass-through spending for CY 2011 and the 0.15 percent estimate of CY 
2012 pass-through spending. Finally, estimated payments for outliers 
remain at 1.0 percent of total OPPS payments for CY 2012.
    The proposed OPD fee schedule increase factor of 1.5 percent for CY 
2012 (that is, the estimate of the hospital market basket increase of 
2.8 percent less the 1.2 percentage points MFP adjustment and less the 
0.1 percentage point adjustment which are necessary in order to comply 
with the requirements of the Affordable Care Act), the required 
proposed wage index budget neutrality adjustment of approximately 
1.0003, the proposed cancer hospital payment adjustment of 0.9927, and 
the proposed adjustment of 0.00 percent of projected OPPS spending for 
the difference in the pass-through spending result in a proposed 
conversion factor for CY 2012 of $69.420, which reflects the full OPD 
fee schedule increase, after including the adjustments necessary to 
comply with the requirements of the Affordable Care Act.
    To calculate the proposed CY 2012 reduced market basket conversion 
factor for those hospitals that fail to meet the requirements of the 
Hospital OQR Program for the full CY 2012 payment

[[Page 42211]]

update, we are proposing to make all other adjustments discussed above, 
but would use a proposed reduced OPD fee schedule update factor of -0.5 
percent (that is, the proposed OPD fee schedule increase factor further 
reduced by 2.0 percentage points as required by section 
1833(t)(17)(A)(i) of the Act for failure to comply with the Hospital 
OQR requirements). This resulted in a proposed reduced conversion 
factor for CY 2012 of $68.052 for those hospitals that fail to meet the 
Hospital OQR requirements (a difference of -$1.368 in the proposed 
conversion factor relative to those hospitals that met the Hospital OQR 
requirements).
    In summary, for CY 2012, we are proposing to use a conversion 
factor of $69.420 in the calculation of the national unadjusted payment 
rates for those items and services for which payment rates are 
calculated using median costs. We are proposing to amend Sec.  
419.32(b)(1)(iv)(B) by adding a new paragraph (3) to reflect the 
reductions to the OPD fee schedule increase factor that are required 
for CY 2012 in order to satisfy the statutory requirements of sections 
1833(t)(3)(F) and (t)(3)(G)(ii) of the Act. We also are proposing to 
amend Sec.  419.32(b)(1)(iv)(A) to indicate that the hospital inpatient 
market basket percentage increase is reduced by the adjustments 
described in Sec.  419.32(b)(1)(iv)(B). We are proposing to use a 
reduced conversion factor of $68.052 in the calculation of payments for 
hospitals that fail to comply with the Hospital OQR requirements to 
reflect the reduction to the OPD fee schedule increase factor that is 
required by section 1833(t)(17) of the Act for these hospitals.

C. Proposed Wage Index Changes

    Section 1833(t)(2)(D) of the Act requires the Secretary to 
determine a wage adjustment factor to adjust, for geographic wage 
differences, the portion of the OPPS payment rate, which includes the 
copayment standardized amount, that is attributable to labor and labor-
related cost. This portion of the OPPS payment rate is called the OPPS 
labor-related share. This adjustment must be made in a budget neutral 
manner and budget neutrality is discussed in section II.B. of this 
proposed rule.
    The OPPS labor-related share is 60 percent of the national OPPS 
payment. This labor-related share is based on a regression analysis 
that determined that, for all hospitals, approximately 60 percent of 
the costs of services paid under the OPPS were attributable to wage 
costs. We confirmed that this labor-related share for outpatient 
services is appropriate during our regression analysis for the payment 
adjustment for rural hospitals in the CY 2006 OPPS final rule with 
comment period (70 FR 68553). Therefore, we are not proposing to revise 
this policy for the CY 2012 OPPS. We refer readers to section II.H. of 
this proposed rule for a description and example of how the proposed 
wage index for a particular hospital is used to determine the proposed 
payment for the hospital.
    As discussed in section II.A.2.c. of this proposed rule, for 
estimating national median APC costs, we standardize 60 percent of 
estimated claims costs for geographic area wage variation using the 
same proposed FY 2012 pre-reclassified wage index that the IPPS uses to 
standardize costs. This standardization process removes the effects of 
differences in area wage levels from the determination of a national 
unadjusted OPPS payment rate and the copayment amount.
    As published in the original OPPS April 7, 2000 final rule with 
comment period (65 FR 18545), the OPPS has consistently adopted the 
final fiscal year IPPS wage index as the calendar year wage index for 
adjusting the OPPS standard payment amounts for labor market 
differences. Thus, the wage index that applies to a particular acute 
care short-stay hospital under the IPPS would also apply to that 
hospital under the OPPS. As initially explained in the September 8, 
1998 OPPS proposed rule, we believed that using the IPPS wage index as 
the source of an adjustment factor for the OPPS is reasonable and 
logical, given the inseparable, subordinate status of the HOPD within 
the hospital overall. In accordance with section 1886(d)(3)(E) of the 
Act, the IPPS wage index is updated annually.
    The Affordable Care Act contains provisions that affect the 
proposed FY 2012 IPPS wage index values, including revisions to the 
reclassification wage comparability criteria that were finalized in the 
FY 2009 IPPS final rule (73 FR 48568 through 48570), and the 
application of rural floor budget neutrality on a national, rather than 
State-specific, basis through a uniform, national adjustment to the 
area wage index (76 FR 26021). In addition, section 10324 of the 
Affordable Care Act requires CMS to establish an adjustment to create a 
wage index floor of 1.00 for hospitals located in States determined to 
be frontier States.
    Section 10324 specifies that, for services furnished beginning CY 
2011, the wage adjustment factor applicable to any hospital outpatient 
department that is located in a frontier State (as defined in section 
1886(d)(3)(E)(iii)(II) of the Act) may not be less than 1.00. Further, 
section 10324 states that this adjustment to the wage index for these 
outpatient departments should not be made in a budget neutral manner. 
As such, for the CY 2012 OPPS, we are proposing to continue to adjust 
the FY 2012 IPPS wage index, as adopted on a calendar year basis for 
the OPPS, for all hospitals paid under the OPPS, including non-IPPS 
hospitals (providers that are not paid under the IPPS) located in a 
frontier State, to 1.00 in instances where the proposed FY 2012 wage 
index (that reflects Medicare Geographic Classification Review Board 
(MGCRB) reclassifications, the application of the rural floor, and the 
rural floor budget neutrality adjustment) for these hospitals is less 
than 1.00. Similar to our current policy for HOPDs that are affiliated 
with multicampus hospital systems, we fully expect that the HOPD would 
receive a wage index based on the geographic location of the specific 
inpatient hospital with which it is associated. Therefore, if the 
associated hospital is located in a frontier State, the wage index 
adjustment applicable for the hospital would also apply for the 
affiliated HOPD. We refer readers to the FY 2011 IPPS/LTCH PPS final 
rule (75 FR 50160) for a detailed discussion regarding this provision, 
including our methodology for identifying which areas meet the 
definition of frontier States as provided for in section 
1886(d)(3)(E)(iii)(II)) of the Act.
    In addition to the changes required by the Affordable Care Act, we 
note that the proposed FY 2012 IPPS wage indices continue to reflect a 
number of adjustments implemented over the past few years, including, 
but not limited to, reclassification of hospitals to different 
geographic areas, the rural floor provisions, an adjustment for 
occupational mix, and an adjustment to the wage index based on 
commuting patterns of employees (out-migration adjustment). We refer 
readers to the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25880 through 
25888) for a detailed discussion of all proposed changes to the FY 2012 
IPPS wage indices. In addition, we refer readers to the CY 2005 OPPS 
final rule with comment period (69 FR 65842 through 65844) and 
subsequent OPPS rules for a detailed discussion of the history of these 
wage index adjustments as applied under the OPPS.
    Section 3137 of the Affordable Care Act extended, through FY 2010, 
section 508 reclassifications as well as certain special exceptions. 
The most recent extension of the provision was included in section 102 
of the Medicare and Medicaid Extender Act, which extends,

[[Page 42212]]

through FY 2011, section 508 reclassifications as well as certain 
special exceptions. The latest extension of these provisions expires on 
September 30, 2011, and will no longer be applicable effective with FY 
2012. As we did for CY 2010, we revised wage index values for certain 
special exception hospitals from January 1, 2011 through December 31, 
2011, under the OPPS, in order to give these hospitals the special 
exception wage indices under the OPPS for the same time period as under 
the IPPS. In addition, because the OPPS pays on a calendar year basis, 
the effective date under OPPS for all other non-section 508 and non-
special exception providers is July 1, 2011, instead of April 1, 2011, 
so that these providers may also receive a full 6 months of payment 
under the revised wage index comparable to IPPS.
    For purposes of the OPPS, we are proposing to continue our policy 
in CY 2012 to allow non-IPPS hospitals paid under the OPPS to qualify 
for the 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 2012 IPPS/LTCH 
PPS proposed rule (and made available via the Internet on the CMS Web 
site at: http://www.cms.hhs.gov/AcuteInpatientPPS/01_overview.asp) 
identifies counties eligible for the proposed out-migration adjustment 
and providers proposed to receive the adjustment for FY 2012. We note 
that, beginning with FY 2012, we proposed under the IPPS that an 
eligible hospital that waives its Lugar status in order to receive the 
out-migration adjustment has effectively waived its deemed urban status 
and, thus, is rural for all purposes under the IPPS, including being 
considered rural for the disproportionate share hospital (DSH) payment 
adjustment, effective for the fiscal year in which the hospital 
receives the out-migration adjustment. We refer readers to the FY 2012 
IPPS/LTCH PPS proposed rule (76 FR 25885) for more detailed discussion 
on the proposed Lugar redesignation waiver for the out-migration 
adjustment). As we have done in prior years, we are reprinting Table 4J 
as Addendum L to this proposed rule with the addition of non-IPPS 
hospitals that would receive the section 505 out-migration adjustment 
under the CY 2012 OPPS. Addendum L is referenced in section XVII. of 
this proposed rule and available via the Internet on the CMS Web site.
    As stated earlier in this section, our longstanding policy for OPPS 
has been to adopt the final wage index used in IPPS. Therefore, for 
calculating proposed OPPS payments in CY 2012, we use the proposed FY 
2012 IPPS wage indices. However, section 1833(t)(2)(D) of the Act 
confers broad discretionary authority upon the Secretary in determining 
the wage adjustment factor used under the OPPS. Specifically, this 
provision provides that ``subject to paragraph (19), the Secretary 
shall determine a wage adjustment factor to adjust the portion of 
payment and coinsurance attributable to labor-related costs for 
relative differences in labor and labor-related costs across geographic 
regions. * * *'' In other prospective payment systems, we do not adopt 
the adjustments applied to the IPPS wage index, such as the 
outmigration adjustment, reclassifications, and the rural floor. For 
the OPPS, using the hospital IPPS wage index as the source of an 
adjustment factor for geographic wage differences has in the past been 
both reasonable and logical, given the inseparable, subordinate status 
of the outpatient department within the hospital overall.
    However, in recent years, we have become concerned that hospitals 
converting status significantly inflates wage indexes across a State, 
in a manner that was not intended by the Congress. In the FY 2008 IPPS 
final rule (72 FR 47324 and 47325), we discussed a situation where a 
CAH may have converted back to IPPS status in order to increase the 
rural floor.
    The FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26060) shows the 
impact of the CAH conversion. Hospitals in one State can expect an 
approximate 8-percent increase in IPPS payments due to the conversion 
and resulting increase of the rural floor. Our concern is that the 
manipulation of the rural floor is of sufficient magnitude that it 
requires all hospital wage indexes to be reduced approximately 0.62 
percent as a result of nationwide budget neutrality for the rural floor 
(or more than a 0.4 percent total payment reduction to all IPPS 
hospitals).
    In addition to the CAH conversion, we recently received two 
requests from urban hospitals to convert to rural hospital status under 
section 1886(d)(8)(E) of the Act, which would inflate other States' 
rural floors, through the conversion of what would otherwise be urban 
hospitals to rural status. While we recognize that conversions from 
urban-to-rural status are permitted under section 1886(d)(8)(E) of the 
Act, we do not believe Congress anticipated individual urban to rural 
conversion allowing payment redistributions of this magnitude.
    We believe the above discussions demonstrate that, as a result of 
hospital actions not envisioned by Congress, the rural floor is 
resulting in significant disparities in wage index and, in some cases, 
resulting in situations where all hospitals in a State receive a wage 
index higher than that of the single highest wage index urban hospital 
in the State. As stated above, the statute does not require the 
Secretary to use the IPPS wage adjustment factor to wage adjust OPPS 
payments and copayments, nor to apply to OPPS payment and copayment 
calculation the same adjustment that the law requires be applied to the 
IPPS wage adjustment factor.
    We are considering adopting a policy that would address situations 
where IPPS wage index adjustments, such as the rural floor, are 
resulting in significant fluctuations in the wage index. One option 
would be to not apply the rural floor wage index at all in the OPPS 
where the rural floor is set by a snall number of hospitals and results 
in a rural floor that benefits all hospitals in the State. 
Alternatively, we could apply within State rural budget neutrality to 
the OPPS wage index as we did for both the IPPS and OPPS wage index 
beginning in FY 2009. We are seeking public comment on whether to: (1) 
Adopt the IPPS wage index for the OPPS in its entirety including the 
rural floor, geographic reclassifications and all other wage index 
adjustments; (2) adopt the IPPS wage index for the OPPS in its entirety 
except when a small number of hospitals set the rural floor for the 
benefit of all other hospitals in the State; (3) adopt the IPPS wage 
index for the OPPS in its entirety except apply rural floor budget 
neutrality within each State instead of nationally; or (4) adopt 
another decision rule for when the rural floor should not be applied in 
the OPPS when we have concerns about disproportionate impact.
    We also are requesting public comments on an option that we are 
considering adopting for both the IPPS and the OPPS, where we would 
determine the applicable rural wage index floor using only data from 
those hospitals geographically rural under OMB and the Census Bureau's 
MSA designations, and without including wage data associated with 
hospitals reclassified from urban to rural status under section 
1886(d)(8)(E) of the Act. Such a policy would eliminate the incentive 
to reclassify from urban to rural status primarily to increase rural 
floors across a State, and would ensure

[[Page 42213]]

that the rural floor is based upon hospitals located in rural areas.
    With the exception of the proposed out-migration wage adjustment 
table (Addendum L to this proposed rule, which is available via the 
Internet on the CMS Web site), which includes non-IPPS hospitals paid 
under the OPPS, we are not reprinting the proposed FY 2012 IPPS wage 
indices referenced in this discussion of the wage index. We refer 
readers to the CMS Web site for the OPPS at: http://www.cms.gov/HospitalOutpatientPPS/. At this link, readers will find a link to the 
proposed FY 2012 IPPS wage index tables.

D. Proposed Statewide Average Default CCRs

    In addition to using CCRs to estimate costs from charges on claims 
for ratesetting, CMS uses overall hospital-specific CCRs calculated 
from the hospital's most recent cost report to determine outlier 
payments, payments for pass-through devices, and monthly interim 
transitional corridor payments under the OPPS during the PPS year. 
Medicare contractors cannot calculate a CCR for some hospitals because 
there is no cost report available. For these hospitals, CMS uses the 
statewide average default CCRs to determine the payments mentioned 
above until a hospital's Medicare contractor is able to calculate the 
hospital's actual CCR from its most recently submitted Medicare cost 
report. These hospitals include, but are not limited to, hospitals that 
are new, have not accepted assignment of an existing hospital's 
provider agreement, and have not yet submitted a cost report. CMS also 
uses the statewide average default CCRs to determine payments for 
hospitals that appear to have a biased CCR (that is, the CCR falls 
outside the predetermined ceiling threshold for a valid CCR) or for 
hospitals in which the most recent cost report reflects an all-
inclusive rate status (Medicare Claims Processing Manual (Pub. 100-04), 
Chapter 4, Section 10.11). In this proposed rule, we are proposing to 
update the default ratios for CY 2012 using the most recent cost report 
data. We discuss our policy for using default CCRs, including setting 
the ceiling threshold for a valid CCR, in the CY 2009 OPPS/ASC final 
rule with comment period (73 FR 68594 through 68599) in the context of 
our adoption of an outlier reconciliation policy for cost reports 
beginning on or after January 1, 2009.
    For CY 2012, we are proposing to continue to use our standard 
methodology of calculating the statewide average default CCRs using the 
same hospital overall CCRs that we use to adjust charges to costs on 
claims data for setting the proposed CY 2012 OPPS relative weights. 
Table 11 below lists the proposed CY 2012 default urban and rural CCRs 
by State and compares them to last year's default CCRs. These proposed 
CCRs represent the ratio of total costs to total charges for those cost 
centers relevant to outpatient services from each hospital's most 
recently submitted cost report, weighted by Medicare Part B charges. We 
also are proposing to adjust ratios from submitted cost reports to 
reflect final settled status by applying the differential between 
settled to submitted overall CCRs for the cost centers relevant to 
outpatient services from the most recent pair of final settled and 
submitted cost reports. We then weight each hospital's CCR by the 
volume of separately paid line-items on hospital claims corresponding 
to the year of the majority of cost reports used to calculate the 
overall CCRs. We refer readers to the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66680 through 66682) and prior OPPS rules for a 
more detailed discussion of our established methodology for calculating 
the statewide average default CCRs, including the hospitals used in our 
calculations and our trimming criteria.
    For this CY 2012 OPPS/ASC proposed rule, approximately 87 percent 
of the submitted cost reports utilized in the default ratio 
calculations represented data for cost reporting periods ending in CY 
2009 and 13 percent were for cost reporting periods ending in CY 2008. 
For Maryland, we used an overall weighted average CCR for all hospitals 
in the Nation as a substitute for Maryland CCRs. Few hospitals in 
Maryland are eligible to receive payment under the OPPS, which limits 
the data available to calculate an accurate and representative CCR. The 
weighted CCR is used for Maryland because it takes into account each 
hospital's volume, rather than treating each hospital equally. We refer 
readers to the CY 2005 OPPS final rule with comment period (69 FR 
65822) for further discussion and the rationale for our longstanding 
policy of using the national average CCR for Maryland. In general, 
observed changes in the statewide average default CCRs between CY 2011 
and CY 2012 are modest and the few significant changes are associated 
with areas that have a small number of hospitals.
    Table 11 below lists the proposed statewide average default CCRs 
for OPPS services furnished on or after January 1, 2012.

                                Table 11--Proposed CY 2012 Statewide Average CCRs
----------------------------------------------------------------------------------------------------------------
                                                                                                     Previous
                                                                                    Proposed CY     default CCR
                     State                                 Urban/rural             2012 default    (CY 2011 OPPS
                                                                                        CCR         final rule)
----------------------------------------------------------------------------------------------------------------
ALASKA........................................  RURAL...........................           0.487           0.479
ALASKA........................................  URBAN...........................           0.321           0.315
ALABAMA.......................................  RURAL...........................           0.213           0.212
ALABAMA.......................................  URBAN...........................           0.191           0.193
ARKANSAS......................................  RURAL...........................           0.225           0.223
ARKANSAS......................................  URBAN...........................           0.274           0.282
ARIZONA.......................................  RURAL...........................           0.236           0.231
ARIZONA.......................................  URBAN...........................           0.193           0.202
CALIFORNIA....................................  RURAL...........................           0.189           0.195
CALIFORNIA....................................  URBAN...........................           0.202           0.205
COLORADO......................................  RURAL...........................           0.345           0.350
COLORADO......................................  URBAN...........................           0.225           0.233
CONNECTICUT...................................  RURAL...........................           0.356           0.356
CONNECTICUT...................................  URBAN...........................           0.292           0.291
DISTRICT OF COLUMBIA..........................  URBAN...........................           0.301           0.313
DELAWARE......................................  RURAL...........................           0.280           0.279
DELAWARE......................................  URBAN...........................           0.347           0.362

[[Page 42214]]

 
FLORIDA.......................................  RURAL...........................           0.183           0.185
FLORIDA.......................................  URBAN...........................           0.170           0.172
GEORGIA.......................................  RURAL...........................           0.241           0.246
GEORGIA.......................................  URBAN...........................           0.214           0.220
HAWAII........................................  RURAL...........................           0.320           0.356
HAWAII........................................  URBAN...........................           0.306           0.308
IOWA..........................................  RURAL...........................           0.297           0.252
IOWA..........................................  URBAN...........................           0.272           0.288
IDAHO.........................................  RURAL...........................           0.416           0.419
IDAHO.........................................  URBAN...........................           0.378           0.384
ILLINOIS......................................  RURAL...........................           0.245           0.251
ILLINOIS......................................  URBAN...........................           0.240           0.239
INDIANA.......................................  RURAL...........................           0.298           0.302
INDIANA.......................................  URBAN...........................           0.268           0.270
KANSAS........................................  RURAL...........................           0.282           0.286
KANSAS........................................  URBAN...........................           0.209           0.215
KENTUCKY......................................  RURAL...........................           0.223           0.220
KENTUCKY......................................  URBAN...........................           0.245           0.244
LOUISIANA.....................................  RURAL...........................           0.256           0.256
LOUISIANA.....................................  URBAN...........................           0.226           0.235
MARYLAND......................................  RURAL...........................           0.280           0.284
MARYLAND......................................  URBAN...........................           0.251           0.256
MASSACHUSETTS.................................  URBAN...........................           0.320           0.314
MAINE.........................................  RURAL...........................           0.440           0.460
MAINE.........................................  URBAN...........................           0.460           0.450
MICHIGAN......................................  RURAL...........................           0.313           0.312
MICHIGAN......................................  URBAN...........................           0.314           0.320
MINNESOTA.....................................  RURAL...........................           0.482           0.483
MINNESOTA.....................................  URBAN...........................           0.326           0.311
MISSOURI......................................  RURAL...........................           0.248           0.258
MISSOURI......................................  URBAN...........................           0.267           0.264
MISSISSIPPI...................................  RURAL...........................           0.226           0.229
MISSISSIPPI...................................  URBAN...........................           0.186           0.182
MONTANA.......................................  RURAL...........................           0.434           0.444
MONTANA.......................................  URBAN...........................           0.398           0.399
NORTH CAROLINA................................  RURAL...........................           0.256           0.254
NORTH CAROLINA................................  URBAN...........................           0.264           0.264
NORTH DAKOTA..................................  RURAL...........................           0.322           0.351
NORTH DAKOTA..................................  URBAN...........................           0.429           0.360
NEBRASKA......................................  RURAL...........................           0.323           0.328
NEBRASKA......................................  URBAN...........................           0.252           0.259
NEW HAMPSHIRE.................................  RURAL...........................           0.323           0.323
NEW HAMPSHIRE.................................  URBAN...........................           0.292           0.290
NEW JERSEY....................................  URBAN...........................           0.221           0.221
NEW MEXICO....................................  RURAL...........................           0.266           0.277
NEW MEXICO....................................  URBAN...........................           0.286           0.307
NEVADA........................................  RURAL...........................           0.242           0.269
NEVADA........................................  URBAN...........................           0.169           0.178
NEW YORK......................................  RURAL...........................           0.410           0.415
NEW YORK......................................  URBAN...........................           0.350           0.375
OHIO..........................................  RURAL...........................           0.324           0.327
OHIO..........................................  URBAN...........................           0.241           0.241
OKLAHOMA......................................  RURAL...........................           0.248           0.260
OKLAHOMA......................................  URBAN...........................           0.220           0.208
OREGON........................................  RURAL...........................           0.302           0.306
OREGON........................................  URBAN...........................           0.327           0.340
PENNSYLVANIA..................................  RURAL...........................           0.270           0.275
PENNSYLVANIA..................................  URBAN...........................           0.200           0.210
PUERTO RICO...................................  URBAN...........................           0.490           0.505
RHODE ISLAND..................................  URBAN...........................           0.287           0.284
SOUTH CAROLINA................................  RURAL...........................           0.222           0.222
SOUTH CAROLINA................................  URBAN...........................           0.217           0.227
SOUTH DAKOTA..................................  RURAL...........................           0.309           0.316
SOUTH DAKOTA..................................  URBAN...........................           0.253           0.251
TENNESSEE.....................................  RURAL...........................           0.212           0.221
TENNESSEE.....................................  URBAN...........................           0.201           0.204
TEXAS.........................................  RURAL...........................           0.239           0.245
TEXAS.........................................  URBAN...........................           0.210           0.216

[[Page 42215]]

 
UTAH..........................................  RURAL...........................           0.385           0.386
UTAH..........................................  URBAN...........................           0.359           0.362
VIRGINIA......................................  RURAL...........................           0.238           0.241
VIRGINIA......................................  URBAN...........................           0.257           0.263
VERMONT.......................................  RURAL...........................           0.415           0.411
VERMONT.......................................  URBAN...........................           0.365           0.365
WASHINGTON....................................  RURAL...........................           0.366           0.367
WASHINGTON....................................  URBAN...........................           0.317           0.327
WISCONSIN.....................................  RURAL...........................           0.407           0.412
WISCONSIN.....................................  URBAN...........................           0.327           0.334
WEST VIRGINIA.................................  RURAL...........................           0.283           0.291
WEST VIRGINIA.................................  URBAN...........................           0.335           0.337
WYOMING.......................................  RURAL...........................           0.385           0.393
WYOMING.......................................  URBAN...........................           0.302           0.296
----------------------------------------------------------------------------------------------------------------

E. Proposed OPPS Payments to Certain Rural and Other Hospitals

1. Hold Harmless Transitional Payment Changes Made by Pub. L. 110-275 
(MIPPA)
    When the OPPS was implemented, every provider was eligible to 
receive an additional payment adjustment (called either transitional 
corridor payments or transitional outpatient payments (TOPs)) if the 
payments it received for covered OPD services under the OPPS were less 
than the payments it would have received for the same services under 
the prior reasonable cost-based system (referred to as the pre-BBA 
amount). Section 1833(t)(7) of the Act provides that the transitional 
corridor payments are temporary payments for most providers and were 
intended to ease their transition from the prior reasonable cost-based 
payment system to the OPPS system. There are two exceptions to this 
provision, cancer hospitals and children's hospitals, and those 
hospitals receive the transitional corridor payments on a permanent 
basis. Section 1833(t)(7)(D)(i) of the Act originally provided for 
transitional corridor payments to rural hospitals with 100 or fewer 
beds for covered OPD services furnished before January 1, 2004. 
However, section 411 of Public Law 108-173 amended section 
1833(t)(7)(D)(i) of the Act to extend these payments through December 
31, 2005, for rural hospitals with 100 or fewer beds. Section 411 also 
extended the transitional corridor payments to sole community hospitals 
(SCHs) located in rural areas for services furnished during the period 
that began with the provider's first cost reporting period beginning on 
or after January 1, 2004, and ending on December 31, 2005. Accordingly, 
the authority for making transitional corridor payments under section 
1833(t)(7)(D)(i) of the Act, as amended by section 411 of Public Law 
108-173, for rural hospitals having 100 or fewer beds and SCHs located 
in rural areas expired on December 31, 2005.
    Section 5105 of Public Law 109-171 reinstituted the TOPs for 
covered OPD services furnished on or after January 1, 2006, and before 
January 1, 2009, for rural hospitals having 100 or fewer beds that are 
not SCHs. When the OPPS payment was less than the provider's pre-BBA 
amount, the amount of payment was increased by 95 percent of the amount 
of the difference between the two amounts for CY 2006, by 90 percent of 
the amount of that difference for CY 2007, and by 85 percent of the 
amount of that difference for CY 2008.
    For CY 2006, we implemented section 5105 of Public Law 109-171 
through Transmittal 877, issued on February 24, 2006. In the 
Transmittal, we did not specifically address whether TOPs apply to 
essential access community hospitals (EACHs), which are considered to 
be SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Accordingly, 
under the statute, EACHs are treated as SCHs. In the CY 2007 OPPS/ASC 
final rule with comment period (71 FR 68010), we stated that EACHs were 
not eligible for TOPs under Public Law 109-171. However, we stated they 
were eligible for the adjustment for rural SCHs. In the CY 2007 OPPS/
ASC final rule with comment period (71 FR 68010 and 68228), we updated 
Sec.  419.70(d) of our regulations to reflect the requirements of 
Public Law 109-171.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41461), we stated 
that, effective for services provided on or after January 1, 2009, 
rural hospitals having 100 or fewer beds that are not SCHs would no 
longer be eligible for TOPs, in accordance with section 5105 of Public 
Law 109-171. However, subsequent to issuance of the CY 2009 OPPS/ASC 
proposed rule, section 147 of Public Law 110-275 amended section 
1833(t)(7)(D)(i) of the Act by extending the period of TOPs to rural 
hospitals with 100 beds or fewer for 1 year, for services provided 
before January 1, 2010. Section 147 of Public Law 110-275 also extended 
TOPs to SCHs (including EACHs) with 100 or fewer beds for covered OPD 
services provided on or after January 1, 2009, and before January 1, 
2010. In accordance with section 147 of Public Law 110-275, when the 
OPPS payment is less than the provider's pre-BBA amount, the amount of 
payment is increased by 85 percent of the amount of the difference 
between the two payment amounts for CY 2009.
    For CY 2009, we revised our regulations at Sec. Sec.  419.70(d)(2) 
and (d)(4) and added a new paragraph (d)(5) to incorporate the 
provisions of section 147 of Public Law 110-275. In addition, we made 
other technical changes to Sec.  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 Sec.  419.70.
    For CY 2010, we made a technical correction to the heading of Sec.  
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

[[Page 42216]]

stated that, effective for services provided on or after January 1, 
2010, rural hospitals and SCHs (including EACHs) having 100 or fewer 
beds would no longer be eligible for TOPs, in accordance with section 
147 of Public Law 110-275. However, subsequent to issuance of the CY 
2010 OPPS/ASC final rule with comment period, section 3121(a) of the 
Affordable Care Act amended section 1833(t)(7)(D)(i)(III) of the Act by 
extending the period of TOPs to rural hospitals that are not SCHs with 
100 beds or fewer for 1 year, for services provided before January 1, 
2011. Section 3121(a) of the Affordable Care Act amended section 
1833(t)(7)(D)(i)(III) of the Act and extended the period of TOPs to 
SCHs (including EACHs) for 1 year, for services provided before January 
1, 2011, with section 3121(b) of the Affordable Care Act removing the 
100-bed limitation applicable to such SCHs for covered OPD services 
furnished on and after January 1, 2010, and before January 1, 2011. In 
accordance with section 3121 of the Affordable Care Act, when the OPPS 
payment is less than the provider's 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 
Sec.  419.70(d) of the regulations to reflect the TOPs extensions and 
amendments described in section 3121 of the Affordable Care Act.
    Section 108 of the Medicare and Medicaid Extenders Act of 2010 
(MMEA) (Pub. L. 111-309) extended for one year the hold harmless 
provision for a rural hospital with 100 or fewer beds that is not an 
SCH (as defined in section 1886(d)(5)(D)(iii). Therefore, for such a 
hospital, for services furnished before January 1, 2012, when the PPS 
amount is less than the provider's pre-BBA amount, the amount of 
payment is increased by 85 percent of the amount of the difference 
between the two payments. In addition, section 108 of the MMEA also 
extended for one year the hold harmless provision for an SCH (as 
defined in section 1886(d)(5)(D)(iii) of the Act (including EACHs) 
removing the 100-bed limit applicable to such SCHs for covered OPD 
services furnished on or after January 1, 2010 and before January 1, 
2012. Therefore, for such hospitals, for services furnished before 
January 1, 2012, when the PPS amount is less than the provider's pre-
BBA amount, the amount of payment is increased by 85 percent of the 
amount of the difference between the two payments. We are proposing to 
revise our regulations at Sec.  419.70(d) to conform the regulation 
text to the self-implementing provisions of section 108 of the MMEA 
described above.
2. Proposed Adjustment for Rural SCHs and EACHs Under Section 
1833(t)(13)(B) of the Act
    In the CY 2006 OPPS final rule with comment period (70 FR 68556), 
we finalized a payment increase for rural SCHs of 7.1 percent for all 
services and procedures paid under the OPPS, excluding drugs, 
biologicals, brachytherapy sources, and devices paid under the pass-
through payment policy in accordance with section 1833(t)(13)(B) of the 
Act, as added by section 411 of Public Law 108-173. Section 411 gave 
the Secretary the authority to make an adjustment to OPPS payments for 
rural hospitals, effective January 1, 2006, if justified by a study of 
the difference in costs by APC between hospitals in rural areas and 
hospitals in urban areas. Our analysis showed a difference in costs for 
rural SCHs. Therefore, for the CY 2006 OPPS, we finalized a payment 
adjustment for rural SCHs of 7.1 percent for all services and 
procedures paid under the OPPS, excluding separately payable drugs and 
biologicals, brachytherapy sources, and devices paid under the pass-
through payment policy, in accordance with section 1833(t)(13)(B) of 
the Act.
    In CY 2007, we became aware that we did not specifically address 
whether the adjustment applies to EACHs, which are considered to be 
SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Thus, under the 
statute, EACHs are treated as SCHs. Therefore, in the CY 2007 OPPS/ASC 
final rule with comment period (71 FR 68010 and 68227), for purposes of 
receiving this rural adjustment, we revised Sec.  419.43(g) to clarify 
that EACHs are also eligible to receive the rural SCH adjustment, 
assuming these entities otherwise meet the rural adjustment criteria. 
Currently, three hospitals are classified as EACHs, and as of CY 1998, 
under section 4201(c) of Public Law 105-33, a hospital can no longer 
become newly classified as an EACH.
    This adjustment for rural SCHs is budget neutral and applied before 
calculating outliers and copayment. As stated in the CY 2006 OPPS final 
rule with comment period (70 FR 68560), we would not reestablish the 
adjustment amount on an annual basis, but we may review the adjustment 
in the future and, if appropriate, would revise the adjustment. We 
provided the same 7.1 percent adjustment to rural SCHs, including 
EACHs, again in CYs 2008 through 2011. Further, in the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68590), we updated the 
regulations at Sec.  419.43(g)(4) to specify, in general terms, that 
items paid at charges adjusted to costs by application of a hospital-
specific CCR are excluded from the 7.1 percent payment adjustment.
    For the CY 2012 OPPS, we are proposing to continue our policy of a 
budget neutral 7.1 percent payment adjustment for rural SCHs, including 
EACHs, for all services and procedures paid under the OPPS, excluding 
separately payable drugs and biologicals, devices paid under the pass-
through payment policy, and items paid at charges reduced to costs (75 
FR 46232). We intend to reassess the 7.1 percent adjustment in the near 
future by examining differences between urban and rural hospitals' 
costs using updated claims, cost reports, and provider information.

F. Proposed OPPS Payments to Certain Cancer Hospitals Described by 
Section 1886(d)(1)(B)(v) of the Act

1. Background
    Since the inception of the OPPS, which was authorized by the 
Balanced Budget Act of 1997 (BBA), Medicare has paid cancer hospitals 
identified in section 1886(d)(1)(B)(v) of the Act (cancer hospitals) 
under the OPPS for covered outpatient hospital services. There are 11 
cancer hospitals that meet the classification criteria in section 
1886(d)(1)(B)(v) of the Act. These 11 cancer hospitals are exempted 
from payment under the IPPS. With the Medicare, Medicaid and SCHIP 
Balanced Budget Refinement Act of 1999, Congress created section 
1833(t)(7) of the Act, ``Transitional Adjustment to Limit Decline in 
Payment,'' to serve as a permanent payment floor by limiting cancer 
hospitals' potential losses under the OPPS. Through section 
1833(t)(7)(D)(ii) of the Act, a cancer hospital receives the full 
amount of the difference between payments for covered outpatient 
services under the OPPS and a ``pre-BBA'' amount. That is, cancer 
hospitals are permanently held harmless to their ``pre-BBA'' amount, 
and they receive Transitional Outpatient Payments (TOPs) to ensure that 
they do not receive a payment that is lower under the OPPS than the 
payment they would have received before implementation of the OPPS, as 
set forth in section 1833(t)(7)(F) of the Act. The ``pre-BBA'' payment 
amount is an amount equal to the product of the reasonable cost of the 
hospital for covered outpatient services for the portions of the 
hospital's cost

[[Page 42217]]

reporting period (or periods) occurring in the current year and the 
base payment-to-cost ratio (PCR) for the hospital. The ``pre-BBA'' 
amount, including the determination of the base PCR, are defined at 42 
CFR 419.70(f). TOPs are calculated on Worksheet E, Part B, of the 
Hospital and Hospital Health Care Complex Cost Report (Form CMS-2552-96 
or Form CMS-2552-10, as applicable) each year. Section 1833(t)(7)(I) of 
the Act exempts TOPs from budget neutrality calculations. Almost all of 
the 11 cancer hospitals receive TOPs each year. The volume weighted 
average payment-to-cost ratio (PCR) for the cancer hospitals is 0.83, 
or outpatient payment with TOPs to cancer hospitals is 83 percent of 
reasonable cost.
    Section 3138 of the Affordable Care Act instructs the Secretary to 
conduct a study to determine if, under the OPPS, outpatient costs 
incurred by cancer hospitals described in section 1886(d)(1)(B)(v) of 
the Act with respect to ambulatory payment classification (APC) groups 
exceed the costs incurred by other hospitals furnishing services under 
section 1833(t) of the Act as determined appropriate by the Secretary. 
In addition, section 3138 of the Affordable Care Act requires the 
Secretary to take into consideration the cost of drugs and biologicals 
incurred by such hospitals when studying cancer hospital costliness. 
Further, section 3138 of the Affordable Care Act provides that if the 
Secretary determines that cancer hospitals' costs with respect to APC 
groups are determined to be greater than the costs of other hospitals 
furnishing services under section 1833(t) of the Act, the Secretary 
shall provide an appropriate adjustment to reflect these higher costs. 
Cancer hospitals described in section 1886(d)(1)(B)(v) of the Act 
remain eligible for TOPs (which are not budget neutral) and outlier 
payments (which are budget neutral).
2. Study of Cancer Hospitals' Costs Relative to Other Hospitals
    It has been our standard analytical approach to use a combination 
of explanatory and payment regression models to assess the costliness 
of a class of hospitals while controlling for other legitimate 
influences of costliness, such as ability to achieve economies of 
scale, to ensure that costliness is due to the type of hospital and to 
identify appropriate payment adjustments. We used this approach in our 
CY 2006 OPPS final rule with comment period to establish the 7.1 
percent payment adjustment for rural SCHs (70 FR 68556 through 68561). 
In our discussion for the CY 2006 OPPS proposed rule, we stated that a 
simple comparison of unit costs would not be sufficient to assess the 
costliness of a class of hospitals because the costs faced by 
individual hospitals, whether urban or rural, are a function of many 
varying factors, including local labor supply and the complexity and 
volume of services provided (70 FR 42699).
    In constructing our analysis of cancer hospitals' costs with 
respect to APC groups relative to other hospitals, we considered 
whether our standard analytical approach to use a combination of 
explanatory and payment regression models would lead to valid results 
for this particular study, or whether we should develop a different or 
modified analytic approach. We note that the analyses presented in the 
CY 2006 OPPS proposed and final rules were designed to establish an 
adjustment for a large class of rural hospitals. In contrast, section 
3138 of the Affordable Care Act is specifically limited to identifying 
an adjustment for 11 cancer hospitals to the extent their costs with 
respect to APC groups exceeded those costs incurred by other hospitals 
furnishing services under section 1833(t) of the Act. With such a small 
sample size (11 out of approximately 4,000 hospitals paid under the 
OPPS), we were concerned that the standard explanatory and payment 
regression models used to establish the rural hospital adjustment would 
lead to imprecise estimates of payment adjustments for this small group 
of hospitals. Further, section 3138 of the Affordable Care Act 
specifies explicitly that cost comparisons between classes of hospitals 
must include the cost of drugs and biologicals. In our CY 2006 analysis 
of rural hospitals, we excluded the cost of drugs and biologicals in 
our model because the extreme units associated with proper billing for 
some drugs and biologicals can bias the calculation of a service mix 
index, or volume weighted average APC relative weight, for each 
hospital (70 FR 42698). Therefore, we chose not to pursue our standard 
combination of explanatory and payment regression modeling to determine 
a proposed cancer hospital adjustment.
    As discussed in the CY 2011 OPPS/ASC proposed rule (75 FR 46235), 
while we chose not to use our standard models to calculate a proposed 
cancer hospital adjustment, we determined it still would be appropriate 
to construct our usual provider-level analytical dataset consisting of 
variables related to assessing costliness with respect to APC groups, 
including average cost per unit for a hospital and the hospital's 
average APC relative weight as an indicator of the hospital's resource 
intensity, as measured by the APC relative weights. We used these 
variables to calculate univariate statistics that describe the 
costliness with respect to APC groups and related aspects of cancer 
hospitals and other hospitals paid under the OPPS. While descriptive 
statistics cannot control for the myriad factors that contribute to 
observed costs, we believed that stark differences in cost between 
cancer hospitals and other hospitals paid under the OPPS that would be 
observable by examining descriptive univariate statistics would provide 
some indication of relative costliness. We began our analysis of the 
cancer hospitals by creating an analytical dataset of hospitals billing 
under the OPPS for CY 2009 (a total of 3,933) that were included in our 
claims dataset for establishing the CY 2011 OPPS proposed APC relative 
weights. This analytical dataset included the 3,933 OPPS hospitals' 
total estimated cost (including packaged cost), total lines, total 
discounted units as modeled for CY 2011 OPPS payment, and the average 
weight of their separately payable services (total APC weight divided 
by total units) as modeled for the CY 2011 OPPS. We then summarized 
estimated utilization and payment for each hospital (``hospital-
level''). These files consist of hospital-level aggregate costs 
(including the cost of packaged items and services), total estimated 
discounted units under the modeled proposed CY 2011 OPPS, total 
estimated volume of number of occurrences of separately payable HCPCS 
codes under the modeled proposed CY 2011 OPPS, and total relative 
weight of separately payable services under the modeled proposed CY 
2011 OPPS. After summarizing modeled payment to the hospital-level, we 
removed 48 hospitals in Puerto Rico from our dataset because we did not 
believe that their cost structure reflected the costs of most hospitals 
paid under the OPPS and because they could bias the calculation of 
hospital-weighted statistics. We then removed an additional 66 
hospitals with a cost per unit of more than 3 standard deviations from 
the geometric mean (mean of the natural log) because including outliers 
in hospital-weighted descriptive statistics also could bias those 
statistics. This resulted in a dataset with 11 cancer hospitals and 
3,808 other hospitals.
    We included the following standard hospital-level variables that 
describe hospital costliness in our analysis file: outpatient cost per 
discounted unit

[[Page 42218]]

under the modeled CY 2011 OPPS (substituting a cost per administration, 
rather than a cost per unit, for drugs and biologicals); each 
hospital's proposed CY 2011 wage index as a measure of relative labor 
cost; the service mix index, or volume-weighted average proposed CY 
2011 APC relative weight (including a simulated weight for drugs and 
biologicals created by dividing the CY 2010 April ASP-based payment 
amount at ASP+6 percent appearing in Addendum A and B of the proposed 
rule by the proposed conversion factor of $68.267); outpatient volume 
based on number of occurrences of HCPCS codes in the CY 2009 claims 
data; and number of beds. We used these variables because they are key 
indicators of costliness with respect to APC groups under the modeled 
OPPS system, and they allowed us to assess the relative costliness of 
classes of hospitals under the proposed CY 2011 OPPS. A hospital's 
service mix index is a measure of resource intensity of the services 
provided by the hospital as measured by the proposed CY 2011 OPPS 
relative weights, and standardizing the cost per discounted unit by the 
service mix index creates an adjusted cost per unit estimate that 
reflects the remaining relative costliness of a hospital remaining 
after receiving the estimated payments that we proposed to make under 
the CY 2011 OPPS. In short, if a class of hospitals demonstrates higher 
cost per unit after standardization by service mix, it is an early 
indication that the class of hospitals may be significantly more costly 
in the regression models. We used these data to calculate the 
descriptive univariate statistics for cancer hospitals appearing in 
Table 12 below. We note that because drugs and biologicals are such a 
significant portion of the services that the cancer hospitals provide, 
and because section 3138 of the Affordable Care Act explicitly requires 
us to consider the cost of drugs and biologicals, we included the cost 
of these items in our total cost calculation for each hospital, 
counting each occurrence of a drug in the modeled proposed CY 2011 data 
(based on units in CY 2009 claims data). That is, we sought to treat 
each administration of a drug or biological as one unit.
    In reviewing these descriptive statistics, we observed that cancer 
hospitals had a standardized cost per discounted unit of $150.12 
compared to a standardized cost per discounted unit of $94.14 for all 
other hospitals. That is, cancer hospitals' average cost per discounted 
unit remained high even after accounting for payment under the modeled 
proposed CY 2011 payment system, which is not true for all other 
hospitals. Observing such differences in standardized cost per 
discounted unit led us to conclude that cancer hospitals are more 
costly with respect to APC groups than other hospitals furnishing 
services under the OPPS, even without the inferential statistical 
models that we typically employ.

        Table 12--Means and Standard Deviations for Key Variables by Cancer and Non-Cancer OPPS Hospitals
----------------------------------------------------------------------------------------------------------------
                                                         Cancer hospitals              Non-cancer hospitals
                                                 ---------------------------------------------------------------
                    Variable                                         Standard                        Standard
                                                       Mean          deviation         Mean          deviation
----------------------------------------------------------------------------------------------------------------
Outpatient Cost per Unit *......................         $344.20         (64.68)         $264.11        (165.86)
Unit Cost Standardized by Service Mix Wage               $150.12         (31.64)          $94.14         (81.19)
 Indices........................................
Wage Index......................................            1.10          (0.13)            0.98          (0.16)
Service Mix Index *.............................            2.19          (0.26)            3.18          (2.25)
Outpatient Volume...............................         192,197       (186,063)          34,578        (43,094)
Beds............................................             173        (162.33)             173        (171.46)
Number of Hospitals.............................              11  ..............           3,808  ..............
----------------------------------------------------------------------------------------------------------------
* Includes drugs and biologicals based on per administration rather than per unit.

3. CY 2011 Proposed Payment Adjustment for Certain Cancer Hospitals
    Having reviewed the cost data from the standard analytic database 
and determined that cancer hospitals are more costly with respect to 
APC groups than other hospitals furnishing services under the OPPS 
system, we decided to examine hospital cost report data from Worksheet 
E, Part B (where TOPs are calculated on the Hospital and Hospital 
Health Care Complex Cost Report each year) in order to determine 
whether our findings were further supported by cost report data and to 
determine an appropriate proposed payment adjustment methodology for CY 
2011 based on cost report data. Analyses on our standard analytic 
database and descriptive statistics presented in Table 12 above did not 
consider TOPs in assessing costliness of cancer hospitals relative to 
other hospitals furnishing services under section 1833(t) of the Act. 
There were several reasons for this. One, TOPs have no associated 
relative weight that could be included in an assessment of APC-based 
payment. TOPs are paid at cost report settlement on an aggregate basis, 
not on a per service basis, and we would have no way to break these 
payments down into a relative weight to incorporate these retrospective 
aggregate payments in the form of a relative weight. In addition, 
section 3138 of the Affordable Care Act requires that any cancer 
adjustment be made within the budget neutral system, and TOPs are not 
part of the budget neutral payment system. The cost report data we 
selected for the analysis were limited to the OPPS-specific payment and 
cost data available on Worksheet E, Part B. These data include 
aggregate OPPS payments, including outlier payments and the cost of 
medical and other health services. These aggregate measures of cost and 
payment also include the cost and payment for drugs and biologicals and 
other adjustments that we typically include in our regression modeling, 
including wage index adjustment and rural adjustment, if applicable. 
While these cost report data cannot provide an estimate of cost per 
unit after controlling for other potential factors that could influence 
cost per unit, we used this aggregate cost and payment data to examine 
the cancer hospitals' OPPS PCR and OPPS PCR with TOPs, and compare 
these to the OPPS PCR for other hospitals. PCRs calculated from the 
most recent cost report data available at the time of the CY 2011 OPPS/
ASC proposed rule also indicated that costs relative to payments at 
cancer hospitals were higher than those at other hospitals paid under 
the OPPS (that is, cancer hospitals have lower PCRs). In order to 
calculate PCRs for hospitals paid under the OPPS (including cancer 
hospitals), we used the same extract of cost report data from the 
Hospital Cost Report Information System (HCRIS) that we used to 
calculate the CCRs that were used to estimate median costs for the CY 
2011

[[Page 42219]]

OPPS. We limited the dataset to the hospitals with CY 2009 claims data 
that we used to model the CY 2011 proposed APC relative weights.
    We estimated that, on average, the OPPS payments to the 11 cancer 
hospitals, not including TOPs, were approximately 62 percent of 
reasonable cost (that is, we calculated a PCR of 0.615 for the cancer 
hospitals), whereas we estimated that, on average, the OPPS payments to 
other hospitals furnishing services under the OPPS were approximately 
87 percent of reasonable cost (resulting in a PCR of 0.868). When TOPS 
were included in the calculation of the PCR, cancer hospitals, as a 
group, received payments that were approximately 83 percent of 
reasonable cost, which was still lower than the average PCR of other 
OPPS hospitals of approximately 87 percent of reasonable cost.
    Based on our findings that cancer hospitals, as a class, have a 
significantly lower volume weighted average PCR than the volume 
weighted PCR of other hospitals furnishing services under the OPPS and 
our findings that the cancer hospitals cost per discounted unit 
standardized for service mix remains much higher than the standardized 
cost per discounted unit of all other hospitals, we proposed an 
adjustment for cancer hospitals to reflect these higher costs, 
effective January 1, 2011. For purposes of calculating a proposed 
adjustment, we chose to rely on this straightforward assessment of 
payments and costs from the cost report data because of the concerns 
outlined above with respect to the small number of hospitals, and 
because of the challenges associated with accurately including drug and 
biological costs in our standard regression models. We believed that an 
appropriate adjustment would redistribute enough payments from other 
hospitals furnishing services under the OPPS to the cancer hospitals to 
give cancer hospitals a PCR that was comparable to the average PCR for 
other hospitals furnishing services under the OPPS. Therefore, we 
proposed a hospital-specific payment adjustment determined as the 
percentage of additional payment needed to raise each cancer hospital's 
PCR to the weighted average PCR for other hospitals furnishing services 
under the OPPS (0.868) in the CY 2011 dataset. This would be 
accomplished by adjusting each cancer hospital's OPPS payment by the 
percentage difference between the hospital's individual PCR (without 
TOPs) and the weighted average PCR of the other hospitals furnishing 
services under the OPPS. This cancer hospital payment adjustment 
proposed for CY 2011 would have resulted in an estimated aggregate 
increase in OPPS payments to cancer hospitals of 41.2 percent and a net 
increase in total payments, including TOPs, of 5 percent for CY 2011.
4. Proposed CY 2011 Cancer Hospital Payment Adjustment That Was Not 
Finalized
    The public comments associated with the cancer hospital adjustment 
that we proposed for CY 2011 are detailed in the CY 2011 OPPS/ASC final 
rule with comment period (75 FR 71886 through 71887). Many commenters 
urged CMS to consider TOPs when calculating the cancer hospital payment 
adjustment stating that the proposed methodology results, largely, in a 
change in the form of outpatient payments to cancer hospitals by 
shifting payment from hold harmless payment under the TOPs provision to 
APC payments. Noting that the majority of cancer care provided in the 
country is provided by the non-cancer hospitals that would experience a 
payment reduction under the CY 2011 proposal, commenters also suggested 
that the associated budget neutral payment reduction of 0.7 percent was 
not appropriate or equitable to other OPPS hospitals. Commenters also 
expressed concern that the proposed payment adjustment would increase 
beneficiary copayments. That is, they believed that the proposed cancer 
hospital adjustment would increase APC payments and, because 
beneficiary copayment is a percentage of the APC payment, Medicare 
beneficiaries seeking services at the 11 designated cancer hospitals 
would experience higher copayments due to the proposed methodology. 
These commenters strongly encouraged CMS to implement the adjustment in 
a way that does not increase beneficiary copayments. These commenters 
also indicated that CMS should have taken into account the 
concentration of outpatient services at the designated cancer 
hospitals, as compared to other OPPS hospitals, and adjust the PCR 
benchmark higher. The commenters argued that other PPS hospitals have 
the ability to improve their Medicare margins through other payment 
systems, but that cancer hospitals receive the majority of their 
Medicare payments through the OPPS. One commenter suggested that the 
CMS analysis was inadequate to conclude that costs are higher in cancer 
hospitals and that an adjustment is warranted. As indicated in the CY 
2011 OPPS/ASC final rule with comment period (75 FR 71887), because the 
many public comments we received identified a broad range of very 
important issues and concerns associated with the proposed cancer 
hospital payment adjustment, we determined that further study and 
deliberation was necessary and, therefore, we did not finalize the CY 
2011 proposed payment adjustment for certain cancer hospitals.
5. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2012
    During our deliberations that occurred subsequent to the CY 2011 
OPPS/ASC final rule, we reconfirmed that TOPs could not be included 
when establishing the PCR target given the current statutory language 
in section 1833(t)(18) of the Act that was to capture costliness with 
respect to APC groups. Specifically, section 1833(t)(18)(A) of the Act 
requires the Secretary to determine if, under the OPPS, costs incurred 
by cancer hospitals with respect to APC groups exceed those costs 
incurred by other hospitals furnishing services under the OPPS. As 
discussed in the CY 2011 OPPS/ASC proposed rule and final rule with 
comment period, TOPs payments are not paid on a service specific basis, 
and we have no way to break these payments down into a relative weight 
that could be included in an assessment of an APC-based payment. 
Because section 1833(t)(18)(A) of the Act ties the assessment of the 
costs incurred by the 11 cancer hospitals to APC groups, we cannot 
include TOPs, which are not tied to APC groups, in such assessment. In 
addition, section 1833(t)(7)(D)(ii) of the Act (the hold harmless 
provision for cancer hospitals) provides that this adjustment is 
applied for covered OPD services for which the ``PPS amount'' is less 
than the ``pre-BBA'' amount. The ``PPS amount'' means, with respect to 
covered OPD services, ``the amount payable under this title [Title 18] 
for such services (determined without regard to this paragraph) * * *'' 
(See section 1833(t)(7)(E) of the Act). Under this provision, the 
cancer adjustment must be included in the calculation of the ``PPS 
amount'' because it is an integral component of ``the amount payable 
under this title.'' Further, we note that the Affordable Care Act 
requires that any cancer hospital payment adjustment be made within the 
budget neutral system. We note that TOPs are not part of the budget 
neutral payment system.
    In addition, we have revisited the issue of whether payments 
associated with the cancer hospital payment adjustment can be excluded 
from the amount of payment on which the copayment amount is determined. 
We continue to believe that the statute requires such payment to be 
included in

[[Page 42220]]

the amount of payment upon which the copayment amount is determined. 
Specifically, section 1833(t)(8) of the Act sets forth the methodology 
for calculating the copayment amount under section 1833(t). Section 
1833(t)(8)(A) of the Act states the following: ``Except as provided in 
subparagraphs (B) and (C), the copayment amount under this subsection 
is the amount by which the amount described in paragraph (4)(B) exceeds 
the amount of payment determined under paragraph (4)(C).'' We note that 
the amount in paragraph (4)(B) incorporates the amount calculated under 
subparagraph (A) of section 1833(t)(4) of the Act which provides that 
the ``Medicare OPD fee schedule amount (computed under paragraph 
(3)(D)) for the service or group and year is adjusted for relative 
differences in the cost of labor and other factors determined by the 
Secretary, as computed under paragraphs (2)(D) and (2)(E).'' The 
reference to ``factors computed under paragraphs* * * (2)(E)'' includes 
a cancer hospital payment adjustment because it is required to be 
provided under paragraph (2)(E). Therefore, the statute is clear that 
the cancer hospital payment adjustment is a component of the payment 
amount upon which the beneficiary copayment is determined.
    Finally, though commenters suggested that CMS take into account the 
cancer hospitals' significant Medicare outpatient concentration 
relative to that of other OPPS hospitals when establishing an 
appropriate PCR benchmark, we believe it is inappropriate to 
incorporate the payments associated with other Medicare payment systems 
when determining a payment adjustment under the OPPS.
    After a thorough review and deliberation of the issues associated 
with the cancer hospital payment adjustment proposed for CY 2011, we 
continue to believe a straightforward and appropriate method to adjust 
payments of cancer hospitals described in section 1886(d)(1)(B)(v) of 
the Act in order to reflect their higher costs with respect to APC 
groups is to propose to redistribute enough payments from other 
hospitals furnishing services under the OPPS to the cancer hospitals to 
give each cancer hospital a PCR that is comparable to the weighted 
average PCR for other hospitals furnishing services under section 
1833(t) of the Act. Therefore, as explained in more detail below, for 
services furnished on and after January 1, 2012, we are proposing that, 
for a cancer hospital with an individual PCR (as determined by the 
Secretary) below the weighted average PCR for other hospitals 
furnishing services under section 1833(t) of the Act (as determined by 
the Secretary) (Target PCR), we would make a hospital-specific payment 
adjustment by adjusting the wage-adjusted OPPS payment for covered OPD 
services (except for devices receiving pass-through status as defined 
in 42 CFR 419.66) by the percent difference between the hospital's 
individual PCR and the weighted average PCR of other hospitals 
furnishing services under section 1833(t) of the Act in the CY 2012 
dataset. With respect to such hospitals, for devices receiving pass-
through status as defined in 42 CFR 419.66 which are furnished on and 
after January 1, 2012, we are proposing a zero percent adjustment. For 
a cancer hospital with an individual PCR (as determined by the 
Secretary) above the weighted average PCR for other hospitals 
furnishing services under section 1833(t) of the Act (as determined by 
the Secretary), we are proposing a zero percent adjustment for covered 
hospital outpatient services furnished on and after January 1, 2012.
    In order to calculate PCRs for hospitals furnishing services under 
the OPPS (including cancer hospitals) for the proposed CY 2012 cancer 
hospital payment adjustment, we used the same extract of cost report 
data from HCRIS, as discussed in section II.A of this proposed rule, 
used to estimate median costs for the proposed CY 2012 OPPS. Using 
these cost report data, we included data from Worksheet E, Part B, for 
each hospital, using data from each hospital's most recent cost report, 
whether as submitted or settled. We then limited the data set to the 
hospitals with CY 2010 claims data that we use to model the impact of 
the CY 2012 proposed APC relative weights (4,009 hospitals) because it 
is appropriate to use the same set of hospitals that we are using to 
calibrate the modeled proposed CY 2012 OPPS. The cancer hospitals in 
this dataset largely had cost report data from cost reporting periods 
ending in FY 2009 and FY 2010. The cost report data for the other 
hospitals were from cost report periods with fiscal year ends ranging 
from 2008 to 2010. We then removed the cost report data for 47 
hospitals from Puerto Rico from our data set because we do not believe 
that their cost structure reflects the costs of most hospitals paid 
under the OPPS and therefore their inclusion may bias the calculation 
of hospital-weighted statistics. We also removed 206 hospitals with 
cost report data that were not complete (missing OPPS payments, 
including outliers, missing aggregate cost data, or both), so that all 
cost reports in the study would have both the payment and cost data 
necessary to calculate a PCR for each hospital, leading to a final 
analytic file of 3,756 hospitals with cost report data. We believe that 
the costs and PPS payments reported on Worksheet E, Part B, for the 
hospitals included in our CY 2012 modeling should be sufficiently 
accurate for assessing the hospital's relative costliness because all 
of the key elements that we believe are necessary for the analysis 
(payment and cost) are contained on this worksheet.
    Using this smaller dataset of cost report data, we estimate that, 
on average, the OPPS payments to the 11 cancer hospitals, not including 
TOPs, are approximately 65 percent of reasonable cost (that is, we 
calculated a PCR of 0.647 for the cancer hospitals), whereas, we 
estimate that, on average, the OPPS payments to other hospitals 
furnishing services under the OPPS are approximately 90 percent of 
reasonable cost (resulting in a PCR of 0.901). Individual cancer 
hospitals' OPPS PCRs range from approximately 0.56 to approximately 
0.82.
    As indicated above, we are proposing that, for a cancer hospital 
with an individual PCR below the weighted average PCR for other 
hospitals furnishing services under the OPPS in the CY 2012 dataset, we 
would make a hospital-specific payment adjustment by adjusting the 
wage-adjusted OPPS payment for covered OPD services (except devices 
receiving pass-through status because these items and services are 
always paid at the estimated full cost and, therefore, no payment 
adjustment is necessary) furnished on and after January 1, 2012, by the 
percent difference between the hospital's individual PCR and the 
weighted average PCR of other hospitals furnishing services under the 
OPPS in the CY 2012 dataset. This proposed methodology would result in 
the proposed percentage payment adjustments for the 11 cancer hospitals 
appearing in Table 13 below. In addition, we note that we are proposing 
to amend 42 CFR 419.43 by adding a new paragraph (i). Proposed new 
paragraph (i)(1) would specify that CMS provides for a payment 
adjustment for covered hospital outpatient services furnished on or 
after January 1, 2012, by cancer hospitals described in section 
1886(d)(1)(B)(v) of the Act. Proposed new paragraph (i)(2) would 
specify how the amount of the payment adjustment to cancer hospitals is 
established. Proposed new paragraph (i)(3) would specify that this 
payment adjustment would be budget neutral, consistent

[[Page 42221]]

with section 1833(t)(18)(B) of the Act. Proposed new paragraph (i)(4) 
would specify the services or groups that are excluded from qualifying 
for the cancer hospital payment adjustment. In the event that a cancer 
hospital has a PCR that is higher than the weighted average PCR for 
other OPPS hospitals furnishing services under the OPPS, we are 
proposing that the specific hospital would receive a zero percent 
adjustment. We believe that this would indicate that the cancer 
hospital's costs do not exceed the costs incurred by other hospitals 
furnishing services under the OPPS and, therefore, a payment adjustment 
above zero percent would not be necessary.
    We note that the proposed payment adjustment for all cancer 
hospitals would result in an estimated aggregate increase in OPPS 
payments to cancer hospitals of 39 percent for CY 2012 and an estimated 
net increase in total payments, including TOPs, of 9 percent, based on 
cost report data. The dataset of hospital cost report data that we used 
to model this proposed payment adjustment for cancer hospitals is 
available under supporting documentation for this proposed rule on the 
CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/HORD/.

   Table 13--Proposed CY 2012 Hospital-Specific Payment Adjustment for
      Cancer Hospitals Without Regard to TOPS and Outlier Payments
------------------------------------------------------------------------
                                                              Percent
                                                             increase
    Provider number               Hospital name            without TOPs
                                                            or outlier
                                                              payment
------------------------------------------------------------------------
050146.................  City of Hope Helford Clinical              10.1
                          Research Hospital.
050660.................  USC Kenneth Norris Jr. Cancer              15.7
                          Hospital.
100079.................  University of Miami Hospital &             27.6
                          Clinic.
100271.................  H. Lee Moffitt Cancer Center &             21.6
                          Research Institute.
220162.................  Dana-Farber Cancer Institute...            54.4
330154.................  Memorial Hospital for Cancer               39.4
                          and Allied Diseases.
330354.................  Roswell Park Cancer Institute..            24.3
360242.................  James Cancer Hospital & Solove             30.1
                          Research Institute.
390196.................  Hospital of the Fox Chase                  15.3
                          Cancer Center.
450076.................  University of Texas M. D.                  61.8
                          Anderson Cancer Center.
500138.................  Seattle Cancer Care Alliance...            43.7
Proposed Aggregate Payment Adjustment                               39.3
------------------------------------------------------------------------

    Because section 7101 of the Affordable Care Act expanded the 340B 
drug program to include certain cancer hospitals, we believe that the 
PCRs and any cancer hospital payment adjustment should be recalculated 
annually. The 340B drug program allows certain hospitals to purchase 
certain outpatient drugs at reduced prices. The Affordable Care Act 
provision was effective for drugs purchased on or after January 1, 
2010. Inclusion of cancer hospitals in the 340B drug program should 
lower drug costs at these cancer hospitals going forward and, 
therefore, may cause significant changes in each cancer hospital's PCR 
compared to the previous year's calculation. Therefore, we are 
proposing to recalculate the PCR of each cancer hospital and the 
weighted average PCR of the other hospitals furnishing services under 
1833(t) on an annual basis in order to determine an appropriate 
hospital specific payment adjustment to cancer hospitals each year.
    We note that the changes made by section 3138 of the Affordable 
Care Act do not affect the existing statutory provisions that provide 
for outlier payment for all hospitals paid under the OPPS, including 
cancer hospitals and TOPs for cancer hospitals. Because outlier 
payments are made within budget neutrality, outlier payments are 
assessed after all budget neutral payments for an individual service 
have been made, including the cancer hospital payment adjustment. The 
TOPs are assessed after all payments have been made for a cost 
reporting period. Further, both outlier payments and TOPs serve as a 
safety net for hospitals, although outliers are budget neutral and TOPs 
are not, and TOPs are limited to certain hospitals. Outliers and TOPs 
are assessed after final payments have been made. If this proposed 
payment adjustment is finalized, we estimate that there would be no 
cancer hospitals that would continue to receive TOPs. We are proposing 
to update the hospital-specific cancer hospital payment adjustments in 
Table 13 using the more recent cost reports that will become available 
for the CY 2012 OPPS/ASC final rule with comment period.

G. Proposed Hospital Outpatient Outlier Payments

1. Background
    Currently, the OPPS pays outlier payments on a service-by-service 
basis. For CY 2011, the outlier threshold is met when the cost of 
furnishing a service or procedure by a hospital exceeds 1.75 times the 
APC payment amount and exceeds the APC payment rate plus a $2,025 
fixed-dollar threshold. We introduced a fixed-dollar threshold in CY 
2005, in addition to the traditional multiple threshold, in order to 
better target outliers to those high cost and complex procedures where 
a very costly service could present a hospital with significant 
financial loss. If the cost of a service meets both of these 
conditions, the multiple threshold and the fixed-dollar threshold, the 
outlier payment is calculated as 50 percent of the amount by which the 
cost of furnishing the service exceeds 1.75 times the APC payment rate. 
Before CY 2009, this outlier payment had historically been considered a 
final payment by longstanding OPPS policy. We implemented a 
reconciliation process similar to the IPPS outlier reconciliation 
process for cost reports with cost reporting periods beginning on or 
after January 1, 2009 (73 FR 68594 through 68599).
    It has been our policy for the past several years to report the 
actual amount of outlier payments as a percent of total spending in the 
claims being used to model the proposed OPPS. Our current estimate of 
total outlier payments as a percent of total CY 2010 OPPS payment, 
using available CY 2010 claims and the revised OPPS expenditure 
estimate for the Presidential Budget for FY 2012, is

[[Page 42222]]

approximately 1.11 percent of the total aggregated OPPS payments. 
Therefore, for CY 2010, we estimate that we paid at 0.11 percent above 
the CY 2010 outlier target of 1.0 percent of total aggregated OPPS 
payments.
    As explained in the CY 2011 OPPS/ASC final rule with comment period 
(75 FR 71887 through 71889), we set our projected target for aggregate 
outlier payments at 1.0 percent of the estimated aggregate total 
payments under the OPPS for CY 2011. The outlier thresholds were set so 
that estimated CY 2011 aggregate outlier payments would equal 1.0 
percent of the total estimated aggregate payments under the OPPS. Using 
CY 2010 claims data and CY 2011 payment rates, we currently estimate 
that the aggregate outlier payments for CY 2011 would be approximately 
1.06 percent of the total CY 2011 OPPS payments. The difference between 
1.0 percent and 1.06 percent is reflected in the regulatory impact 
analysis in section XX. of this proposed rule. We note that we provide 
estimated CY 2012 outlier payments for hospitals and CMHCs with claims 
included in the claims data that we used to model impacts in the 
Hospital-Specific Impacts--Provider-Specific Data file on the CMS Web 
site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/.
2. Proposed Outlier Calculation
    We are proposing for CY 2012 to continue our policy of estimating 
outlier payments to be 1.0 percent of the estimated aggregate total 
payments under the OPPS for outlier payments. We are proposing that a 
portion of that 1.0 percent, specifically 0.14 percent, would be 
allocated to CMHCs for PHP outlier payments. This is the amount of 
estimated outlier payments that would result from the proposed CMHC 
outlier threshold as a proportion of total estimated outlier payments. 
As discussed in section VIII.C. of this proposed rule, for CMHCs, we 
are proposing to continue our longstanding policy that if a CMHC's cost 
for partial hospitalization services, paid under either APC 0172 (Level 
I Partial Hospitalization (3 services) for CMHCs) or APC 0173 (Level II 
Partial Hospitalization (4 or more services) for CMHCs), exceeds 3.40 
times the payment for APC 0173, the outlier payment would be calculated 
as 50 percent of the amount by which the cost exceeds 3.40 times the 
APC 0173 payment rate. For further discussion of CMHC outlier payments, 
we refer readers to section VIII.C. of this proposed rule.
    To ensure that the estimated CY 2012 aggregate outlier payments 
would equal 1.0 percent of estimated aggregate total payments under the 
OPPS, we are proposing that the hospital outlier threshold be set so 
that outlier payments would be triggered when the cost of furnishing a 
service or procedure by a hospital exceeds 1.75 times the APC payment 
amount and exceeds the APC payment rate plus a $2,100 fixed-dollar 
threshold. This proposed threshold reflects the methodology discussed 
below in this section, as well as the proposed APC recalibration for CY 
2012.
    We calculated the proposed fixed-dollar threshold for this proposed 
rule using largely the same methodology as we did in CY 2011 (75 FR 
71887 through 71889). For purposes of estimating outlier payments for 
the proposed rule, we used the hospital-specific overall ancillary CCRs 
available in the April 2011 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. For this proposed rule, we used CY 2010 
claims to model the CY 2012 OPPS. In order to estimate the proposed CY 
2012 hospital outlier payments for this proposed rule, we inflated the 
charges on the CY 2010 claims using the same inflation factor of 1.0908 
that we used to estimate the IPPS fixed-dollar outlier threshold for 
the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26024). We used an 
inflation factor of 1.0444 to estimate CY 2011 charges from the CY 2010 
charges reported on CY 2010 claims. The methodology for determining 
this charge inflation factor is discussed in the FY 2012 IPPS/LTCH PPS 
proposed rule (76 FR 26024). As we stated in the CY 2005 OPPS final 
rule with comment period (69 FR 65845), we believe that the use of 
these charge inflation factors are appropriate for the OPPS because, 
with the exception of the inpatient routine service cost centers, 
hospitals use the same ancillary and outpatient cost centers to capture 
costs and charges for inpatient and outpatient services.
    As noted in the CY 2007 OPPS/ASC final rule with comment period (71 
FR 68011), we are concerned that we could systematically overestimate 
the OPPS hospital outlier threshold if we did not apply a CCR inflation 
adjustment factor. Therefore, we are proposing to apply the same CCR 
inflation adjustment factor that we are proposing to apply for the FY 
2012 IPPS outlier calculation to the CCRs used to simulate the proposed 
CY 2012 OPPS outlier payments that determine the fixed-dollar 
threshold. Specifically, for CY 2012, we are proposing to apply an 
adjustment of 0.9850 to the CCRs that were in the April 2011 OPSF to 
trend them forward from CY 2011 to CY 2012. The methodology for 
calculating this proposed adjustment is discussed in the FY 2012 IPPS/
LTCH PPS proposed rule (76 FR 26024 through 26025).
    Therefore, to model hospital outlier payments for this CY 2012 
OPPS/ASC proposed rule, we applied the overall CCRs from the April 2011 
OPSF file after adjustment (using the proposed CCR inflation adjustment 
factor of 0.9850 to approximate CY 2012 CCRs) to charges on CY 2010 
claims that were adjusted (using the proposed charge inflation factor 
of 1.0908 to approximate CY 2012 charges). We simulated aggregated CY 
2012 hospital outlier payments using these costs for several different 
fixed-dollar thresholds, holding the 1.75 multiple threshold constant 
and assuming that outlier payments would continue to be made at 50 
percent of the amount by which the cost of furnishing the service would 
exceed 1.75 times the APC payment amount, until the total outlier 
payments equaled 1.0 percent of aggregated estimated total CY 2012 OPPS 
payments. We estimate that a proposed fixed-dollar threshold of $2,100, 
combined with the proposed multiple threshold of 1.75 times the APC 
payment rate, would allocate 1.0 percent of aggregated total OPPS 
payments to outlier payments. We are proposing to continue to make an 
outlier payment that equals 50 percent of the amount by which the cost 
of furnishing the service exceeds 1.75 times the APC payment amount 
when both the 1.75 multiple threshold and the proposed fixed-dollar 
threshold of $2,100 are met. For CMHCs, we are proposing that, if a 
CMHC's cost for partial hospitalization services, paid under either APC 
0172 or APC 0173, exceeds 3.40 times the payment for APC 0173, the 
outlier payment would be calculated as 50 percent of the amount by 
which the cost exceeds 3.40 times the APC 0173 payment rate.
    Section 1833(t)(17)(A) of the Act, which applies to hospitals as 
defined under section 1886(d)(1)(B) of the Act, requires that hospitals 
that fail to report data required for the quality measures selected by 
the Secretary, in the form and manner required by the Secretary under 
1833(t)(17)(B) of the Act, incur a 2.0 percentage point reduction to 
their OPD fee schedule increase factor, that is, the annual payment 
update factor. The application of a reduced OPD fee schedule increase 
factor results in

[[Page 42223]]

reduced national unadjusted payment rates that will apply to certain 
outpatient items and services furnished by hospitals that are required 
to report outpatient quality data and that fail to meet the Hospital 
OQR requirements. For hospitals that fail to meet the Hospital OQR 
requirements, we are proposing to continue our policy that we 
implemented in CY 2010 that the hospitals' costs would be compared to 
the reduced payments for purposes of outlier eligibility and payment 
calculation. For more information on the Hospital OQR Program, we refer 
readers to section XIV. of this proposed rule.
3. Outlier Reconciliation
    In the CY 2009 OPPS/ASC final rule with comment period (73 CFR 
68599), we adopted as final policy a process to reconcile hospital or 
CMHC outlier payments at cost report settlement for services furnished 
during cost reporting periods beginning in CY 2009. OPPS outlier 
reconciliation more fully ensures accurate outlier payments for those 
facilities that have CCRs that fluctuate significantly relative to the 
CCRs of other facilities, and that receive a significant amount of 
outlier payments (73 FR 68598). As under the IPPS, we do not adjust the 
fixed-dollar threshold or the amount of total OPPS payments set aside 
for outlier payments for reconciliation activity because such action 
would be contrary to the prospective nature of the system. Our proposed 
outlier threshold calculation assumes that overall ancillary CCRs 
accurately estimate hospital costs based on the information available 
to us at the time we set the prospective fixed-dollar outlier 
threshold. For these reasons, as we have previously discussed in the CY 
2009 OPPS/ASC final rule with comment period (73 FR 68596), we are not 
proposing to incorporate any assumptions about the effects of 
reconciliation into our calculation of the OPPS fixed-dollar outlier 
threshold.

H. Proposed Calculation of an Adjusted Medicare Payment From the 
National Unadjusted Medicare Payment

    The basic methodology for determining prospective payment rates for 
HOPD services under the OPPS is set forth in existing regulations at 42 
CFR Part 419, subparts C and D. For this proposed rule, the payment 
rate for most services and procedures for which payment is made under 
the OPPS is the product of the proposed conversion factor calculated in 
accordance with section II.B. of this proposed rule and the proposed 
relative weight determined under section II.A. of this proposed rule. 
Therefore, the proposed national unadjusted payment rate for most APCs 
contained in Addendum A to this proposed rule (which is referenced in 
section XVII. of this proposed rule and available via the Internet on 
the CMS Web site) and for most HCPCS codes to which separate payment 
under the OPPS has been assigned in Addendum B to this proposed rule 
(which is referenced in section XVII. of this proposed rule and 
available via the Internet on the CMS Web site) was calculated by 
multiplying the proposed CY 2012 scaled weight for the APC by the 
proposed CY 2012 conversion factor.
    We note that section 1833(t)(17) of the Act, which applies to 
hospitals as defined under section 1886(d)(1)(B) of the Act, requires 
that hospitals that fail to submit data required to be submitted on 
quality measures selected by the Secretary, in the form and manner and 
at a time specified by the Secretary, incur a reduction of 2.0 
percentage points to their OPD fee schedule increase factor, that is, 
the annual payment update factor. The application of a reduced OPD fee 
schedule increase factor results in reduced national unadjusted payment 
rates that apply to certain outpatient items and services provided by 
hospitals that are required to report outpatient quality data and that 
fail to meet the Hospital Outpatient Quality Reporting (OQR) Program 
(formerly referred to as the Hospital Outpatient Quality Data Reporting 
Program (HOP QDRP)) requirements. For further discussion of the payment 
reduction for hospitals that fail to meet the requirements of the 
Hospital OQR Program, we refer readers to section XVI.D. of this 
proposed rule.
    We demonstrate in the steps below how to determine the APC payments 
that will be made in a calendar year under the OPPS to a hospital that 
fulfills the Hospital OQR Program requirements and to a hospital that 
fails to meet the Hospital OQR Program requirements for a service that 
has any of the following status indicator assignments: ``P,'' ``Q1,'' 
``Q2,'' ``Q3,'' ``R,'' ``S,'' ``T,'' ``U,'' ``V,'' or ``X'' (as defined 
in Addendum D1 to this proposed rule), in a circumstance in which the 
multiple procedure discount does not apply, the procedure is not 
bilateral, and conditionally packaged services (status indicator of 
``Q1'' and ``Q2'') qualify for separate payment. We note that, although 
blood and blood products with status indicator ``R'' and brachytherapy 
sources with status indicator ``U'' are not subject to wage adjustment, 
they are subject to reduced payments when a hospital fails to meet the 
Hospital OQR Program requirements.
    Individual providers interested in calculating the payment amount 
that they would receive for a specific service from the national 
unadjusted payment rates presented in Addenda A and B to this proposed 
rule (which are referenced in section XVII. of this proposed rule and 
available via the Internet on the CMS Web site) should follow the 
formulas presented in the following steps. For purposes of the payment 
calculations below, we refer to the proposed national unadjusted 
payment rate for hospitals that meet the requirements of the Hospital 
OQR Program as the ``full'' national unadjusted payment rate. We refer 
to the national unadjusted payment rate for hospitals that fail to meet 
the requirements of the Hospital OQR Program as the ``reduced'' 
national unadjusted payment rate. The reduced national unadjusted 
payment rate is calculated by multiplying the reporting ratio of 0.980 
times the ``full'' national unadjusted payment rate. The national 
unadjusted payment rate used in the calculations below is either the 
full national unadjusted payment rate or the reduced national 
unadjusted payment rate, depending on whether the hospital met its 
Hospital OQR Program requirements in order to receive the full CY 2012 
OPPS fee schedule increase factor of 1.50 percent.
    Step 1. Calculate 60 percent (the labor-related portion) of the 
proposed national unadjusted payment rate. Since the initial 
implementation of the OPPS, we have used 60 percent to represent our 
estimate of that portion of costs attributable, on average, to labor. 
We refer readers to the April 7, 2000 OPPS final rule with comment 
period (65 FR 18496 through 18497) for a detailed discussion of how we 
derived this percentage. We confirmed that this labor-related share for 
hospital outpatient services is appropriate during our regression 
analysis for the payment adjustment for rural hospitals in the CY 2006 
OPPS final rule with comment period (70 FR 68553).
    The formula below is a mathematical representation of Step 1 and 
identifies the labor-related portion of a specific payment rate for a 
specific service.
    X is the labor-related portion of the national unadjusted payment 
rate.

X = .60 * (national unadjusted payment rate)

    Step 2. Determine the wage index area in which the hospital is 
located and identify the wage index level that applies to the specific 
hospital. The wage index values assigned to each area reflect the 
geographic statistical areas (which are based upon OMB standards)

[[Page 42224]]

to which hospitals are assigned for FY 2012 under the IPPS, 
reclassifications through the MGCRB, section 1886(d)(8)(B) ``Lugar'' 
hospitals, reclassifications under section 1886(d)(8)(E) of the Act, as 
defined in Sec.  412.103 of the regulations, and hospitals designated 
as urban under section 601(g) of Public Law 98-21. We note that the 
reclassifications of hospitals under section 508 of Public Law 108-173, 
as extended by sections 3137 and 10317 of the Affordable Care Act, 
expired on September 30, 2010. Section 102 of the Medicare and Medicaid 
Extenders Act of 2010 extends Section 508 and certain additional 
special exception hospital reclassifications from October 1, 2010 
through September 30, 2011. Therefore, these reclassifications will not 
apply to the CY 2012 OPPS. (For further discussion of the changes to 
the FY 2012 IPPS wage indices, as applied to the CY 2012 OPPS, we refer 
readers to section II.C. of this proposed rule.) We are proposing to 
continue applying a wage index floor of 1.00 to frontier states, in 
accordance with section 10324 of the Affordable Care Act.
    Step 3. Adjust the wage index of hospitals located in certain 
qualifying counties that have a relatively high percentage of hospital 
employees who reside in the county, but who work in a different county 
with a higher wage index, in accordance with section 505 of Public Law 
108-173. Addendum L to this proposed rule (which is referenced in 
section XVII. of this proposed rule and available via the Internet on 
the CMS Web site) contains the qualifying counties and the associated 
proposed wage index increase developed for the FY 2012 IPPS and listed 
as Table 4J in the FY 2012 IPPS/LTCH PPS proposed rule and available 
via the Internet on the CMS Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/01_overview.asp. This step is to be followed only if 
the hospital is not reclassified or redesignated under section 
1886(d)(8) or section 1886(d)(10) of the Act.
    Step 4. Multiply the applicable wage index determined under Steps 2 
and 3 by the amount determined under Step 1 that represents the labor-
related portion of the national unadjusted payment rate.
    The formula below is a mathematical representation of Step 4 and 
adjusts the labor-related portion of the national payment rate for the 
specific service by the wage index.
    Xa is the labor-related portion of the national unadjusted payment 
rate (wage adjusted).

Xa = .60 * (national unadjusted payment rate) * applicable wage index.

    Step 5. Calculate 40 percent (the nonlabor-related portion) of the 
national unadjusted payment rate and add that amount to the resulting 
product of Step 4. The result is the wage index adjusted payment rate 
for the relevant wage index area.
    The formula below is a mathematical representation of Step 5 and 
calculates the remaining portion of the national payment rate, the 
amount not attributable to labor, and the adjusted payment for the 
specific service.
    Y is the nonlabor-related portion of the national unadjusted 
payment rate.

Y = .40 * (national unadjusted payment rate)
Adjusted Medicare Payment = Y + Xa

    Step 6. If a provider is a SCH, set forth in the regulations at 
Sec.  412.92, or an EACH, which is considered to be a SCH under section 
1886(d)(5)(D)(iii)(III) of the Act, and located in a rural area, as 
defined in Sec.  412.64(b), or is treated as being located in a rural 
area under Sec.  412.103, multiply the wage index adjusted payment rate 
by 1.071 to calculate the proposed total payment.
    The formula below is a mathematical representation of Step 6 and 
applies the rural adjustment for rural SCHs.

Adjusted Medicare Payment (SCH or EACH) = Adjusted Medicare Payment * 
1.071

    We have provided examples below of the calculation of both the 
proposed full and reduced national unadjusted payment rates that would 
apply to certain outpatient items and services performed by hospitals 
that meet and that fail to meet the Hospital OQR Program requirements, 
using the steps outlined above. For purposes of this example, we use a 
provider that is located in Brooklyn, New York that is assigned to CBSA 
35644. This provider bills one service that is assigned to APC 0019 
(Level I Excision/Biopsy). The proposed CY 2012 full national 
unadjusted payment rate for APC 0019 is $338.51. The proposed reduced 
national unadjusted payment rate for a hospital that fails to meet the 
Hospital OQR Program requirements is $331.74. This reduced rate is 
calculated by multiplying the reporting ratio of 0.980 by the full 
unadjusted payment rate for APC 0019.
    The proposed FY 2012 wage index for a provider located in CBSA 
35644 in New York is 1.3190. The proposed labor-related portion of the 
full national unadjusted payment is $267.90 (.60 * $338.51 *1.3190). 
The proposed labor-related portion of the reduced national unadjusted 
payment is $262.54 (.60 * $331.74 * 1.3190). The proposed nonlabor-
related portion of the full national unadjusted payment is $135.40 (.40 
* $338.51). The proposed nonlabor-related portion of the reduced 
national unadjusted payment is $132.70 (.40 * $331.74). The sum of the 
labor-related and nonlabor-related portions of the full national 
adjusted payment is $403.30 ($267.90 + $135.40). The sum of the reduced 
national adjusted payment is $395.24 ($262.54 + $132.70).

I. Proposed Beneficiary Copayments

1. Background
    Section 1833(t)(3)(B) of the Act requires the Secretary to set 
rules for determining the unadjusted copayment amounts to be paid by 
beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of 
the Act specifies that the Secretary must reduce the national 
unadjusted copayment amount for a covered OPD service (or group of such 
services) furnished in a year in a manner so that the effective 
copayment rate (determined on a national unadjusted basis) for that 
service in the year does not exceed a specified percentage. As 
specified in section 1833(t)(8)(C)(ii)(V) of the Act, for all services 
paid under the OPPS in CY 2010, and in calendar years thereafter, the 
percentage is 40 percent of the APC payment rate.
    Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered 
OPD service (or group of such services) furnished in a year, the 
national unadjusted copayment amount cannot be less than 20 percent of 
the OPD fee schedule amount. However, section 1833(t)(8)(C)(i) of the 
Act limits the amount of beneficiary copayment that may be collected to 
the amount of the inpatient deductible. Section 4104 of the Affordable 
Care Act eliminated the Part B coinsurance for preventive services 
furnished on and after January 1, 2011 that meet certain requirements, 
including flexible sigmoidoscopies and screening colonscopies, and 
waived the Part B deductible for screening colonoscopies that become 
diagnostic during the procedure. Our discussion of the changes made by 
the Affordable Care Act with regard to copayments for preventive 
services furnished on and after January 1, 2011 may be found in section 
XII.B. of the CY 2011 OPPS final rule (75 FR 72013).
2. Proposed OPPS Copayment Policy
    For CY 2012, we are proposing to determine copayment amounts for 
new and revised APCs using the same methodology that we implemented 
beginning in CY 2004. (We refer readers to the November 7, 2003 OPPS 
final rule with comment period (68 FR 63458).) In

[[Page 42225]]

addition, we are proposing to use the same standard rounding principles 
that we have historically used in instances where the application of 
our standard copayment methodology would result in a copayment amount 
that is less than 20 percent and cannot be rounded, under standard 
rounding principles, to 20 percent. (We refer readers to the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66687) in which we 
discuss our rationale for applying these rounding principles.) The 
proposed national unadjusted copayment amounts for services payable 
under the OPPS that would be effective January 1, 2012, are shown in 
Addenda A and B to this proposed rule (which are referenced in section 
XVII. of this proposed rule and available via the Internet on the CMS 
Web site). As discussed in section XIV.E. of this proposed rule, for CY 
2012, the proposed Medicare beneficiary's minimum unadjusted copayment 
and national unadjusted copayment for a service to which a reduced 
national unadjusted payment rate applies would equal the product of the 
reporting ratio and the national unadjusted copayment, or the product 
of the reporting ratio and the minimum unadjusted copayment, 
respectively, for the service.
3. Proposed Calculation of an Adjusted Copayment Amount for an APC 
Group
    Individuals interested in calculating the national copayment 
liability for a Medicare beneficiary for a given service provided by a 
hospital that met or failed to meet its Hospital OQR Program 
requirements should follow the formulas presented in the following 
steps.
    Step 1. Calculate the beneficiary payment percentage for the APC by 
dividing the APC's national unadjusted copayment by its payment rate. 
For example, using APC 0019, $67.71 is 20 percent of the full national 
unadjusted payment rate of $338.51. For APCs with only a minimum 
unadjusted copayment in Addenda A and B of this proposed rule (which 
are referenced in section XVII. of this proposed rule and available via 
the Internet on the CMS Web site), the beneficiary payment percentage 
is 20 percent.
    The formula below is a mathematical representation of Step 1 and 
calculates national copayment as a percentage of national payment for a 
given service.
    B is the beneficiary payment percentage.

B = National unadjusted copayment for APC/national unadjusted payment 
rate for APC

    Step 2. Calculate the appropriate wage-adjusted payment rate for 
the APC for the provider in question, as indicated in Steps 2 through 4 
under section II.H. of this proposed rule. Calculate the rural 
adjustment for eligible providers as indicated in Step 6 under section 
II.H. of this proposed rule.
    Step 3. Multiply the percentage calculated in Step 1 by the payment 
rate calculated in Step 2. The result is the wage-adjusted copayment 
amount for the APC.
    The formula below is a mathematical representation of Step 3 and 
applies the beneficiary percentage to the adjusted payment rate for a 
service calculated under section II.H. of this proposed rule, with and 
without the rural adjustment, to calculate the adjusted beneficiary 
copayment for a given service.

Wage-adjusted copayment amount for the APC = Adjusted Medicare Payment 
* B
Wage-adjusted copayment amount for the APC (SCH or EACH) = (Adjusted 
Medicare Payment * 1.071) * B

    Step 4. For a hospital that failed to meet its Hospital OQR Program 
requirements, multiply the copayment calculated in Step 3 by the 
reporting ratio of 0.980.
    The proposed unadjusted copayments for services payable under the 
OPPS that would be effective January 1, 2012, are shown in Addenda A 
and B to this proposed rule (which are referenced in section XVII. of 
this proposed rule and available via the Internet on the CMS Web site). 
We note that the proposed national unadjusted payment rates and 
copayment rates shown in Addenda A and B to this proposed rule reflect 
the proposed full CY 2012 OPD fee schedule increase factor discussed in 
section XIV.E. of this proposed rule.
    Also as noted above, section 1833(t)(8)(C)(i) of the Act limits the 
amount of beneficiary copayment that may be collected to the amount of 
the inpatient deductible.

III. Proposed OPPS Ambulatory Payment Classification (APC) Group 
Policies

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

    CPT and Level II HCPCS codes are used to report procedures, 
services, items, and supplies under the hospital OPPS. Specifically, 
CMS recognizes the following codes on OPPS claims: (1) Category I CPT 
codes, which describe medical services and procedures; (2) Category III 
CPT codes, which describe new and emerging technologies, services, and 
procedures; and (3) Level II HCPCS codes, which are used primarily to 
identify products, supplies, temporary procedures, and services not 
described by CPT codes. CPT codes are established by the American 
Medical Association (AMA) and the Level II HCPCS codes are established 
by the CMS HCPCS Workgroup. These codes are updated and changed 
throughout the year. CPT and HCPCS code changes that affect the OPPS 
are published both through the annual rulemaking cycle and through the 
OPPS quarterly update Change Requests (CRs). CMS releases new Level II 
HCPCS codes to the public or recognizes the release of new CPT codes by 
the AMA and makes these codes effective (that is, the codes can be 
reported on Medicare claims) outside of the formal rulemaking process 
via OPPS quarterly update CRs. This quarterly process offers hospitals 
access to codes that may more accurately describe items or services 
furnished and/or provides payment or more accurate payment for these 
items or services in a timelier manner than if CMS waited for the 
annual rulemaking process. We solicit comments on these new codes and 
finalize our proposals related to these codes through our annual 
rulemaking process. In Table 14 below, we summarize our proposed 
process for updating codes through our OPPS quarterly update CRs, 
seeking public comments, and finalizing their treatment under the OPPS. 
We note that because of the timing of the publication of this proposed 
rule, the codes that will be implemented through the July 2011 OPPS 
quarterly update are not included in Addendum B of this proposed rule 
(which is referenced in section XVII. of this proposed rule and 
available via the Internet on the CMS Web site), while those codes 
based upon the April 2011 OPPS quarterly update are included in 
Addendum B.

[[Page 42226]]

                           Table 14--Comment Timeframe for New or Revised HCPCS Codes
----------------------------------------------------------------------------------------------------------------
    OPPS quarterly update CR         Type of code       Effective date      Comments sought     When finalized
----------------------------------------------------------------------------------------------------------------
April l, 2011...................  Level II HCPCS      April 1, 2011.....  CY 2012 OPPS/ASC    CY 2012 OPPS/ASC
                                   Codes.                                  proposed rule.      final rule with
                                                                                               comment period.
July 1, 2011....................  Level II HCPCS      July 1, 2011......  CY 2012 OPPS/ASC    CY 2012 OPPS/ASC
                                   Codes.                                  proposed rule.      final rule with
                                                                                               comment period.
                                  Category I          July 1, 2011......  CY 2012 OPPS/ASC    CY 2012 OPPS/ASC
                                   (certain vaccine                        proposed rule.      final rule with
                                   codes) and III                                              comment period.
                                   CPT codes.
October 1, 2011.................  Level II HCPCS      October 1, 2011...  CY 2012 OPPS/ASC    CY 2013 OPPS/ASC
                                   Codes.                                  final rule with     final rule with
                                                                           comment period.     comment period.
January 1, 2012.................  Level II HCPCS      January 1, 2012...  CY 2012 OPPS/ASC    CY 2013 OPPS/ASC
                                   Codes.                                  final rule with     final rule with
                                                                           comment period.     comment period.
                                  Category I and III  January 1, 2012...  CY 2012 OPPS/ASC    CY 2013 OPPS/ASC
                                   CPT Codes.                              final rule with     final rule with
                                                                           comment period.     comment period.
----------------------------------------------------------------------------------------------------------------

    This process is discussed in detail below. We have separated our 
discussion into two sections based on whether we are proposing to 
solicit public comments in this CY 2012 OPPS/ASC proposed rule or 
whether we will be soliciting public comments in the CY 2012 OPPS/ASC 
final rule with comment period. We note that we sought public comment 
in the CY 2011 OPPS/ASC final rule with comment period on the new CPT 
and Level II HCPCS codes that were effective January 1, 2011. We also 
sought public comments in the CY 2011 OPPS/ASC final rule with comment 
period on the new Level II HCPCS codes effective October 1, 2010. These 
new codes, with an effective date of October 1, 2010, or January 1, 
2011, were flagged with comment indicator ``NI'' (New code, interim APC 
assignment; comments will be accepted on the interim APC assignment for 
the new code) in Addendum B to the CY 2011 OPPS/ASC final rule with 
comment period to indicate that we were assigning them an interim 
payment status and an APC and payment rate, if applicable, which were 
subject to public comment following publication of the CY 2011 OPPS/ASC 
final rule with comment period. We will respond to public comments and 
finalize our proposed OPPS treatment of these codes in the CY 2012 
OPPS/ASC final rule with comment period.
1. Proposed Treatment of New Level II HCPCS Codes and Category I CPT 
Vaccine Codes and Category III CPT Codes for Which We Are Soliciting 
Public Comments in This CY 2012 Proposed Rule
    Through the April 2011 OPPS quarterly update CR (Transmittal 2174, 
Change Request 7342, dated March 18, 2011) and the July 2011 OPPS 
quarterly update CR (Transmittal 2234, Change Request 7443, dated May 
27, 2011), we recognized several new HCPCS codes for separate payment 
under the OPPS. Effective April 1 and July 1 of CY 2011, we made 
effective a total of 22 new Level II HCPCS codes and 14 Category III 
CPT codes. Specifically, 5 new Level II HCPCS codes were effective for 
the April 2011 update and another 17 new Level II HCPCS codes were 
effective for the July 2011 update for a total of 22. Fourteen new 
Category III CPT codes were effective for the July 2011 update. Of the 
22 new Level II HCPCS codes, we recognized for separate payment 16 of 
these codes, and of the 14 new Category III CPT codes, we recognized 
for separate payment 12 of these codes, for a total of 28 new HCPCS 
codes that are recognized for separate payment for CY 2012.
    Through the April 2011 OPPS quarterly update CR, we allowed 
separate payment for each of the five new Level II HCPCS codes. 
Specifically, as displayed in Table 15 below, we provided separate 
payment for the following HCPCS codes:
     HCPCS code C9280 (Injection, eribulin mesylate, 1 mg)
     HCPCS code C9281 (Injection, pegloticase, 1 mg)
     HCPCS code C9282 (Injection, ceftaroline fosamil, 10 mg)
     HCPCS code Q2040 (Injection, incobotulinumtoxin A, 1 unit)
     HCPCS code C9729 (Percutaneous laminotomy/laminectomy 
(intralaminar approach) for decompression of neural elements, (with 
ligamentous resection, discectomy, facetectomy and/or foraminotomy, 
when performed) any method under indirect image guidance, with the use 
of an endoscope when performed, single or multiple levels, unilateral 
or bilateral; lumbar)
    We note that HCPCS code Q2040 replaced HCPCS code C9278 (Injection, 
incobotulinumtoxin A, 1 unit) beginning April 1, 2010. HCPCS code C9278 
was effective January 1, 2011, and deleted March 30, 2011, because it 
was replaced with HCPCS code Q2040. HCPCS code C9278 was assigned to 
pass-through status beginning January 1, 2011, when the code was 
implemented. Because HCPCS code Q2040 describes the same drug as HCPCS 
code C9278, we are continuing its pass-through status and assigning the 
HCPCS Q-code to the same APC and status indicator as its predecessor 
HCPCS C-code, as shown in Table 15 below. Specifically, HCPCS code 
Q2040 is assigned to APC 9278 and status indicator ``G.''
    We are proposing to assign the Level II HCPCS codes listed in Table 
15 to the specific proposed APCs and status indicators set forth in 
this proposed rule.

Table 15--LEVEL II HCPCS Codes With a Change in OPPS Status Indicator or
                     Newly Implemented in April 2011
------------------------------------------------------------------------
                                                Proposed CY
CY 2011 HCPCS code    CY 2011 long descriptor   2012 status  Proposed CY
                                                  indicator    2012 APC
------------------------------------------------------------------------
C9280.............  Injection, eribulin                   G         9280
                     mesylate, 1 mg.

[[Page 42227]]

 
C9281.............  Injection, pegloticase, 1             G         9281
                     mg.
C9282.............  Injection, ceftaroline                G         9282
                     fosamil, 10 mg.
C9729.............  Percutaneous laminotomy/              T         0208
                     laminectomy (intralaminar
                     approach) for
                     decompression of neural
                     elements, (with
                     ligamentous resection,
                     discectomy, facetectomy
                     and/or foraminotomy, when
                     performed) any method
                     under indirect image
                     guidance, with the use of
                     an endoscope when
                     performed, single or
                     multiple levels,
                     unilateral or bilateral;
                     lumbar.
Q2040*............  Injection,                            G         9278
                     incobotulinumtoxin A, 1
                     unit.
------------------------------------------------------------------------
*Level II HCPCS code C9278 was deleted March 31, 2011, and replaced with
  HCPCS code Q2040 effective April 1, 2011.

    Through the July 2011 OPPS quarterly update CR, which included 
HCPCS codes that were made effective July 1, 2011, we allowed separate 
payment for 11 of the 17 new Level II HCPCS codes. Specifically, as 
displayed in Table 16 of this proposed rule, we provided separate 
payment for the following HCPCS codes:
     HCPCS code C9283 (Injection, acetaminophen, 10 mg)
     HCPCS code C9284 (Injection, ipilimumab, 10 mg)
     HCPCS code C9285 (Lidocaine 70 mg/tetracaine 70 mg, per 
patch)
     HCPCS code C9365 (Oasis Ultra Tri-Layer matrix, per square 
centimeter)
     HCPCS code C9406 (Iodine I-123 ioflupane, diagnostic, per 
study dose, up to 5 millicuries)
     HCPCS code C9730 (Bronchoscopic bronchial thermoplasty 
with imaging guidance (if performed), radiofrequency ablation of airway 
smooth muscle, 1 lobe)
     HCPCS code C9731 (Bronchoscopic bronchial thermoplasty 
with imaging guidance (if performed), radiofrequency ablation of airway 
smooth muscle, 2 or more lobes)
     HCPCS code Q2041 (Injection, von willebrand factor complex 
(human), Wilate, 1 i.u. vwf:rco)
     HCPCS code Q2042 (Injection, hydroxyprogesterone caproate, 
1 mg)
     HCPCS code Q2043 (Sipuleucel-t, minimum of 50 million 
autologous cd54+ cells activated with pap-gm-csf, including 
leukapheresis and all other preparatory procedures, per infusion)
     HCPCS code Q2044 (Injection, belimumab, 10 mg)
    We note that two of the Level II HCPCS Q-codes that were made 
effective July 1, 2011, were previously described by a HCPCS J-code and 
a C-code that were assigned to pass-through status under the hospital 
OPPS. Specifically, HCPCS code Q2041 replaced HCPCS code J7184 
(Injection, von willebrand factor complex (human), Wilate, per 100 iu 
vwf:rco) beginning July 1, 2011. HCPCS code J7184 was assigned to pass-
through status when it was made effective January 1, 2011; however, the 
code is ``Not Payable by Medicare'' because HCPCS code J7184 is 
replaced with HCPCS code Q2041 effective July 1, 2011. Therefore, HCPCS 
code J7184 was reassigned to status indicator ``E'' effective July 1, 
2011. Because HCPCS code J7184 describes the same drug as HCPCS code 
Q2041, we continued its pass-through status and assigned HCPCS code 
Q2041 to status indicator ``G'' effective July 1, 2011. However, 
because the dosage descriptor for HCPCS code Q2041 is not the same as 
HCPCS code J7184, we reassigned HCPCS code Q2041 to a new APC to 
maintain data consistency for future rulemaking. Specifically, HCPCS 
code Q2041 was assigned to APC 1352 effective July 1, 2011. In 
addition, HCPCS code Q2043 replaced HCPCS code C9273 (Sipuleucel-t, 
minimum of 50 million autologous cd54+ cells activated with pap-gm-csf, 
including leukapheresis and all other preparatory procedures, per 
infusion) beginning July 1, 2011. HCPCS code C9273 was assigned to 
pass-through status when it was made effective October 1, 2010. Because 
HCPCS code Q2043 describes the same product as HCPCS code C9273, we 
continued its pass-through status and assigned HCPCS code Q2043 to 
status indicator ``G'' as well as assigned it to the same APC, 
specifically APC 9273, effective July 1, 2011.
    Of the 17 HCPCS codes that were made effective July 1, 2011, we did 
not recognize for separate payment 6 HCPCS codes that describe durable 
medical equipment (DME) because DME is paid under the Durable Medical 
Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Fee Schedule 
and not the OPPS. These codes are listed in Table 16 below, and are 
assigned to either status indicator ``Y'' or ``A'' effective July 1, 
2011.
    Table 16 below includes a complete list of the Level II HCPCS codes 
that were made effective July 1, 2011, with their proposed status 
indicators, APC assignments, and payment rates for CY 2012.

                           TABLE 16--New Level II HCPCS Codes Implemented in July 2011
----------------------------------------------------------------------------------------------------------------
                                                                    Proposed CY                     Proposed CY
     CY 2011 HCPCS code            CY 2011 long descriptor          2012 status     Proposed CY    2012 payment
                                                                     indicator       2012 APC          rate
----------------------------------------------------------------------------------------------------------------
C9283......................  Injection, acetaminophen, 10 mg....               G            9283           $0.11
C9284......................  Injection, ipilimumab, 1 mg........               G            9284          127.20
C9285......................  Lidocaine 70 mg/tetracaine 70 mg,                 G            9285           13.57
                              per patch.
C9365......................  Oasis Ultra Tri-Layer matrix, per                 G            9365           10.60
                              square centimeter.
C9406......................  Iodine I-123 ioflupane, diagnostic,               G            9406        1,908.00
                              per study dose, up to 5
                              millicuries.
C9730......................  Bronchoscopic bronchial                           T            0415        1,971.77
                              thermoplasty with imaging guidance
                              (if performed), radiofrequency
                              ablation of airway smooth muscle,
                              1 lobe.
C9731......................  Bronchoscopic bronchial                           T            0415        1,971.77
                              thermoplasty with imaging guidance
                              (if performed), radiofrequency
                              ablation of airway smooth muscle,
                              2 or more lobes.

[[Page 42228]]

 
K0741......................  Portable gaseous oxygen system,                   Y              NA              NA
                              rental, includes portable
                              container, regulator, flowmeter,
                              humidifier, cannula or mask, and
                              tubing, for cluster headaches.
K0742......................  Portable oxygen contents, gaseous,                Y              NA              NA
                              1 month's supply = 1 unit, for
                              cluster headaches, for initial
                              months supply or to replace used
                              contents.
K0743......................  Suction pump, home model, portable,               Y              NA              NA
                              for use on wounds.
K0744......................  Absorptive wound dressing for use                 A              NA              NA
                              with suction pump, home model,
                              portable, pad size 16 square
                              inches or less.
K0745......................  Absorptive wound dressing for use                 A              NA              NA
                              with suction pump, home model,
                              portable, pad size more than 16
                              square inches but less than or
                              equal to 48 square inches.
K0746......................  Absorptive wound dressing for use                 A              NA              NA
                              with suction pump, home model,
                              portable, pad size greater than 48
                              square inches.
Q2041......................  Injection, von willebrand factor                  G            1352            0.88
                              complex (human), Wilate, 1 i.u.
                              vwf:rco.
Q2042......................  Injection, hydroxyprogesterone                    K            1354            2.90
                              caproate, 1 mg.
Q2043......................  Sipuleucel-t, minimum of 50 million               G            9273       32,860.00
                              autologous cd54+ cells activated
                              with pap-gm-csf, including
                              leukapheresis and all other
                              preparatory procedures, per
                              infusion.
Q2044......................  Injection, belimumab, 10 mg........               G            1353           39.15
----------------------------------------------------------------------------------------------------------------

    For CY 2012, we are proposing to continue our established policy of 
recognizing Category I CPT vaccine codes for which FDA approval is 
imminent and Category III CPT codes that the AMA releases in January of 
each year for implementation in July through the OPPS quarterly update 
process. Under the OPPS, Category I vaccine codes and Category III CPT 
codes that are released on the AMA Web site in January are made 
effective in July of the same year through the July quarterly update 
CR, consistent with the AMA's implementation date for the codes. 
Through the July 2011 OPPS quarterly update CR, we allow separate 
payment for 12 of the 14 new Category III CPT codes effective July 1, 
2011. Specifically, as displayed in Table 17 of this proposed rule, we 
allow separate payment for the following CPT codes:
     CPT code 0263T (Intramuscular autologous bone marrow cell 
therapy, with preparation of harvested cells, multiple injections, one 
leg, including ultrasound guidance, if performed; complete procedure 
including unilateral or bilateral bone marrow harvest)
     CPT code 0264T (Intramuscular autologous bone marrow cell 
therapy, with preparation of harvested cells, multiple injections, one 
leg, including ultrasound guidance, if performed; complete procedure 
excluding bone marrow harvest)
     CPT code 0265T (Intramuscular autologous bone marrow cell 
therapy, with preparation of harvested cells, multiple injections, one 
leg, including ultrasound guidance, if performed; unilateral or 
bilateral bone marrow harvest only for intramuscular autologous bone 
marrow cell therapy)
     CPT code 0267T (Implantation or replacement of carotid 
sinus baroreflex activation device; lead only, unilateral (includes 
intra-operative interrogation, programming, and repositioning, when 
performed))
     CPT code 0268T (Implantation or replacement of carotid 
sinus baroreflex activation device; pulse generator only (includes 
intra-operative interrogation, programming, and repositioning, when 
performed))
     CPT code 0269T (Revision or removal of carotid sinus 
baroreflex activation device; total system (includes generator 
placement, unilateral or bilateral lead placement, intra-operative 
interrogation, programming, and repositioning, when performed))
     CPT code 0270T (Revision or removal of carotid sinus 
baroreflex activation device; lead only, unilateral (includes intra-
operative interrogation, programming, and repositioning, when 
performed))
     CPT code 0271T (Revision or removal of carotid sinus 
baroreflex activation device; pulse generator only (includes intra-
operative interrogation, programming, and repositioning, when 
performed))
     CPT code 0272T (Interrogation device evaluation (in 
person), carotid sinus baroreflex activation system, including 
telemetric iterative communication with the implantable device to 
monitor device diagnostics and programmed therapy values, with 
interpretation and report (e.g., battery status, lead impedance, pulse 
amplitude, pulse width, therapy frequency, pathway mode, burst mode, 
therapy start/stop times each day))
     CPT code 0273T (Interrogation device evaluation (in 
person), carotid sinus baroreflex activation system, including 
telemetric iterative communication with the implantable device to 
monitor device diagnostics and programmed therapy values, with 
interpretation and report (e.g., battery status, lead impedance, pulse 
amplitude, pulse width, therapy frequency, pathway mode, burst mode, 
therapy start/stop times each day); with programming)
     CPT 0274T (Percutaneous laminotomy/laminectomy 
(intralaminar approach) for decompression of neural elements, (with or 
without ligamentous resection, discectomy, facetectomy and/or 
foraminotomy) any method under indirect image guidance (e.g., 
fluoroscopic, CT), with or without the use of an endoscope, single or 
multiple levels, unilateral or bilateral; cervical or thoracic)
     CPT 0275T (Percutaneous laminotomy/laminectomy 
(intralaminar approach) for decompression of neural elements, (with or 
without ligamentous resection, discectomy, facetectomy and/or 
foraminotomy) any method under indirect image guidance (e.g., 
fluoroscopic, CT), with or without the use of an endoscope, single or 
multiple levels, unilateral or bilateral; lumbar) (As published in the 
July 2011 OPPS quarterly update CR, CPT code 0275T replaced Level II 
HCPCS code C9729 effective July 1, 2011.)
    We note that Category III CPT codes 0262T (Implantation of 
catheter-delivered prosthetic pulmonary valve, endovascular approach) 
and 0266T (Implantation or replacement of carotid sinus baroreflex 
activation device; total system (includes generator placement, 
unilateral or bilateral lead placement,

[[Page 42229]]

intra-operative interrogation, programming, and repositioning, when 
performed)) are assigned to status indicator ``C'' (Inpatient 
Procedures) under the hospital OPPS beginning July 1, 2011. We believe 
these procedures should only be paid when provided in the inpatient 
setting because of the clinical circumstances under which these 
procedures are performed. There are no new Category I Vaccine CPT codes 
for the July 2011 update.
    Table 17 below lists the Category III CPT codes that were 
implemented in July 2011 for which we are proposing to allow separate 
payment, along with their proposed status indicators, proposed APC 
assignments, and proposed payment rates for CY 2012.

                            Table 17--Category III CPT Codes Implemented in July 2011
----------------------------------------------------------------------------------------------------------------
                                                                                                    Proposed CY
        CY 2011 CPT code         CY 2011 long descriptor     Proposed CY 2012       Proposed CY    2012 payment
                                                             status  indicator       2012 APC          rate
----------------------------------------------------------------------------------------------------------------
0262T..........................  Implantation of          C                                   NA              NA
                                  catheter-delivered
                                  prosthetic pulmonary
                                  valve, endovascular
                                  approach.
0263T..........................  Intramuscular            S                                 0112       $2,166.33
                                  autologous bone marrow
                                  cell therapy, with
                                  preparation of
                                  harvested cells,
                                  multiple injections,
                                  one leg, including
                                  ultrasound guidance,
                                  if performed; complete
                                  procedure including
                                  unilateral or
                                  bilateral bone marrow
                                  harvest.
0264T..........................  Intramuscular            S                                 0112        2,166.33
                                  autologous bone marrow
                                  cell therapy, with
                                  preparation of
                                  harvested cells,
                                  multiple injections,
                                  one leg, including
                                  ultrasound guidance,
                                  if performed; complete
                                  procedure excluding
                                  bone marrow harvest.
0265T..........................  Intramuscular            S                                 0112        2,166.33
                                  autologous bone marrow
                                  cell therapy, with
                                  preparation of
                                  harvested cells,
                                  multiple injections,
                                  one leg, including
                                  ultrasound guidance,
                                  if performed;
                                  unilateral or
                                  bilateral bone marrow
                                  harvest only for
                                  intramuscular
                                  autologous bone marrow
                                  cell therapy.
0266T..........................  Implantation or          C                                   NA              NA
                                  replacement of carotid
                                  sinus baroreflex
                                  activation device;
                                  total system (includes
                                  generator placement,
                                  unilateral or
                                  bilateral lead
                                  placement, intra-
                                  operative
                                  interrogation,
                                  programming, and
                                  repositioning, when
                                  performed).
0267T..........................  Implantation or          T                                 0687        1,496.15
                                  replacement of carotid
                                  sinus baroreflex
                                  activation device;
                                  lead only, unilateral
                                  (includes intra-
                                  operative
                                  interrogation,
                                  programming, and
                                  repositioning, when
                                  performed).
0268T..........................  Implantation or          S                                 0039       14,743.58
                                  replacement of carotid
                                  sinus baroreflex
                                  activation device;
                                  pulse generator only
                                  (includes intra-
                                  operative
                                  interrogation,
                                  programming, and
                                  repositioning, when
                                  performed).
0269T..........................  Revision or removal of   T                                 0221        2,567.33
                                  carotid sinus
                                  baroreflex activation
                                  device; total system
                                  (includes generator
                                  placement, unilateral
                                  or bilateral lead
                                  placement, intra-
                                  operative
                                  interrogation,
                                  programming, and
                                  repositioning, when
                                  performed).
0270T..........................  Revision or removal of   T                                 0687        1,496.15
                                  carotid sinus
                                  baroreflex activation
                                  device; lead only,
                                  unilateral (includes
                                  intra-operative
                                  interrogation,
                                  programming, and
                                  repositioning, when
                                  performed).
0271T..........................  Revision or removal of   T                                 0688        2,003.33
                                  carotid sinus
                                  baroreflex activation
                                  device; pulse
                                  generator only
                                  (includes intra-
                                  operative
                                  interrogation,
                                  programming, and
                                  repositioning, when
                                  performed).
0272T..........................  Interrogation device     S                                 0218           80.78
                                  evaluation (in
                                  person), carotid sinus
                                  baroreflex activation
                                  system, including
                                  telemetric iterative
                                  communication with the
                                  implantable device to
                                  monitor device
                                  diagnostics and
                                  programmed therapy
                                  values, with
                                  interpretation and
                                  report (e.g., battery
                                  status, lead
                                  impedance, pulse
                                  amplitude, pulse
                                  width, therapy
                                  frequency, pathway
                                  mode, burst mode,
                                  therapy start/stop
                                  times each day).
0273T..........................  Interrogation device     S                                 0218           80.78
                                  evaluation (in
                                  person), carotid sinus
                                  baroreflex activation
                                  system, including
                                  telemetric iterative
                                  communication with the
                                  implantable device to
                                  monitor device
                                  diagnostics and
                                  programmed therapy
                                  values, with
                                  interpretation and
                                  report (e.g., battery
                                  status, lead
                                  impedance, pulse
                                  amplitude, pulse
                                  width, therapy
                                  frequency, pathway
                                  mode, burst mode,
                                  therapy start/stop
                                  times each day); with
                                  programming.
0274T..........................  Percutaneous laminotomy/ T                                 0208        3,535.92
                                  laminectomy
                                  (intralaminar
                                  approach) for
                                  decompression of
                                  neural elements, (with
                                  or without ligamentous
                                  resection, discectomy,
                                  facetectomy and/or
                                  foraminotomy) any
                                  method under indirect
                                  image guidance (e.g.,
                                  fluoroscopic, CT),
                                  with or without the
                                  use of an endoscope,
                                  single or multiple
                                  levels, unilateral or
                                  bilateral; cervical or
                                  thoracic.
0275T..........................  Percutaneous laminotomy/ T                                 0208        3,535.92
                                  laminectomy
                                  (intralaminar
                                  approach) for
                                  decompression of
                                  neural elements, (with
                                  or without ligamentous
                                  resection, discectomy,
                                  facetectomy and/or
                                  foraminotomy) any
                                  method under indirect
                                  image guidance (e.g.,
                                  fluoroscopic, CT),
                                  with or without the
                                  use of an endoscope,
                                  single or multiple
                                  levels, unilateral or
                                  bilateral; lumbar.
----------------------------------------------------------------------------------------------------------------

[[Page 42230]]

    We are soliciting public comments on the CY 2012 proposed status 
indicators and the proposed APC assignments and payment rates, if 
applicable, for the Level II HCPCS codes and the Category III CPT codes 
that are newly recognized in April or July 2011 through the respective 
OPPS quarterly update CRs. These codes are listed in Tables 15, 16, and 
17 of this proposed rule. We are proposing to finalize their status 
indicators and their APC assignments and payment rates, if applicable, 
in the CY 2012 OPPS/ASC final rule with comment period. Because the 
July 2011 OPPS quarterly update CR is issued close to the publication 
of this proposed rule, the Level II HCPCS codes and the Category III 
CPT codes implemented through the July 2011 OPPS quarterly update CR 
could not be included in Addendum B to this proposed rule, but these 
codes are listed in Tables 16 and 17, respectively. We are proposing to 
incorporate these codes into Addendum B to the CY 2012 OPPS/ASC final 
rule with comment period, which is consistent with our annual OPPS 
update policy. The Level II HCPCS codes implemented or modified through 
the April 2011 OPPS update CR and displayed in Table 15 are included in 
Addendum B to this proposed rule (which is referenced in section XVII. 
of this proposed rule and available via the Internet on the CMS Web 
site), where their proposed CY 2012 payment rates also are shown.
2. Proposed Process for New Level II HCPCS Codes and Category I and 
Category III CPT Codes for Which We Will Be Soliciting Public Comments 
on the CY 2012 OPPS/ASC Final Rule With Comment Period
    As has been our practice in the past, we incorporate those new 
Category I and III CPT codes and new Level II HCPCS codes that are 
effective January 1 in the final rule with comment period updating the 
OPPS for the following calendar year. These codes are released to the 
public via the CMS HCPCS (for Level II HCPCS codes) and AMA Web sites 
(for CPT codes), and also through the January OPPS quarterly update 
CRs. In the past, we also have released new Level II HCPCS codes that 
are effective October 1 through the October OPPS quarterly update CRs 
and incorporated these new codes in the final rule with comment period 
updating the OPPS for the following calendar year. All of these codes 
are flagged with comment indicator ``NI'' in Addendum B to the OPPS/ASC 
final rule with comment period to indicate that we are assigning them 
an interim payment status which is subject to public comment. 
Specifically, the status indicator and the APC assignment and payment 
rate, if applicable, for all such codes flagged with comment indicator 
``NI'' are open to public comment in the final rule with comment 
period, and we respond to these comments in the OPPS/ASC final rule 
with comment period for the next calendar year's OPPS/ASC update. We 
are proposing to continue this process for CY 2012. Specifically, for 
CY 2012, we are proposing to include in Addendum B (which is available 
via the Internet on the CMS Web site) to the CY 2012 OPPS/ASC final 
rule with comment period the new Category I and III CPT codes effective 
January 1, 2012 (including the Category III CPT codes that were 
released by the AMA in July 2011) that would be incorporated in the 
January 2012 OPPS quarterly update CR and the new Level II HCPCS codes, 
effective October 1, 2011, or January 1, 2012, that would be released 
by CMS in its October 2011 and January 2012 OPPS quarterly update CRs. 
These codes would be flagged with comment indicator ``NI'' in Addendum 
B to the CY 2012 OPPS/ASC final rule with comment period to indicate 
that we have assigned them an interim OPPS payment status for CY 2012. 
Their status indicators and their APC assignments and payment rates, if 
applicable, would be open to public comment in the CY 2012 OPPS/ASC 
final rule with comment period and would be finalized in the CY 2013 
OPPS/ASC final rule with comment period. We note that the Category III 
CPT codes that were released by the AMA in July 2011 that are subject 
to comment in this CY 2012 OPPS/ASC proposed rule, and are listed in 
Table 17, will not be assigned to comment indicator ``NI'' in Addendum 
B because comments about these codes will be addressed in the CY 2012 
OPPS/ASC final rule with comment period.

B. Proposed OPPS Changes--Variations Within APCs

1. Background
    Section 1833(t)(2)(A) of the Act requires the Secretary to develop 
a classification system for covered hospital outpatient department 
services. Section 1833(t)(2)(B) of the Act provides that the Secretary 
may establish groups of covered OPD services within this classification 
system, so that services classified within each group are comparable 
clinically and with respect to the use of resources. In accordance with 
these provisions, we developed a grouping classification system, 
referred to as Ambulatory Payment Classifications (APCs), as set forth 
in Sec.  419.31 of the regulations. We use Level I and Level II HCPCS 
codes to identify and group the services within each APC. The APCs are 
organized such that each group is homogeneous both clinically and in 
terms of resource use. Using this classification system, we have 
established distinct groups of similar services. We also have developed 
separate APC groups for certain medical devices, drugs, biologicals, 
therapeutic radiopharmaceuticals, and brachytherapy devices.
    We have packaged into payment for each procedure or service within 
an APC group the costs associated with those items or services that are 
directly related to, and supportive of, performing the main independent 
procedures or furnishing the services. Therefore, we do not make 
separate payment for these packaged items or services. For example, 
packaged items and services include: (1) use of an operating, 
treatment, or procedure room; (2) use of a recovery room; (3) 
observation services; (4) anesthesia; (5) medical/surgical supplies; 
(6) pharmaceuticals (other than those for which separate payment may be 
allowed under the provisions discussed in section V. of this proposed 
rule); (7) incidental services such as venipuncture; and (8) guidance 
services, image processing services, intraoperative services, imaging 
supervision and interpretation services, diagnostic 
radiopharmaceuticals, and contrast media. Further discussion of 
packaged services is included in section II.A.3. of this proposed rule.
    In CY 2008, we implemented composite APCs to provide a single 
payment for groups of services that are typically performed together 
during a single clinical encounter and that result in the provision of 
a complete service (72 FR 66650 through 66652). Under CY 2011 OPPS 
policy, we provide composite APC payment for certain extended 
assessment and management services, low dose rate (LDR) prostate 
brachytherapy, cardiac electrophysiologic evaluation and ablation, 
mental health services, and multiple imaging services. Further 
discussion of composite APCs is included in section II.A.2.e. of this 
proposed rule.
    Under the OPPS, we generally pay for hospital outpatient services 
on a rate-per-service basis, where the service may be reported with one 
or more HCPCS codes. Payment varies according to the APC group to which 
the independent service or combination of services is assigned. Each 
APC weight represents the hospital median cost of the services included 
in that APC, relative to the

[[Page 42231]]

hospital median cost of the services included in APC 0606 (Level 3 
Hospital Clinic Visits). The APC weights are scaled to APC 0606 because 
it is the middle level hospital clinic visit APC (the Level 3 hospital 
clinic visit CPT code out of five levels), and because middle level 
hospital clinic visits are among the most frequently furnished services 
in the hospital outpatient setting.
    Section 1833(t)(9)(A) of the Act requires the Secretary to review, 
on a recurring basis occurring no less than annually and revise the 
groups, the relative payment weights, and the wage and other 
adjustments to take into account changes in medical practice, changes 
in technology, the addition of new services, new cost data, and other 
relevant information and factors; the Act further requires us to repeat 
this process on a basis that is not less often than annually. Section 
1833(t)(9)(A) of the Act also requires the Secretary, beginning in CY 
2001, to consult with an expert outside advisory panel composed of an 
appropriate selection of representatives of providers to review (and 
advise the Secretary concerning) the clinical integrity of the APC 
groups and the relative payment weights (the APC Panel recommendations 
for specific services for the CY 2012 OPPS and our responses to them 
are discussed in the relevant specific sections throughout this 
proposed rule).
    Finally, section 1833(t)(2) of the Act provides that, subject to 
certain exceptions, the items and services within an APC group cannot 
be considered comparable with respect to the use of resources if the 
highest median cost (or mean cost as elected by the Secretary) for an 
item or service in the group is more than 2 times greater than the 
lowest median cost (or mean cost, if so elected) for an item or service 
within the same group (referred to as the ``2 times rule''). We use the 
median cost of the item or service in implementing this provision. The 
statute authorizes the Secretary to make exceptions to the 2 times rule 
in unusual cases, such as low-volume items and services (but the 
Secretary may not make such an exception in the case of a drug or 
biological that has been designated as an orphan drug under section 526 
of the Federal Food, Drug, and Cosmetic Act).
2. Application of the 2 Times Rule
    In accordance with section 1833(t)(2) of the Act and Sec.  419.31 
of the regulations, we annually review the items and services within an 
APC group to determine, with respect to comparability of the use of 
resources, if the median cost of the highest cost item or service 
within an APC group is more than 2 times greater than the median of the 
lowest cost item or service within that same group. In making this 
determination, we consider only those HCPCS codes that are significant 
based on the number of claims. We note that, for purposes of 
identifying significant HCPCS for examination in the 2 times rule, we 
consider codes that have more than 1,000 single major claims or codes 
that have both greater than 99 single major claims and contribute at 
least 2 percent of the single major claims used to establish the APC 
median cost to be significant (75 FR 71832). This longstanding 
definition of when a HCPCS code is significant for purposes of the 2 
times rule was selected because we believe that a subset of 1,000 
claims is negligible within the set of approximately 100 million single 
procedure or single session claims we use for establishing median 
costs. Similarly, a HCPCS code for which there are fewer than 99 single 
bills and which comprises less than 2 percent of the single major 
claims within an APC will have a negligible impact on the APC median. 
In this proposed rule, we are proposing to make exceptions to this 
limit on the variation of costs within each APC group in unusual cases, 
such as low volume items and services for CY 2012.
    During the APC Panel's February 2011 meeting, we presented median 
cost and utilization data for services furnished during the period of 
January 1, 2010, through September 30, 2010, about which we had 
concerns or about which the public had raised concerns regarding their 
APC assignments, status indicator assignments, or payment rates. The 
discussions of most service-specific issues, the APC Panel 
recommendations, if any, and our proposals for CY 2012 are contained 
mainly in sections III.C. and III.D. of this proposed rule.
    In addition to the assignment of specific services to APCs that we 
discussed with the APC Panel, we also identified APCs with 2 times 
violations that were not specifically discussed with the APC Panel but 
for which we are proposing changes to their HCPCS codes' APC 
assignments in Addendum B (available via the Internet) to this proposed 
rule. In these cases, to eliminate a 2 times violation or to improve 
clinical and resource homogeneity, we are proposing to reassign the 
codes to APCs that contain services that are similar with regard to 
both their clinical and resource characteristics. We also are proposing 
to rename existing APCs or create new clinical APCs to complement 
proposed HCPCS code reassignments. In many cases, the proposed HCPCS 
code reassignments and associated APC reconfigurations for CY 2012 
included in this proposed rule are related to changes in median costs 
of services that are observed in the CY 2010 claims data newly 
available for CY 2012 ratesetting. We also are proposing changes to the 
status indicators for some codes that are not specifically and 
separately discussed in this proposed rule. In these cases, we are 
proposing to change the status indicators for some codes because we 
believe that another status indicator would more accurately describe 
their payment status from an OPPS perspective based on the policies 
that we are proposing for CY 2012.
    Addendum B to this proposed rule (which is referenced in section 
XVII. of this proposed rule and available via the Internet on the CMS 
Web site) identifies with comment indicator ``CH'' those HCPCS codes 
for which we are proposing a change to the APC assignment or status 
indicator that were initially assigned in the April 2011 Addendum B 
update (via Transmittal 2174, Change Request 7342, dated March 18, 
2011).
3. Proposed Exceptions to the 2 Times Rule
    As discussed earlier, we may make exceptions to the 2 times limit 
on the variation of costs within each APC group in unusual cases such 
as low-volume items and services. Taking into account the APC changes 
that we are proposing for CY 2012 based on the APC Panel 
recommendations that are discussed mainly in sections III.C. and III.D. 
of this proposed rule, the other proposed changes to status indicators 
and APC assignments as identified in Addendum B to this proposed rule 
(which is referenced in section XVII. of this proposed rule and 
available via the Internet on the CMS Web site), and the use of CY 2010 
claims data to calculate the median costs of procedures classified in 
the APCs, we reviewed all the APCs to determine which APCs would not 
satisfy the 2 times rule. We used the following criteria to decide 
whether to propose exceptions to the 2 times rule for affected APCs:
     Resource homogeneity;
     Clinical homogeneity;
     Hospital outpatient setting;
     Frequency of service (volume); and
     Opportunity for upcoding and code fragments.
    For a detailed discussion of these criteria, we refer readers to 
the April 7, 2000 OPPS final rule with comment period (65 FR 18457 and 
18458).

[[Page 42232]]

    Table 18 of this proposed rule lists 17 APCs that we are proposing 
to exempt from the 2 times rule for CY 2012 based on the criteria cited 
above and based on claims data processed from January 1, 2010, through 
September 30, 2010. For the final rule with comment period, we plan to 
use claims data for dates of service between January 1, 2010, and 
December 31, 2010, that were processed on or before June 30, 2011, and 
updated CCRs, if available. Based on our analysis of CY 2010 claims 
data in preparation for this proposed rule, we found 17 APCs with 2 
times rule violations. We applied the criteria as described earlier to 
identify the APCs that we are proposing as exceptions to the 2 times 
rule for CY 2012, and identified 17 APCs that meet the criteria for 
exception to the 2 times rule for this proposed rule. These proposed 
APC exceptions are listed in Table 18 below. For cases in which a 
recommendation by the APC Panel appeared to result in or allow a 
violation of the 2 times rule, we generally accepted the APC Panel's 
recommendation because those recommendations were based on explicit 
consideration of resource use, clinical homogeneity, hospital 
specialization, and the quality of the CY 2010 claims data used to 
determine the APC payment rates that we are proposing for CY 2012. The 
proposed median costs for hospital outpatient services for these and 
all other APCs that were used in the development of this proposed rule 
can be found on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/01_overview.asp.

    Table 18--Proposed APC Exceptions to the 2 Times Rule for CY 2012
------------------------------------------------------------------------
      Proposed CY 2012 APC              Proposed CY 2012 APC title
------------------------------------------------------------------------
0016...........................  Level IV Debridement & Destruction.
0057...........................  Bunion Procedures.
0058...........................  Level I Strapping and Cast Application.
0060...........................  Manipulation Therapy.
0080...........................  Diagnostic Cardiac Catheterization.
0105...........................  Repair/Revision/Removal of Pacemakers,
                                  AICDs, or Vascular Devices.
0235...........................  Level I Posterior Segment Eye
                                  Procedures.
0245...........................  Level I Cataract Procedures without IOL
                                  Insert.
0263...........................  Level I Miscellaneous Radiology
                                  Procedures.
0340...........................  Minor Ancillary Procedures.
0347...........................  Level III Transfusion Laboratory
                                  Procedures.
0367...........................  Level I Pulmonary Test.
0369...........................  Level III Pulmonary Tests.
0432...........................  Health and Behavior Services.
0604...........................  Level 1 Hospital Clinic Visits.
0660...........................  Level II Otorhinolaryngologic Function
                                  Tests.
0667...........................  Level II Proton Beam Radiation Therapy.
------------------------------------------------------------------------

C. Proposed New Technology APCs

1. Background
    In the November 30, 2001 final rule (66 FR 59903), we finalized 
changes to the time period a service was eligible for payment under a 
New Technology APC. Beginning in CY 2002, we retain services within New 
Technology APC groups until we gather sufficient claims data to enable 
us to assign the service to an appropriate clinical APC. This policy 
allows us to move a service from a New Technology APC in less than 2 
years if sufficient data are available. It also allows us to retain a 
service in a New Technology APC for more than 2 years if sufficient 
data upon which to base a decision for reassignment have not been 
collected.
    We note that the cost bands for New Technology APCs range from $0 
to $50 in increments of $10, from $50 to $100 in increments of $50, 
from $100 to $2,000 in increments of $100, and from $2,000 to $10,000 
in increments of $500. These cost bands identify the APCs to which new 
technology procedures and services with estimated service costs that 
fall within those cost bands are assigned under the OPPS. Payment for 
each APC is made at the mid-point of the APC's assigned cost band. For 
example, payment for New Technology APC 1507 (New Technology--Level VII 
($500--$600)) is made at $550. Currently, there are 82 New Technology 
APCs, ranging from the lowest cost band assigned to APC 1491 (New 
Technology--Level IA ($0-$10)) through the highest cost band assigned 
to APC 1574 (New Technology--Level XXXVII ($9,500-$10,000). In CY 2004 
(68 FR 63416), we last restructured the New Technology APCs to make the 
cost intervals more consistent across payment levels and refined the 
cost bands for these APCs to retain two parallel sets of New Technology 
APCs, one set with a status indicator of ``S''' (Significant 
Procedures, Not Discounted when Multiple. Paid under OPPS; separate APC 
payment) and the other set with a status indicator of ``T'' 
(Significant Procedure, Multiple Reduction Applies. Paid under OPPS; 
separate APC payment). These current New Technology APC configurations 
allow us to price new technology services more appropriately and 
consistently.
    Every year we receive many requests for higher payment amounts 
under our New Technology APCs for specific procedures under the OPPS 
because they require the use of expensive equipment. We are taking this 
opportunity to reiterate our response in general to the issue of 
hospitals' capital expenditures as they relate to the OPPS and 
Medicare.
    Under the OPPS, one of our goals is to make payments that are 
appropriate for the services that are necessary for the treatment of 
Medicare beneficiaries. The OPPS, like other Medicare payment systems, 
is budget neutral and increases are limited to the annual hospital 
inpatient market basket increase. We believe that our payment rates 
generally reflect the costs that are associated with providing care to 
Medicare beneficiaries in cost-efficient settings, and we believe that 
our rates are adequate to ensure access to services.
    For many emerging technologies, there is a transitional period 
during which utilization may be low, often because providers are first 
learning about the techniques and their clinical utility. Quite often, 
parties request that Medicare make higher payment amounts under our New 
Technology APCs for new procedures in that transitional phase. These 
requests, and their accompanying estimates for expected total patient 
utilization, often reflect very low rates of patient use of expensive 
equipment, resulting in high per use costs for which requesters believe 
Medicare should make full payment. Medicare does not, and we believe 
should not, assume responsibility for more than its share of the costs 
of procedures based on Medicare beneficiary projected utilization and 
does not set its payment rates based on initial projections of low 
utilization for services that require expensive capital equipment. For 
the OPPS, we rely on hospitals to make informed business decisions 
regarding the acquisition of high cost capital equipment, taking into 
consideration their knowledge about their entire patient base (Medicare 
beneficiaries included) and an understanding of Medicare's and other 
payers' payment policies.
    We note that, in a budget neutral environment, payments may not 
fully cover hospitals' costs in a particular

[[Page 42233]]

circumstance, including those for the purchase and maintenance of 
capital equipment. We rely on hospitals to make their decisions 
regarding the acquisition of high cost equipment with the understanding 
that the Medicare program must be careful to establish its initial 
payment rates, including those made through New Technology APCs, for 
new services that lack hospital claims data based on realistic 
utilization projections for all such services delivered in cost-
efficient hospital outpatient settings. As the OPPS acquires claims 
data regarding hospital costs associated with new procedures, we 
regularly examine the claims data and any available new information 
regarding the clinical aspects of new procedures to confirm that our 
OPPS payments remain appropriate for procedures as they transition into 
mainstream medical practice.
2. Proposed Movement of Procedures From New Technology APCs to Clinical 
APCs
    As we explained in the November 30, 2001 final rule (66 FR 59902), 
we generally keep a procedure in the New Technology APC to which it is 
initially assigned until we have collected sufficient data to enable us 
to move the procedure to a clinically appropriate APC. However, in 
cases where we find that our original New Technology APC assignment was 
based on inaccurate or inadequate information (although it was the best 
information available at the time), or where the New Technology APCs 
are restructured, we may, based on more recent resource utilization 
information (including claims data) or the availability of refined New 
Technology APC cost bands, reassign the procedure or service to a 
different New Technology APC that most appropriately reflects its cost.
    Consistent with our current policy, we are proposing for CY 2012 to 
retain services within New Technology APC groups until we gather 
sufficient claims data to enable us to assign the service to a 
clinically appropriate APC. The flexibility associated with this policy 
allows us to move a service from a New Technology APC in less than 2 
years if sufficient claims data are available. It also allows us to 
retain a service in a New Technology APC for more than 2 years if 
sufficient claims data upon which to base a decision for reassignment 
have not been collected. Table 19 below lists the HCPCS codes and 
associated status indicators that we are proposing to reassign from a 
New Technology APC to a clinically appropriate APC or to a different 
New Technology APC for CY 2012.
    Currently, in CY 2011, there are three procedures described by a 
HCPCS G-code receiving payment through a New Technology APC. 
Specifically, HCPCS code G0417 (Surgical pathology, gross and 
microscopic examination for prostate needle saturation biopsy sampling, 
21-40 specimens) is assigned to New Technology APC 1506 (New 
Technology--Level VI ($400-$500)); HCPCS code G0418 (Surgical 
pathology, gross and microscopic examination for prostate needle 
saturation biopsy sampling, 41-60 specimens) is assigned to New 
Technology APC 1511 (New Technology--Level XI ($900-$1,000)); and HCPCS 
code G0419 (Surgical pathology, gross and microscopic examination for 
prostate needle saturation biopsy sampling, greater than 60 specimens) 
is assigned to New Technology APC 1513 (New Technology--Level XIII 
($1,100-$1,200)).
    Analysis of our hospital outpatient data for claims submitted for 
CY 2010 indicates that prostate saturation biopsy procedures are rarely 
performed on Medicare patients. For OPPS claims submitted from CY 2009 
through CY 2010, our claims data show that there were only five claims 
submitted for HCPCS code G0417 in CY 2009 and only one in CY 2010 with 
a proposed median cost of approximately $532. Our claims data did not 
show any hospital outpatient claims for HCPCS codes G0418 and G0419 
from either CY 2009 or CY 2010.
    While we believe that these procedures will always be low volume, 
given the number of specimens being collected, we believe that we 
should continue their New Technology payments for another year for 
HCPCS codes G0417, G0418, and G0419 to see if more claims data become 
available. For CY 2012, we are proposing to revise the APC assignments 
for these procedures and continue the New Technology APC payments for 
HCPCS G-codes G0417, G0418, and G0419. Specifically, we are proposing 
to reassign HCPCS code G0417 from APC 1506 to APC 1505 (New Technology-
Level V ($300-$400)), HCPCS code G0418 from APC 1511 to APC 1506 (New 
Technology--Level VI ($400-$500)), and HCPCS G0419 code from APC 1513 
to APC 1508 (New Technology--Level VIII ($600-$700)). We believe that 
the proposed revised APC assignments would more appropriately reflect 
the procedures described by these three HCPCS G-codes, based on 
clinical and resource considerations. These procedures and their 
proposed APC assignments are displayed in Table 19.

            Table 19--Proposed Reassignment of Procedures Assigned to New Technology APCs for CY 2012
----------------------------------------------------------------------------------------------------------------
                                                                                        Proposed CY  Proposed CY
     CY 2011 HCPCS code          CY 2011 short descriptor      CY 2011 SI  CY 2011 APC    2012 SI      2012 APC
----------------------------------------------------------------------------------------------------------------
G0417......................  Sat biopsy prostate 21-40......            S         1506            S         1505
G0418......................  Sat biopsy prostate 41-60......            S         1511            S         1506
G0419......................  Sat biopsy prostate: >60.......            S         1513            S         1508
----------------------------------------------------------------------------------------------------------------

D. Proposed OPPS APC-Specific Policies

1. Revision/Removal of Neurostimulator Electrodes (APC 0687)
    For CY 2011, we continued to assign CPT codes 63661 (Removal of 
spinal neurostimulator electrode percutaneous array(s), including 
fluoroscopy, when performed), 63662 (Removal of spinal neurostimulator 
electrode plate/paddle(s) placed via laminotomy or laminectomy, 
including fluoroscopy, when performed), 63663 (Revision, including 
replacement, when performed, of spinal neurostimulator electrode 
percutaneous array(s), including fluoroscopy, when performed), and 
63664 (Revision, including replacement, when performed, of spinal 
neurostimulator electrode plate/paddle(s) placed via laminotomy or 
laminectomy, including fluoroscopy, when performed) to APC 0687 
(Revision/Removal of Neurostimulator Electrodes), which had a CY 2011 
final rule median cost of approximately $1,480. These codes were 
created effective for services performed

[[Page 42234]]

on or after January 1, 2010, when the AMA CPT Editorial Board deleted 
CPT code 63660 (Revision or removal of spinal neurostimulator electrode 
percutaneous array(s) or plate/paddle(s)) and created new CPT codes 
63661, 63662, 63663, and 63664 to differentiate between revision and 
removal procedures, and to also differentiate between percutaneous 
leads (arrays) and surgical leads (plates/paddles).
    As discussed in the CY 2011 OPPS/ASC final rule with comment period 
(75 FR 71913), we have received several comments objecting to the 
placement of CPT codes 63663 and 63664 in APC 0687 because, the 
commenter stated, these codes are used to report both revision and 
replacement of neurostimulator electrodes. The commenters believed that 
the use of hospital resources is substantially greater when 
neurostimulator electrodes are being replaced rather than revised. We 
responded to these comments by stating that we did not have CY 2009 
claims data on the cost of these codes upon which to make an assessment 
of whether there is a meaningful difference between the cost of 
revising the electrodes or replacing them, and that we were not 
convinced by the commenters stating that the use of the CPT codes for 
these services and the assignment of the codes for revision/replacement 
of neurostimulator electrodes to APC 0687 was inappropriate. We further 
stated that the OPPS is a payment system of averages in which the 
payment for a service is based on the estimated relative cost of the 
service, including a range of supply and other input costs, as well as 
other services in the same APC that are comparable in resource cost and 
clinical homogeneity. We noted that we expect that hospital charges for 
a service, which are derived from the cost of a service, can vary 
across individual patients. Therefore, we expect variability in the 
estimated cost of a service, across cases in a hospital and among 
hospitals, to be reflected at some level in the final APC relative 
payment weight. We indicated that we would examine estimated costs for 
these CPT codes in the CY 2010 claims data that we would use to model 
the CY 2012 proposed rule when these data became available.
    At its February 28-March 1, 2011 meeting, the APC Panel recommended 
that CMS provide more data on CPT codes 63663, 63664, and 64569 
(Revision or replacement of cranial nerve (e.g., vagus nerve) 
neurostimulator electrode array, including connection to existing pulse 
generator) to determine whether they represent primarily device 
replacements or device revisions. We are accepting this recommendation 
and have examined the CY 2010 claims data available for this proposed 
rule to compare the frequency of claims containing CPT codes 63663 or 
63664 that were billed with HCPCS C1778 (Lead, neurostimulator 
(implantable)) or C1897 (Lead, neurostimulator test kit (implantable)) 
to the frequency of claims with CPT codes 63663 or 63664 billed without 
HCPCS codes C1778 and C1897, in order to determine whether they 
represent primarily device replacements or device revisions. We found 
that 61 percent of claims containing CPT codes 63663 or 63664 did not 
contain HCPCS code C1778 or C1897, while 39 percent of claims with CPT 
codes 63663 or 63664 did contain HCPCS code C1778 or C1897. Because the 
majority of the claims did not contain HCPCS code C1778 or C1897, these 
findings suggest that these CPT codes are used to describe mainly 
device revision procedures, although there are a significant number of 
cases of device replacement procedures in the claims data. We will 
present the requested data for CPT code 64569 at a future meeting of 
the APC Panel.
    We also have completed an examination of the estimated costs for 
CPT codes 63661, 63662, 63663, and 63664 now that claims data for these 
CPT codes are available for the first time since they became effective 
on January 1, 2010. Based on the partial year claims data available for 
this proposed rule, the proposed median costs for CPT codes 63661 and 
63662 are approximately $1,167 and $2,190, respectively. The claims 
data show a median cost of approximately $4,316 for CPT code 63663 and 
a median cost of approximately $4,883 for CPT code 63664, which 
constitute a 2 times rule violation within APC 0687.
    In order to resolve the 2 times rule violation in APC 0687, we are 
proposing to move CPT codes 63663 and 63664 from APC 0687 to APC 0040 
(Percutaneous Implantation of Neurostimulator Electrodes), which has a 
CY 2012 proposed median cost of approximately $4,516 that is more 
consistent with the median costs for CPT codes 63663 and 63664. We also 
are proposing to change the title of APC 0040 to ``Level I 
Implantation/Revision/Replacement of Neurostimulator Electrodes'' to 
reflect that the APC would include revision and replacement procedures 
beginning in CY 2012, and to change the title of APC 0061 from 
``Laminectomy, Laparoscopy, or Incision for Implantation of 
Neurostimulator Electrodes'' to ``Level II Implantation/Revision/
Replacement of Neurostimulator Electrodes'' to be consistent with the 
APC 0040 title change. We believe that CPT codes 63661 and 63662 
continue to be placed appropriately in APC 0687 because their CY 2012 
proposed CPT median costs of approximately $1,167 and $2,190, 
respectively, are consistent with the overall proposed APC 0687 median 
cost of approximately $1,492 and because they describe only device 
removal procedures.
2. Computed Tomography of Abdomen and Pelvis (APCs 0331 and 0334)
    The AMA CPT Editorial Panel created three new codes for computed 
tomography (CT) of abdominal and pelvis that were effective January 1, 
2011: CPT code 74176 (Computed tomography, abdomen and pelvis; without 
contrast material); CPT code 74177 (Computed tomography, abdomen and 
pelvis; with contrast material(s)); and CPT code 74178 (Computed 
tomography, abdomen and pelvis; without contrast material in one or 
both body regions, followed by contrast material(s) and further 
sections in one or both body regions). As with all new CPT codes for CY 
2011, these new codes were announced through the publication of the CY 
2011 CPT in November 2010, effective on January 1, 2011.
    In accordance with our longstanding policy, we made an interim APC 
assignment for each new code for CY 2011 based on our understanding of 
the resources required to furnish the service as the service was 
defined in the new code (75 FR 71898). Specifically, for CY 2011, we 
assigned new CPT code 74176 to APC 0332 (Computed Tomography Without 
Contrast), which has a CY 2011 payment rate of approximately $194; we 
assigned CPT code 74177 to APC 0283 (Computed Tomography With 
Contrast), which has a CY 2011 payment rate of $300; and we assigned 
CPT code 74178 to CPT code 0333 (Computed Tomography Without Contrast 
Followed by With Contrast), which has a CY 2011 payment rate of $334. 
For CY 2011, we also made these codes eligible for composite payment 
under the multiple imaging composite APC methodology when they are 
furnished with other CT procedures to the same patient on the same day.
    As is our standard practice each year, our clinicians review each 
of the many CPT code changes that will be effective in the forthcoming 
year and make a decision regarding status indicator and/or APC 
assignment based on their understanding of the nature of the services 
furnished. We are unable to

[[Page 42235]]

include a proposed status indicator and/or APC assignment in the 
proposed rule for codes that are not announced by the AMA CPT Editorial 
Board prior to the proposed rule. Therefore, in accordance with our 
longstanding policy, we include, in the final rule with comment period, 
an interim status indicator and/or APC assignment for all new CPT codes 
that are announced by the AMA CPT Editorial Board subsequent to the 
OPPS/ASC proposed rule to enable payment to be made for new services as 
soon as the code is effective. In accordance with our longstanding 
practice, we identified the new codes for abdominal/pelvis CT for CY 
2011 in Addendum B of the CY 2011 OPPS/ASC final rule with comment 
period as having new interim APC assignments by showing a comment 
indicator of ``NI,'' and we provided a public comment period. As we do 
with all new CPT codes, we will respond to the public comments in the 
OPPS/ASC final rule with comment period for CY 2012. This longstanding 
process enables us to pay for new services as soon as the new CPT codes 
for them go into effect, despite the fact that they first become 
publicly available at the same time the final rule with comment period 
for the upcoming year is made public.
    At its February 28-March 1, 2011 meeting, the APC Panel heard 
public presentations on this issue and recommended that CMS provide 
more data on the new CPT codes for combined abdomen and pelvis CT as 
soon as these data are available. We are accepting this recommendation, 
and we will provide claims data as soon as the data are available. We 
note that because these codes were effective January 1, 2011, the first 
available claims data for these codes will be the APC Panel claims data 
for the CY 2013 OPPS rulemaking. These data will be for dates of 
service January 1, 2011 through and including September 30, 2011, as 
processed through the Common Working File on or before September 30, 
2011.
    In general, stakeholders who provided comments on the interim 
assignment of these codes for CY 2011 stated that the most appropriate 
approach to establishing payment for these new codes is to assign these 
procedures to APCs that recognize that each of the new codes reflects 
the reporting under a single code of two services that were previously 
reported under two separate codes and that, therefore, payments would 
be more accurate and better reflective of the relative cost of the 
services under the OPPS if we were to establish payment rates for the 
codes for CY 2012 using claim data that reflect the combined cost of 
the two predecessor codes. They noted that when these services were 
reported in CY 2010 using two CPT codes, rather than a single code, the 
services that are being reported under CPT code 74176 were assigned to 
imaging composite APC 8005 (CT and CTA without Contrast) for which the 
CY 2010 payment was $419.45. Similarly, the services being reported 
under CPT code 74177 or CPT code 74178 were assigned to composite APC 
8006 (CT and CTA with Contrast) for which the CY 2010 payment was 
$628.49. They indicated that they believed that simulating the median 
cost for CPT codes 74176, 74177, and 74178 using historic claims data 
from the predecessor codes in a manner similar to that used to create 
the composite APC medians would result in the best estimates of costs 
for these codes and, therefore, the most accurate payment rate for 
these codes.
    After considering the presentations at the APC Panel meeting, the 
views of stakeholders who met with us to discuss this issue, and the 
comments in response to the CY 2011 final rule with public comment 
period, and after examining our claims data for the predecessor codes, 
we believe that establishment of payment rates for these services based 
on historic claims data for the combinations of predecessor codes that 
are now reported by CPT codes 74176, 74177, and 74178 would result in a 
more accurate and appropriate payment for these services for CY 2012 
because it would take into account the full cost of both services that 
are now reported by a single CPT code. We believe that the best way to 
secure the most appropriate payments for CY 2012 is to use the claims 
data from the predecessor codes under which the new codes were reported 
for CY 2010 to simulate median costs for the new codes and to create 
APCs that are appropriate to the services. To do so should reflect both 
the full cost of the service as reported by the new code and should 
also reflect the efficiencies of reporting the service represented by 
the single new code. Therefore, we are proposing to establish two APCs 
to which we would propose to assign the combined abdominal and pelvis 
CT services. Specifically, we are proposing to create new APC 0331 
(Combined Abdominal and Pelvis CT Without Contrast), to which we are 
proposing to assign CPT code 74176 and for which we are proposing to 
base the CY 2012 OPPS payment rate on a median cost of approximately 
$417. We also are proposing to create new APC 0334 (Combined Abdominal 
and Pelvis CT With Contrast), to which we are proposing to assign CPT 
codes 74177 and 74178 for the CY 2012 OPPS and for which we are 
proposing to base the CY 2012 OPPS payment rate on a median cost of 
approximately $592. We are proposing to create two new APCs to which to 
assign these codes, rather than one, because CPT code 74176 is 
furnished without contrast, while CPT codes 74177 and 74178 are 
furnished with contrast. Section 1833(t)(2)(G) of the Act requires that 
services with contrast may not be assigned to APCs that contain 
services without contrast, and therefore, we could not assign CPT code 
74176, which does not require contrast, to the same APC as CPT codes 
74177 and 74178, which require contrast.
    We are proposing to create new APC 0331 to which we would assign 
CPT code 74176 and to create new APC 0334 to which we would assign CPT 
codes 74177 and 74178 because the proposed methodology for simulating 
the median costs for CPT codes 74176, 74177, and 74178, which uses 
claims data for the predecessor codes is unique to these CPT codes. 
Therefore, we believe that it is appropriate to create APCs comprised 
only of services for which we calculated medians using claims data for 
the predecessor codes. To the extent this policy is finalized, we would 
reassess whether it continues to be appropriate to pay these codes 
under APCs 0331 and 0334 once the median costs for the proposed CY 2013 
OPPS are calculated using our standard methodology, based on hospitals' 
CY 2011 charges for CPT codes 74176, 74177, and 74178.
    To calculate the median costs for proposed APCs 0331 and 0334 for 
CY 2012, we selected claims that contained one unit of both of the 
predecessor CPT codes that appear in the CY 2011 CPT for CPT codes 
74676, 74677, and 74678. The predecessor codes are limited to the codes 
in Table 20 below.

   Table 20--CPT Codes That Were Combined To Create New Abdominal and
                      Pelvis CPT Codes for CY 2011
------------------------------------------------------------------------
           CPT Code                            Descriptor
------------------------------------------------------------------------
72192.........................  Computed tomography, pelvis; without
                                 contrast material.
72193.........................  Computed tomography, pelvis; with
                                 contrast material(s).
72194.........................  Computed tomography, pelvis; without
                                 contrast material, followed by contrast
                                 material(s) and further sections.
74150.........................  Computed tomography, abdomen; without
                                 contrast material.

[[Page 42236]]

 
74160.........................  Computed tomography, abdomen; with
                                 contrast material(s).
74170.........................  Computed tomography, abdomen; without
                                 contrast material, followed by contrast
                                 material(s) and further sections.
------------------------------------------------------------------------

    For purposes of selecting claims to be used to calculate simulated 
median costs, we selected only claims that contained one (and only one) 
unit of each of the predecessor codes in the allowed combinations 
identified in Table 21 below. We used only claims that contained one 
and only one unit of each of the code combinations because we believe 
that it represents the best simulation of the definition of the new 
codes. Where more than one unit of either or both codes were reported, 
the claim would be paid under an imaging composite APC, not under APC 
0331 or 0334. For median calculation, claims that contained more than 
one unit of either or both codes were assigned to the applicable 
imaging composite APC. We refer readers to section II.A.2.e.5 of this 
proposed rule for discussion of the imaging composite APCs.

  Table 21--Combinations of Predecessor CPT Codes Used To Simulate Median Costs for the Combined Abdominal and
                                    Pelvis CT Codes That Are New for CY 2011
----------------------------------------------------------------------------------------------------------------
                                                  Predecessor CT
                                                      abdomen     Predecessor CT  Predecessor CT  Predecessor CT
      Combined abdominal and pelvis CT code           without     pelvis without   abdomen with     pelvis with
                                                     contrast        contrast        contrast        contrast
----------------------------------------------------------------------------------------------------------------
74176...........................................           74150           72192  ..............  ..............
74177...........................................  ..............  ..............           74160           72193
74178...........................................           74150  ..............  ..............           72193
74178...........................................           74150  ..............  ..............           72194
74178...........................................  ..............           72192           74160  ..............
74178...........................................  ..............  ..............           74160           72194
74178...........................................  ..............           72192           74170  ..............
74178...........................................  ..............  ..............           74170           72193
74178...........................................  ..............  ..............           74170           72194
----------------------------------------------------------------------------------------------------------------

    After we selected the claims that contained one and only one unit 
of each code in each combination, we deleted claims that contained 
other separately paid HCPCS codes if those codes did not appear on the 
bypass list (we refer readers to section II.A.1.b. of this proposed 
rule and to Addendum N, which is referenced in section XVII. of this 
proposed rule and available via the Internet on the CMS Web site). We 
bypassed the costs for codes that appeared on the bypass list to create 
simulated single procedure claims for CPT codes 74178, 74177, and 
74178. Using the remaining simulated single procedure claims for the 
combined abdominal and pelvis CT services, we applied our standard 
trimming, packaging, and wage standardization methodology to calculate 
the median cost for each combined abdominal and pelvis CT code for the 
two proposed APCs. We refer readers to section II.A.2.c. of this 
proposed rule for discussion of our standard trimming, packaging, and 
wage standardization methodology.
    We found that using this proposed methodology resulted in a 
simulated median cost for CPT code 74176 of approximately $417, and 
that, because we are proposing that CPT code 74176 would be the only 
HCPCS code assigned to APC 0331, the simulated median cost for APC 0331 
also would be approximately $417. We found that using this proposed 
methodology, the simulated median cost for CPT code 74177 was 
approximately $570 and the simulated median cost for CPT code 74178 was 
approximately $638, and that the simulated median cost for proposed APC 
0334 was approximately $592. We are proposing to use this simulation 
methodology to establish proposed median costs for proposed APCs 0331 
and 0334 for the CY 2012 OPPS.
    We also are proposing that, in cases where CPT code 74176 is 
reported with CT codes that describe CT services for other regions of 
the body other than the abdomen and pelvis in which contrast is not 
used, it would be assigned to imaging composite APC 8005 (CT and CTA 
Without Contrast), for which we are proposing a median cost of 
approximately $445 for the CY 2012 OPPS. In cases where CPT code 74177 
or 74178 is reported with CT codes that describe CT services for 
regions of the body other than abdomen and pelvis in which contrast is 
used, we are proposing that the code would be assigned to APC 8006 (CT 
and CTA With Contrast), for which we are proposing a median cost of 
approximately $744 for the CY 2012 OPPS. We are proposing to assign CPT 
codes 74176 to imaging composite APC 8005 and to assign CPT codes 74177 
and 74178 to imaging composite APC 8006 because the predecessor codes 
for CPT codes 74176, 74177 and 74178 (identified in Table 20), continue 
to be reported when either abdominal CT or pelvis CT (but not both) is 
furnished, and we are proposing to continue to assign them to imaging 
composite APCs 8005 and 8006. We believe that it would be inconsistent 
with our proposed imaging composite policy if we did not propose to 
assign CPT codes 74176, 74177, and 74178 to the applicable imaging 
composite APC for CY 2012. We refer readers to section II.A.2.e.(5) of 
this proposed rule for the discussion of the calculation of our 
proposed median costs for APCs 8005 and 8006 for CY 2012.
    In summary, we are proposing to establish new APCs 0331 and 0334 to 
which we would assign the abdominal and pelvis CT codes that were 
created by the AMA CPT Editorial Panel for CY 2011 and to use the 
simulation methodology we describe above to establish simulated median 
costs on which we would base the CY 2012 payment rates because we 
believe that to do so would result in relative payment weights for 
these new services that will more accurately reflect the resources 
required to furnish these services as defined by CPT than would be true 
of continued assignment of the codes to the single service APCs to 
which we made interim assignments for

[[Page 42237]]

CY 2011. We note that claims and cost data for these services will be 
available for the CY 2013 OPPS rulemaking, and we will reassess the 
payment policy for these codes based on the cost data that are used to 
establish the CY 2013 OPPS median cost and payment rates.
3. Placement of Amniotic Membrane (APCs 0233 and 0244)
    For the CY 2011 update, the AMA CPT Editorial Panel revised the 
long descriptor for CPT code 65780 (Ocular surface reconstruction; 
amniotic membrane transplantation, multiple layers) to include the 
words ``multiple layers'' to further clarify the code descriptor. In 
addition, the AMA CPT Editorial Panel created two new CPT codes that 
describe the placement of amniotic membrane on the ocular surface 
without reconstruction; one describing the placement of a 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 CPT Editorial Panel created 
CPT codes 65778 (Placement of amniotic membrane on the ocular surface 
for wound healing; self-retaining) and 65779 (Placement of amniotic 
membrane on the ocular surface for wound healing; single layer, 
sutured), effective January 1, 2011.
    As has been our practice since the implementation of the OPPS in 
2000, we carefully review all new procedures before assigning them to 
an APC. In determining the APC assignments for CPT codes 65778 and 
65779, we took into consideration the clinical and resource 
characteristics involved with placement of amniotic membrane products 
on the eye for wound healing via a self-retaining device and a sutured, 
single-layer technique. In the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 72402), we assigned CPT code 65780 to APC 0244 (Corneal 
and Amniotic Membrane Transplant) with a CY 2011 payment rate of 
approximately $2,681. We assigned CPT code 65778 to APC 0239 (Level II 
Repair and Plastic Eye Procedures) with a payment rate of approximately 
$559, and CPT code 65779 to APC 0255 (Level II Anterior Segment Eye 
Procedures) with a payment rate of approximately $519. In addition, we 
assigned both CPT codes 65778 and 65779 to comment indicator ``NI'' in 
Addendum B of the CY 2011 OPPS/ASC final rule with comment period to 
indicate that both codes were new codes for CY 2011 with an interim APC 
assignment subject to public comment. We will address any public 
comments on issues regarding these new codes in the CY 2012 OPPS/ASC 
final rule with comment period.
    At the APC Panel at the February 28-March 1, 2011 meeting, a 
presenter requested the reassignment of both new CPT codes 65778 and 
65779 to APC 0244, which is the same APC to which CPT code 65780 is 
assigned. The presenter indicated that prior to CY 2011, the procedures 
described by CPT codes 65578 and 65779 were previously reported under 
the original version of CPT code 65780, which did not specify 
``multiple layers,'' and as such these new codes should continue to be 
assigned to APC 0244. Further, the presenter stated that the costs of 
the new procedures described by CPT codes 65778 and 65779 are very 
similar to the procedure described by CPT code 65780.
    The APC Panel recommended that CMS reassign both CPT codes 65778 
and 65779 to APC 0233 (Level III Anterior Segment Eye Procedures), 
citing clinical similarity to procedures already in APC 0233. Based on 
clinical as well as resource similarity to the other procedures 
currently assigned to APC 0233, we are proposing to accept the APC 
Panel's recommendations to reassign CPT code 65778 from APC 0239 to APC 
0233 and to reassign CPT code 65779 from APC 0255 to APC 0233. However, 
based upon our further review and analysis of the clinical 
characteristics of the procedure described by CPT code 65778, we also 
are proposing to conditionally package CPT code 65778. The service 
described by CPT code 65778 would rarely be provided as a separate, 
stand-alone service in the HOPD; it would almost exclusively be 
provided in addition to another procedure or service. Our medical 
advisors indicate that the procedure described by CPT code 65778 is not 
significantly different than placing a bandage contact lens on the 
surface of the eye to cover a corneal epithelial defect. CPT code 65778 
describes the simple placement of a special type of bandage (a self-
retaining amniotic membrane device) on the surface of the eye, which 
would most commonly be used in the HOPD to cover the surface of the eye 
after a procedure that results in a corneal epithelial defect. Given 
the characteristics of this procedure and its likely use in the HOPD, 
we are proposing to conditionally package CPT code 65778 for CY 2012 
and reassign its status indicator from ``T'' to ``Q2'' to indicate that 
the procedure is packaged when it is billed on the same date with 
another procedure or service that is also assigned to status indicator 
``T.'' Otherwise, separate payment would be made for the procedure.
    In summary, for CY 2012, we are proposing to reassign CPT code 
65778 from APC 0239 to APC 0233 with a conditionally packaged status, 
to reassign CPT code 65779 from APC 0255 to APC 0233, which has a 
proposed median cost of approximately $1,214, and to continue to assign 
CPT code 65780 to APC 0244, which has a proposed median cost of 
approximately $2,767.
    As has been our practice since the implementation of the OPPS, we 
annually review all the items and services within an APC group to 
determine, with respect to comparability of the use of resources, for 
any 2 times violations. In making this determination, we review our 
claims data and determine whether we need to make changes to the 
current APC assignments for the following year. Because CPT codes 65778 
and 65779 are new for CY 2011, and we have no claims data for the CY 
2012 update, we will again reevaluate the status indicator and APC 
assignments for CPT codes 65778, 65779, and 65780 in CY 2012 for the CY 
2013 OPPS rulemaking cycle. The amniotic membrane procedures and their 
CY 2012 proposed APC assignments are displayed in Table 22 below.

               Table 22--Proposed APC Assignment for the Amniotic Membrane Procedures for CY 2012
----------------------------------------------------------------------------------------------------------------
                                                                                        Proposed CY  Proposed CY
     CY 2011 HCPCS code          CY 2011 short descriptor      CY 2011 SI  CY 2011 APC    2012 SI      2012 APC
----------------------------------------------------------------------------------------------------------------
65778.......................  Cover eye w/membrane..........            T         0239           Q2         0233
65779.......................  Cover eye w/membrane suture...            T         0255            T         0233
65780.......................  Ocular reconst transplant.....            T         0244            T         0244
----------------------------------------------------------------------------------------------------------------

[[Page 42238]]

4. Upper Gastrointestinal Services (APCs 0141, 0419, and 0422)
    For CY 2011, there are two upper gastrointestinal (GI) procedure 
APCs, APC 0141 (Level I Upper GI Procedures), which has a CY 2011 
national unadjusted payment rate of $611.73, and APC 0422 (Level II 
Upper GI Procedures), which has a CY 2011 national unadjusted payment 
rate of $1,148.75. In the CY 2011 OPPS/ASC proposed rule, we proposed 
to reconfigure APCs 0141 (Level I Upper GI Procedures) and APC 0442 
(Level II Upper GI Procedures) by moving several CPT codes from APC 
0141 to APC 0422. We received public comments on the proposed rule 
objecting to our proposal on the basis that the reconfiguration would 
reduce the median cost and, therefore, the payment for services to 
which APC 0422 was assigned and would not maintain the clinical 
homogeneity of these services. Instead commenters, including the 
applicable medical specialty societies, asked that we reconfigure APCs 
0141 and 0422 to create three APCs by adding a new APC for upper GI 
procedures. They also recommended a HCPCS configuration that they 
believed would provide payment rates that would more accurately reflect 
the median costs of the services in APCs 0141 and 0422. We finalized 
our proposed changes to APCs 0141 and 0422 for CY 2011 without 
establishing a third APC for upper GI procedures for the reasons 
discussed in the CY 2011 OPPS/ASC final rule with public comment period 
(75 FR 71907).
    However, when we developed the median costs for APCs 0141 and 0422 
using CY 2010 claims data for discussion at the APC Panel meeting of 
February 28-March 1, 2011, we observed that there was a 2 times 
violation for APC 0141 that had not existed for CY 2010 OPPS. For the 
APC Panel meeting, we simulated the HCPCS and APC median costs that 
would result from the reconfiguration that was recommended by the 
stakeholders in their comments on the CY 2011 OPPS/ASC final rule with 
comment period, and we discussed the results with the APC Panel. The 
APC Panel recommended that CMS create an intermediate level upper GI 
procedures APC (APC Panel Recommendation 13). The APC Panel 
recommendations and report may be found at the APC Panel Web site, 
located at: http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.
    For the reasons we discuss below, we are accepting the APC Panel 
recommendation to propose to establish three levels of upper GI 
procedure APCs and to propose to adopt the reconfiguration recommended 
by stakeholders because we believe that the proposed reconfiguration 
will provide payments that are more closely aligned with the median 
costs of the services. Creating an intermediate APC for upper GI 
procedures provides APC median costs that are more closely aligned with 
the median costs for the many CPT codes for upper GI procedures, and 
therefore, the APC median costs better reflect the resources required 
to provide these services as defined by the CPT codes for them. 
Moreover, the proposed reconfiguration resolves the 2 times rule 
violation that would result in APC 0141 if we were to apply the CY 2011 
APC configuration to the CY 2012 proposed rule data. Therefore, we 
believe that we would need to propose to reassign HCPCS codes 
regardless of whether we created the intermediate APC for CY 2012. We 
believe that the proposed reconfiguration to create the intermediate 
APC is the most appropriate means of avoiding a 2 times violation that 
would otherwise exist for CY 2012 and that the resulting median costs 
will provide payments that are more reflective of the relative costs of 
the services being furnished.
    Therefore, for CY 2012, we are proposing to create new APC 0419 
(Level II Upper GI Procedures), as recommended by the stakeholders, and 
we are proposing to reassign HCPCS codes previously assigned to APCs 
0141 and 0422 to the three APC configuration. Table 23 below contains 
the proposed HCPCS reassignments for CY 2012 using the proposed three 
APC reconfiguration. We believe that this proposed reconfiguration 
classifies upper GI CPT codes in groups that demonstrate the best 
clinical and resource homogeneity. For APC 0141, we calculated a 
proposed rule median cost for CY 2012 of approximately $603. For 
proposed new APC 0419, we calculated a proposed rule median cost of 
approximately $904. For APC 0422, we calculated a proposed rule median 
cost of approximately $1,833.

                                       Table 23--Proposed Reconfiguration of Upper GI Procedure Codes for CY 2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                  Percent
                APC                     HCPCS                  SI                   Description          Median    Single bill     single       Total
                                                                                                                    frequency      bills      frequency
--------------------------------------------------------------------------------------------------------------------------------------------------------
0141...............................  ...........  ...........................  Level I Upper GI           $602.59  ...........  ...........  ...........
                                                                                Procedures.
                                           43831  T                            Place gastrostomy             0.00            0  ...........            0
                                                                                tube.
                                           43510  T                            Surgical opening of         186.33            1  ...........            1
                                                                                stomach.
                                           43999  T                            Stomach surgery             238.68        1,732  ...........        2,128
                                                                                procedure.
                                           43204  T                            Esoph scope w/              361.50            2  ...........            6
                                                                                sclerosis inj.
                                           43761  T                            Reposition                  496.12          361  ...........          602
                                                                                gastrostomy tube.
                                           43235  T                            Uppr gi endoscopy           538.38       70,885           20      124,837
                                                                                diagnosis.
                                           43200  T                            Esophagus endoscopy..       592.17        1,016  ...........        5,513
                                           43239  T                            Upper gi endoscopy          618.39      260,422           73      516,015
                                                                                biopsy.
                                           43202  T                            Esophagus endoscopy         619.63          461  ...........        1,244
                                                                                biopsy.
                                           43248  T                            Uppr gi endoscopy/          621.09       16,548            5       37,741
                                                                                guide wire.
                                           43234  T                            Upper gi endoscopy          644.39          510  ...........          872
                                                                                exam.
                                           43247  T                            Operative upper GI          656.88        5,028            1       16,489
                                                                                endoscopy.
                                           43236  T                            Uppr gi scope w/            660.41        3,369            1        8,141
                                                                                submuc inj.
                                           43600  T                            Biopsy of stomach....       666.46            5  ...........           14
                                           43243  T                            Upper gi endoscopy &        748.56          161  ...........          326
                                                                                inject.
                                           43241  T                            Upper GI endoscopy          782.08          164  ...........          462
                                                                                with tube.
                                           43499  T                            Esophagus surgery         2,158.45          528  ...........        1,375
                                                                                procedure.
0419...............................  ...........  ...........................  Level II Upper GI           903.97  ...........  ...........  ...........
                                                                                Procedures.
                                           91111  T                            Esophageal capsule          730.21           69  ...........           79
                                                                                endoscopy.
                                           43250  T                            Upper GI endoscopy/         730.67          949            1        3,083
                                                                                tumor.
                                           43201  T                            Esoph scope w/              760.79           99  ...........          256
                                                                                submucous inj.
                                           43251  T                            Operative upper GI          793.29        2,976            3       10,936
                                                                                endoscopy.
                                           43237  T                            Endoscopic us exam          796.01          369  ...........          696
                                                                                esoph.

[[Page 42239]]

 
                                           43259  T                            Endoscopic ultrasound       811.70       13,234           15       21,312
                                                                                exam.
                                           43246  T                            Place gastrostomy           814.37       15,205           17       20,923
                                                                                tube.
                                           43231  T                            Esoph endoscopy w/us        822.22          346  ...........          455
                                                                                exam.
                                           43244  T                            Upper GI endoscopy/         875.56        5,100            6        6,916
                                                                                ligation.
                                           43215  T                            Esophagus endoscopy..       881.45          220  ...........          858
                                           43255  T                            Operative upper GI          882.09        3,810            4        7,517
                                                                                endoscopy.
                                           43458  T                            Dilate esophagus.....       890.28          145  ...........        1,305
                                           43217  T                            Esophagus endoscopy..       890.36           24  ...........          104
                                           49446  T                            Change g-tube to g-j        891.78          389  ...........          681
                                                                                perc.
                                           43205  T                            Esophagus endoscopy/        894.22          121  ...........          142
                                                                                ligation.
                                           43249  T                            Esoph endoscopy             897.83       19,351           22       50,173
                                                                                dilation.
                                           49440  T                            Place gastrostomy           899.69        1,770            2        2,823
                                                                                tube perc.
                                           43245  T                            Uppr gi scope dilate        919.77        2,489            3        5,401
                                                                                strictr.
                                           43226  T                            Esoph endoscopy             925.45          741            1        1,138
                                                                                dilation.
                                           43240  T                            Esoph endoscope w/          953.86           32  ...........           85
                                                                                drain cyst.
                                           49441  T                            Place duod/jej tube         976.70          136  ...........          232
                                                                                perc.
                                           43220  T                            Esoph endoscopy           1,011.56          593            1          908
                                                                                dilation.
                                           43232  T                            Esoph endoscopy w/us      1,017.09          351  ...........          425
                                                                                fn bx.
                                           44100  T                            Biopsy of bowel......     1,028.66            5  ...........           22
                                           43238  T                            Uppr gi endoscopy w/      1,115.06          383  ...........          539
                                                                                us fn bx.
                                           43242  T                            Uppr gi endoscopy w/      1,125.47       12,260           14       16,443
                                                                                us fn bx.
                                           43258  T                            Operative upper GI        1,138.38        5,654            6       10,278
                                                                                endoscopy.
                                           43227  T                            Esoph endoscopy           1,405.46           25  ...........           39
                                                                                repair.
                                           43830  T                            Place gastrostomy         1,721.16          150  ...........          288
                                                                                tube.
0422...............................  ...........  ...........................  Level III Upper GI        1,833.15  ...........  ...........  ...........
                                                                                Procedures.
                                           43216  T                            Esophagus endoscopy/      1,416.11           12  ...........           31
                                                                                lesion.
                                           43870  T                            Repair stomach            1,651.04           95            4          153
                                                                                opening.
                                           43257  T                            Uppr gi scope w/thrml     1,724.95           46            2           62
                                                                                txmnt.
                                           43228  T                            Esoph endoscopy           1,829.56        2,518           93        3,022
                                                                                ablation.
                                           C9724  T                            EPS gast cardia plic.     5,957.92           38            1           69
--------------------------------------------------------------------------------------------------------------------------------------------------------

5. Pulmonary Rehabilitation (APC 0102)
    Section 144(a)(1) of Public Law 110-275 (MIPPA) added section 
1861(fff) to the Act to provide Medicare Part B coverage and payment 
for a comprehensive program of pulmonary rehabilitation services 
furnished to beneficiaries with chronic obstructive pulmonary disease, 
effective January 1, 2010. Accordingly, in the CY 2010 OPPS/ASC final 
rule with comment period, we established a policy to pay for pulmonary 
rehabilitation services furnished as a part of the comprehensive 
pulmonary rehabilitation program benefit (74 FR 60567). There was and 
continues to be no single CPT code that fully and accurately describes 
the comprehensive pulmonary rehabilitation benefit provided in section 
1861(fff) of the Act. Moreover, there were no alphanumeric HCPCS codes 
that described the comprehensive pulmonary rehabilitation benefit in 
effect for CY 2008 (on which the CY 2010 OPPS was based) or CY 2009 (on 
which the CY 2011 OPPS was based). Therefore, for CY 2010, we created 
new HCPCS code G0424 (Pulmonary rehabilitation, including exercise 
(includes monitoring), one hour, per session, up to two sessions per 
day) and assigned the code to APC 0102 (Level II Pulmonary Treatment), 
which we also created for CY 2010 OPPS. Because none of the pulmonary 
treatment codes for which there were charges for CY 2008 or CY 2009 
accurately described the comprehensive pulmonary rehabilitation service 
for which MIPPA provided coverage, we did not assume that the charge 
reported on any one of the previously existing HCPCS codes under which 
pulmonary treatments were reported would represent the full charge for 
the comprehensive pulmonary rehabilitation service.
    Instead, for the CY 2010 OPPS, which was based on claims for 
services in CY 2008, we calculated a median ``per session'' cost that 
we simulated from historical hospital claims data for pulmonary therapy 
services that were billed in combination with one another, much like we 
create composite APC median costs by summing the costs of multiple 
procedures that are typically provided on the same date. Our 
methodology for calculating the ``per session'' median cost that we 
used as the basis for the CY 2010 OPPS payment rate for HCPCS code 
G0424 and APC 0102 is discussed in detail in the CY 2010 OPPS final 
rule with comment period (74 FR 60567 through 60570).
    Specifically, to simulate the ``per session'' median cost of new 
HCPCS code G0424 from claims data for existing services, we used only 
claims that contained at least one unit of HCPCS code G0239 
(Therapeutic procedures to improve respiratory function or increase 
strength or endurance of respiratory muscles, two or more individuals 
(includes monitoring), the group code that is without limitation on 
time duration, and one unit of HCPCS code G0237 (Therapeutic procedures 
to increase strength or endurance of respiratory muscles, one on one, 
face to face, per 15 minutes (includes monitoring) or HCPCS code G0238 
(Therapeutic procedures to improve respiratory function or increase 
strength or endurance of respiratory muscles, one on one, face to face, 
per 15 minutes (includes monitoring), the individual, face-to-face 
codes that report 15 minutes of service, on the same date of service. 
We reasoned that patients in a pulmonary rehabilitation program would 
typically receive individual and group services in each session of 
approximately 1 hour in duration. This was consistent with public 
comments that suggested that pulmonary rehabilitation is often provided 
in group sessions in the HOPD, although patients commonly require 
additional one-on-one care in order to fully participate in

[[Page 42240]]

the program. We note that our use of ``per session'' claims reporting 
one unit of HCPCS code G0237 or G0238 and one unit of HCPCS code G0239 
in this simulation methodology was also consistent with our overall 
finding of approximately 2.4 service units of the HCPCS G-codes per day 
on a single date of service, usually consisting of both individual and 
group services, for patients receiving pulmonary therapy services in 
the HOPD based upon CY 2008 claims. We concluded that the typical 
session of pulmonary rehabilitation would be 1 hour based on public 
comments that indicated that a session of pulmonary rehabilitation is 
typically 1 hour and based on our findings that the most commonly 
reported HCPCS code for pulmonary treatment is HCPCS code G0239, which 
has no time definition for this group service.
    We included all costs of the related tests and assessment services 
(CPT codes 94620 (Pulmonary stress testing; simple (e.g., 6-minute walk 
test, prolonged exercise test for bronchospasm with pre- and post-
spirometry and oximetry)); 94664 (Demonstration and/or evaluation of 
patient utilization of an aerosol generator, nebulizer, metered dose 
inhaler or IPPB device); and 94667 (Manipulation chest wall, such as 
cupping, percussion and vibration to facilitate lung function; initial 
demonstration and/or evaluation), and all CPT codes for established 
patient clinic visits, on the same date of service as the HCPCS G-codes 
in the claims we used to simulate the median cost for HCPCS code G0424. 
After identifying these ``per session'' claims, which we believe to 
represent 1 hour of care, we summed the costs on them and calculated 
the median cost for the set of selected claims. In light of the cost 
and clinical similarities of pulmonary rehabilitation and the existing 
services described by HCPCS codes G0237, G0238, and G0239 and the CPT 
codes for related assessments and tests, and the significant number of 
``per session'' hospital claims we found, we believed that the 
simulated median cost for HCPCS code G0424, constructed to include the 
costs of these services where furnished, was our best estimate of the 
expected hospital cost of a pulmonary rehabilitation session, given 
that we did not have hospital charges for the comprehensive pulmonary 
rehabilitation service provided by MIPPA for which we created HCPCS 
code G0424.
    We used the resulting simulated median ``per session'' cost of 
approximately $50 as the basis for the payment for pulmonary 
rehabilitation service for CY 2010, the first year in which the 
comprehensive pulmonary rehabilitation benefit was covered. For CY 
2011, which was based on claims for services furnished in CY 2009, we 
continued to assign HCPCS code G0424 to APC 0102 and to apply the 
simulation methodology that we used in CY 2010 to claims for services 
in CY 2009 to calculate a median ``per session'' cost simulated from 
historical hospital claims data for similar pulmonary therapy services 
for the CY 2011 OPPS. The CY 2011 OPPS final rule median cost of 
approximately $62 resulted in a national unadjusted payment rate for CY 
2011 of approximately $63.
    For the CY 2012 OPPS, however, we have a very robust set of claims 
for HCPCS code G0424 on which hospitals reported the charges for the 
comprehensive pulmonary rehabilitation service for which MIPPA provided 
the pulmonary rehabilitation benefit beginning on January 1, 2010. 
Specifically, the CY 2012 OPPS proposed rule data, based on CY 2010 
claims, contained a total frequency of 393,056 lines of HCPCS code 
G0424, of which we were able to use 391,901 single procedure bills or 
almost 100 percent of the claims submitted for HCPCS code G0424. This 
is an extremely robust volume of single procedure bills containing 
charges for HCPCS code G0424 on which to base a median cost. In 
general, we have found that higher volumes of single bills both in 
absolute numbers and as a percentage of total frequency provide very 
stable estimates of hospital costs.
    Therefore, we are proposing that the payment rate for HCPCS code 
G0424 and, therefore, for APC 102, would be based on the median cost 
for the service as derived from claims for services furnished in CY 
2010 and the most current available cost report information, using our 
longstanding process for estimating the median cost of a service 
described by a HCPCS code. We refer readers to section II. of this 
proposed rule for a description of our longstanding standard process 
for calculating the median costs on which the OPPS payment rates are 
based. Using our standard median calculation process for HCPCS code 
G0424 results in a proposed median cost of approximately $38 for HCPCS 
code G0424 and, therefore, for APC 0102. Given that the volume of 
claims in the CY 2012 OPPS proposed rule data is so robust for HCPCS 
code G0424, we believe that the proposed median cost we calculated for 
HCPCS code G0424 is a valid reflection of the relative cost of the 
comprehensive pulmonary rehabilitation service described by HCPCS code 
G0424 and that the proposed median cost for HCPCS code G0424 is an 
appropriate basis on which to establish the proposed national 
unadjusted payment rate for APC 0102.
    We recognize that there is a significant difference between our 
simulated median cost for CY 2011 and the CY 2012 proposed rule median 
cost of approximately $38 that is derived from application of our 
standard median calculation process to hospital claims data for CY 
2010. We believe that this difference arises because the median 
simulation methodology we used for CY 2010 and CY 2011 selected claims 
that contained multiple procedures and packaged the costs of numerous 
services into the ``per session'' cost for the simulated code where 
numerous services appeared on the same date of service. Our simulation 
methodology assumed that hospitals would include the charges for these 
additional services in their CY 2010 charges for HCPCS code G0424 
because the services are included in the definition of comprehensive 
pulmonary rehabilitation.
    In response to the CY 2012 OPPS proposed median of approximately 
$38 for HCPCS code G0424, we looked at our claims data in more depth. 
We found that 1,048 hospitals, approximately 25 percent of hospitals 
paid under the OPPS, reported HCPCS code G0424 and that the median line 
item median cost (exclusive of packaging) was approximately $38, 
virtually no different from the median cost per unit that we derived 
from the single bills. We also examined the charges that were submitted 
for HCPCS code G0424 in CY 2010 and the CCRs that were applied to the 
charges for HCPCS code G0424 to calculate the estimated median cost for 
the code for this CY 2012 proposed rule. We also looked at the revenue 
codes under which charges for HCPCS code G0424 were reported and the 
percentage of cost that was associated with packaged costs, such as 
oxygen, drugs, and medical supplies. We found that the median line item 
charge for HCPCS code G0424 in the CY 2012 proposed rule data was 
approximately $150 and that the median CCR was 0.29. We also found that 
the most frequently reported revenue code for HCPCS code G0424 was 
revenue code 410 (Respiratory therapy), approximately 108,000 single 
bills, and with revenue code 948 (Pulmonary Rehabilitation), 
approximately 81,000 single bills, being the second most commonly 
reported revenue code for HCPCS code G0424. We found that only

[[Page 42241]]

0.02 percent of the cost of HCPCS code G0424 was packaged cost (for 
example, oxygen, drugs, and supplies). In general, our detailed 
examination of total and line item charges for pulmonary 
rehabilitation, the CCRs used to reduce the charges to estimated costs 
on the single bills, the revenue codes reported, and the absence of 
packaging on the single bills supports the proposed median cost of $38 
per unit as a valid estimate of the relative cost of one unit of HCPCS 
code G0424.
    In summary, our examination of the claims and cost data for HCPCS 
code G0424 causes us to believe that the proposed median cost that we 
calculated from claims data for HCPCS code G0424 was calculated 
correctly according to our longstanding standard median cost 
calculation methodology. Therefore, we are proposing to base the CY 
2012 OPPS payment rate for HCPCS code G0424 and APC 0102 on the median 
cost that we derive from applying our standard median calculation 
methodology to the CY 2010 charges and cost data for HCPCS code G0424.
6. Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing 
Electrodes (APC 0108)
    For CY 2011, only HCPCS code 33249 (Insertion or repositioning of 
electrode lead(s) for single or dual chamber pacing cardioverter-
defibrillator and insertion of pulse generator) is assigned to APC 0108 
(Insertion/Replacement/Repair of Cardioverter Defibrillator Leads). 
HCPCS code 33249, and therefore APC 0108, has a CY 2011 OPPS median 
cost of $26,543.91 on which the CY 2011 national unadjusted payment 
rate is based. For CY 2011, there are two HCPCS codes assigned to APC 
0418: CPT code 33225 (Insertion of pacing electrode, cardiac venous 
system, for left ventricular pacing, at time of insertion of pacing 
cardioverter-defibrillator or pacemaker pulse generator (including 
upgrade to dual chamber system) (List separately in addition to code 
for primary procedure)), and CPT code 33224 (Insertion of pacing 
electrode, cardiac venous system, for left ventricular pacing, with 
attachment to previously placed pacemaker or pacing cardioverter-
defibrillator pulse generator (including revision of pocket, removal, 
insertion, and/or replacement of generator)). APC 0418 is titled 
``Insertion of left ventricular pacing electrode'' for CY 2011. APC 
0418 has a CY 2011 median cost of $10,516.97 on which the CY 2011 
payment rate for HCPCS codes 33225 and 33224 are based. Both APCs 0108 
and 0418 are device-dependent APCs for which the criteria and process 
used for calculating the median costs are discussed in section 
II.A.2.d.1. of this proposed rule.
    In the CY 2010 claims data used for this CY 2012 proposed rule, 
HCPCS code 33249 has a median cost of approximately $27,020 based on 
6,139 single bills; HCPCS code 33225 has a median cost of approximately 
$34,018 based on 458 single bills, and HCPCS code 33224 has a median 
cost of approximately $12,418 based on 201 single bills. We are 
proposing to retain HCPCS code 33249 in APC 0108 but to reassign HCPCS 
code 33225 to APC 0108 on the basis that these codes are similar in 
clinical characteristics and median cost. We are proposing to revise 
the title of APC 0108 to read ``Insertion/Replacement/Repair of AICD 
Leads, Generator, and Pacing Electrodes'' for CY 2012. Under our 
standard methodology, using CY 2010 claims data, we calculated a median 
cost of approximately $27,361 for APC 0108.
    We also are proposing to assign HCPCS code 33224 to APC 0655 
because it is similar in clinical characteristics and median costs to 
the other services in APC 0655, and to revise the title of APC 0655 to 
read ``Insertion/Replacement/Conversion of a Permanent Dual Chamber 
Pacemaker or Pacing Electrode.'' We are proposing a CY 2012 OPPS median 
cost for APC 0655 of approximately $9,785 upon which we are proposing 
to base the CY 2012 OPPS payment rate. We are proposing the changes to 
the titles of APCs 0108 and 0655 to better describe the proposed 
content of the APCs. Because the reassignment of HCPCS code 33225 to 
APC 0108 and HCPCS 33244 to APC 0655 would result in APC 0418 
containing no HCPCS codes, we are proposing to delete APC 0418.
    As we discuss in detail in section III.D. of this proposed rule, we 
are proposing that HCPCS codes 33249 and 33225 would be paid under APC 
0108 only if they are not reported on the same date of service. We are 
proposing that, when HCPCS codes 33249 and 33225 are reported on the 
same date of service, they would be paid through proposed new composite 
APC 8009 (Cardiac Resynchronization Therapy with Defibrillator 
Composite) and that the payment rate for proposed composite APC 8009 
would be limited to the proposed IPPS standardized payment amount for 
MS-DRG 227 (Cardiac Defibrillator Implant without Cardiac 
Catheterization and without Medical Complications and Comorbidities), 
which is currently estimated to be $26,364.93. In other words, we are 
proposing to pay APC 8009 at the lesser of the APC 8009 median cost or 
the IPPS standardized payment rate for MS-DRG 227. We calculated the 
standardized payment rate for MS-DRG 227 ($26,364.93) by multiplying 
the normalized weight from Table 5 of the FY 2012 IPPS/LTCH PPS 
proposed rule (5.1370) by the sum of the nonlabor and labor-related 
shares of the proposed FY 2012 IPPS operating standardized amount 
(nonwage-adjusted) labor-related share $3,182.06 + nonlabor-related 
share $1,950.30 = $5,132.36) which were obtained from Table1B. For 
further detail on the calculation of the IPPS proposed FY 2012 payment 
rates, we refer readers to the FY 2012 IPPS/LTCH PPS proposed rule (76 
FR 26028 through 26029).
    In addition, under the authority of section 1833(t)(2)(E) of the 
Act, which gives the Secretary the authority to make adjustments to 
ensure equitable payments, we are proposing to limit the payment for 
services that are assigned to APC 0108, to the proposed IPPS 
standardized payment amount for MS-DRG 227. In other words, we are 
proposing to pay APC 0108 at the lesser of the APC 0108 median cost or 
the IPPS standardized payment rate for MS-DRG 227. We believe that MS-
DRG 227 is the most comparable DRG to APC 0108 because, like APC 0108, 
MS-DRG 227 includes implantation of a defibrillator in patients who do 
not have medical complication or comorbidities. If we were to base 
payment for APC 0108 on our calculated median cost of approximately 
$27,361, it would result in a payment under the CY 2012 OPPS that would 
exceed our proposed standardized payment under the IPPS for MS-DRG 227 
of $26,364.93. We do not believe that it would be equitable to pay more 
for the implantation of a cardioverter defibrillator or implantation of 
a left ventricular pacing electrode for an outpatient encounter, which, 
by definition, includes fewer items and services than an inpatient stay 
during which the patient has the same procedure. In contrast, the 
amount Medicare would pay for an inpatient stay includes continuous 
skilled nursing care, room and board, all medications, and all 
diagnostic tests for an average of 3 days.
    We believe that limiting OPPS payment for the services described by 
HCPCS codes 33249 and 33225 to the IPPS MS-DRG payment will ensure 
sufficient, appropriate, and equitable payment to hospitals because 
patients who receive these services in the hospital outpatient setting 
are not as sick as patients who have been admitted to receive this same 
service in the hospital inpatient setting. Therefore, we

[[Page 42242]]

expect it would be less costly to care for these patients as 
outpatients, who would also spend less time in the facility and receive 
fewer services. In addition, we believe that a payment cap is necessary 
to ensure that we do not create an inappropriate payment incentive to 
implant ICDs and left ventricular leads in one setting of care over 
another by paying more in the outpatient setting compared to the 
inpatient setting.
    We are proposing to continue all other standard policies that apply 
to device-dependent procedures, including the procedure-to-device edits 
that were established beginning in the CY 2005 OPPS for claims 
processing and median calculation; and calculation of and application 
of device offset amounts when pass-through devices are used and when an 
``FB'' or ``FC'' modifier is attached to the line for either CPT code 
33249 or 33225. However, for CY 2012, we are proposing that if the APC 
0108 median cost that we will calculate for the CY 2012 OPPS/ASC final 
rule exceeds the FY 2012 IPPS standardized payment rate for MS-DRG 227, 
as adopted in the FY 2012 IPPS/LTCH PPS final rule, we would establish 
the OPPS payment amount at the IPPS standardized payment rate for MS-
DRG 227 for FY 2012. In the FY 2012 IPPS/LTCH PPS proposed rule, this 
amount is $26,364.93. If the median cost for APC 0108 as calculated 
using the CY 2012 OPPS/ASC final rule data is less than the FY 2012 
IPPS standardized payment rate for MS-DRG 227, we would base the 
payment for APC 0108 on the CY 2012 OPPS/ASC final rule median cost for 
APC 0108. These proposed changes would be made in a budget neutral 
manner, in the same way that payment for other APCs is budget neutral 
within the OPPS.

IV. Proposed OPPS Payment for Devices

A. Proposed Pass-Through Payments for Devices

1. Expiration of Transitional 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. The date on which a pass-through category is in effect is the 
first date on which pass-through payment may be made for any medical 
device that is described by such category. We propose and finalize the 
dates for expiration of pass-through status for device categories as 
part of the OPPS annual update.
    We also have an established policy to package the costs of the 
devices that are no longer eligible for pass-through payments into the 
costs of the procedures with which the devices are reported in the 
claims data used to set the payment rates (67 FR 66763). Brachytherapy 
sources, which are now separately paid in accordance with section 
1833(t)(2)(H) of the Act, are an exception to this established policy.
    There currently is one new device category eligible for pass-
through payment, described by HCPCS code C1749 (Endoscope, retrograde 
imaging/illumination colonoscope device (implantable), which we 
announced in the October 2010 OPPS Update (Transmittal 2050, Change 
Request 7117, dated September 17, 2010). There are no categories for 
which we proposed expiration of pass-through status in CY 2011. If we 
create new device categories for pass-through payment status during the 
remainder of CY 2011, we will propose future expiration dates in 
accordance with the statutory requirement that they be eligible for 
pass-through payments for at least 2, but not more than 3, years from 
the date on which pass-through payment for any medical device described 
by the category may first be made.
b. Proposed CY 2012 Policy
    As stated above, section 1833(t)(6)(B)(iii) of the Act requires 
that, under the OPPS, a category of devices be eligible for 
transitional pass-through payments for at least 2, but not more than 3 
years. Device pass-through category C1749 was established for pass-
through payments on October 1, 2010, 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 2012. Therefore, we are proposing an expiration date for 
pass-through payment for device category C1749 of December 31, 2012. 
Therefore, under our proposal, beginning January 1, 2013, device 
category C1749 will no longer be eligible for pass-through payments.
2. Proposed Provisions for Reducing Transitional Pass-Through Payments 
to Offset Costs Packaged into APC Groups
a. Background
    We have an established policy to estimate the portion of each APC 
payment rate that could reasonably be attributed to the cost of the 
associated devices that are eligible for pass-through payments (66 FR 
59904). We deduct from the pass-through payments for identified device 
categories eligible for pass-through payments an amount that reflects 
the portion of the APC payment amount that we determine is associated 
with the cost of the device, defined as the device APC offset amount, 
as required by section 1833(t)(6)(D)(ii) of the Act. We have 
consistently employed an established methodology to estimate the 
portion of each APC payment rate that could reasonably be attributed to 
the cost of an associated device eligible for pass-through payment, 
using claims data from the period used for the most recent 
recalibration of the APC rates (72 FR 66751 through 66752). We 
establish and update the applicable device APC offset amounts for 
eligible pass-through device categories through the transmittals that 
implement the quarterly OPPS updates.
    We currently have published a list of all procedural APCs with the 
CY 2011 portions (both percentages and dollar amounts) of the APC 
payment amounts that we determine are associated with the cost of 
devices, on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/01_overview.asp. The dollar amounts are used as 
the device APC offset amounts. In addition, in accordance with our 
established practice, the device APC offset amounts in a related APC 
are used in order to evaluate whether the cost of a device in an 
application for a new device category for pass-through payment is not 
insignificant in relation to the APC payment amount for the service 
related to the category of devices, as specified in our regulations at 
Sec.  419.66(d).
    As of CY 2009, the costs of implantable biologicals without pass-
through status are packaged into the payment for the procedures in 
which they are inserted or implanted because implantable biologicals 
without pass-through status are not separately paid (73 FR 68633 
through 68636). For CY 2010, we finalized a new policy to specify that 
the pass-through evaluation process and pass-through payment 
methodology for implantable biologicals that are surgically inserted or 
implanted (through a surgical incision or a natural orifice; also 
referred to as ``implantable

[[Page 42243]]

biologicals'') and that are newly approved for pass-through status 
beginning on or after January 1, 2010, be the device pass-through 
process and payment methodology only. As a result, for CY 2010, we 
included implantable biologicals in our calculation of the device APC 
offset amounts (74 FR 60476). We calculated and set the device APC 
offset amount for a newly established device pass-through category, 
which could include a newly eligible implantable biological, beginning 
in CY 2010 using the same methodology we have historically used to 
calculate and set device APC offset amounts for device categories 
eligible for pass-through payment (72 FR 66751 through 66752), with one 
modification. Because implantable biologicals are considered devices 
rather than drugs for purposes of pass-through evaluation and payment 
under our established policy, the device APC offset amounts include the 
costs of implantable biologicals. For CY 2010, we also finalized a 
policy to utilize the revised device APC offset amounts to evaluate 
whether the cost of an implantable biological in an application for a 
new device category for pass-through payment is not insignificant in 
relation to the APC payment amount for the service related to the 
category of devices. Further, for CY 2010, we no longer used the 
``policy-packaged'' drug APC offset amounts for evaluating the cost 
significance of implantable biological pass-through applications under 
review and for setting the APC offset amounts that would apply to pass-
through payment for those implantable biologicals, effective for new 
pass-through status determinations beginning in CY 2010 (74 FR 60463).
    For CY 2011, we continued our policy that the pass-through 
evaluation process and pass-through payment methodology for implantable 
biologicals that are surgically inserted or implanted (through a 
surgical incision or a natural orifice) and that are newly approved for 
pass-through status beginning on or after January 1, 2010, be the 
device pass-through process and payment methodology only.
b. Proposed CY 2012 Policy
    We are proposing to continue our policy, for CY 2012, 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 are 
proposing to continue our established policies for calculating and 
setting the device APC offset amounts for each device category eligible 
for pass-through payment. In addition, we are proposing to continue to 
review each new device category on a case-by-case basis to determine 
whether device costs associated with the new category are already 
packaged into the existing APC structure. If device costs packaged into 
the existing APC structure are associated with the new category, we 
would deduct the device APC offset amount from the pass-through payment 
for the device category. As stated earlier, these device APC offset 
amounts also would be used in order to evaluate whether the cost of a 
device in an application for a new device category for pass-through 
payment is not insignificant in relation to the APC payment amount for 
the service related to the category of devices (Sec.  419.66(d)).
    For CY 2012, we also are proposing to continue our policy 
established in CY 2010 to include implantable biologicals in our 
calculation of the device APC offset amounts. In addition, we are 
proposing to continue to calculate and set any device APC offset amount 
for a new device pass-through category that includes a newly eligible 
implantable biological beginning in CY 2012 using the same methodology 
we have historically used to calculate and set device APC offset 
amounts for device categories eligible for pass-through payment, and to 
include the costs of implantable biologicals in the calculation of the 
device APC offset amounts, as we first finalized and implemented for CY 
2010.
    In addition, we are proposing to update, on the CMS Web site at 
http://www.cms.gov/HospitalOutpatientPPS, the list of all procedural 
APCs with the final CY 2012 portions of the APC payment amounts that we 
determine are associated with the cost of devices so that this 
information is available for use by the public in developing potential 
CY 2012 device pass-through payment applications and by CMS in 
reviewing those applications.
    In summary, for CY 2012, consistent with the policy established for 
CY 2010, we are proposing to continue the following policies related to 
pass-through payment for devices: (1) treating implantable biologicals 
that are surgically inserted or implanted (through a surgical incision 
or a natural orifice) and that are newly approved for pass-through 
status on or after January 1, 2010, as devices for purposes of the OPPS 
pass-through evaluation process and payment methodology; (2) including 
implantable biologicals in calculating the device APC offset amounts; 
(3) using the device APC offset amounts to evaluate whether the cost of 
a device (defined to include implantable biologicals) in an application 
for a new device category for pass-through payment is not insignificant 
in relation to the APC payment amount for the service related to the 
category of devices; and (4) reducing device pass-through payments 
based on device costs already included in the associated procedural 
APCs, when we determine that device costs associated with the new 
category are already packaged into the existing APC structure.

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

1. Background
    In recent years, there have been several field actions on and 
recalls of medical devices as a result of implantable device failures. 
In many of these cases, the manufacturers have offered devices without 
cost to the hospital or with credit for the device being replaced if 
the patient required a more expensive device. In order to ensure that 
payment rates for procedures involving devices reflect only the full 
costs of those devices, our standard ratesetting methodology for 
device-dependent APCs uses only claims that contain the correct device 
code for the procedure, do not contain token charges, do not contain 
the ``FB'' modifier signifying that the device was furnished without 
cost or with a full credit, and do not contain the ``FC'' modifier 
signifying that the device was furnished with partial credit. As 
discussed in section II.A.2.d.(1) of this proposed rule, we are 
proposing to continue to use our standard ratesetting methodology for 
device-dependent APCs for CY 2012.
    To ensure equitable payment when the hospital receives a device 
without cost or with full credit, in CY 2007, we implemented a policy 
to reduce the payment for specified device-dependent APCs by the 
estimated portion of the APC payment attributable to device costs (that 
is, the device offset) when the hospital receives a specified device at 
no cost or with full credit (71 FR 68071 through 68077). Hospitals are 
instructed to report no cost/full credit cases using the ``FB'' 
modifier on the line with the procedure code in which the no cost/full 
credit device is used. In cases in which the device is furnished 
without

[[Page 42244]]

cost or with full credit, the hospital is instructed to report a token 
device charge of less than $1.01. In cases in which the device being 
inserted is an upgrade (either of the same type of device or to a 
different type of device) with a full credit for the device being 
replaced, the hospital is instructed to report as the device charge the 
difference between its usual charge for the device being implanted and 
its usual charge for the device for which it received full credit. In 
CY 2008, we expanded this payment adjustment policy to include cases in 
which hospitals receive partial credit of 50 percent or more of the 
cost of a specified device. Hospitals are instructed to append the 
``FC'' modifier to the procedure code that reports the service provided 
to furnish the device when they receive a partial credit of 50 percent 
or more of the cost of the new device.
    We reduce the OPPS payment for the implantation procedure by 100 
percent of the device offset for no cost/full credit cases when both a 
specified device code is present on the claim and the procedure code 
maps to a specified APC. Payment for the implantation procedure is 
reduced by 50 percent of the device offset for partial credit cases 
when both a specified device code is present on the claim and the 
procedure code maps to a specified APC. Beneficiary copayment is based 
on the reduced payment amount when either the ``FB'' or the ``FC'' 
modifier is billed and the procedure and device codes appear on the 
lists of procedures and devices to which this policy applies. We refer 
readers to the CY 2008 OPPS/ASC final rule with comment period for more 
background information on the ``FB'' and ``FC'' payment adjustment 
policies (72 FR 66743 through 66749).
2. Proposed APCs and Devices Subject to the Adjustment Policy
    For CY 2012, we are proposing to continue the existing policy of 
reducing OPPS payment for specified APCs by 100 percent of the device 
offset amount when a hospital furnishes a specified device without cost 
or with a full credit and by 50 percent of the device offset amount 
when the hospital receives partial credit in the amount of 50 percent 
or more of the cost for the specified device. Because the APC payments 
for the related services are specifically constructed to ensure that 
the full cost of the device is included in the payment, we continue to 
believe it is appropriate to reduce the APC payment in cases in which 
the hospital receives a device without cost, with full credit, or with 
partial credit, in order to provide equitable payment in these cases. 
(We refer readers to section II.A.2.d.(1) of this proposed rule for a 
description of our standard ratesetting methodology for device-
dependent APCs.) Moreover, the payment for these devices comprises a 
large part of the APC payment on which the beneficiary copayment is 
based, and we continue to believe it is equitable that the beneficiary 
cost sharing reflects the reduced costs in these cases.
    For CY 2012, we also are proposing to continue using the three 
criteria established in the CY 2007 OPPS/ASC final rule with comment 
period for determining the APCs to which this policy applies (71 FR 
68072 through 68077). Specifically: (1) all procedures assigned to the 
selected APCs must involve implantable devices that would be reported 
if device insertion procedures were performed; (2) the required devices 
must be surgically inserted or implanted devices that remain in the 
patient's body after the conclusion of the procedure (at least 
temporarily); and (3) the device offset amount must be significant, 
which, for purposes of this policy, is defined as exceeding 40 percent 
of the APC cost. We also are proposing to continue to restrict the 
devices to which the APC payment adjustment would apply to a specific 
set of costly devices to ensure that the adjustment would not be 
triggered by the implantation of an inexpensive device whose cost would 
not constitute a significant proportion of the total payment rate for 
an APC. As we stated in the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 71925), we continue to believe these criteria are 
appropriate because free devices and device credits are likely to be 
associated with particular cases only when the device must be reported 
on the claim and is of a type that is implanted and remains in the body 
when the beneficiary leaves the hospital. We believe that the reduction 
in payment is appropriate only when the cost of the device is a 
significant part of the total cost of the APC into which the device 
cost is packaged, and that the 40-percent threshold is a reasonable 
definition of a significant cost.
    We examined the offset amounts calculated from the CY 2012 proposed 
rule data and the clinical characteristics of APCs to determine whether 
the APCs to which the no cost/full credit and partial credit device 
adjustment policy applied in CY 2011 continue to meet the criteria for 
CY 2012, and to determine whether other APCs to which the policy did 
not apply in CY 2011 would meet the criteria for CY 2012. Based on the 
CY 2010 claims data available for this proposed rule, we are not 
proposing any changes to the APCs and devices to which this policy 
applies. However, as discussed in section II.A.2.e.(6) of this proposed 
rule, we are proposing to delete APC 0418 (Insertion of Left 
Ventricular Pacing Electrode) for CY 2012 and, therefore, are proposing 
to remove this APC from the list of APCs to which the no cost/full 
credit and partial credit device adjustment policy would apply in CY 
2012.
    Table 24 below lists the proposed APCs to which the payment 
adjustment policy for no cost/full credit and partial credit devices 
would apply in CY 2012 and displays the proposed payment adjustment 
percentages for both no cost/full credit and partial credit 
circumstances. We are proposing that the no cost/full credit adjustment 
for each APC to which this policy would continue to apply would be the 
device offset percentage for the APC (the estimated percentage of the 
APC cost that is attributable to the device costs that are packaged 
into the APC). We also are proposing that the partial credit device 
adjustment for each APC would continue to be 50 percent of the no cost/
full credit adjustment for the APC.
    Table 25 below lists the proposed devices to which the payment 
adjustment policy for no cost/full credit and partial credit devices 
would apply in CY 2012. In the CY 2012 OPPS/ASC final rule with comment 
period, we will update the lists of APCs and devices to which the no 
cost/full credit and partial credit device adjustment policy would 
apply for CY 2012, consistent with the three selection criteria 
discussed earlier in this section, based on the final CY 2010 claims 
data available for the final rule with comment period.
    We are proposing, for CY 2012, that OPPS payments for implantation 
procedures to which the ``FB'' modifier is appended be reduced by 100 
percent of the device offset for no cost/full credit cases when both a 
device code listed in Table 25 below, is present on the claim and the 
procedure code maps to an APC listed in Table 24 below. We are also 
proposing that OPPS payments for implantation procedures to which the 
``FC'' modifier is appended are reduced by 50 percent of the device 
offset when both a device code listed in Table 25 is present on the 
claim and the procedure code maps to an APC listed in Table 24. 
Beneficiary copayment is based on the reduced amount when either the 
``FB'' modifier or the ``FC'' modifier is billed and the procedure and 
device codes appear on the lists of procedures and devices to which 
this policy applies.

[[Page 42245]]

  Table 24--Proposed APCs to Which the No Cost/Full Credit and Partial
         Credit Device Adjustment Policy Would Apply in CY 2012
------------------------------------------------------------------------
                                            Proposed CY     Proposed CY
                                            2012 device     2012 device
  Proposed CY      Proposed CY 2012 APC       offset          offset
    2012 APC              title           percentage for  percentage for
                                           no cost/full   partial credit
                                            credit case        case
------------------------------------------------------------------------
0039...........  Level I Implantation of             85%             43%
                  Neurostimulator
                  Generator.
0040...........  Level I Implantation/               54%             27%
                  Revision/Replacement
                  of Neurostimulator
                  Electrodes.
0061...........  Level II Implantation/              64%             32%
                  Revision/Replacement
                  of Neurostimulator
                  Electrodes.
0089...........  Insertion/Replacement               71%             35%
                  of Permanent Pacemaker
                  and Electrodes.
0090...........  Insertion/Replacement               73%             37%
                  of Pacemaker Pulse
                  Generator.
0106...........  Insertion/Replacement               43%             21%
                  of Pacemaker Leads and/
                  or Electrodes.
0107...........  Insertion of                        88%             44%
                  Cardioverter-
                  Defibrillator.
0108...........  Insertion/Replacement/              87%             43%
                  Repair of Cardioverter-
                  Defibrillator Leads.
0227...........  Implantation of Drug                81%             40%
                  Infusion Device.
0259...........  Level VII ENT                       83%             41%
                  Procedures.
0315...........  Level II Implantation               88%             44%
                  of Neurostimulator
                  Generator.
0318...........  Implantation of Cranial             86%             43%
                  Neurostimulator Pulse
                  Generator and
                  Electrode.
0385...........  Level I Prosthetic                  61%             30%
                  Urological Procedures.
0386...........  Level II Prosthetic                 70%             35%
                  Urological Procedures.
0425...........  Level II Arthroplasty               60%             30%
                  or Implantation with
                  Prosthesis.
0648...........  Level IV Breast Surgery             44%             22%
0654...........  Insertion/Replacement               74%             37%
                  of a permanent dual
                  chamber pacemaker.
0655...........  Insertion/Replacement/              73%             37%
                  Conversion of a
                  permanent dual chamber
                  pacemaker.
0680...........  Insertion of Patient                72%             36%
                  Activated Event
                  Recorders.
------------------------------------------------------------------------

 Table 25--Proposed Devices to Which the No Cost/Full Credit and Partial
         Credit Device Adjustment Policy Would Apply In CY 2012
------------------------------------------------------------------------
     CY 2012 Device HCPCS code            CY 2012 Short descriptor
------------------------------------------------------------------------
C1721.............................  AICD, dual chamber.
C1722.............................  AICD, single chamber.
C1728.............................  Cath, brachytx seed adm.
C1764.............................  Event recorder, cardiac.
C1767.............................  Generator, neurostim, imp.
C1771.............................  Rep dev, urinary, w/sling.
C1772.............................  Infusion pump, programmable.
C1776.............................  Joint device (implantable).
C1777.............................  Lead, AICD, endo single coil.
C1778.............................  Lead, neurostimulator.
C1779.............................  Lead, pmkr, transvenous VDD.
C1785.............................  Pmkr, dual, rate-resp.
C1786.............................  Pmkr, single, rate-resp.
C1789.............................  Prosthesis, breast, imp.
C1813.............................  Prosthesis, penile, inflatab.
C1815.............................  Pros, urinary sph, imp.
C1820.............................  Generator, neuro rechg bat sys.
C1881.............................  Dialysis access system.
C1882.............................  AICD, other than sing/dual.
C1891.............................  Infusion pump, non-prog, perm.
C1895.............................  Lead, AICD, endo dual coil.
C1896.............................  Lead, AICD, non sing/dual.
C1897.............................  Lead, neurostim, test kit.
C1898.............................  Lead, pmkr, other than trans.
C1899.............................  Lead, pmkr/AICD combination.
C1900.............................  Lead coronary venous.
C2619.............................  Pmkr, dual, non rate-resp.
C2620.............................  Pmkr, single, non rate-resp.
C2621.............................  Pmkr, other than sing/dual.
C2622.............................  Prosthesis, penile, non-inf.
C2626.............................  Infusion pump, non-prog, temp.
C2631.............................  Rep dev, urinary, w/o sling.
L8600.............................  Implant breast silicone/eq.
L8614.............................  Cochlear device/system.
L8680.............................  Implt neurostim elctr each.
L8685.............................  Implt nrostm pls gen sng rec.
L8686.............................  Implt nrostm pls gen sng non.
L8687.............................  Implt nrostm pls gen dua rec.
L8688.............................  Implt nrostm pls gen dua non
L8690.............................  Aud osseo dev, int/ext comp.
------------------------------------------------------------------------

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

A. Proposed OPPS Transitional 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 CY 2012 pass-through drugs and biologicals 
and their designated APCs are assigned status indicator ``G'' in 
Addenda A and B to this proposed rule, which are referenced in section 
XVII. of this proposed rule and available via the Internet.
    Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through 
payment amount, in the case of a drug or biological, is the amount by 
which the amount determined under section 1842(o) of the Act for the 
drug or biological exceeds the portion of the otherwise applicable 
Medicare OPD fee

[[Page 42246]]

schedule that the Secretary determines is associated with the drug or 
biological. If the drug or biological is covered under a competitive 
acquisition contract under section 1847B of the Act, the pass-through 
payment amount is determined by the Secretary to be equal to the 
average price for the drug or biological for all competitive 
acquisition areas and the year established under such section as 
calculated and adjusted by the Secretary. As we noted in the CY 2009 
OPPS/ASC final rule with comment period (73 FR 68633), the Part B drug 
CAP program was postponed beginning in CY 2009 (Medicare Learning 
Network (MLN) Matters Special Edition 0833, available via the Web site: 
http://www.cms.gov). As of publication of this proposed rule, the 
postponement of the Part B drug CAP program remains in effect, and 
there is no effective CAP program rate for pass-through drugs and 
biologicals as of January 1, 2009. Consistent with what we indicated in 
the CY 2011 OPPS/ASC final rule with comment period (75 FR 71928), if 
the program is reinstituted during CY 2012 and Part B drug CAP rates 
become available, we would again use the Part B drug CAP rate for pass-
through drugs and biologicals if they are a part of the Part B drug CAP 
program. Otherwise, we would continue to use the rate that would be 
paid in the physician's office setting for all drugs and biologicals 
with pass-through status.
    This methodology for determining the pass-through payment amount is 
set forth in regulations at 42 CFR 419.64, which specify that the pass-
through payment equals the amount determined under section 1842(o) of 
the Act minus the portion of the APC payment that CMS determines is 
associated with the drug or biological. Section 1847A of the Act 
establishes the average sales price (ASP) methodology, which is used 
for payment for drugs and biologicals described in section 
1842(o)(1)(C) of the Act furnished on or after January 1, 2005. The ASP 
methodology, as applied under the OPPS, uses several sources of data as 
a basis for payment, including the ASP, the wholesale acquisition cost 
(WAC), and the average wholesale price (AWP). In this proposed rule, 
the term ``ASP methodology'' and ``ASP-based'' are inclusive of all 
data sources and methodologies described therein. Additional 
information on the ASP methodology can be found on the CMS Web site at: 
http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice.
    For CYs 2005, 2006, and 2007, we estimated the OPPS pass-through 
payment amount for drugs and biologicals to be zero based on our 
interpretation that the ``otherwise applicable Medicare OPD fee 
schedule'' amount was equivalent to the amount to be paid for pass-
through drugs and biologicals under section 1842(o) of the Act (or 
section 1847B of the Act, if the drug or biological is covered under a 
competitive acquisition contract). We concluded for those years that 
the resulting difference between these two rates would be zero. For CYs 
2008 and 2009, we estimated the OPPS 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. Our proposed OPPS pass-through payment estimate for 
drugs and biologicals in CY 2012 is $19 million, which is discussed in 
section VI.B. of this proposed rule.
    The pass-through application and review process for drugs and 
biologicals is explained on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/04_passthrough_payment.asp.
2. Proposed Drugs and Biologicals With Expiring Pass-Through Status in 
CY 2012
    We are proposing that the pass-through status of 19 drugs and 
biologicals would expire on December 31, 2011, as listed in Table 26 
below. All of these drugs and biologicals will have received OPPS pass-
through payment for at least 2 years and no more than 3 years by 
December 31, 2011. These drugs and biologicals were approved for pass-
through status on or before January 1, 2010. With the exception of 
those groups of drugs and biologicals that are always packaged when 
they do not have pass-through status, specifically diagnostic 
radiopharmaceuticals, contrast agents, and implantable biologicals, our 
standard methodology for providing payment for drugs and biologicals 
with expiring pass-through status in an upcoming calendar year is to 
determine the product's estimated per day cost and compare it with the 
OPPS drug packaging threshold for that calendar year (which is proposed 
at $80 for CY 2012), as discussed further in section V.B.2. of this 
proposed rule. If the drug's or biological's estimated per day cost is 
less than or equal to the applicable OPPS drug packaging threshold, we 
would package payment for the drug or biological into the payment for 
the associated procedure in the upcoming calendar year. If the 
estimated per day cost of the drug or biological is greater than the 
OPPS drug packaging threshold, we would provide separate payment at the 
applicable relative ASP-based payment amount (which is proposed at 
ASP+4 percent for CY 2012, as discussed further in section V.B.3. of 
this proposed rule). Section V.B.2.d. of this proposed rule discusses 
the packaging of all nonpass-through contrast agents, diagnostic 
radiopharmaceuticals, and implantable biologicals.

 Table 26--Proposed Drugs and Biologicals for Which Pass-Through Status
                      Will Expire December 31, 2011
------------------------------------------------------------------------
  Proposed CY 2012                              Proposed CY  Proposed CY
     HCPCS code       CY 2012 long descriptor     2012 SI      2012 APC
------------------------------------------------------------------------
A9582..............  Iodine I-123 iobenguane,             N          N/A
                      diagnostic, per study
                      dose, up to 15
                      millicuries.
A9583..............  Injection, gadofosveset              N          N/A
                      trisodium, 1 ml.
C9250..............  Human plasma fibrin                  K         9250
                      sealant, vapor-heated,
                      solvent-detergent
                      (Artiss), 2 ml.
C9360..............  Dermal substitute,                   K         9360
                      native, non-denatured
                      collagen, neonatal
                      bovine origin (SurgiMend
                      Collagen Matrix), per
                      0.5 square centimeters.
C9361..............  Collagen matrix nerve                N          N/A
                      wrap (NeuroMend Collagen
                      Nerve Wrap), per 0.5
                      centimeter length.
C9362..............  Porous purified collagen             N          N/A
                      matrix bone void filler
                      (Integra Mozaik
                      Osteoconductive Scaffold
                      Strip), per 0.5 cc.
C9363..............  Skin substitute, Integra             K         9363
                      Meshed Bilayer Wound
                      Matrix, per square
                      centimeter.
C9364..............  Porcine implant,                     N          N/A
                      Permacol, per square
                      centimeter.
J0598..............  Injection, C-1 esterase              K         9251
                      inhibitor (human),
                      Cinryze, 10 units.
J0641..............  Injection, levoleucovorin            K         1236
                      calcium, 0.5 mg.

[[Page 42247]]

 
J0718..............  Injection, certolizumab              K         9249
                      pegol, 1 mg.
J1680..............  Injection, human                     K         1290
                      fibrinogen concentrate,
                      100 mg.
J2426..............  Injection, paliperidone              K         9255
                      palmitate, 1 mg.
J2562..............  Injection, plerixafor, 1             K         9252
                      mg.
J7312..............  Injection, dexamethasone             K         9256
                      intravitreal implant,
                      0.1 mg.
J8705..............  Topotecan, oral, 0.25 mg.            K         1238
J9155..............  Injection, degarelix, 1              K         1296
                      mg.
J9328..............  Injection, temozolomide,             K         9253
                      1 mg.
Q0138..............  Injection, Ferumoxytol,              K         1297
                      for treatment of iron
                      deficiency anemia, 1 mg.
------------------------------------------------------------------------

3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With New or 
Continuing Pass-Through Status in CY 2012
    We are proposing to continue pass-through status in CY 2012 for 33 
drugs and biologicals. None of these drugs and biologicals will have 
received OPPS pass-through payment for at least 2 years and no more 
than 3 years by December 31, 2011. These drugs and biologicals, which 
were approved for pass-through status between April 1, 2010 and July 1, 
2011, are listed in Table 27 below. The APCs and HCPCS codes for these 
drugs and biologicals approved for pass-through status through April 1, 
2011, are assigned status indicator ``G'' in Addenda A and B, which are 
referenced in section XVIII of this proposed rule and available via the 
Internet.
    Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through 
payment for pass-through drugs and biologicals (the pass-through 
payment amount) as the difference between the amount authorized under 
section 1842(o) of the Act (or, if the drug or biological is covered 
under a CAP under section 1847B of the Act, an amount determined by the 
Secretary equal to the average price for the drug or biological for all 
competitive acquisition areas and the year established under such 
section as calculated and adjusted by the Secretary) and the portion of 
the otherwise applicable OPD fee schedule that the Secretary determines 
is associated with the drug or biological. Payment for drugs and 
biologicals with pass-through status under the OPPS is currently made 
at the physician's office payment rate of ASP+6 percent. We believe it 
is consistent with the statute to propose to continue to provide 
payment for drugs and biologicals with pass-through status at a rate of 
ASP+6 percent in CY 2012, the amount that drugs and biologicals receive 
under section 1842(o) of the Act. Thus, for CY 2012, we are proposing 
to pay for 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 2012. Therefore, the difference 
between ASP+4 percent that we are proposing to pay for nonpass-through 
separately payable drugs under the CY 2012 OPPS and ASP+6 percent would 
be the CY 2012 pass-through payment amount for these drugs and 
biologicals. In the case of pass-through contrast agents and diagnostic 
radiopharmaceuticals, their pass-through payment amount would be equal 
to ASP+6 percent because, if not on pass-through status, payment for 
these products would be packaged into the associated procedures. We 
note that we are proposing to expire pass-through status for the 
remaining three implantable biologicals approved on or before January 
1, 2010, under pass-through status as a drug or biological. Therefore, 
as described in the CY 2010 OPPS/ASC final rule with comment period (74 
FR 60476) and as proposed in this proposed rule, implantable 
biologicals that are surgically inserted or implanted (through a 
surgical incision or a natural orifice) would be evaluated under the 
device pass-through process and paid according to the device payment 
methodology. Payment for nonpass-through implantable biologicals would 
continue to be packaged into the payment for the associated procedure 
as described in section V.B.2.d. of this proposed rule.
    In addition, we are proposing to continue to update pass-through 
payment rates on a quarterly basis on the CMS Web site during CY 2012 
if later quarter ASP submissions (or more recent WAC or AWP 
information, as applicable) indicate that adjustments to the payment 
rates for these pass-through drugs or biologicals are necessary. For a 
full description of this policy, we refer readers to the CY 2006 OPPS/
ASC final rule with comment period (70 FR 42722 and 42723). If the Part 
B drug CAP is reinstated during CY 2012, and a drug or biological that 
has been granted pass-through status for CY 2012 becomes covered under 
the Part B drug CAP, we are proposing to provide pass-through payment 
at the Part B drug CAP rate and to make the adjustments to the payment 
rates for these drugs and biologicals on a quarterly basis, as 
appropriate. As is our standard methodology, we annually review new 
permanent HCPCS codes and delete temporary HCPCS C-codes if an 
alternate permanent HCPCS code is available for purposes of OPPS 
billing and payment.
    In CY 2012, as is consistent with our CY 2011 policy for diagnostic 
and therapeutic radiopharmaceuticals, we are proposing to provide 
payment for both diagnostic and therapeutic radiopharmaceuticals that 
are granted pass-through status based on the ASP methodology. As stated 
above, for purposes of pass-through payment, we consider 
radiopharmaceuticals to be drugs under the OPPS. Therefore, if a 
diagnostic or therapeutic radiopharmaceutical receives pass-through 
status during CY 2012, we are proposing 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 are proposing 
to 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 are proposing 
to provide payment for the pass-through radiopharmaceutical at 95 
percent of its most recent AWP.
    As discussed in more detail in section V.B.2.d. of this proposed 
rule, over the last 4 years, we implemented a policy whereby payment 
for all nonpass-through diagnostic

[[Page 42248]]

radiopharmaceuticals, contrast agents, and implantable biologicals is 
packaged into payment for the associated procedure. We are proposing to 
continue the packaging of these items, regardless of their per day 
cost, in CY 2012. As stated earlier, pass-through payment is the 
difference between the amount authorized under section 1842(o) of the 
Act (or, if the drug or biological is covered under a CAP under section 
1847B of the Act, an amount determined by the Secretary equal to the 
average price for the drug or biological for all competitive 
acquisition areas and the year established under such section as 
calculated and adjusted by the Secretary) and the portion of the 
otherwise applicable OPD fee schedule that the Secretary determines is 
associated with the drug or biological. Because payment for a drug that 
is either a diagnostic radiopharmaceutical or a contrast agent 
(identified as a ``policy-packaged'' drug, first described in the CY 
2009 OPPS/ASC final rule with comment period (73 FR 68639)) would 
otherwise be packaged if the product did not have pass-through status, 
we believe the otherwise applicable OPPS payment amount would be equal 
to the ``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 are 
described in more detail in section IV.A.2. of this proposed rule. It 
follows that the copayment for the nonpass-through payment portion (the 
otherwise applicable fee schedule amount that we would also offset from 
payment for the drug or biological if a payment offset applies) of the 
total OPPS payment for those drugs and biologicals would, therefore, be 
accounted for in the copayment for the associated clinical APC in which 
the drug or biological is used.
    According to section 1833(t)(8)(E) of the Act, the amount of 
copayment associated with pass-through items is equal to the amount of 
copayment that would be applicable if the pass-through adjustment was 
not applied. Therefore, as we did in CY 2011, we are proposing to 
continue to set the associated copayment amount for pass-through 
diagnostic radiopharmaceuticals and contrast agents that would 
otherwise be packaged if the item did not have pass-through status to 
zero for CY 2012. The separate OPPS payment to a hospital for the pass-
through diagnostic radiopharmaceutical or contrast agent, after taking 
into account any applicable payment offset for the item due to the 
device or ``policy-packaged'' APC offset policy, is the item's pass-
through payment, which is not subject to a copayment according to the 
statute. Therefore, we are proposing to not publish a copayment amount 
for these items in Addenda A and B to the proposed rule (which are 
referenced in section XVII. of this proposed rule and available via the 
Internet on the CMS Web site).
    The 33 drugs and biologicals that we are proposing to continue on 
pass-through status for CY 2012 or that have been granted pass-through 
status as of July 2011 are displayed in Table 27. We note that, for CY 
2010 and the first two quarters of CY 2011, HCPCS code J1572 
(Injection, immune globulin, (flebogamma/flebogamma dif), intravenous, 
non-lyophilized (e.g. liquid), 500 mg) was assigned a status indicator 
of ``K,'' meaning that this product was paid separately as a nonpass-
through separate payable drug. Beginning on July 1, 2011, HCPCS code 
J1572 is assigned a status indicator of ``G'' and will be given pass-
through status for at least 2, but not more than 3, years. The payment 
rate reflecting a pass-through payment amount of ASP+6 percent is not 
included in Addenda A and B of this proposed rule because these Addenda 
solely reflect codes and prices effective as of the second quarter of 
CY 2011, or April 2011.

 Table 27--Proposed Drugs and Biologicals With Pass-Through Status in CY
                                  2012
------------------------------------------------------------------------
  Proposed CY 2012                              Proposed CY  Proposed CY
     HCPCS code       CY 2012 long descriptor     2012 SI      2012 APC
------------------------------------------------------------------------
C9270..............  Injection, immune                    G         9270
                      globulin (Gammaplex),
                      intravenous, non-
                      lyophilized (e.g.
                      liquid), 500 mg.
C9272..............  Injection, denosumab, 1              G         9272
                      mg.
C9274..............  Crotalidae polyvalent                G         9274
                      immune fab (ovine), 1
                      vial.
C9275..............  Injection,                           G         9275
                      hexaminolevulinate
                      hydrochloride, 100 mg,
                      per study dose.
C9276..............  Injection, cabazitaxel, 1            G         9276
                      mg.
C9277..............  Injection, alglucosidase             G         9277
                      alfa (Lumizyme), 1 mg.
C9279..............  Injection, ibuprofen, 100            G         9279
                      mg.
C9280..............  Injection, eribulin                  G         9280
                      mesylate, 1 mg.
C9281..............  Injection, pegloticase, 1            G         9281
                      mg.
C9282..............  Injection, ceftaroline               G         9282
                      fosamil, 10 mg.
C9283 **...........  Injection, acetaminophen,            G         9283
                      10 mg.
C9284 **...........  Injection, ipilimumab, 1             G         9284
                      mg.
C9285 **...........  Lidocaine 70 mg/                     G         9285
                      tetracaine 70 mg, per
                      patch.
C9365 **...........  Oasis Ultra Tri-Layer                G         9365
                      Matrix, per square
                      centimeter.
C9367..............  Skin substitute, Endoform            G         9367
                      Dermal Template, per
                      square centimeter.
C9406 **...........  Iodine I-123 ioflupane,              G         9406
                      diagnostic, per study
                      dose, up to 5
                      millicuries.
J0597..............  Injection, C-1 Esterase              G         9269
                      inhibitor (human),
                      Berinert, 10 units.
J0775..............  Injection, collagenase               G         1340
                      clostridium
                      histolyticum, 0.01 mg.
J1290..............  Injection, ecallantide, 1            G         9263
                      mg.
J1572 ***..........  Injection, immune                    G         0947
                      globulin, (flebogamma/
                      flebogamma dif),
                      intravenous, non-
                      lyophilized (e.g.
                      liquid), 500 mg.
J3095..............  Injection, telavancin, 10            G         9258
                      mg.
J3262..............  Injection, tocilizumab, 1            G         9624
                      mg.
J3357..............  Injection, ustekinumab, 1            G         9261
                      mg.
J3385..............  Injection, velaglucerase             G         9271
                      alfa, 100 units.
J7335..............  Capsaicin 8% patch, per              G         9268
                      10 square centimeters.
J8562..............  Fludarabine phosphate,               G         1339
                      oral, 10 mg.
J9302..............  Injection, ofatumumab, 10            G         9260
                      mg.
J9307..............  Injection, pralatrexate,             G         9259
                      1 mg.
J9315..............  Injection, romidepsin, 1             G         9625
                      mg.

[[Page 42249]]

 
Q2040..............  Injection,                           G         9278
                      incobotulinumtoxin A, 1
                      unit.
Q2041 **...........  Injection, von willebrand            G         1352
                      factor complex (human),
                      Wilate, 1 i.u. vwf:rco.
Q2043 *............  Sipuleucel-T, minimum of             G         9273
                      50 million autologous
                      CD54+ cells activated
                      with PAP-GM-CSF,
                      including leukapheresis
                      and all other
                      preparatory procedures,
                      per infusion.
Q2044 **...........  Injection, belimumab, 10             G         1353
                      mg.
------------------------------------------------------------------------
* HCPCS code C9273 was deleted June 30, 2011, and replaced with HCPCS
  code Q2043 effective July 1, 2011.
** These HCPCS codes are effective July 1, 2011, and are not included in
  the Addenda to this proposed rule.
*** HCPCS code J1572 has a status indicator of ``G,'' effective July 1,
  2011.

4. Proposed Provisions for Reducing Transitional Pass-Through Payments 
for Diagnostic Radiopharmaceuticals and Contrast Agents To Offset Costs 
Packaged into APC Groups
a. Background
    Prior to CY 2008, diagnostic radiopharmaceuticals and contrast 
agents were paid separately under the OPPS if their mean per day costs 
were greater than the applicable year's drug packaging threshold. In CY 
2008 (72 FR 66768), we began a policy of packaging payment for all 
nonpass-through diagnostic radiopharmaceuticals and contrast agents as 
ancillary and supportive items and services into their associated 
nuclear medicine procedures. Therefore, beginning in CY 2008, nonpass-
through diagnostic radiopharmaceuticals and contrast agents were not 
subject to the annual OPPS drug packaging threshold to determine their 
packaged or separately payable payment status, and instead all nonpass-
through diagnostic radiopharmaceuticals and contrast agents were 
packaged as a matter of policy. For CY 2012, we are proposing to 
continue to package payment for all nonpass-through diagnostic 
radiopharmaceuticals and contrast agents, as discussed in section 
V.B.2.d. of this proposed rule.
b. Proposed Payment Offset Policy for Diagnostic Radiopharmaceuticals
    As previously noted, radiopharmaceuticals are considered to be 
drugs for OPPS pass-through payment purposes. As described above, 
section 1833(t)(6)(D)(i) of the Act specifies that the transitional 
pass-through payment amount for pass-through drugs and biologicals is 
the difference between the amount paid under section 1842(o) of the Act 
(or the Part B drug CAP rate) and the otherwise applicable OPD fee 
schedule amount. There is currently one radiopharmaceutical with pass-
through status under the OPPS, HCPCS code C9406 (Iodine I-123 
ioflupane, diagnostic, per study dose, up to 5 millicuries). HCPCS code 
C9406 was granted pass-through status beginning July 1, 2011, and is 
proposed to continue receiving pass-through status in CY 2012. We 
currently apply the established radiopharmaceutical payment offset 
policy to pass-through payment for this product. As described earlier 
in section V.A.3. of this proposed rule, we are proposing that new 
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 radiopharmaceuticals an amount reflecting the 
portion of the APC payment associated with predecessor 
radiopharmaceuticals in order to ensure no duplicate 
radiopharmaceutical payment is made. In CY 2009, we established a 
policy to estimate the portion of each APC payment rate that could 
reasonably be attributed to the cost of predecessor diagnostic 
radiopharmaceuticals when considering a new diagnostic 
radiopharmaceutical for pass-through payment (73 FR 68638 through 
68641). Specifically, we utilize the ``policy-packaged'' drug offset 
fraction for APCs containing nuclear medicine procedures, calculated as 
1 minus (the cost from single procedure claims in the APC after 
removing the cost for ``policy-packaged'' drugs divided by the cost 
from single procedure claims in the APC). In the CY 2010 OPPS/ASC final 
rule with comment period (74 FR 60480 through 60484), we finalized a 
policy to redefine ``policy-packaged'' drugs as only nonpass-through 
diagnostic radiopharmaceuticals and contrast agents, as a result of the 
policy discussed in sections V.A.4. and V.B.2.d. of the CY 2010 OPPS/
ASC final rule with comment period (74 FR 60471 through 60477 and 60495 
through 60499, respectively) that treats 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 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[sol]OCE CMS specifications on the CMS Web site at http://www.cms.gov/OutpatientCodeEdit/02_OCEQtrReleaseSpecs.asp#TopOfPage. 
For CY 2012 and future years, we are proposing to continue to require 
hospitals to append modifier ``FB'' to specified nuclear medicine 
procedures when the diagnostic radiopharmaceutical is received at no 
cost/full credit. In addition, we are proposing to continue to require 
that when a hospital bills with an ``FB'' modifier with the nuclear 
medicine scan, the payment amount for procedures in the APCs listed in 
Table

[[Page 42250]]

28 of this proposed rule would be reduced by the full ``policy-
packaged'' offset amount appropriate for diagnostic 
radiopharmaceuticals. Finally, we also are proposing to continue to 
require hospitals to report a token charge of less than $1.01 in cases 
in which the diagnostic radiopharmaceutical is furnished without cost 
or with full credit.
    For CY 2011, we finalized a policy to apply the diagnostic 
radiopharmaceutical offset policy to payment for pass-through 
diagnostic radiopharmaceuticals, as described above. For CY 2012, we 
are proposing to continue to apply the diagnostic radiopharmaceutical 
offset policy to payment for pass-through diagnostic 
radiopharmaceuticals. Table 28 displays the proposed APCs to which 
nuclear medicine procedures would be assigned in CY 2012 and for which 
we expect that an APC offset could be applicable in the case of 
diagnostic radiopharmaceuticals with pass-through status.

  Table 28--Proposed APCs To Which Nuclear Medicine Procedures Would Be
                          Assigned for CY 2012
------------------------------------------------------------------------
   Proposed CY 2012 APC                   CY 2012 APC title
------------------------------------------------------------------------
0307......................  Myocardial Positron Emission Tomography
                             (PET) imaging.
0308......................  Non-Myocardial Positron Emission Tomography
                             (PET) imaging.
0377......................  Level II Cardiac Imaging.
0378......................  Level II Pulmonary Imaging.
0389......................  Level I Non-imaging Nuclear Medicine.
0390......................  Level I Endocrine Imaging.
0391......................  Level II Endocrine Imaging.
0392......................  Level II Non-imaging Nuclear Medicine.
0393......................  Hematologic Processing & Studies.
0394......................  Hepatobiliary Imaging.
0395......................  GI Tract Imaging.
0396......................  Bone Imaging.
0397......................  Vascular Imaging.
0398......................  Level I Cardiac Imaging.
0400......................  Hematopoietic Imaging.
0401......................  Level I Pulmonary Imaging.
0402......................  Level II Nervous System Imaging.
0403......................  Level I Nervous System Imaging.
0404......................  Renal and Genitourinary Studies.
0406......................  Level I Tumor/Infection Imaging.
0408......................  Level II Tumor/Infection Imaging.
0414......................  Level II Tumor/Infection Imaging.
------------------------------------------------------------------------

c. Proposed Payment Offset Policy for Contrast Agents
    Section 1833(t)(6)(D)(i) of the Act specifies that the transitional 
pass-through payment amount for pass-through drugs and biologicals is 
the difference between the amount paid under section 1842(o) of the Act 
(or the Part B drug CAP rate) and the otherwise applicable OPD fee 
schedule amount. There is currently one contrast agent with pass-
through status under the OPPS: HCPCS code C9275 (Injection, 
hexaminolevulinate hydrochloride, 100 mg, per study dose). HCPCS code 
C9275 was granted pass-through status beginning January 1, 2011, and is 
proposed to continue with pass-through status in CY 2012. As described 
earlier in section V.A.3. of this proposed rule, new pass-through 
contrast agents would be paid at ASP+6 percent, while those without ASP 
information would be paid at WAC+6 percent or, if WAC is not available, 
payment would be based on 95 percent of the product's most recently 
published AWP.
    We believe that a payment offset is necessary in order to provide 
an appropriate transitional pass-through payment for contrast agents, 
because all of these items are packaged when they do not have pass-
through status. In accordance with our standard offset methodology, we 
are proposing for CY 2012 to deduct from the payment for pass-through 
contrast agents an amount that reflects the portion of the APC payment 
associated with predecessor contrast agents, in order to ensure no 
duplicate contrast agent payment is made.
    In CY 2010, we established a policy to estimate the portion of each 
APC payment rate that could reasonably be attributed to the cost of 
predecessor contrast agents when considering new contrast agents for 
pass-through payment (74 FR 60482 through 60484). For CY 2012, as we 
did in CY 2011, we are proposing to continue to apply this same policy 
to contrast agents. Specifically, we are proposing to utilize the 
``policy-packaged'' drug offset fraction for clinical APCs calculated 
as 1 minus (the cost from single procedure claims in the APC after 
removing the cost for ``policy-packaged'' drugs divided by the cost 
from single procedure claims in the APC). In CY 2010, we finalized a 
policy to redefine ``policy-packaged'' drugs as only nonpass-through 
diagnostic radiopharmaceuticals and contrast agents (74 FR 60495 
through 60499). To determine the actual APC offset amount for pass-
through contrast agents that takes into consideration the otherwise 
applicable OPPS payment amount, we are proposing to multiply the 
``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 are proposing to continue to apply 
this methodology for CY 2012 to recognize that when a contrast agent 
with pass-through status is billed with any procedural APC listed in 
Table 29, a specific offset based on the procedural APC would be 
applied to payments for the contrast agent to ensure that duplicate 
payment is not made for the contrast agent.
    We are proposing to continue to post annually on the CMS Web site 
at http://www.cms.gov/HospitalOutpatientPPS a file that contains the 
APC offset amounts that will be used for that year for purposes of both 
evaluating cost

[[Page 42251]]

significance for candidate pass-through device categories and drugs and 
biologicals, including contrast agents, and establishing any 
appropriate APC offset amounts. Specifically, the file will continue to 
provide, for every OPPS clinical APC, the amounts and percentages of 
APC payment associated with packaged implantable devices, ``policy-
packaged'' drugs, and ``threshold-packaged'' drugs and biologicals.
    Proposed procedural APCs for which we expect a contrast offset 
could be applicable in the case of a pass-through contrast agent have 
been identified as any procedural APC with a ``policy-packaged'' drug 
amount greater than $20 that is not a nuclear medicine APC identified 
in Table 28 above and these APCs are displayed in Table 29 below. The 
methodology used to determine a proposed threshold cost for application 
of a contrast agent offset policy is described in detail in the CY 2010 
OPPS/ASC final rule with comment period (70 FR 60483 through 60484). 
For CY 2012, we are proposing to continue to recognize that when a 
contrast agent with pass-through status is billed with any procedural 
APC listed in Table 29, a specific offset based on the procedural APC 
would be applied to payment for the contrast agent to ensure that 
duplicate payment is not made for the contrast agent.

     Table 29--Proposed APCs to Which a Contrast Agent Offset May Be
                         Applicable for CY 2012
------------------------------------------------------------------------
      Proposed CY 2012 APC              Proposed CY 2012 APC title
------------------------------------------------------------------------
0080............................  Diagnostic Cardiac Catheterization.
0082............................  Coronary or Non-Coronary Atherectomy.
0083............................  Coronary or Non-Coronary Angioplasty
                                   and Percutaneous Valvulopasty.
0093............................  Vascular Reconstruction/Fistula Repair
                                   without Device.
0104............................  Transcathether Placement of
                                   Intracoronary Stents.
0128............................  Echocardiogram with Contrast.
0152............................  Level I Percutaneous Abdominal and
                                   Biliary Procedures.
0229............................  Transcathether Placement of
                                   Intravascular Shunts.
0278............................  Diagnostic Urography.
0279............................  Level II Angiography and Venography.
0280............................  Level III Angiography and Venography.
0283............................  Computed Tomography with Contrast.
0284............................  Magnetic Resonance Imaging and
                                   Magnetic Resonance Angiography with
                                   Contrast.
0333............................  Computed Tomography without Contrast
                                   followed by Contrast.
0334............................  Combined Abdomen and Pelvis CT with
                                   Contrast
0337............................  Magnetic Resonance Imaging and
                                   Magnetic Resonance Angiography
                                   without Contrast followed by
                                   Contrast.
0375............................  Ancillary Outpatient Services When
                                   Patient Expires.
0383............................  Cardiac Computed Tomographic Imaging.
0388............................  Discography.
0418............................  Insertion of Left Ventricular Pacing
                                   Elect.
0442............................  Dosimetric Drug Administration.
0653............................  Vascular Reconstruction/Fistula Repair
                                   with Device.
0656............................  Transcatheter Placement of
                                   Intracoronary Drug-Eluting Stents.
0662............................  CT Angiography.
0668............................  Level I Angiography and Venography.
8006............................  CT and CTA with Contrast Composite.
8008............................  MRI and MRA with Contrast Composite.
------------------------------------------------------------------------

B. Proposed OPPS Payment for Drugs, Biologicals, and 
Radiopharmaceuticals Without Pass-Through Status
1. Background
    Under the CY 2011 OPPS, we currently pay for drugs, biologicals, 
and radiopharmaceuticals that do not have pass-through status in one of 
two ways: as a packaged payment included in the payment for the 
associated service; or as a separate payment (individual APCs). We 
explained in the April 7, 2000 OPPS final rule with comment period (65 
FR 18450) that we generally package the cost of drugs and 
radiopharmaceuticals into the APC payment rate for the procedure or 
treatment with which the products are usually furnished. Hospitals do 
not receive separate payment for packaged items and supplies, and 
hospitals may not bill beneficiaries separately for any packaged items 
and supplies whose costs are recognized and paid within the national 
OPPS payment rate for the associated procedure or service. (Transmittal 
A-01-133, issued on November 20, 2001, explains in greater detail the 
rules regarding separate payment for packaged services.)
    Packaging costs into a single aggregate payment for a service, 
procedure, or episode-of-care is a fundamental principle that 
distinguishes a prospective payment system from a fee schedule. In 
general, packaging the costs of items and services into the payment for 
the primary procedure or service with which they are associated 
encourages hospital efficiencies and also enables hospitals to manage 
their resources with maximum flexibility.
    Section 1833(t)(16)(B) of the Act set the threshold for 
establishing separate APCs for drugs and biologicals at $50 per 
administration for CYs 2005 and 2006. Therefore, for CYs 2005 and 2006, 
we paid separately for drugs, biologicals, and radiopharmaceuticals 
whose per day cost exceeded $50 and packaged the costs of drugs, 
biologicals, and radiopharmaceuticals whose per day cost was equal to 
or less than $50 into the procedures with which they were billed. For 
CY 2007, the packaging threshold for drugs, biologicals, and 
radiopharmaceuticals that were not new and did not have pass-through 
status was established at $55. For CYs 2008 and 2009, the packaging 
threshold for drugs, biologicals, and radiopharmaceuticals that were 
not new and did not have pass-through status was established at $60. 
For CY 2010, the packaging threshold for drugs, biologicals, and 
radiopharmaceuticals that were not new and did not have pass-through 
status was established at $65. For CY 2011, the packaging threshold for 
drugs, biologicals, and radiopharmaceuticals that were not new and did 
not have pass-through status was established at $70. The methodology 
used to establish the $55

[[Page 42252]]

threshold for CY 2007, the $60 threshold for CYs 2008 and 2009, the $65 
threshold for CY 2010, the $70 threshold for CY 2011, and our proposed 
approach for CY 2012 are discussed in more detail in section V.B.2.b. 
of this proposed rule.
2. Proposed Criteria for Packaging Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
a. Background
    As indicated in section V.B.1. of this proposed rule, in accordance 
with section 1833(t)(16)(B) of the Act, the threshold for establishing 
separate APCs for payment of drugs and biologicals was set to $50 per 
administration during CYs 2005 and 2006. In CY 2007, we used the four 
quarter moving average Producer Price Index (PPI) levels for 
Pharmaceutical Preparations (Prescription) to trend the $50 threshold 
forward from the third quarter of CY 2005 (when the Pub. L. 108-173 
mandated threshold became effective) to the third quarter of CY 2007. 
We then rounded the resulting dollar amount to the nearest $5 increment 
in order to determine the CY 2007 threshold amount of $55. Using the 
same methodology as that used in CY 2007 (which is discussed in more 
detail in the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68085 through 68086)), we set the packaging threshold for establishing 
separate APCs for drugs and biologicals at $60 for CYs 2008 and 2009. 
For CY 2010, we set the packaging threshold at $65; and for CY 2011, we 
set the packaging threshold at $70.
    Following the CY 2007 methodology, for CY 2012, we used updated 
four quarter moving average PPI levels to trend the $50 threshold 
forward from the third quarter of CY 2005 to the third quarter of CY 
2012 and again rounded the resulting dollar amount ($77.63) to the 
nearest $5 increment, which yielded a figure of $80. In performing this 
calculation, we used the most recent forecast of the quarterly index 
levels for the PPI for Pharmaceuticals for Human Use (Prescription) 
(Bureau of Labor Statistics (BLS) series code WPUSI07003) from CMS' 
Office of the Actuary (OACT). We note that we are not proposing a 
change to the PPI that is used to calculate the threshold for CY 2012; 
however, this change in terminology reflects a change to the BLS naming 
convention for this series. We refer to this series generally as the 
PPI for Prescription Drugs below. We chose this PPI as it reflects 
price changes associated with the average mix of all pharmaceuticals in 
the overall economy. In addition, we chose this price series because it 
is publicly available and regularly published, improving public access 
and transparency. Forecasts of the PPI for Prescription Drugs are 
developed by IHS Global Insight, Inc., a nationally recognized economic 
and financial forecasting firm. As actual inflation for past quarters 
replaced forecasted amounts, the PPI estimates for prior quarters have 
been revised (compared with those used in the CY 2007 OPPS/ASC final 
rule with comment period) and have been incorporated into our 
calculation. Based on the calculations described above, we are 
proposing a packaging threshold for CY 2012 of $80. (For a more 
detailed discussion of the OPPS drug packaging threshold and the use of 
the PPI for Prescription Drugs, we refer readers to the CY 2007 OPPS/
ASC final rule with comment period (71 FR 68085 through 68086).)
b. Proposed Cost Threshold for Packaging of Payment for HCPCS Codes 
That Describe Certain Drugs, Nonimplantable Biologicals, and 
Therapeutic Radiopharmaceuticals (``Threshold-Packaged Drugs'')
    To determine their proposed CY 2012 packaging status for this 
proposed rule, we calculated on a HCPCS code-specific basis (with the 
exception of those drugs and biologicals with multiple HCPCS codes that 
include different dosages as described in section V.B.2.c. of this 
proposed rule and excluding diagnostic radiopharmaceuticals, contrast 
agents, and implantable biologicals that we are proposing to continue 
to package in CY 2012, as discussed in section V.B.2.d. of this 
proposed rule) the per day cost of all drugs, nonimplantable 
biologicals, and therapeutic radiopharmaceuticals (collectively called 
``threshold-packaged'' drugs) that had a HCPCS code in CY 2010 and were 
paid (via packaged or separate payment) under the OPPS, using CY 2010 
claims data processed before January 1, 2011. In order to calculate the 
per day costs for drugs, nonimplantable biologicals, and therapeutic 
radiopharmaceuticals to determine their proposed packaging status in CY 
2012, we used the methodology that was described in detail in the CY 
2006 OPPS proposed rule (70 FR 42723 through 42724) and finalized in 
the CY 2006 OPPS final rule with comment period (70 FR 68636 through 70 
FR 68638).
    To calculate the CY 2012 proposed rule per day costs, we used an 
estimated payment rate for each drug and nonimplantable biological 
HCPCS code of ASP+4 percent (which is the payment rate we are proposing 
for separately payable drugs and nonimplantable biologicals for CY 
2012, as discussed in more detail in section V.B.3.b. of this proposed 
rule). We used the manufacturer submitted ASP data from the fourth 
quarter of CY 2010 (data that were used for payment purposes in the 
physician's office setting, effective April 1, 2011) to determine the 
proposed rule per day cost.
    As is our standard methodology, for CY 2012, we are proposing to 
use payment rates based on the ASP data from the fourth quarter of CY 
2010 for budget neutrality estimates, packaging determinations, impact 
analyses, and completion of Addenda A and B to this proposed rule 
(which are referenced in section XVII. of this proposed rule and 
available via the Internet) because these are the most recent data 
available for use at the time of development of this proposed rule. 
These data were also the basis for drug payments in the physician's 
office setting, effective April 1, 2011. For items that did not have an 
ASP-based payment rate, such as some therapeutic radiopharmaceuticals, 
we used their mean unit cost derived from the CY 2010 hospital claims 
data to determine their per day cost. We are proposing to package items 
with a per day cost less than or equal to $80 and identified items with 
a per day cost greater than $80 as separately payable. Consistent with 
our past practice, we crosswalked historical OPPS claims data from the 
CY 2010 HCPCS codes that were reported to the CY 2011 HCPCS codes that 
we display in Addendum B of this proposed rule (which is referenced in 
section XVII. of this proposed rule and available via the Internet) for 
payment in CY 2012.
    Our policy during previous cycles of the OPPS has been to use 
updated ASP and claims data to make final determinations of the 
packaging status of HCPCS codes for drugs, nonimplantable biologicals, 
and therapeutic radiopharmaceuticals for the final rule with comment 
period. We note that it is also our policy to make an annual packaging 
determination for a HCPCS code only when we develop the OPPS/ASC final 
rule for the update year. Only HCPCS codes that are identified as 
separately payable in the final rule with comment period will be 
subject to quarterly updates. For our calculation of per day costs of 
HCPCS codes for drugs and nonimplantable biologicals in the CY 2012 
OPPS/ASC final rule with comment period, we are proposing to use ASP 
data from the first quarter of CY 2011, which is the basis for 
calculating payment rates for drugs and biologicals in the physician's 
office setting using the ASP methodology, effective July 1, 2011, along 
with

[[Page 42253]]

updated hospital claims data from CY 2010. We note that we also are 
proposing to use these data for budget neutrality estimates and impact 
analyses for the CY 2012 OPPS/ASC final rule with comment period. 
Payment rates for HCPCS codes for separately payable drugs and 
nonimplantable biologicals included in Addenda A and B to the final 
rule with comment period will be based on ASP data from the second 
quarter of CY 2011, which will be the basis for calculating payment 
rates for drugs and biologicals in the physician's office setting using 
the ASP methodology, effective October 1, 2011. These rates would then 
be updated in the January 2012 OPPS update, based on the most recent 
ASP data to be used for physician's office and OPPS payment as of 
January 1, 2012. For items that do not currently have an ASP-based 
payment rate, we are proposing to recalculate their mean unit cost from 
all of the CY 2010 claims data and updated cost report information 
available for the CY 2012 final rule with comment period to determine 
their final per day cost.
    Consequently, the packaging status of some HCPCS codes for drugs, 
nonimplantable biologicals, and therapeutic radiopharmaceuticals in 
this CY 2012 OPPS/ASC proposed rule may be different from the same drug 
HCPCS code's packaging status determined based on the data used for the 
final rule with comment period. Under such circumstances, we are 
proposing to continue to follow the established policies initially 
adopted for the CY 2005 OPPS (69 FR 65780) in order to more equitably 
pay for those drugs whose median cost fluctuates relative to the 
proposed CY 2012 OPPS drug packaging threshold and the drug's payment 
status (packaged or separately payable) in CY 2011. Specifically, for 
CY 2012, we are proposing to apply the following policies to these 
HCPCS codes for drugs, nonimplantable biologicals, and therapeutic 
radiopharmaceuticals whose relationship to the proposed $80 drug 
packaging threshold changes:
     HCPCS codes for drugs and nonimplantable biologicals that 
were paid separately in CY 2011 and that are proposed for separate 
payment in CY 2012, and that then have per day costs equal to or less 
than $80, based on the ASPs and hospital claims data used for this CY 
2012 proposed rule, would continue to receive separate payment in CY 
2012.
     HCPCS codes for drugs and nonimplantable biologicals that 
were packaged in CY 2011 and that are proposed for separate payment in 
CY 2012, and that then have per day costs equal to or less than $80, 
based on the ASPs and hospital claims data used for this CY 2012 
proposed rule, would remain packaged in CY 2012.
     HCPCS codes for drugs and nonimplantable biologicals for 
which we are proposing packaged payment in CY 2012 but then have per 
day costs greater than $80, based on the ASPs and hospital claims data 
used for this CY 2012 proposed rule, would receive separate payment in 
CY 2012.
    In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60485 
through 60489), we implemented a policy to treat oral and injectable 
forms of 5-HT3 antiemetics comparably to all other threshold packaged 
drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals 
under our standard packaging methodology of packaging drugs with a per 
day cost less than $65. We are proposing for CY 2012 to continue our 
policy of not exempting these 5-HT3 antiemetic products from our 
standard packaging methodology. For CY 2012, we are proposing to 
package payment for all of the 5-HT3 antiemetics except palonosetron 
hydrochloride, which for CY 2012 has a estimated per day cost, from the 
CY 2010 claims data, above the proposed CY 2012 drug packaging 
threshold. Our rationale for this policy is outlined in the CY 2010 
OPPS/ASC final rule with comment period (74 FR 60487 through 60488).
c. Proposed Packaging Determination for HCPCS Codes That Describe the 
Same Drug or Biological but Different Dosages
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66776), we began recognizing, for OPPS payment purposes, multiple HCPCS 
codes reporting different dosages for the same covered Part B drugs or 
biologicals in order to reduce hospitals' administrative burden by 
permitting them to report all HCPCS codes for drugs and biologicals. In 
general, prior to CY 2008, the OPPS recognized for payment only the 
HCPCS code that described the lowest dosage of a drug or biological. We 
extended this recognition to multiple HCPCS codes for several other 
drugs under the CY 2009 OPPS (73 FR 68665). During CYs 2008 and 2009, 
we applied a policy that assigned the status indicator of the 
previously recognized HCPCS code to the associated newly recognized 
code(s), reflecting the packaged or separately payable status of the 
new code(s). In the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66775), we explained that once claims data were available for these 
previously unrecognized HCPCS codes, we would determine the packaging 
status and resulting status indicator for each HCPCS code according to 
the general, established HCPCS code-specific methodology for 
determining a code's packaging status for a given update year. However, 
we also stated that we planned to closely follow our claims data to 
ensure that our annual packaging determinations for the different HCPCS 
codes describing the same drug or biological did not create 
inappropriate payment incentives for hospitals to report certain HCPCS 
codes instead of others.
    In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60490 
through 60491), we finalized a policy to make a single packaging 
determination for a drug, rather than an individual HCPCS code, when a 
drug has multiple HCPCS codes describing different dosages. We analyzed 
CY 2008 claims data for the HCPCS codes describing different dosages of 
the same drug or biological that were newly recognized in CY 2008 and 
found that our claims data would result in several different packaging 
determinations for different codes describing the same drug or 
biological. Furthermore, we found that our claims data would include 
few units and days for a number of newly recognized HCPCS codes, 
resulting in our concern that these data reflected claims from only a 
small number of hospitals, even though the drug or biological itself 
may be reported by many other hospitals under the most common HCPCS 
code. Based on these findings from our first available claims data for 
the newly recognized HCPCS codes, we believed that adopting our 
standard HCPCS code-specific packaging determinations for these codes 
could lead to payment incentives for hospitals to report certain HCPCS 
codes instead of others, particularly because we do not currently 
require hospitals to report all drug and biological HCPCS codes under 
the OPPS in consideration of our previous policy that generally 
recognized only the lowest dosage HCPCS code for a drug or biological 
for OPPS payment. For CY 2012, we continue to believe that adopting the 
standard HCPCS 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, we 
are proposing to continue our policy to make packaging determinations 
on a

[[Page 42254]]

drug-specific basis, rather than an HCPCS code-specific basis, for 
those HCPCS codes that describe the same drug or biological but 
different dosages in CY 2012.
    For CY 2012, in order to propose a packaging determination that is 
consistent across all HCPCS codes that describe different dosages of 
the same drug or biological, we aggregated both our CY 2010 claims data 
and our pricing information at ASP+4 percent across all of the HCPCS 
codes that describe each distinct drug or biological in order to 
determine the mean units per day of the drug or biological in terms of 
the HCPCS code with the lowest dosage descriptor. All HCPCS codes 
listed in Table 30 below had ASP pricing information available for this 
CY 2012 OPPS/ASC proposed rule. Therefore, we multiplied the weighted 
average ASP+4 percent per unit payment amount across all dosage levels 
of a specific drug or biological by the estimated units per day for all 
HCPCS codes that describe each drug or biological from our claims data 
to determine the estimated per day cost of each drug or biological at 
less than or equal to $80 (whereupon all HCPCS codes for the same drug 
or biological would be packaged) or greater than $80 (whereupon all 
HCPCS codes for the same drug or biological would be separately 
payable). The proposed packaging status of each drug and biological 
HCPCS code to which this methodology would apply is displayed in Table 
30 below.

  Table 30.--Proposed Hcpcs Codes To Which the CY 2012 Drug--Specific Packaging Determination Methodology Would
                                                      Apply
----------------------------------------------------------------------------------------------------------------
     Proposed CY 2012  HCPCS code               Proposed CY 2012 long descriptor            Proposed CY 2012 SI
----------------------------------------------------------------------------------------------------------------
C9257................................  Injection, bevacizumab, 0.25 mg..................  K
J9035................................  Injection, bevacizumab, 10 mg....................  K
J1020................................  Injection, methylprednisolone acetate, 20 mg.....  N
J1030................................  Injection, methylprednisolone acetate, 40 mg.....  N
J1040................................  Injection, methylprednisolone acetate, 80 mg.....  N
J1070................................  Injection, testosterone cypionate, up to 100 mg..  N
J1080................................  Injection, testosterone cypionate, 1 cc, 200 mg..  N
J1440................................  Injection, filgrastim (g-csf), 300 mcg...........  K
J1441................................  Injection, filgrastim (g-csf), 480 mcg...........  K
J1460................................  Injection, gamma globulin, intramuscular, 1 cc...  K
J1560................................  Injection, gamma globulin, intramuscular over 10   K
                                        cc.
J1642................................  Injection, heparin sodium, (heparin lock flush),   N
                                        per 10 units.
J1644................................  Injection, heparin sodium, per 1000 units........  N
J1850................................  Injection, kanamycin sulfate, up to 75 mg........  N
J1840................................  Injection, kanamycin sulfate, up to 500 mg.......  N
J2270................................  Injection, morphine sulfate, up to 10 mg.........  N
J2271................................  Injection, morphine sulfate, 100mg...............  N
J2788................................  Injection, rho d immune globulin, human,           K
                                        minidose, 50 micrograms (250 i.u.).
J2790................................  Injection, rho d immune globulin, human, full      K
                                        dose, 300 micrograms (1500 i.u.).
J2920................................  Injection, methylprednisolone sodium succinate,    N
                                        up to 40 mg.
J2930................................  Injection, methylprednisolone sodium succinate,    N
                                        up to 125 mg.
J3120................................  Injection, testosterone enanthate, up to 100 mg..  N
J3130................................  Injection, testosterone enanthate, up to 200 mg..  N
J3471................................  Injection, hyaluronidase, ovine, preservative      N
                                        free, per 1 usp unit (up to 999 usp units).
J3472................................  Injection, hyaluronidase, ovine, preservative      N
                                        free, per 1000 usp units.
J7050................................  Infusion, normal saline solution , 250 cc........  N
J7040................................  Infusion, normal saline solution, sterile (500     N
                                        ml=1 unit).
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          N
                                        approved prescription anti-emetic, for use as a
                                        complete therapeutic substitute for an IV anti-
                                        emetic at the time of chemotherapy treatment,
                                        not to exceed a 48-hour doseage regimen.
Q0165................................  Prochlorperazine maleate, 10 mg, oral, FDA         N
                                        approved prescription anti-emetic, for use as a
                                        complete therapeutic substitute for an IV anti-
                                        emetic at the time of chemotherapy treatment,
                                        not to exceed a 48-hour doseage regimen.
Q0167................................  Dronabinol, 2.5 mg, oral, FDA approved             N
                                        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.
Q0168................................  Dronabinol, 5 mg, oral, FDA approved prescription  N
                                        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.
Q0169................................  Promethazine hydrochloride, 12.5 mg, oral, FDA     N
                                        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.
Q0170................................  Promethazine hydrochloride, 25 mg, oral, FDA       N
                                        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.

[[Page 42255]]

 
Q0171................................  Chlorpromazine hydrochloride, 10 mg, oral, FDA     N
                                        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     N
                                        approved prescription anti-emetic, for use as a
                                        complete therapeutic substitute for an IV anti-
                                        emetic at the time of chemotheapy treatment, not
                                        to exceed a 48-hour dosage regimen.
Q0175................................  Perphenazine, 4 mg, oral, FDA approved             N
                                        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             N
                                        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     N
                                        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.
Q0178................................  Hydroxyzine pamoate, 50 mg, oral, FDA approved     N
                                        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.
----------------------------------------------------------------------------------------------------------------

d. Proposed Packaging of Payment for Diagnostic Radiopharmaceuticals, 
Contrast Agents, and Implantable Biologicals (``Policy-Packaged'' Drugs 
and Devices)
    Prior to CY 2008, the methodology of calculating a product's 
estimated per day cost and comparing it to the annual OPPS drug 
packaging threshold was used to determine the packaging status of 
drugs, biologicals, and radiopharmaceuticals under the OPPS (except for 
our CYs 2005 through 2009 exemption for 5-HT3 antiemetics). However, as 
established in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66766 through 66768), we began packaging payment for all diagnostic 
radiopharmaceuticals and contrast agents into the payment for the 
associated procedure, regardless of their per day costs. In addition, 
in CY 2009 we adopted a policy that packaged the payment for nonpass-
through implantable biologicals into payment for the associated 
surgical procedure on the claim (73 FR 68633 through 68636). We refer 
to diagnostic radiopharmaceuticals and contrast agents collectively as 
``policy-packaged'' drugs and implantable biologicals as devices 
because, in CY 2010, we began to treat implantable biologicals as 
devices for all OPPS payment purposes.
    According to our regulations at Sec.  419.2(b), as a prospective 
payment system, the OPPS establishes a national payment rate that 
includes operating and capital-related costs that are directly related 
and integral to performing a procedure or furnishing a service on an 
outpatient basis including, but not limited to, implantable 
prosthetics, implantable durable medical equipment, and medical and 
surgical supplies. Packaging costs into a single aggregate payment for 
a service, encounter, or episode-of-care is a fundamental principle 
that distinguishes a prospective payment system from a fee schedule. In 
general, packaging the costs of items and services into the payment for 
the primary procedure or service with which they are associated 
encourages hospital efficiencies and also enables hospitals to manage 
their resources with maximum flexibility.
    Prior to CY 2008, we noted that the proportion of drugs, 
biologicals, and radiopharmaceuticals that were separately paid under 
the OPPS had increased in recent years, a pattern that we also observed 
for procedural services under the OPPS. Our final CY 2008 policy that 
packaged payment for all nonpass-through diagnostic 
radiopharmaceuticals and contrast agents, regardless of their per day 
costs, contributed significantly to expanding the size of the OPPS 
payment bundles and is consistent with the principles of a prospective 
payment system.
    As discussed in more detail in the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68645 through 68649), we presented several 
reasons supporting our initial policy to package payment of diagnostic 
radiopharmaceuticals and contrast agents into their associated 
procedures on a claim. Specifically, we stated that we believed 
packaging was appropriate because: (1) the statutorily required OPPS 
drug packaging threshold has expired; (2) we believe that diagnostic 
radiopharmaceuticals and contrast agents function effectively as 
supplies that enable the provision of an independent service; and (3) 
section 1833(t)(14)(A)(iii) of the Act requires that payment for 
specified covered outpatient drugs (SCODs) be set prospectively based 
on a measure of average hospital acquisition cost. For these reasons, 
we believe it is appropriate to continue to treat diagnostic 
radiopharmaceuticals and contrast agents differently from other SCODs 
for CY 2012. Therefore, we are proposing to continue packaging payment 
for all contrast agents and diagnostic radiopharmaceuticals, 
collectively referred to as ``policy-packaged'' drugs, regardless of 
their per day costs, for CY 2012. We also are proposing to continue to 
package the payment for diagnostic radiopharmaceuticals into the 
payment for the associated nuclear medicine procedure and to package 
the payment for contrast agents into the payment of the associated 
echocardiography imaging procedure, regardless of whether the agent met 
the OPPS drug packaging threshold. We refer readers to the CY 2010 
OPPS/ASC final rule with comment period for a detailed discussion of 
nuclear medicine and echocardiography services (74 FR 35269 through 
35277).
    In CY 2009, we adopted a final policy to package payment for all 
nonpass-through implantable biologicals that are surgically inserted or 
implanted (through a surgical incision or a natural orifice) like our 
longstanding policy that packaged payment for all implantable 
nonbiological devices without pass-

[[Page 42256]]

through status. We finalized a policy in CY 2010 to package payment for 
nonpass-through implantable biologicals that are surgically inserted or 
implanted (through a surgical incision or a natural orifice) into the 
body, considering them to be devices. For CY 2012, we are proposing to 
continue to package payment for nonpass-through implantable biologicals 
that are surgically inserted or implanted (through a surgical incision 
or a natural orifice) into the body, considering them to be devices. 
Three of the products with expiring pass-through status for CY 2012 are 
biologicals that, according to their FDA-approved indications, are only 
surgically implanted. These products are described by HCPCS codes C9361 
(Collagen matrix nerve wrap (NeuroMend Collagen Nerve Wrap), per 0.5 
centimeter length), C9362 (Porous purified collagen matrix bone void 
filler (Integra Mozaik Osteoconductive Scaffold Strip), per 0.5 cc), 
and C9364 (Porcine implant, Permacol, per square centimeter). Like the 
two implantable biologicals with expiring pass-through status in CY 
2011 that were discussed in the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71948 through 71950), we believe that the three 
biologicals specified above with expiring pass-through status for CY 
2012 differ from other biologicals paid under the OPPS in that they 
specifically function as surgically implanted devices. As a result of 
our proposed packaged payment methodology for nonpass-through 
implantable biologicals, we are proposing to package payment for HCPCS 
codes C9361, C9362, and C9364 and assign them status indicator ``N'' 
for CY 2012. In addition, any new biologicals without pass-through 
status that are surgically inserted or implanted (through a surgical 
incision or a natural orifice) would be packaged in CY 2012. Moreover, 
for nonpass-through biologicals that may sometimes be used as 
implantable devices, we continue to instruct hospitals to not bill 
separately for the HCPCS codes for the products when used as 
implantable devices. This reporting ensures that the costs of these 
products that may be, but are not always, used as implanted biologicals 
are appropriately packaged into payment for the associated implantation 
procedures.
3. Proposed Payment for Drugs and Biologicals Without Pass-Through 
Status That Are Not Packaged
a. Proposed Payment for Specified Covered Outpatient Drugs (SCODs) and 
Other Separately Payable and Packaged Drugs and Biologicals
    Section 1833(t)(14) of the Act defines certain separately payable 
radiopharmaceuticals, drugs, and biologicals and mandates specific 
payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a 
``specified covered outpatient drug'' is a covered outpatient drug, as 
defined in section 1927(k)(2) of the Act, for which a separate APC has 
been established and that either is a radiopharmaceutical agent or is a 
drug or biological for which payment was made on a pass-through basis 
on or before December 31, 2002.
    Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and 
biologicals are designated as exceptions and are not included in the 
definition of ``specified covered outpatient drugs,'' known as SCODs. 
These exceptions are--
     A drug or biological for which payment is first made on or 
after January 1, 2003, under the transitional pass-through payment 
provision in section 1833(t)(6) of the Act.
     A drug or biological for which a temporary HCPCS code has 
not been assigned.
     During CYs 2004 and 2005, an orphan drug (as designated by 
the Secretary).
    Section 1833(t)(14)(A)(iii) of the Act requires that payment for 
SCODs in CY 2006 and subsequent years be equal to the average 
acquisition cost for the drug for that year as determined by the 
Secretary, subject to any adjustment for overhead costs and taking into 
account the hospital acquisition cost survey data collected by the 
Government Accountability Office (GAO) in CYs 2004 and 2005, and later 
periodic surveys conducted by the Secretary as set forth in the 
statute. If hospital acquisition cost data are not available, the law 
requires that payment be equal to payment rates established under the 
methodology described in section 1842(o), section 1847A, or section 
1847B of the Act, as calculated and adjusted by the Secretary as 
necessary. Most physician Part B drugs are paid at ASP+6 percent 
pursuant to section 1842(o) and section 1847A of the Act.
    Section 1833(t)(14)(E) of the Act provides for an adjustment in 
OPPS payment rates for overhead and related expenses, such as pharmacy 
services and handling costs. Section 1833(t)(14)(E)(i) of the Act 
required MedPAC to study pharmacy overhead and related expenses and to 
make recommendations to the Secretary regarding whether, and if so how, 
a payment adjustment should be made to compensate hospitals for 
overhead and related expenses. Section 1833(t)(14)(E)(ii) of the Act 
authorizes the Secretary to adjust the weights for ambulatory procedure 
classifications for SCODs to take into account the findings of the 
MedPAC study.
    In the CY 2006 OPPS proposed rule (70 FR 42728 through 42731), we 
discussed the June 2005 report by MedPAC regarding pharmacy overhead 
costs in HOPDs and summarized the findings of that study:
     Handling costs for drugs, biologicals, and 
radiopharmaceuticals administered in the HOPD are not insignificant;
     Little information is available about the magnitude of 
pharmacy overhead costs;
     Hospitals set charges for drugs, biologicals, and 
radiopharmaceuticals at levels that reflect their respective handling 
costs; and
     Hospitals vary considerably in their likelihood of 
providing services that utilize drugs, biologicals, or 
radiopharmaceuticals with different handling costs.
    As a result of these findings, MedPAC developed seven drug 
categories for pharmacy and nuclear medicine handling costs based on 
the estimated level of hospital resources used to prepare the products 
(70 FR 42729). Associated with these categories were two 
recommendations for accurate payment of pharmacy overhead under the 
OPPS.
    1. CMS should establish separate, budget neutral payments to cover 
the costs hospitals incur for handling separately payable drugs, 
biologicals, and radiopharmaceuticals.
    2. CMS should define a set of handling fee APCs that group drugs, 
biologicals, and radiopharmaceuticals based on attributes of the 
products that affect handling costs; CMS should instruct hospitals to 
submit charges for these APCs and base payment rates for the handling 
fee APCs on submitted charges reduced to costs.
    In response to the MedPAC findings, in the CY 2006 OPPS proposed 
rule (70 FR 42729), we discussed our belief that, because of the varied 
handling resources required to prepare different forms of drugs, it 
would be impossible to exclusively and appropriately assign a drug to a 
certain overhead category that would apply to all hospital outpatient 
uses of the drug. Therefore, our CY 2006 OPPS proposal included a 
proposal to establish three distinct Level II HCPCS

[[Page 42257]]

C-codes and three corresponding APCs for drug handling categories to 
differentiate overhead costs for drugs and biologicals (70 FR 42730). 
We also proposed: (1) to combine several overhead categories 
recommended by MedPAC; (2) to establish three drug handling categories, 
as we believed that larger groups would minimize the number of drugs 
that may fit into more than one category and would lessen any 
undesirable payment policy incentives to utilize particular forms of 
drugs or specific preparation methods; (3) to collect hospital charges 
for these HCPCS C-codes for 2 years; and (4) to ultimately base payment 
for the corresponding drug handling APCs on CY 2006 claims data 
available for the CY 2008 OPPS.
    In the CY 2006 OPPS final rule with comment period (70 FR 68659 
through 68665), we discussed the public comments we received on our 
proposal regarding pharmacy overhead. The overwhelming majority of 
commenters did not support our proposal regarding pharmacy overhead and 
urged us not to finalize this policy, as it would be administratively 
burdensome for hospitals to establish charges for HCPCS codes for 
pharmacy overhead and to report them. Therefore, we did not finalize 
this proposal for CY 2006. Instead, we established payment for 
separately payable drugs and biologicals at ASP+6 percent, which we 
calculated by comparing the estimated aggregate cost of separately 
payable drugs and biologicals in our claims data to the estimated 
aggregate ASP dollars for separately payable drugs and biologicals, 
using the ASP as a proxy for average acquisition cost (70 FR 68642). 
Hereinafter, we refer to this methodology as our standard drug payment 
methodology. We concluded that payment for drugs and biologicals and 
pharmacy overhead at a combined ASP+6 percent rate would serve as an 
acceptable proxy for the combined acquisition and overhead costs of 
each of these products.
    In the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68091), we finalized our proposed policy to provide a single payment of 
ASP+6 percent for the hospital's acquisition cost for the drug or 
biological and all associated pharmacy overhead and handling costs. The 
ASP+6 percent rate that we finalized was higher than the equivalent 
average ASP-based amount calculated from claims of ASP+4 percent 
according to our standard drug payment methodology, but we adopted 
payment at ASP+6 percent for stability while we continued to examine 
the issue of the costs of pharmacy overhead in the HOPD and awaited the 
accumulation of CY 2006 data as discussed in the prior year's rule.
    In the CY 2008 OPPS/ASC proposed rule (72 FR 42735), in response to 
ongoing discussions with interested parties, we proposed to continue 
our methodology of providing a combined payment rate for drug and 
biological acquisition and pharmacy overhead costs while continuing our 
efforts to improve the available data. We also proposed to instruct 
hospitals to remove the pharmacy overhead charge for both packaged and 
separately payable drugs and biologicals from the charge for the drug 
or biological and report the pharmacy overhead charge on an uncoded 
revenue code line on the claim. We believed that this would provide us 
with an avenue for collecting pharmacy handling cost data specific to 
drugs in order to package the overhead costs of these items into the 
associated procedures, most likely drug administration services. 
Similar to the public response to our CY 2006 pharmacy overhead 
proposal, the overwhelming majority of commenters did not support our 
CY 2008 proposal and urged us to not finalize this policy (72 FR 
66761). At its September 2007 meeting, the APC Panel recommended that 
hospitals not be required to separately report charges for pharmacy 
overhead and handling and that payment for overhead be included as part 
of drug payment. The APC Panel also recommended that CMS continue to 
evaluate alternative methods to standardize the capture of pharmacy 
overhead costs in a manner that is simple to implement at the 
organizational level (72 FR 66761). Because of concerns expressed by 
the APC Panel and public commenters, we did not finalize the proposal 
to instruct hospitals to separately report pharmacy overhead charges 
for CY 2008. Instead, in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66763), we finalized a policy of providing payment for 
separately payable drugs and biologicals and their pharmacy overhead at 
ASP+5 percent as a transition from their CY 2007 payment of ASP+6 
percent to payment based on the equivalent average ASP-based payment 
rate calculated from hospital claims according to our standard drug 
payment methodology, which was ASP+3 percent for the CY 2008 OPPS/ASC 
final rule with comment period. Hospitals continued to include charges 
for pharmacy overhead costs in the line-item charges for the associated 
drugs reported on claims.
    For CY 2009, we proposed to pay separately payable drugs and 
biologicals at ASP+4 percent, including both SCODs and other drugs 
without CY 2009 OPPS pass-through status, based on our standard drug 
payment methodology. We also continued to explore mechanisms to improve 
the available data. We proposed to split the ``Drugs Charged to 
Patients'' cost center into two cost centers: One for drugs with high 
pharmacy overhead costs and one for drugs with low pharmacy overhead 
costs (73 FR 41492). We noted that we expected that CCRs from the 
proposed new cost centers would be available in 2 to 3 years to refine 
OPPS drug cost estimates by accounting for differential hospital markup 
practices for drugs with high and low overhead costs. After 
consideration of the public comments received and the APC Panel 
recommendations, we finalized a CY 2009 policy (73 FR 68659) to provide 
payment for separately payable nonpass-through drugs and biologicals 
based on costs calculated from hospital claims at a 1-year transitional 
rate of ASP+4 percent, in the context of an equivalent average ASP-
based payment rate of ASP+2 percent calculated according to our 
standard drug payment methodology from the final rule claims data and 
cost report data. We did not finalize our proposal to split the single 
standard ``Drugs Charged to Patients'' cost center into two cost 
centers largely due to concerns raised by hospitals about the 
associated administrative burden. Instead, we indicated in the CY 2009 
OPPS/ASC final rule with comment period (73 FR 68659) that we would 
continue to explore other potential approaches to improve our drug cost 
estimation methodology, thereby increasing payment accuracy for 
separately payable drugs and biologicals.
    In response to the CMS proposals for the CY 2008 and CY 2009 OPPS, 
a group of pharmacy stakeholders (hereinafter referred to as the 
pharmacy stakeholders), including some cancer hospitals, some 
pharmaceutical manufacturers, and some hospital and professional 
associations, commented that CMS should pay an acquisition cost of 
ASP+6 percent for separately payable drugs, should substitute ASP+6 
percent for the packaged cost of all packaged drugs and biologicals on 
procedure claims, and should redistribute the difference between the 
aggregate estimated packaged drug cost in claims and payment for all 
drugs, including packaged drugs at ASP+6 percent, as separate pharmacy 
overhead payments for separately payable drugs. They indicated that 
this approach would preserve the aggregate drug cost observed in the 
claims data, while

[[Page 42258]]

significantly increasing payment accuracy for individual drugs and 
procedures by redistributing drug cost from packaged drugs. Their 
suggested approach would provide a separate overhead payment for each 
separately payable drug or biological at one of three different levels, 
depending on the pharmacy stakeholders' assessment of the complexity of 
pharmacy handling associated with each specific drug or biological (73 
FR 68651 through 68652). Each separately payable drug or biological 
HCPCS code would be assigned to one of the three overhead categories, 
and the separate pharmacy overhead payment applicable to the category 
would be made when each of the separately payable drugs or biologicals 
was paid.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35332), we 
acknowledged the limitations of our data and our availability to find a 
method to improve that data in a way that did not impose unacceptable 
administrative burdens on providers. Accepting that charge compression 
was a reasonable but unverifiable supposition, we proposed to 
redistribute between one-third and one-half of the estimated overhead 
cost associated with coded packaged drugs and biologicals with an ASP, 
which resulted in our proposal to pay for the acquisition and pharmacy 
overhead costs of separately payable drugs and biologicals that did not 
have 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 drugs and biologicals that we calculate based on the charges 
and costs reported by hospitals on claims and cost reports. As a result 
of this approach, no redistribution of cost would occur from other 
services to drugs and biologicals or vice versa.
    Using our CY 2010 proposed rule data, and applying our longstanding 
methodology for calculating the total cost of separately payable drugs 
and biologicals in our claims compared to the ASP dollars for the same 
drugs and biologicals, without applying the proposed overhead cost 
redistribution, we determined that the estimated aggregate cost of 
separately payable drugs and biologicals (status indicators ``K'' and 
``G''), including acquisition and pharmacy overhead costs, was 
equivalent to ASP-2 percent. Therefore, under the standard methodology 
for establishing payment for separately payable drugs and biologicals, 
we would have paid for those drugs and biologicals at ASP-2 percent for 
CY 2010, their equivalent average ASP-based payment rate. We also 
determined that the estimated aggregate cost of coded packaged drugs 
and biologicals with an ASP (status indicator ``N''), including 
acquisition and pharmacy overhead costs, was equivalent to ASP+247 
percent.
    While we had no way of assessing whether this current distribution 
of overhead cost to coded packaged drugs and biologicals with an ASP 
was appropriate, we acknowledged that the established method of 
converting billed charges to costs had the potential to ``compress'' 
the calculated costs to some degree. Further, we recognized that the 
attribution of pharmacy overhead costs to packaged or separately 
payable drugs and biologicals through our standard drug payment 
methodology of a combined payment for acquisition and pharmacy overhead 
costs depends, in part, on the treatment of all drugs and biologicals 
each year under our annual drug packaging threshold. Changes to the 
packaging threshold may result in changes to payment for the overhead 
cost of drugs and biologicals that do not reflect actual changes in 
hospital pharmacy overhead cost for those products. For these reasons, 
we stated that we believed some portion, but not all, of the total 
overhead cost that is associated with coded packaged drugs and 
biologicals (the difference between aggregate cost for those drugs and 
biologicals on the claims and ASP dollars for the same drugs and 
biologicals), based on our standard drug payment methodology, should, 
at least for CY 2010, be attributed to separately payable drugs and 
biologicals.
    We acknowledged that the observed combined payment for acquisition 
and pharmacy overhead costs of ASP-2 percent for separately payable 
drugs and biologicals may be too low and ASP+247 percent for coded 
packaged drugs and biologicals with reported ASP data in the CY 2010 
claims data may be too high (74 FR 35327 and 35328). In addition, we 
stated that we believed that the pharmacy stakeholders' recommendation 
to set packaged drug and biological dollars to ASP+6 percent was 
inappropriate, given our understanding that an equal allocation of 
indirect overhead costs among packaged and separately payable drugs and 
biologicals would lead to a higher observed ASP+X percent than ASP+6 
percent for packaged drugs and biologicals. Further, we indicated that 
indirect overhead costs that are common to all drugs and biologicals 
have no relationship to the cost of an individual drug or biological or 
to the complexity of the handling, preparation, or storage of that 
individual drug or biological. Therefore, we indicated that we believed 
that indirect overhead cost alone for an inexpensive drug or biological 
which would be packaged could be far in excess of the ASP for that 
inexpensive product. We also explained that layered on these indirect 
costs are direct costs of staff, supplies, and equipment that are 
directly attributable only to the storage, handling, preparation, and 
distribution of drugs and biologicals and which do vary, sometimes 
considerably, depending upon the drug being furnished.
    Therefore, we stated that a middle ground would represent the most 
accurate redistribution of pharmacy overhead cost. Our assumption was 
that approximately one-third to one-half of the total pharmacy overhead 
cost currently associated with coded packaged drugs and biologicals in 
the CY 2008 claims data offered a more appropriate allocation of drug 
and biological cost to separately payable drugs and biologicals. One 
third of the $395 million of pharmacy overhead cost associated with 
packaged drugs and biologicals was $132 million, whereas one-half was 
$198 million.
    Within the one-third to one-half parameters, we proposed that

[[Page 42259]]

reallocating $150 million in drug and biological cost observed in the 
claims data from coded packaged drugs and biologicals with an ASP to 
separately payable drugs and biologicals for CY 2010 would more 
appropriately distribute pharmacy overhead cost among packaged and 
separately payable drugs and biologicals. Based on this redistribution, 
we proposed a CY 2010 payment rate for separately payable drugs and 
biologicals of ASP+4 percent. Redistributing $150 million represented a 
reduction in cost of coded packaged drugs and biologicals with reported 
ASP data in the CY 2010 proposed rule claims data of 27 percent.
    We also proposed that any redistribution of pharmacy overhead cost 
that may arise from CY 2010 final rule data would occur only from some 
drugs and biologicals to other drugs and biologicals, thereby 
maintaining the estimated total cost of drugs and biologicals in our 
claims data (no redistribution of cost would occur from other services 
to drugs and biologicals or vice versa). We further proposed that the 
claims data for 340B hospitals be included in the calculation of 
payment for drugs and biologicals under the CY 2010 OPPS, and that 
hospitals that participate in the 340B program would be paid the same 
amounts for separately payable drugs and biologicals as hospitals that 
do not participate in the 340B program (74 FR 35332 through 35333). 
Finally, we proposed that, in accordance with our standard drug payment 
methodology, the estimated payments for separately payable drugs and 
biologicals would be taken into account in the calculation of the 
weight scaler that would apply to the relative weights for all 
procedural services (but would not apply to separately payable drugs 
and biologicals) paid under the OPPS, as required by section 
1833(t)(14)(H) of the Act (74 FR 35333).
    In the CY 2010 OPPS final rule with comment period, we adopted a 
transitional payment rate of ASP+4 percent based on a pharmacy overhead 
adjustment methodology for CY 2010 that redistributed $200 million from 
packaged drug and biological cost to separately payable drug cost. This 
$200 million included the proposed $150 million redistribution from the 
pharmacy overhead cost of coded packaged drugs and biologicals for 
which an ASP is reported and an additional $50 million dollars from the 
total uncoded drug and biological cost to separately payable drugs and 
biologicals as a conservative estimate of the pharmacy overhead cost of 
uncoded packaged drugs and biologicals that should be appropriately 
associated with the cost of separately payable drugs and biologicals 
(74 FR 60517). We believed that our proposal to reallocate $150 million 
of costs from coded packaged drugs and biologicals, or one-third of the 
pharmacy overhead costs of these products, based upon the claims data 
available for the CY 2010 final rule, to separately payable drugs and 
biologicals was appropriate (74 FR 60511). We also acknowledged that, 
to some unknown extent, there are pharmacy overhead costs being 
attributed to the items and services reported under the pharmacy 
revenue code without HCPCS codes that are likely pharmacy overhead for 
separately payable drugs. Therefore, we reallocated $50 million or 8 
percent of the total cost of uncoded packaged drug and biological cost 
in order to represent the pharmacy overhead cost of uncoded packaged 
drugs and biologicals that should be appropriately associated with the 
cost of separately payable drugs and biologicals. This was an 
intentionally conservative estimate as we could not identify definitive 
evidence that uncoded packaged drug and biological cost included a 
pharmacy overhead amount comparable to that of coded packaged drugs and 
biologicals with an ASP. We stated that we could not know the amount of 
overhead associated with these drugs without making significant 
assumptions about the amount of pharmacy overhead cost associated with 
the drug and biologicals captured by these uncoded packaged drug costs 
(74 FR 60511 through 60513).
    We noted that our final CY 2010 payment policy for separately 
payable drugs and biologicals at ASP+4 percent fell within the range of 
ASP-3 percent (that would have resulted from no pharmacy overhead cost 
redistribution from packaged to separately payable drugs and 
biologicals), to ASP+7 percent (that would have resulted from 
redistribution of pharmacy overhead cost based on expansive assumptions 
about the nature of uncoded packaged drug and biological cost). We 
finalized a policy of redistributing pharmacy overhead cost from some 
drugs and biologicals to other drugs and biologicals, thereby 
maintaining the estimated total cost of drugs and biologicals in our 
claims data (no redistribution of cost would occur from other services 
to drugs and biologicals or vice versa). We also reiterated our 
commitment to continue in our efforts to refine our analyses.
    For CY 2011, we continued the CY 2010 pharmacy overhead adjustment 
methodology (74 FR 60500 through 60512). We determined the total cost 
of separately payable drugs using CY 2009 claims data and compared 
these costs to the ASP dollars (April 2010 ASP quarterly payment rates 
multiplied by units for the separately payable drugs and biologicals in 
the claims data) for the same drugs and biologicals. We determined that 
the total estimated payment for separately payable drugs and 
biologicals (status indicators ``K'' and ``G''), including acquisition 
and pharmacy overhead costs, was ASP-1 percent, which also would be the 
ASP-based payment rate under the standard methodology that we 
established in CY 2006 (75 FR 46275). Additionally, we determined that 
the total estimated aggregate cost for packaged drugs and biologicals 
with a HCPCS code for which manufacturers report ASP data (status 
indicator ``N''), including acquisition and pharmacy overhead costs, 
was equivalent to ASP+296 percent. Finally, we determined that the 
total estimated cost for both packaged drugs and biologicals with a 
HCPCS code and separately payable drugs and biologicals (status 
indicators ``N,'' ``K,'' and ``G'') for which we also have ASP data, 
including acquisition and pharmacy overhead costs, was ASP+13 percent. 
Consistent with our supposition that the combined payment for average 
acquisition and pharmacy overhead costs under our standard methodology 
may understate the cost of separately payable drugs and biologicals and 
related pharmacy overhead for those drugs and biologicals, we 
redistributed $150 million from the pharmacy overhead cost of coded 
packaged drugs and biologicals with an ASP and redistributed $50 
million from the cost of uncoded packaged drugs and biologicals, for a 
total redistribution of $200 million from costs for coded and uncoded 
packaged drugs to separately payable drugs and biologicals, with the 
result that we pay separately paid drugs and biologicals at ASP+5 
percent for CY 2011. The redistribution amount of $150 million in 
overhead cost from coded packaged drugs and biologicals with an ASP and 
$50 million in costs from uncoded packaged drugs and biologicals 
without an ASP were within the parameters established in the CY 2010 
OPPS/ASC final rule. In addition, as in prior years, we described some 
of our work to improve our analyses during the preceding year, and 
reiterated our commitment to continue to refine our drug pricing 
methodology.
b. Proposed Payment Policy
    Section 1833(t)(14)(A)(iii) of the Act, as described above, 
continues to be applicable to determining payments for SCODs for CY 
2012. This provision requires that payment for SCODs be equal to the 
average acquisition cost for

[[Page 42260]]

the drug for that year as determined by the Secretary, subject to any 
adjustment for overhead costs and taking into account the hospital 
acquisition cost survey data collected by the GAO in CYs 2004 and 2005 
and later periodic surveys conducted by the Secretary as set forth in 
the statute. If hospital acquisition cost data are not available, 
section 1833(t)(14)(A)(iii)(II) of the Act requires that payment be 
equal to payment rates established under the methodology described in 
section 1842(o) of the Act, section 1847A of the Act (ASP+6 percent as 
paid for physician Part B drugs), or section 1847B of the Act (CAP), as 
the case may be, as calculated and adjusted by the Secretary as 
necessary. In accordance with sections 1842(o) and 1847A of the Act, 
payments for most Medicare non-OPPS Part B drugs furnished on or after 
January 1, 2005, are paid based on the ASP methodology. Medicare Part B 
drugs generally fall into three categories: physician-administered 
drugs (drugs furnished incident to a physician's service), drugs 
delivered through DME (drugs furnished under the durable medical 
equipment benefit), and drugs specifically covered by a statutory 
provision (certain oral anti-cancer and immunosuppressive drugs). 
Section 1833(t)(14)(E)(ii) of the Act authorizes, but does not require, 
the Secretary to adjust APC weights to take into account the 2005 
MedPAC report relating to overhead and related expenses, such as 
pharmacy services and handling costs. As discussed in V.B.3.a. of this 
proposed rule, since CY 2006, we have used ASP data and costs estimated 
from charges on hospital claims data as a proxy for the sum of the 
average hospital acquisition cost that the statute requires for payment 
of SCODs and the associated pharmacy overhead cost in order to 
establish a combined payment rate for acquisition cost and pharmacy 
overhead. Prior to CY 2010, we applied this methodology to payment for 
all separately payable drugs and biologicals without pass-through 
status, including both SCODs and other drugs and biologicals that do 
not meet the statutory definition of SCODs.
    For the CY 2010 OPPS, as part of our ongoing efforts to improve the 
validity of our payments, we revised the standard methodology to 
include an adjustment for pharmacy overhead. As explained previously, 
we have acknowledged, and continue to believe, that the established 
method of converting billed charges to costs had the potential to 
``compress'' the calculated costs to some degree. We recognized that 
the attribution of pharmacy overhead costs to packaged or separately 
payable drugs and biologicals through our standard drug payment 
methodology of a combined payment for acquisition and pharmacy overhead 
costs depends, in part, on the treatment of all drugs and biologicals 
each year under our annual drug packaging threshold. To some unknown 
extent, we believe that some pharmacy overhead costs attributed to 
packaged drugs and biologicals may include pharmacy overhead costs for 
separately payable drugs.
    For this CY 2012 OPPS/ASC proposed rule, we are proposing to 
continue to use our standard methodology for determining the total cost 
of separately payable drugs and biologicals in our CY 2010 claims data 
and comparing these costs to the ASP dollars (April 2011 ASP quarterly 
payment rates multiplied by units for the separately payable drugs and 
biologicals in the claims data) for the same drugs and biologicals. We 
determined that the total estimated payment for separately payable 
drugs and biologicals (status indicators ``K'' and ``G''), including 
acquisition and pharmacy overhead costs, is ASP-2 percent, which also 
would be the ASP-based payment rate under the standard methodology that 
we established in CY 2006 (75 FR 46275). Additionally, we determined 
that the total estimated aggregate cost for packaged drugs and 
biologicals with a HCPCS code for which manufacturers report ASP data 
(status indicator ``N''), including acquisition and pharmacy overhead 
costs, is equivalent to ASP+188 percent. Finally, we determined that 
the total estimated cost for both packaged drugs and biologicals with a 
HCPCS code and separately payable drugs and biologicals (status 
indicators ``N,'' ``K,'' and ``G'') for which we also have ASP data, 
including acquisition and pharmacy overhead costs, is ASP+11 percent. 
Table 31 below displays our findings with regard to the percentage of 
ASP in comparison to the cost for packaged coded drugs and biologicals 
and for separately payable coded drugs and biologicals before 
application of the proposed overhead adjustment methodology.

               Table 31--CY 2012 Proposed Rule Data: Asp+X Calculation Under Standard Methodology
----------------------------------------------------------------------------------------------------------------
                                                     Total ASP     Total cost of
                                                    dollars for      drugs and
                                                     drugs and    biologicals in   Ratio of cost
                                                  biologicals in    claims data   to ASP (column  ASP+X  percent
                                                    claims data         (in         3/column 2)
                                                  (in millions)*    millions)**
----------------------------------------------------------------------------------------------------------------
Uncoded Packaged Pharmaceutical Revenue Code             Unknown       * * *$502         Unknown         Unknown
 Costs..........................................
Coded Packaged Drugs and Biologicals with a                 $244             705            2.88         ASP+188
 reported ASP...................................
Separately Payable Drugs and Biologicals with a            3,536           3,476            0.98           ASP-2
 reported ASP...................................
All Coded Drugs and Biologicals with a reported            3,780           4,181            1.11          ASP+11
 ASP............................................
----------------------------------------------------------------------------------------------------------------
* Total April 2011 ASP dollars (ASP multiplied by drug or biologicals units in CY 2010 claims) for drugs and
  biologicals with a HCPCS code and ASP information.
** Total cost in the CY 2010 claims data for drugs and biologicals.
*** Pharmacy revenue code costs without HCPCS codes.

    We acknowledge that the combined payment for average acquisition 
and pharmacy overhead costs under our standard methodology may 
understate the cost of separately payable drugs and biologicals and 
related pharmacy overhead for those drugs and biologicals. 
Specifically, we recognize that payment at ASP-2 percent for such costs 
may not be sufficient. We also acknowledge that ASP +188 percent may 
overstate the combined acquisition and pharmacy overhead cost of 
packaged drugs and biologicals. Therefore, given this issue, for CY 
2012, we are proposing to continue the CY 2010 and CY 2011 overhead 
adjustment methodology, which redistributes $200 million in cost from 
packaged drugs with an ASP and uncoded packaged drugs, as first 
implemented in the CY 2010 OPPS/ASC final rule with comment period (74 
FR 60501 through 60517).
    For CY 2012, because we are proposing to continue to make an 
overhead adjustment for another year,

[[Page 42261]]

we believe it is appropriate to account for inflation that has occurred 
since the overhead redistribution amount of $200 million was applied in 
CY 2011. Therefore, we are proposing to apply an inflation allowance to 
account for inflation and changes in the prices of pharmaceuticals in 
the overall economy. We are proposing to adjust the overhead 
redistribution amount of $200 million using the PPI for Pharmaceuticals 
for Human Use. The PPI for Pharmaceuticals for Human Use (Prescription) 
(Bureau of Labor Statistics (BLS) series code WPUSI07003), provided 
through CMS' Office of the Actuary (OACT) is a price series that 
reflects price changes associated with the average mix of all 
pharmaceuticals in the overall economy. We refer to this series 
generally as the PPI for Prescription Drugs. We believe that this price 
series is appropriate to use to update the overhead redistribution 
amount because the PPI for Prescription Drugs is publicly available and 
regularly published and because we have successfully utilized the PPI 
for Prescription Drugs for the past 5 years to update the drug 
packaging threshold as described in section V.B.2.a. of this proposed 
rule.
    In order to apply the inflation allowance to the overhead 
redistribution amount for CY 2012, we used the most recent forecast of 
yearly index levels provided in the PPI for Prescription Drugs to 
calculate an updated overhead redistribution amount. After adjusting 
the $200 million overhead redistribution amount for inflation using the 
PPI for Prescription Drugs, we determined that $161 million would need 
to be redistributed from coded packaged drugs and biologicals with 
reported ASP data and $54 million would need to be redistributed from 
the cost of uncoded packaged drugs and biologicals without an ASP to 
separately payable drugs and biologicals. The proposed redistribution 
amount of $161 million in overhead cost from coded packaged drugs and 
biologicals is within the redistribution parameters established in the 
CY 2010 OPPS/ASC final rule with comment period of roughly one-third to 
one-half of overhead cost in coded packaged drugs and biologicals. The 
total proposed redistribution amount from both coded and uncoded 
packaged drugs and biologicals to separately paid drugs and biologicals 
would therefore be $215 million. Having determined to redistribute 
overhead, we also continue to believe that the methodology to 
redistribute a portion of drug overhead cost from packaged coded and 
uncoded drugs and biologicals to separately payable drugs and 
biologicals while keeping the total cost of drugs and biologicals in 
the claims data constant continues to be appropriate for the reasons 
set forth in the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60501 through 60517). Therefore, for CY 2012, we are proposing to 
redistribute a total overhead redistribution amount, adjusted for 
inflation, of $215 million from coded and uncoded packaged drugs and 
biologicals to separately payable drugs and biologicals.
    In the CY 2010 OPPS/ASC final rule with comment period, we 
reallocated $150 million in overhead cost from coded packaged drugs and 
biologicals with an ASP to separately payable drugs and biologicals 
with an ASP, or one-third of the pharmacy overhead cost of these 
products based upon the claims data available for the CY 2010 final 
rule. In addition, we noted that some of the cost associated with 
uncoded packaged drugs and biologicals was appropriate to redistribute 
to separately payable drugs and biologicals. Therefore, we made a 
conservative estimate, as compared with the case of coded packaged 
drugs and biologicals with an ASP for which we had a specific pharmacy 
overhead cost estimate in relationship to their known ASPs, and 
reallocated $50 million, or 8 percent of the total cost of uncoded 
packaged drugs and biologicals with no ASP. We made the assumption that 
whatever pharmacy overhead cost inappropriately associated with uncoded 
packaged drugs and biologicals would not be less than 8 percent of 
total uncoded drugs and biologicals cost.
    For this CY 2012 OPPS/ASC proposed rule, we note that continuing to 
redistribute $200 million (or $215 million with the adjustment for 
inflation) falls within the parameters originally established in the CY 
2010 OPPS/ASC final rule with comment period. A redistribution amount 
of $161 million in overhead cost from coded packaged drugs and 
biologicals with an ASP or approximately 35 percent falls within one-
third to one-half of the estimated pharmacy overhead cost. In addition, 
we note that a redistribution amount of $54 million in overhead cost 
from uncoded packaged drugs and biologicals, or approximately 11 
percent, is not less than 8 percent of the total cost of uncoded 
packaged drugs and biologicals. Therefore, our proposal to redistribute 
$215 million is consistent with the overhead adjustment methodology 
first implemented in CY 2010. We continue to believe that a middle 
ground of approximately one-third to one-half of the total pharmacy 
overhead cost currently associated with coded packaged drugs and 
biologicals in the CY 2010 claims data represents the most accurate 
redistribution of pharmacy overhead cost.
    We estimate the overhead cost for coded packaged drugs to be $544 
million ($705 million in total cost for coded packaged drugs and 
biologicals with a reported ASP, less $161 million in total ASP dollars 
for coded packaged drugs and biologicals with a reported ASP). As we 
did in CY 2010 and CY 2011, we are proposing for CY 2012 that any 
redistribution of pharmacy overhead cost would occur only among drugs 
and biologicals in our claims data, that no redistribution of cost 
would occur from other services to drugs and biologicals or vice versa. 
We believe that redistributing $215 million from packaged to separately 
payable drugs and biologicals, which includes an adjustment for 
inflation, is an appropriate redistribution of pharmacy overhead costs 
to address any charge compression in the standard methodology. This 
would result in a proposed CY 2012 payment rate for separately payable 
drugs and biologicals of ASP+4 percent. We note that, in past years, 
the proposed ASP+X amount decreased by at least 1 percentage point when 
we updated the ASP data, claims data, and cost report data between the 
proposed rule and the final rule with comment period. Therefore, it is 
possible that the proposed methodology would result in an ASP+X amount 
that is different from ASP+4.
    As indicated in Table 31 above, if we were to propose to establish 
payment for separately payable drugs and biologicals under the standard 
methodology established in CY 2006 without applying a pharmacy overhead 
adjustment, we would have to propose to pay for separately payable 
drugs and biologicals at ASP-2 percent. However, because we are 
concerned about the possibility of underpaying for separately payable 
drugs and biologicals, we believe that a pharmacy overhead adjustment 
using a redistribution methodology for determining the amount of 
payment for drugs and biologicals, as we did for CY 2011, is 
appropriate for CY 2012. We acknowledge that the observed ASP-2 percent 
may reflect some amount of charge compression and variability 
attributable to the choice of a packaging threshold.

[[Page 42262]]

         Table 32--CY 2012 Proposed Pharmacy Overhead Adjustment Payment Methodology: Asp+X Calculation
----------------------------------------------------------------------------------------------------------------
                                                     Total ASP     Total cost of
                                                    dollars for      drugs and
                                                     drugs and    biologicals in   Ratio of cost
                                                  biologicals in    claims data   to ASP (column   ASP+X percent
                                                    claims Data        after        3/column 2)
                                                   (in millions)  adjustment (in
                                                         *         millions) * *
----------------------------------------------------------------------------------------------------------------
Uncoded Packaged Pharmaceutical Revenue Code             Unknown      * * * $448         Unknown         Unknown
 Costs..........................................
Coded Packaged Drugs and Biologicals with a                  244             544            2.23         ASP+123
 reported ASP...................................
Separately Payable Drugs and Biologicals with a            3,536           3,691            1.04           ASP+4
 reported ASP...................................
All Coded Drugs and Biologicals with a reported            3,780           4,181            1.11          ASP+11
 ASP............................................
----------------------------------------------------------------------------------------------------------------
* Total April 2011 ASP dollars (ASP multiplied by drug or biological units in CY 2010 claims) for drugs and
  biologicals with a HCPCS code and ASP information.
** Total cost in the CY 2010 claims data for drugs and biologicals.
*** Pharmacy revenue code costs without HCPCS codes.

    We note that although it is CMS' longstanding policy under the OPPS 
to refrain from instructing hospitals on the appropriate revenue code 
to use to charge for specific services, we continue to encourage 
hospitals to bill all drugs and biologicals with HCPCS codes, 
regardless of whether they are separately payable or packaged, and to 
ensure that drug costs are completely reported, using appropriate 
revenue codes. We note that we make packaging determinations for drugs 
and biologicals annually based on cost information reported under HCPCS 
codes, and the OPPS ratesetting is best served when hospitals report 
charges for all items and services with HCPCS codes when they are 
available, whether or not Medicare makes separate payment for the items 
and services.
    In summary, for the reasons set forth above and considering the 
data limitations we have previously discussed, we are proposing to 
continue our prior CY 2010 and CY 2011 acquisition cost proxy 
methodology and pharmacy overhead redistribution methodology. In 
addition, we are proposing to adjust the $200 million redistribution 
amount finalized in CY 2011 for inflation. Therefore, we are proposing 
to redistribute $161 million in overhead costs from coded packaged 
drugs and biologicals and $54 million in overhead costs from uncoded 
packaged drugs and biologicals to result in $215 million in costs 
redistributed from packaged coded and uncoded drugs and biologicals to 
separately payable drugs and biologicals for CY 2012. The proposed 
redistribution amount of $161 million in overhead cost from coded 
packaged drugs and biologicals is within the redistribution parameters 
established in the CY 2010 OPPS/ASC final rule with comment period of 
roughly one-third to one-half of overhead cost in coded packaged drugs 
and biologicals. Approximately 11 percent of drug cost in uncoded 
packaged drugs and biologicals would be redistributed to separately 
payable drugs for CY 2012, and therefore, this amount continues to be 
no less than 8 percent of the total uncoded drug and biological cost. 
The result of this proposed methodology when applied using April 2011 
ASPs, data for claims for services furnished during CY 2010 and 
processed through the Common Working File before January 1, 2010, and 
the most current submitted cost reports as of January 1, 2011, is a 
proposed ASP+4 percent amount for CY 2012.
    Further, we are proposing to continue to include the claims data 
for 340B hospitals in the calculation of payment for drugs and 
biologicals under the CY 2012 OPPS because we believe excluding data 
from hospitals that participate in the 340B program from our ASP+X 
calculation, but paying those hospitals at that derived payment amount, 
would effectively redistribute payment to drugs or biologicals from 
payment for other services under the OPPS. Furthermore, we do not 
believe it would be appropriate to exclude claims from this subset of 
hospitals in the context of a proposed CY 2012 drug and biological 
payment policy that pays all hospitals the same rate for separately 
payable drugs and biologicals (74 FR 60517). In addition, we are 
proposing that 340B hospitals continue to be paid the same amounts for 
separately payable drugs and biologicals as hospitals that do not 
participate in the 340B program for CY 2012 because commenters have 
generally opposed differential payment for hospitals based on their 
340B participation status. In addition, we are proposing to include 
claims from 340B hospitals in our assessment of average acquisition 
cost under section 1833(t)(14)(A)(iii) of the Act. We are proposing 
that the estimated payments for separately payable drugs and 
biologicals be taken into account in the calculation of the weight 
scaler that would apply to the relative weights for all procedural 
services (but would not apply to separately payable drugs and 
biologicals) paid under the OPPS, as required by section 1833(t)(14)(H) 
of the Act.
    We note that we continue to pursue the most appropriate methodology 
for establishing payment for drugs and biologicals under the OPPS. 
Because we are always trying to improve the integrity of our data, we 
have previously proposed multiple mechanisms to improve the cost data 
available to us, but have not implemented those proposals due to 
hospital concerns about the administrative burden. We continue to be 
interested in developing mechanisms that improve the cost data 
available to us while minimizing to the extent possible the 
administrative burden on hospitals. For the past 3 years, we have 
proposed an internal adjustment to redistribute an amount from packaged 
coded and uncoded drugs and biologicals to separately payable drugs and 
biologicals, because the results of our standard drug payment 
methodology are unlikely to accurately reflect the full cost of 
acquisition and pharmacy overhead for separately payable and packaged 
drugs and biologicals due to hospital charging practices and our use of 
an annual drug packaging threshold. As we continue to work to refine 
our payment systems, a goal to which we have been consistently 
committed over the past several years, we encourage public input on 
determining alternative cost-based methodologies to aid in our ongoing 
evaluation of alternative cost-based methodologies that could improve 
upon the current methodology.
c. Proposed Payment Policy for Therapeutic Radiopharmaceuticals
    Beginning in the CY 2005 OPPS final rule with comment period, we

[[Page 42263]]

exempted radiopharmaceutical manufacturers from reporting ASP data for 
all radiopharmaceuticals for payment purposes under the OPPS. (For more 
information, we refer readers to the CY 2005 OPPS final rule with 
comment period (69 FR 65811) and the CY 2006 OPPS final rule with 
comment period (70 FR 68655).) Consequently, we did not have ASP data 
for radiopharmaceuticals for consideration for OPPS ratesetting until 
we began collecting ASP for nonpass-through separately paid therapeutic 
radiopharmaceuticals for CY 2010. In accordance with section 
1833(t)(14)(B)(i)(I) of the Act, we have classified 
radiopharmaceuticals under the OPPS as SCODs. As such, we have paid for 
radiopharmaceuticals at average acquisition cost as determined by the 
Secretary and subject to any adjustment for overhead costs. For CYs 
2006 and 2007, we used mean unit cost data from hospital claims to 
determine each radiopharmaceutical's packaging status and implemented a 
temporary policy to pay for separately payable radiopharmaceuticals 
based on the hospital's charge for each radiopharmaceutical adjusted to 
cost using the hospital's overall CCR. The methodology of providing 
separate radiopharmaceutical payment based on charges adjusted to cost 
through application of an individual hospital's overall CCR for CYs 
2006 and 2007 was finalized as an interim proxy for average acquisition 
cost.
    In CY 2008, we packaged payment for all diagnostic 
radiopharmaceuticals and we proposed and finalized a methodology to 
provide prospective payment for therapeutic radiopharmaceuticals 
(defined as those Level II HCPCS codes that include the term 
``therapeutic'' along with a radiopharmaceutical in their long code 
descriptors) using mean costs derived from the CY 2006 claims data, 
where the costs were determined using our standard methodology of 
applying hospital-specific departmental CCRs to radiopharmaceutical 
charges, defaulting to hospital-specific overall CCRs only if 
appropriate departmental CCRs were unavailable (72 FR 66772). Following 
issuance of the CY 2009 OPPS/ASC proposed rule, section 142 of the 
Medicare Improvements for Patients and Providers Act of 2008 (Pub. L. 
110-275) amended section 1833(t)(16)(C) of the Act, as amended by 
section 106(a) of the Medicare, Medicaid, and SCHIP Extension Act of 
2007 (Pub. L. 110-173), to further extend the payment period for 
therapeutic radiopharmaceuticals based on hospitals' charges adjusted 
to cost through December 31, 2009. Therefore, for CY 2009, we finalized 
a policy to continue to pay hospitals for therapeutic 
radiopharmaceuticals at charges adjusted to cost through the end of CY 
2009.
    For CY 2010, we proposed and finalized a policy to pay for 
separately paid therapeutic radiopharmaceuticals under the ASP 
methodology adopted for separately payable drugs and biologicals. We 
allowed manufacturers to submit the ASP data in a patient-specific dose 
or patient-ready form in order to properly calculate the ASP amount for 
a given HCPCS code. This resulted in payment for nonpass-through 
separately paid therapeutic radiopharmaceuticals at ASP+4 percent for 
CY 2010 for products for which the manufacturer submitted ASP. We also 
finalized a policy to base therapeutic radiopharmaceutical payment on 
CY 2008 mean unit cost data derived from hospital claims if ASP 
information was unavailable. For CY 2011, we continued to pay for 
nonpass-through separately paid therapeutic radiopharmaceuticals under 
the ASP methodology adopted for separately payable drugs and 
biologicals, resulting in a payment rate for nonpass-through separately 
paid therapeutic radiopharmaceuticals of ASP+5 percent. We also 
continued to base therapeutic radiopharmaceutical payment on CY 2009 
mean unit cost data derived from hospital claims if ASP information was 
unavailable.
    We believe that the rationale outlined in the CY 2010 OPPS/ASC 
final rule with comment period (74 FR 60524 through 60525) for applying 
the principles of separately payable drug pricing to therapeutic 
radiopharmaceuticals continues to be appropriate for nonpass-through 
separately payable therapeutic radiopharmaceuticals in CY 2012. 
Therefore, we are proposing to continue to pay all nonpass-through, 
separately payable therapeutic radiopharmaceuticals under the ASP+X 
payment level established using the proposed pharmacy overhead 
adjustment based on a redistribution methodology to set payment for 
separately payable drugs and biologicals (proposed at ASP+4 percent, as 
discussed in section V.B.3.b. of this proposed rule) based on ASP 
information, if available, for a ``patient ready'' dose and updated on 
a quarterly basis for products for which manufacturers report ASP data. 
For a full discussion of how a ``patient ready'' dose is defined, we 
refer readers to the CY 2010 OPPS/ASC final rule with comment period 
(74 FR 60520 through 60521). We also are proposing to rely on CY 2010 
mean unit cost data derived from hospital claims data for payment rates 
for therapeutic radiopharmaceuticals for which ASP data are unavailable 
and to update the payment rates for separately payable therapeutic 
radiopharmaceuticals, according to our usual process for updating the 
payment rates for separately payable drugs and biologicals, on a 
quarterly basis if updated ASP information is available.
    The proposed CY 2012 payment rates for nonpass-through separately 
payable therapeutic radiopharmaceuticals are included in Addenda A and 
B to this proposed rule (which is referenced in section XVII. of this 
proposed rule and available via the Internet).
4. Proposed Payment for Blood Clotting Factors
    For CY 2011, we provided payment for blood clotting factors under 
the same methodology as other nonpass-through separately payable drugs 
and biologicals under the OPPS and continued paying an updated 
furnishing fee. That is, for CY 2011, we provided payment for blood 
clotting factors under the OPPS at ASP+5 percent, plus an additional 
payment for the furnishing fee. We note that when blood clotting 
factors are provided in physicians' offices under Medicare Part B and 
in other Medicare settings, a furnishing fee is also applied to the 
payment. The CY 2011 updated furnishing fee is $0.176 per unit.
    For CY 2012, we are proposing to pay for blood clotting factors at 
ASP+4 percent, consistent with our proposed payment policy for other 
nonpass-through separately payable drugs and biologicals, and to 
continue our policy for payment of the furnishing fee using an updated 
amount. Our rationale for this proposed policy was first articulated in 
the CY 2006 OPPS final rule with comment period (70 FR 68661) and then 
later discussed in the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66765). The proposed furnishing fee update is based on the 
percentage increase in the Consumer Price Index (CPI) for medical care 
for the 12-month period ending with June of the previous year. Because 
the Bureau of Labor Statistics releases the applicable CPI data after 
the MPFS and OPPS/ASC proposed rules are published, we are not able to 
include the actual updated furnishing fee in the proposed rules. 
Therefore, in accordance with our policy, as finalized in the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66765), we would 
announce the actual figure for the percent change in the applicable CPI

[[Page 42264]]

and the updated furnishing fee calculated based on that figure through 
applicable program instructions and posting on the CMS Web site at: 
http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice/.
5. Proposed Payment for 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) does not address the OPPS payment in CY 2005 
and after for drugs, biologicals, and radiopharmaceuticals that have 
assigned HCPCS codes, but that do not have a reference AWP or approval 
for payment as pass-through drugs or biologicals. Because there is no 
statutory provision that dictated payment for such drugs, biologicals, 
and radiopharmaceuticals in CY 2005, and because we had no hospital 
claims data to use in establishing a payment rate for them, we 
investigated several payment options for CY 2005 and discussed them in 
detail in the CY 2005 OPPS final rule with comment period (69 FR 65797 
through 65799).
    For CYs 2005 to 2007, we implemented a policy to provide separate 
payment for new drugs, biologicals, and radiopharmaceuticals with HCPCS 
codes (specifically those new drug, biological, and radiopharmaceutical 
HCPCS codes in each of those calendar years that did not crosswalk to 
predecessor HCPCS codes) but which did not have pass-through status, at 
a rate that was equivalent to the payment they received in the 
physician's office setting, established in accordance with the ASP 
methodology for drugs and biologicals, and based on charges adjusted to 
cost for radiopharmaceuticals. For CYs 2008 and 2009, we finalized a 
policy to provide payment for new drugs (excluding contrast agents and 
diagnostic radiopharmaceuticals) and biologicals (excluding implantable 
biologicals for CY 2009) with HCPCS codes, but which did not have pass-
through status and were without OPPS hospital claims data, at ASP+5 
percent and ASP+4 percent, respectively, consistent with the final OPPS 
payment methodology for other separately payable drugs and biologicals. 
New therapeutic radiopharmaceuticals were paid at charges adjusted to 
cost based on the statutory requirement for CY 2008 and CY 2009 and 
payment for new diagnostic radiopharmaceuticals was packaged in both 
years. For CY 2010, we continued to provide payment for new drugs 
(excluding contrast agents), and nonimplantable biologicals with HCPCS 
codes that do not have pass-through status and are without OPPS 
hospital claims data, at ASP+4 percent, consistent with the CY 2010 
payment methodology for other separately payable nonpass-through drugs, 
and nonimplantable biologicals. We also finalized a policy to extend 
the CY 2009 payment methodology to new therapeutic radiopharmaceutical 
HCPCS codes, consistent with our final policy in the CY 2010 OPPS/ASC 
final rule with comment period (74 FR 60581 through 60526), providing 
separate payment for therapeutic radiopharmaceuticals that do not 
crosswalk to CY 2009 HCPCS codes, do not have pass-through status, and 
are without OPPS hospital claims data, at ASP+4 percent. This policy 
was continued in the CY 2011 OPPS/ASC final rule with comment period 
(75 FR 71970 through 71973), paying for new drugs, nonimplantable 
biologicals and radiopharmaceuticals that do not crosswalk to CY 2010 
HCPCS codes, do not have pass-through status, and are without OPPS 
hospital claims data at ASP+5 percent.
    For CY 2012, we are proposing to continue our payment policies for 
new drugs (excluding contrast agents and diagnostic 
radiopharmaceuticals), nonimplantable biologicals, and therapeutic 
radiopharmaceuticals that have HCPCS codes that do not crosswalk to CY 
2011 HCPCS codes, do not have pass-through status, and are without OPPS 
hospital claims data. We are proposing to provide payment for new CY 
2012 drugs (excluding contrast agents and diagnostic 
radiopharmaceuticals), nonimplantable biologicals, and therapeutic 
radiopharmaceuticals, at ASP+4 percent, consistent with the proposed CY 
2012 payment methodology for other separately payable nonpass-through 
drugs, nonimplantable biologicals, and therapeutic 
radiopharmaceuticals. We believe this proposed policy would ensure that 
new nonpass-through drugs, nonimplantable biologicals and therapeutic 
radiopharmaceuticals would be treated like other drugs, nonimplantable 
biologicals, and therapeutic radiopharmaceuticals under the OPPS, 
unless they are granted pass-through status. Only if they are pass-
through drugs, nonimplantable biologicals, or therapeutic 
radiopharmaceuticals would they receive a different payment for CY 
2012, generally equivalent to the payment these drugs and biologicals 
would receive in the physician's office setting, consistent with the 
requirements of the statute.
    We also are proposing to continue our CY 2011 policy of packaging 
payment for all new nonpass-through diagnostic radiopharmaceuticals, 
contrast agents, and implantable biologicals with HCPCS codes but 
without claims data (those new CY 2012 diagnostic radiopharmaceuticals, 
contrast agents, and implantable biological HCPCS codes that do not 
crosswalk to predecessor HCPCS codes), consistent with the proposed 
packaging of all existing nonpass-through diagnostic 
radiopharmaceuticals, contrast agents and implantable biologicals, as 
discussed in more detail in section V.B.2.d. and IV.A.2. of this 
proposed rule.
    In accordance with the OPPS ASP methodology, in the absence of ASP 
data, for CY 2012, we are proposing to continue the policy we 
implemented beginning in CY 2005 of using the WAC for the product to 
establish the initial payment rate for new nonpass-through drugs and 
biologicals with HCPCS codes, but which are without OPPS claims data. 
However, we note that if the WAC is also unavailable, we would make 
payment at 95 percent of the product's most recent AWP. We also are 
proposing to assign status indicator ``K'' (separately paid nonpass-
through drugs and nonimplantable biologicals, including therapeutic 
radiopharmaceuticals) to HCPCS codes for new drugs and nonimplantable 
biologicals without OPPS claims data and for which we have not granted 
pass-through status. With respect to new, nonpass-through drugs, 
nonimplantable biologicals, and therapeutic radiopharmaceuticals, for 
which we do not have ASP data, we are proposing that once their ASP 
data become available in later quarterly submissions, their payment 
rates under the OPPS would be adjusted so that the rates would be based 
on the ASP methodology and set to the finalized ASP-based amount 
(proposed for CY 2012 at ASP+4 percent) for items that have not been 
granted pass-through status. This proposed policy, which is consistent 
with prior years' policies for these items, would ensure that new 
nonpass-through drugs, nonimplantable biologicals, and therapeutic 
radiopharmaceuticals would be treated like other drugs, nonimplantable 
biologicals, and therapeutic radiopharmaceuticals under the OPPS, 
unless they are granted pass-through status. Only if they are pass-
through drugs, nonimplantable biologicals, or therapeutic 
radiopharmaceuticals would they receive a different payment for CY

[[Page 42265]]

2012, generally equivalent to the payment these drugs and biologicals 
would receive in the physician's office setting, consistent with the 
requirements of the statute.
    Similarly, we are proposing to continue our CY 2011 policy to base 
the initial payment for new therapeutic radiopharmaceuticals with HCPCS 
codes, but which do not have 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 are proposing to make payment for new therapeutic 
radiopharmaceutical at 95 percent of the products' most recent AWP 
because we would not have mean costs from hospital claims data upon 
which to base payment. As we are proposing with new drugs and 
biologicals, we are proposing to continue our policy of assigning 
status indicator ``K'' to HCPCS codes for new therapeutic 
radiopharmaceuticals without OPPS claims data for which we have not 
granted pass-through status.
    Consistent with other ASP-based payment, for CY 2012 we are 
proposing to announce any changes to the payment amounts for new drugs 
and biologicals in the CY 2012 OPPS/ASC final rule with comment period 
and also on a quarterly basis on the CMS Web site during CY 2012 if 
later quarter ASP submissions (or more recent WACs or AWPs) indicate 
that changes to the payment rates for these drugs and biologicals are 
necessary. The payment rates for new therapeutic radiopharmaceuticals 
would also be changed accordingly, based on later quarter ASP 
submissions. We note that the new CY 2012 HCPCS codes for drugs, 
biologicals and therapeutic radiopharmaceuticals are not available at 
the time of development of this proposed rule. However, these agents 
will be included in Addendum B to the CY 2012 OPPS/ASC final rule with 
comment period where they will be assigned comment indicator ``NI'' 
(which is referenced in section XVII. of this proposed rule and 
available via the Internet on the CMS Web site) to reflect that their 
interim final OPPS treatment is open to public comment on the CY 2012 
OPPS/ASC final rule with comment period.
    There are several nonpass-through drugs and biologicals that were 
payable in CY 2010 and/or CY 2011 for which we do not have CY 2010 
hospital claims data available for this proposed rule and for which 
there are no other HCPCS codes that describe different doses of the 
same drug, but which have pricing information available for the ASP 
methodology. We note that there are currently no therapeutic 
radiopharmaceuticals in this category. In order to determine the 
packaging status of these products for CY 2012, we calculated an 
estimate of the per day cost of each of these items by multiplying the 
payment rate of each product based on ASP+4 percent, similar to other 
nonpass-through drugs and biologicals paid separately under the OPPS, 
by an estimated average number of units of each product that would 
typically be furnished to a patient during one day in the hospital 
outpatient setting. This rationale was first adopted in the CY 2006 
OPPS/ASC final rule with comment period (70 FR 68666 and 68667). We are 
proposing to package items for which we estimated the per day 
administration cost to be less than or equal to $80, which is the 
general packaging threshold that we are proposing for drugs, 
nonimplantable biologicals, and therapeutic radiopharmaceuticals in CY 
2012. We are proposing to pay separately for items with an estimated 
per day cost greater than $80 (with the exception of diagnostic 
radiopharmaceuticals, contrast agents, and implantable biologicals, 
which we are proposing to continue to package regardless of cost as 
discussed in more detail in section V.B.2.d. of this proposed rule) in 
CY 2012. We are proposing that the CY 2012 payment for separately 
payable items without CY 2010 claims data would be ASP+4 percent, 
similar to payment for other separately payable nonpass-through drugs 
and biologicals under the OPPS. In accordance with the ASP methodology 
paid in the physician's office setting, in the absence of ASP data we 
are proposing to use the WAC for the product to establish the initial 
payment rate. However, we note that if the WAC is also unavailable, we 
would make payment at 95 percent of the most recent AWP available.
    The proposed estimated units per day and status indicators for 
these items are displayed in Table 33 below.

                           Table 33--Drugs and Biologicals Without CY 2010 Claims Data
----------------------------------------------------------------------------------------------------------------
                                                                     Estimated
                                                                  average number    Proposed CY     Proposed CY
          CY 2012 HCPCS Code             CY 2012 Long descriptor   of units per       2012 SI        2012 APC
                                                                        day
----------------------------------------------------------------------------------------------------------------
J0205.................................  Injection, alglucerase,              420               K            0900
                                         per 10 units.
J0364.................................  Injection, apomorphine                12               N             N/A
                                         hydrochloride, 1 mg.
J0630.................................  Injection, calcitonin                1.5               N             N/A
                                         salmon, up to 400 units.
J1680.................................  Injection, human                      49               K            1290
                                         fibrinogen concentrate,
                                         100 mg.
J2513.................................  Injection, pentastarch,                4               K            1222
                                         10% solution, 100 ml.
J2724.................................  Injection, protein c                1540               K            1139
                                         concentrate,
                                         intravenous, human, 10
                                         iu.
J3355.................................  Injection,                             2               K            1741
                                         urofollitropin, 75 IU.
J9216.................................  Injection, interferon,                 1               K            0838
                                         gamma 1-b, 3 million
                                         units.
Q0515.................................  Injection, sermorelin                 70               K            3050
                                         acetate, 1 microgram.
----------------------------------------------------------------------------------------------------------------

    Finally, there were five drugs and biologicals, shown in Table 34 
below, that were payable in CY 2010, but for which we lacked CY 2010 
claims data and any other pricing information for the ASP methodology 
for the CY 2012 OPPS/ASC proposed rule. In CY 2009, for similar items 
without CY 2007 claims data and without pricing information for the ASP 
methodology, we previously stated that we were unable to determine 
their per day cost and we packaged these items for the year, assigning 
these items status indicator ``N.''
    For CY 2010, we finalized a policy to change the status indicator 
for drugs and biologicals previously assigned a payable status 
indicator to status indicator ``E'' (Not paid by Medicare when 
submitted on outpatient claims (any outpatient bill type)) whenever we 
lacked claims data and pricing information and were unable to determine 
the per day cost. In addition, we noted that we would provide separate 
payment for these drugs and biologicals if pricing information 
reflecting recent sales becomes available mid-year in CY 2010 for the 
ASP

[[Page 42266]]

methodology. If pricing information became available, we would assign 
the products status indicator ``K'' and pay for them separately for the 
remainder of CY 2010. In the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 71973), for CY 2011, we continued our CY 2010 policy to 
assign status indicator ``E'' to drugs and biologicals that lacked CY 
2009 claims data and pricing information for the ASP methodology. We 
also continued our policy to change the status indicator for these 
products to ``K'' if pricing information became available and pay for 
them separately for the remainder of CY 2011.
    For CY 2012, we are proposing to continue our CY 2011 policy to 
assign status indicator ``E'' to drugs and biologicals that lack CY 
2010 claims data and pricing information for the ASP methodology. All 
drugs and biologicals without CY 2010 hospital claims data and data 
based on the ASP methodology that are assigned status indicator ``E'' 
on this basis at the time of this proposed rule for CY 2012 are 
displayed in Table 34 below. If pricing information becomes available, 
we are proposing to assign the products status indicator ``K'' and pay 
for them separately for the remainder of CY 2012.

 Table 34--Drugs and Biologicals Without CY 2010 Claims Data and Without
               Pricing Information for the ASP Methodology
------------------------------------------------------------------------
                                  CY 2012 long
     CY 2012 HCPCS code            descriptor        Proposed CY 2012 SI
------------------------------------------------------------------------
J2940.......................  Injection, somatrem,  E
                               1 mg.
J3305.......................  Injection,            E
                               trimetrexate
                               glucuronate, per 25
                               mg.
J8650.......................  Nabilone, oral, 1 mg  E
J9165.......................  Injection,            E
                               diethylstilbestrol
                               diphosphate, 250 mg.
J9213.......................  Injection,            E
                               interferon, alfa-
                               2a, recombinant, 3
                               million units.
------------------------------------------------------------------------

VI. Proposed Estimate of OPPS Transitional Pass-Through Spending for 
Drugs, Biologicals, Radiopharmaceuticals, and Devices

A. Background

    Section 1833(t)(6)(E) of the Act limits the total projected amount 
of transitional pass-through payments for drugs, biologicals, 
radiopharmaceuticals, and categories of devices for a given year to an 
``applicable percentage'' (currently 2.0 percent, as stated below) of 
total program payments estimated to be made for all covered services 
under the hospital OPPS furnished for that year. For a year (or portion 
of a year) before CY 2004, the applicable percentage was 2.5 percent; 
for CY 2004 and subsequent years, the applicable percentage is a 
percentage specified by the Secretary up to (but not to exceed) 2.0 
percent.
    If we estimate before the beginning of the calendar year that the 
total amount of pass-through payments in that year would exceed the 
applicable percentage, section 1833(t)(6)(E)(iii) of the Act requires a 
uniform prospective reduction in the amount of each of the transitional 
pass-through payments made in that year to ensure that the limit is not 
exceeded. We make an estimate of pass-through spending to determine not 
only whether payments exceed the applicable percentage, but also to 
determine the appropriate pro rata reduction to the conversion factor 
for the projected level of pass-through spending in the following year 
in order to ensure that total estimated pass-through spending for the 
prospective payment year is budget neutral, as required by section 
1883(t)(6)(E) of the Act.
    For devices, developing an estimate of pass-through spending in CY 
2012 entails estimating spending for two groups of items. The first 
group of items consists of device categories that were recently made 
eligible for pass-through payment and that will continue to be eligible 
for pass-through payment in CY 2012. The CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66778) describes the methodology we have 
used in previous years to develop the pass-through spending estimate 
for known device categories continuing into the applicable update year. 
The second group contains items that we know are newly eligible, or 
project may be newly eligible, for device pass-through payment in the 
remaining quarters of CY 2011 or beginning in CY 2012. Beginning in CY 
2010, the pass-through evaluation process and pass-through payment for 
implantable biologicals newly approved for pass-through payment 
beginning on or after January 1, 2010, that are surgically inserted or 
implanted (through a surgical incision or a natural orifice; also 
referred to herein as ``implantable biologicals'') is the device pass-
through process and payment methodology only (74 FR 60476). For CY 
2012, we are proposing that the estimate of pass-through spending for 
implantable biologicals newly eligible for pass-through payment 
beginning in CY 2012 be included in the pass-through spending estimate 
for this second group of device categories. The sum of the CY 2012 
pass-through estimates for these two groups of device categories would 
equal the total CY 2012 pass-through spending estimate for device 
categories with pass-through status.
    For devices eligible for pass-through payment, section 
1833(t)(6)(D)(ii) of the Act establishes the pass-through payment 
amount as the amount by which the hospital's charges for the device, 
adjusted to cost, exceeds the portion of the otherwise applicable OPPS 
fee schedule payment that the Secretary determines is associated with 
the device. As discussed in section IV.A.2. of this proposed rule, we 
deduct from the pass-through payment for an identified device category 
eligible for pass-through payment an amount that reflects the portion 
of the APC payment amount that we determine is associated with the cost 
of the device, defined as the device APC offset amount, when we believe 
that the predecessor device costs for the device category newly 
approved for pass-through payment are already packaged into the 
existing APC structure. For each device category that becomes newly 
eligible for device pass-through payment, including implantable 
biologicals from CY 2010 forward, we estimate pass-through spending to 
be the difference between payment for the device category and the 
device APC offset amount, if applicable, for the procedures that would 
use the device. If we determine that the predecessor device costs for 
the new device category are not already included in the existing APC 
structure, the pass-through spending estimate for the device category 
is the full payment at charges adjusted to cost.
    For drugs and biologicals eligible for pass-through payment, 
section 1833(t)(6)(D)(i) of the Act establishes the pass-through 
payment amount as the

[[Page 42267]]

amount by which the amount authorized under section 1842(o) of the Act 
(or, if the drug or biological is covered under a competitive 
acquisition contract under section 1847B of the Act, an amount 
determined by the Secretary equal to the average price for the drug or 
biological for all competitive acquisition areas and year established 
under such section as calculated and adjusted by the Secretary) exceeds 
the portion of the otherwise applicable fee schedule amount that the 
Secretary determines is associated with the drug or biological. Because 
we are proposing to pay for most nonpass-through separately payable 
drugs and nonimplantable biologicals under the CY 2012 OPPS at ASP+4 
percent, which represents the otherwise applicable fee schedule amount 
associated with most pass-through drugs and biologicals, and because we 
are proposing to pay for CY 2012 pass-through drugs and nonimplantable 
biologicals at ASP+6 percent or the Part B drug CAP rate, if 
applicable, our estimate of drug and nonimplantable biological pass-
through payment for CY 2012 would not be zero, as discussed below. 
Furthermore, payment for certain drugs, specifically diagnostic 
radiopharmaceuticals, contrast agents, and implantable biologicals 
without pass-through status, will always be packaged into payment for 
the associated procedures because these products will never be 
separately paid. However, all pass-through diagnostic 
radiopharmaceuticals and contrast agents with pass-through status 
approved prior to CY 2012 would be paid at ASP+6 percent or the Part B 
drug CAP rate, if applicable, like other pass-through drugs and 
biologicals. Therefore, our estimate of pass-through payment for all 
diagnostic radiopharmaceuticals and contrast agents with pass-through 
status approved prior to CY 2012 is also not zero. We note that there 
are no implantable biologicals proposed to continue on pass-through 
status for CY 2012 and, therefore, we are not proposing to include 
implantable biologicals in our estimate of pass-through payment. 
Payment for nonpass-through implantable biologicals will continue to be 
packaged into the payment for the associated procedure as described in 
section V.B.2.d of this proposed rule.
    In section V.A.4. of this proposed rule, we discuss our proposed 
policy to determine if the cost of certain ``policy-packaged'' drugs, 
including diagnostic radiopharmaceuticals and contrast agents, are 
already packaged into the existing APC structure. If we determine that 
a ``policy-packaged'' drug approved for pass-through payment resembles 
predecessor diagnostic radiopharmaceuticals or contrast agents already 
included in the costs of the APCs that would be associated with the 
drug receiving pass-through payment, we are proposing to offset the 
amount of pass-through payment for diagnostic radiopharmaceuticals and 
contrast agents. For these drugs, the APC offset amount would be the 
portion of the APC payment for the specific procedure performed with 
the pass-through diagnostic radiopharmaceutical or contrast agent that 
is attributable to diagnostic radiopharmaceuticals or contrast agents, 
which we refer to as the ``policy-packaged'' drug APC offset amount. If 
we determine that an offset is appropriate for a specific diagnostic 
radiopharmaceutical or contrast agent receiving pass-through payment, 
we would reduce our estimate of pass-through payment for these drugs by 
this amount.
    We note that the Part B drug CAP program has been postponed 
beginning January 1, 2009. We refer readers to the Medicare Learning 
Network (MLN) Matters Special Edition article SE0833 for more 
information, available via the CMS Web site at: http://www.cms.gov/MLNMattersArticles/downloads/SE0833.pdf. As of the publication of this 
proposed rule, the postponement of the Part B drug CAP program is still 
in effect. As in past years, for this proposed rule, we do not have an 
effective Part B drug CAP rate for pass-through drugs and biologicals.
    Similar to pass-through estimates for devices, the first group of 
drugs and nonimplantable biologicals requiring a pass-through payment 
estimate consists of those products that were recently made eligible 
for pass-through payment and that will continue to be eligible for 
pass-through payment in CY 2012. The second group contains drugs and 
nonimplantable biologicals that we know are newly eligible, or project 
will be newly eligible, in the remaining quarters of CY 2011 or 
beginning in CY 2012. The sum of the CY 2012 pass-through estimates for 
these two groups of drugs and biologicals would equal the total CY 2012 
pass-through spending estimate for drugs and biologicals with pass-
through status.

B. Proposed Estimate of Pass-Through Spending

    We are proposing to set the applicable pass-through payment 
percentage limit at 2.0 percent of the total projected OPPS payments 
for CY 2012, consistent with our OPPS policy from CY 2004 through CY 
2011 (75 FR 71975).
    For the first group of devices for pass-through payment estimate 
purposes, there currently is one device category, C1749 (Endoscope, 
retrograde imaging/illumination colonoscope device (implantable)) that 
became effective October 1, 2010, has been paid as a pass-through 
device for CY 2011, and will continue to be eligible for CY 2012. We 
estimate that CY 2012 pass-through expenditures related to C1749 will 
be approximately $35 million.
    In estimating our proposed CY 2012 pass-through spending for device 
categories in the second group, which also includes any estimate for 
implantable biologicals that are eligible for pass-through payment, we 
include: Device categories that we know at the time of the development 
of this proposed rule would be newly eligible for pass-through payment 
in CY 2012 (of which there are none); additional device categories 
(including categories that describe implantable biologicals) that we 
estimate could be approved for pass-through status subsequent to the 
development of this proposed rule and before January 1, 2012; and 
contingent projections for new device categories (including categories 
that describe implantable biologicals) established in the second 
through fourth quarters of CY 2012. We are proposing to use the general 
methodology described in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66778), while also taking into account recent OPPS 
experience in approving new pass-through device categories. For this 
proposed rule, the estimate of CY 2012 pass-through spending for this 
second group of device categories is $10 million. Using our established 
methodology, the total estimated pass-through spending for device 
categories for CY 2012 (spending for the first group of device 
categories ($35 million) plus spending for the second group of device 
categories ($10 million)) equals $45 million.
    To estimate CY 2012 proposed 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 2012, we are proposing to 
utilize the most recent Medicare physician's office data regarding 
their utilization, information provided in the respective pass-through 
applications, historical hospital claims data, pharmaceutical industry 
information, and clinical information regarding those drugs or 
nonimplantable

[[Page 42268]]

biologicals, to project the CY 2012 OPPS utilization of the products.
    For the known drugs and nonimplantable biologicals (excluding 
diagnostic radiopharmaceuticals and contrast agents) that would be 
continuing on pass-through status in CY 2012, we estimate the proposed 
pass-through payment amount as the difference between ASP+6 percent or 
the Part B drug CAP rate, as applicable, and the proposed payment rate 
for nonpass-through drugs and nonimplantable biologicals that would be 
separately paid at ASP+4 percent, aggregated across the projected CY 
2012 OPPS utilization of these products. Because payment for a 
diagnostic radiopharmaceutical or contrast agent would be packaged if 
the product were not paid separately due to its pass-through status, we 
are proposing to include in the proposed CY 2012 pass-through estimate 
the difference between payment for the drug or nonimplantable 
biological at ASP+6 percent (or WAC+6 percent, or 95 percent of AWP, if 
ASP or WAC information is not available) and the ``policy-packaged'' 
drug APC offset amount, if we have determined that the diagnostic 
radiopharmaceutical or contrast agent approved for pass-through payment 
resembles predecessor diagnostic radiopharmaceuticals or contrast 
agents already included in the costs of the APCs that would be 
associated with the drug receiving pass-through payment. For this 
proposed rule, we are proposing to continue to use the methodology used 
in CY 2011 to calculate a proposed spending estimate for this first 
group of drugs and biologicals to be approximately $5.7 million.
    To estimate CY 2012 pass-through spending for drugs and 
nonimplantable biologicals in the second group (that is, drugs and 
nonimplantable biologicals that we know at the time of development of 
this proposed rule would be newly eligible for pass-through payment in 
CY 2012, additional drugs and nonimplantable biologicals that we 
estimate could be approved for pass-through status subsequent to the 
development of this proposed rule and before January 1, 2012, and 
projections for new drugs and nonimplantable biologicals that could be 
initially eligible for pass-through payment in the second through 
fourth quarters of CY 2012), we are proposing to use utilization 
estimates from pass-through applicants, pharmaceutical industry data, 
clinical information, recent trends in the per unit ASPs of hospital 
outpatient drugs, and projected annual changes in service volume and 
intensity as our basis for making the CY 2012 proposed pass-through 
payment estimate. We are also considering the most recent OPPS 
experience in approving new pass-through drugs and nonimplantable 
biologicals. Using our proposed methodology for estimating CY 2012 
pass-through payments for this second group of drugs, we calculated a 
proposed spending estimate for this second group of drugs and 
nonimplantable biologicals to be approximately $13.8 million.
    As discussed in section V.A. of this proposed rule, 
radiopharmaceuticals are considered drugs for pass-through purposes. 
Therefore, we include radiopharmaceuticals in our proposed CY 2012 
pass-through spending estimate for drugs and biologicals. Our proposed 
CY 2012 estimate for total pass-through spending for drugs and 
biologicals (spending for the first group of drugs and nonimplantable 
biologicals ($5.7 million) plus spending for the second group of drugs 
and nonimplantable biologicals ($13.8 million)) equals $19.5 million.
    In summary, in accordance with the methodology described above in 
this section, for this proposed rule, we estimate that total pass-
through spending for the device categories and the drugs and 
nonimplantable biologicals that are continuing to receive pass-through 
payment in CY 2012 and those device categories, drugs, and 
nonimplantable biologicals that first become eligible for pass-through 
payment during CY 2012 would be approximately $64.5 million 
(approximately $45 million for device categories and approximately 
$19.5 million for drugs and non-implantable biologicals), which 
represents 0.15 percent of total OPPS projected total payments for CY 
2012. We estimate that pass-through spending in CY 2012 would not 
amount to 2.0 percent of total projected OPPS CY 2012 program spending.

VII. Proposed OPPS Payment for Hospital Outpatient Visits

A. Background

    Currently, hospitals report visit HCPCS codes to describe three 
types of OPPS services: Clinic visits; emergency department visits; and 
critical care services. For OPPS purposes, we recognize clinic visit 
codes as those codes defined in the CPT code book to report evaluation 
and management (E/M) services provided in the physician's office or in 
an outpatient or other ambulatory facility. We recognize emergency 
department visit codes as those codes used to report E/M services 
provided in the emergency department. Emergency department visit codes 
consist of five CPT codes that apply to Type A emergency departments 
and five Level II HCPCS codes that apply to Type B emergency 
departments. For OPPS purposes, we recognize critical care codes as 
those CPT codes used by hospitals to report critical care services that 
involve the ``direct delivery by a physician(s) of medical care for a 
critically ill or critically injured patient,'' as defined by the CPT 
code book. In Transmittal 1139, Change Request 5438, dated December 22, 
2006, we stated that, under the OPPS, the time that can be reported as 
critical care is the time spent by a physician and/or hospital staff 
engaged in active face-to-face critical care of a critically ill or 
critically injured patient. Under the OPPS, we also recognize HCPCS 
code G0390 (Trauma response team associated with hospital critical care 
service) for the reporting of a trauma response in association with 
critical care services.
    We are proposing to continue to recognize these CPT and HCPCS codes 
describing clinic visits, Type A and Type B emergency department 
visits, critical care services, and trauma team activation provided in 
association with critical care services for CY 2012. These codes are 
listed below in Table 35.

   Table 35--Proposed HCPCS Codes Used To Report Clinic and Emergency
              Department Visits and Critical Care Services
------------------------------------------------------------------------
          CY 2012  HCPCS  Code                  CY 2012 Descriptor
------------------------------------------------------------------------
                        Clinic Visit HCPCS Codes
------------------------------------------------------------------------
99201..................................  Office or other outpatient
                                          visit for the evaluation and
                                          management of a new patient
                                          (Level 1).
99202..................................  Office or other outpatient
                                          visit for the evaluation and
                                          management of a new patient
                                          (Level 2).
99203..................................  Office or other outpatient
                                          visit for the evaluation and
                                          management of a new patient
                                          (Level 3).
99204..................................  Office or other outpatient
                                          visit for the evaluation and
                                          management of a new patient
                                          (Level 4).
99205..................................  Office or other outpatient
                                          visit for the evaluation and
                                          management of a new patient
                                          (Level 5).
99211..................................  Office or other outpatient
                                          visit for the evaluation and
                                          management of an established
                                          patient (Level 1).

[[Page 42269]]

 
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.
------------------------------------------------------------------------

    During the February 28-March 1 2011 APC Panel meeting, the APC 
Panel recommended that CMS continue to report claims data for clinic 
and emergency department visits and observation, and, if CMS identifies 
changes in patterns of utilization or cost, it bring those issues 
before the Visits and Observation Subcommittee for future 
consideration. The APC Panel also recommended that the work of the 
Visits and Observation Subcommittee continue. We are accepting these 
recommendations and will present the available requested data at an 
upcoming meeting of the APC Panel.

B. Proposed Policies for Hospital Outpatient Visits

1. Clinic Visits: New and Established Patient Visits
    As reflected in Table 35 hospitals use different CPT codes for 
clinic visits based on whether the patient being treated is a new 
patient or an established patient. Beginning in CY 2009, we refined the 
definitions of a new patient and an established patient to reflect 
whether or not the patient has been registered as an inpatient or 
outpatient of the hospital within the past 3 years. A patient who has 
been registered as an inpatient or outpatient of the hospital within 
the 3 years prior to a visit would be considered to be an established 
patient for that visit, while a patient who has not been registered as 
an inpatient or outpatient of the hospital within the 3 years prior to 
a visit would be considered to be a new patient for that visit. We 
refer readers to the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68677 through 68680) for a full discussion of the refined 
definitions.
    We continue to believe that defining new or established patient 
status based on whether the patient has been registered as an inpatient 
or outpatient of the hospital within the 3 years prior to a visit will 
reduce hospitals' administrative burden associated with reporting 
appropriate clinic visit CPT codes, as we stated in the CY 2009 OPPS/
ASC final rule with comment period (73 FR 68677 through 68680). For CY 
2012, we are proposing to continue to recognize the refined definitions 
of a new patient and an established patient, and applying our policy of 
calculating median costs for clinic visits under the OPPS using 
historical hospital claims data. As discussed in section II.A.2.e.(1) 
of the this proposed rule and consistent with our CY 2011 policy, when 
calculating the median costs for the clinic visit APCs (0604 through 
0608), we are proposing to continue to utilize our methodology that 
excludes those claims for visits that are eligible for payment through 
the extended assessment and management composite APC 8002 (Level I 
Extended Assessment and Management Composite). We continue to believe 
that this approach results in the most accurate cost estimates for APCs 
0604 through 0608 for CY 2012.
2. Emergency Department Visits
    Since CY 2007, we have recognized two different types of emergency 
departments for payment purposes under the OPPS--Type A emergency 
departments and Type B emergency departments. As described in greater 
detail below, by providing payment for two types of emergency 
departments, we recognize, for OPPS payment purposes, both the CPT 
definition of an emergency department, which requires the facility to 
be available 24 hours, and the requirements for emergency departments 
specified in the provisions of the Emergency Medical Treatment and 
Labor Act (EMTALA) (Pub. L. 99-272), which do not stipulate 24-hour 
availability but do specify other obligations for hospitals that offer 
emergency services. For more detailed information on the EMTALA 
provisions, we refer readers to the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68680).
    In the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68132), we finalized the definition of a Type A emergency department to 
distinguish it from a Type B emergency department. A Type A emergency 
department must be available to provide services 24 hours a day, 7 days 
a week, and meet one or both of the following requirements related to 
the EMTALA definition of a dedicated emergency department specified at 
42 CFR 489.24(b), specifically: (1) It is licensed by the State in 
which it is located under the applicable State law as an emergency room 
or emergency department; or (2) it is held out to the public (by name, 
posted signs, advertising, or other means) as a place that provides 
care for emergency medical conditions on an

[[Page 42270]]

urgent basis without requiring a previously scheduled appointment. For 
CY 2007 (71 FR 68140), we assigned the five CPT E/M emergency 
department visit codes for services provided in Type A emergency 
departments to five Emergency Visit APCs, specifically APC 0609 (Level 
1 Emergency Visits), APC 0613 (Level 2 Emergency Visits), APC 0614 
(Level 3 Emergency Visits), APC 0615 (Level 4 Emergency Visits), and 
APC 0616 (Level 5 Emergency Visits). We defined a Type B emergency 
department as any dedicated emergency department that incurred EMTALA 
obligations but did not meet the CPT definition of an emergency 
department. For example, a hospital department that may be 
characterized as a Type B emergency department would meet the 
definition of a dedicated emergency department but may not be available 
24 hours a day, 7 days a week. Hospitals with such dedicated emergency 
departments incur EMTALA obligations with respect to an individual who 
presents to the department and requests, or has a request made on his 
or her behalf, examination or treatment for a medical condition.
    To determine whether visits to Type B emergency departments have 
different resource costs than visits to either clinics or Type A 
emergency departments, in the CY 2007 OPPS/ASC final rule with comment 
period (71 FR 68132), we finalized a set of five HCPCS G-codes for use 
by hospitals to report visits to all entities that meet the definition 
of a dedicated emergency department under the EMTALA regulations but 
that are not Type A emergency departments. These codes are called 
``Type B emergency department visit codes.'' In the CY 2007 OPPS/ASC 
final rule with comment period (71 FR 68132), we explained that these 
new HCPCS G-codes would serve as a vehicle to capture median cost and 
resource differences among visits provided by Type A emergency 
departments, Type B emergency departments, and clinics. We stated that 
the reporting of specific HCPCS G-codes for emergency department visits 
provided in Type B emergency departments would permit us to 
specifically collect and analyze the hospital resource costs of visits 
to these facilities in order to determine if, in the future, a proposal 
for an alternative payment policy might be warranted. We expected 
hospitals to adjust their charges appropriately to reflect differences 
in Type A and Type B emergency department visit costs.
    As we noted in the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68681), the CY 2007 claims data used for that rulemaking were 
from the first year of claims data available for analysis that included 
hospitals' cost data for these new Type B emergency department HCPCS 
visit codes. Based on our analysis of the CY 2007 claims data, we 
confirmed that the median costs of Type B emergency department visits 
were less than the median costs of Type A emergency department visits 
for all but the level 5 visit. In other words, the median costs from 
the CY 2007 hospital claims represented real differences in the 
hospital resource costs for the same level of visits in a Type A or 
Type B emergency department. Therefore, for CY 2009, we adopted the 
August 2008 APC Panel recommendation to assign Levels 1 through 4 Type 
B emergency department visits to their own APCs and to assign the Level 
5 Type B emergency department visit to the same APC as the Level 5 Type 
A emergency department visit.
    As discussed in the CY 2010 OPPS/ASC final rule with comment period 
(74 FR 60548 through 60551), analyses of CY 2008 hospitals' cost data 
from claims data used for CY 2010 ratesetting for the emergency 
department HCPCS G-codes demonstrated that the pattern of relative cost 
differences between Type A and Type B emergency department visits was 
largely consistent with the distributions we observed in the CY 2007 
data, with the exception that, in the CY 2008 data, we observed a 
relatively lower HCPCS code-specific median cost associated with Level 
5 Type B emergency department visits compared to the HCPCS code-
specific median cost of Level 5 Type A emergency department visits. As 
a result, for CY 2010, we finalized a policy to continue to pay Levels 
1 through 4 Type B emergency department visits through four levels of 
APCs, and to pay for Level 5 Type B emergency department visits through 
new APC 0630 (Level 5 Type B Emergency Department Visit), to which the 
Level 5 Type B emergency department visit HCPCS code is the only 
service assigned.
    As we noted in the CY 2011 OPPS/ASC final rule with comment period 
(75 FR 71987), the pattern of relative cost differences between Type A 
and Type B emergency department visits is consistent with the 
distributions we observed in the CY 2008 claims data. Therefore, we 
finalized our proposal to continue to pay for Type B emergency 
department visits in CY 2011 based on their median costs through five 
levels of APCs: APC 0626 (Level 1 Type B Emergency Department Visit), 
APC 0627 (Level 2 Type B Emergency Department Visit), APC 0628 (Level 3 
Type B Emergency Department Visit), APC 0629 (Level 4 Type B Emergency 
Department Visit), and APC 0630.
    For CY 2012, we continue to believe that this configuration pays 
appropriately for each level of Type B emergency department visits 
based on estimated resource costs from the most recent CY 2010 claims 
data. Therefore, we are proposing to continue to pay for Type B 
emergency department visits in CY 2012 based on their median costs 
through the five levels of Type B emergency department APCs (APCs 0626 
through 0630). We also note that, as discussed in section II.A.2.e.(1) 
of this proposed rule and consistent with our CY 2011 policy, when 
calculating the proposed median costs for the emergency department 
visit and critical care APCs (0609 through 0617 and 0626 through 0630), 
we are proposing to utilize our methodology that excludes those claims 
for visits that are eligible for payment through the extended 
assessment and management composite APC 8002. We believe that this 
approach would result in the most accurate cost estimates for APCs 0604 
through 0608 for CY 2012.
    Table 36 below displays the proposed median costs for each level of 
Type B emergency department visit APCs under the proposed CY 2012 
configuration, compared to the proposed CY 2012 median costs for each 
level of clinic visit APCs and each level of Type A emergency 
department visit APCs.

[[Page 42271]]

Table 36--Comparison of Proposed Median Costs for Clinic Visit APCs, Type B Emergency Department Visit APCs, and
                                     Type A Emergency Department Visit APCs
----------------------------------------------------------------------------------------------------------------
                                                                                    Proposed CY     Proposed CY
                                                                    Proposed CY     2012 Type B     2012 Type A
                                                                    2012 clinic      emergency       emergency
                           Visit level                                 visit        department         visit
                                                                    approximate     approximate     approximate
                                                                    APC median      APC median      APC median
                                                                       cost            cost            cost
----------------------------------------------------------------------------------------------------------------
Level 1.........................................................             $50             $41             $52
Level 2.........................................................              75              59              89
Level 3.........................................................             105              94             142
Level 4.........................................................             138             141             229
Level 5.........................................................             178             271             340
----------------------------------------------------------------------------------------------------------------

    For CY 2010 and in prior years, the AMA CPT Editorial Panel defined 
critical care CPT codes 99291 (Critical care, evaluation and management 
of the critically ill or critically injured patient; first 30-74 
minutes) and 99292 (Critical care, evaluation and management of the 
critically ill or critically injured patient; each additional 30 
minutes (List separately in addition to code for primary service)) to 
include a wide range of ancillary services such as electrocardiograms, 
chest X-rays and pulse oximetry. As we have stated in manual 
instruction, we expect hospitals to report in accordance with CPT 
guidance unless we instruct otherwise. For critical care in particular, 
we instructed hospitals that any services that the CPT Editorial Panel 
indicates are included in the reporting of CPT code 99291 (including 
those services that would otherwise be reported by and paid to 
hospitals using any of the CPT codes specified by the CPT Editorial 
Panel) should not be billed separately. Instead, hospitals were 
instructed to report charges for any services provided as part of the 
critical care services. In establishing payment rates for critical care 
services, and other services, CMS packages the costs of certain items 
and services separately reported by HCPCS codes into payment for 
critical care services and other services, according to the standard 
OPPS methodology for packaging costs (Medicare Claims Processing 
Manual, Pub. 100-04, Chapter 4, Section 160.1).
    For CY 2011, the AMA CPT Editorial Panel revised its guidance for 
the critical care codes to specifically state that, for hospital 
reporting purposes, critical care codes do not include the specified 
ancillary services. Beginning in CY 2011, hospitals that report in 
accordance with the CPT guidelines should report all of the ancillary 
services and their associated charges separately when they are provided 
in conjunction with critical care. Because the CY 2011 payment rate for 
critical care services is based on hospital claims data from CY 2009, 
during which time hospitals would have reported charges for any 
ancillary services provided as part of the critical care services, we 
stated in the CY 2011 OPPS/ASC final rule with comment period that we 
believe it is inappropriate to pay separately in CY 2011 for the 
ancillary services that hospitals may now report in addition to 
critical care services (75 FR 71988). Therefore, for CY 2011, we 
continued to recognize the existing CPT codes for critical care 
services and established a payment rate based on our historical data, 
into which the cost of the ancillary services is intrinsically 
packaged, and implemented claims processing edits that conditionally 
package payment for the ancillary services that are reported on the 
same date of service as critical care services in order to avoid 
overpayment. We noted in the CY 2011 OPPS/ASC final rule with comment 
period that the payment status of the ancillary services will not 
change when they are not provided in conjunction with critical care 
services. We assigned status indicator ``Q3'' (Codes That May Be Paid 
Through a Composite APC) to the ancillary services to indicate that 
payment for them is packaged into a single payment for specific 
combinations of services and made through a separate APC payment or 
packaged in all other circumstances, in accordance with the OPPS 
payment status indicated for status indicator ``Q3'' in Addendum D1 to 
the CY 2011 OPPS/ASC final rule with comment period. The ancillary 
services that were included in the definition of critical care prior to 
CY 2011 and that will be conditionally packaged into the payment for 
critical care services when provided on the same date of service as 
critical care services for CY 2011 were listed in Addendum M to that 
final rule with comment period.
    Because the proposed CY 2012 median costs for critical care 
services are based upon CY 2010 claims data, which reflect the CPT 
billing guidance that was in effect prior to CY 2011, we are proposing 
to continue the methodology established in the CY 2011 OPPS/ASC final 
rule with comment period of calculating a payment rate for critical 
care services based on our historical data, into which the cost of the 
ancillary services is intrinsically packaged. We are proposing to 
continue to implement claims processing edits that conditionally 
package payment for the ancillary services that are reported on the 
same date of service as critical care services in order to avoid 
overpayment.
3. Visit Reporting Guidelines
    Since April 7, 2000, we have instructed hospitals to report 
facility resources for clinic and emergency department hospital 
outpatient visits using the CPT E/M codes and to develop internal 
hospital guidelines for reporting the appropriate visit level. Because 
a national set of hospital-specific codes and guidelines do not 
currently exist, we have advised hospitals that each hospital's 
internal guidelines that determine the levels of clinic and emergency 
department visits to be reported should follow the intent of the CPT 
code descriptors, in that the guidelines should be designed to 
reasonably relate the intensity of hospital resources to the different 
levels of effort represented by the codes.
    As noted in detail in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66802 through 66805), we observed a normal and stable 
distribution of clinic and emergency department visit levels in 
hospital claims over the past several years. The data indicated that 
hospitals, on average, were billing all five levels of visit codes with 
varying frequency, in a consistent pattern over time. Overall, both the 
clinic and emergency department visit distributions indicated that 
hospitals were billing consistently

[[Page 42272]]

over time and in a manner that distinguished between visit levels, 
resulting in relatively normal distributions nationally for the OPPS, 
as well as for specific classes of hospitals. The results of these 
analyses were generally consistent with our understanding of the 
clinical and resource characteristics of different levels of hospital 
outpatient clinic and emergency department visits. In the CY 2008 OPPS/
ASC proposed rule (72 FR 42764 through 42765), we specifically invited 
public comment as to whether a pressing need for national guidelines 
continued at this point in the maturation of the OPPS, or if the 
current system where hospitals create and apply their own internal 
guidelines to report visits was currently more practical and 
appropriately flexible for hospitals. We explained that, although we 
have reiterated our goal since CY 2000 of creating national guidelines, 
this complex undertaking for these important and common hospital 
services was proving more challenging than we initially anticipated as 
we received new and expanded information from the public on current 
hospital reporting practices that led to appropriate payment for the 
hospital resources associated with clinic and emergency department 
visits. We stated our belief that many hospitals had worked diligently 
and carefully to develop and implement their own internal guidelines 
that reflected the scope and types of services they provided throughout 
the hospital outpatient system. Based on public comments, as well as 
our own knowledge of how clinics operate, it seemed unlikely that one 
set of straightforward national guidelines could apply to the reporting 
of visits in all hospitals and specialty clinics. In addition, the 
stable distribution of clinic and emergency department visits reported 
under the OPPS over the past several years indicated that hospitals, 
both nationally in the aggregate and grouped by specific hospital 
classes, were generally billing in an appropriate and consistent manner 
as we would expect in a system that accurately distinguished among 
different levels of service based on the associated hospital resources.
    Therefore, we did not propose to implement national visit 
guidelines for clinic or emergency department visits for CY 2008. As we 
have done since publication of the CY 2008 OPPS/ASC final rule with 
comment period, we again examined the distribution of clinic and Type A 
emergency department visit levels based upon updated CY 2010 claims 
data available for the CY 2012 proposed rule. Analysis of this data 
confirmed that we continue to observe a normal and relatively stable 
distribution of clinic and emergency department visit levels in 
hospital claims compared to CY 2009 data. We note that we have observed 
a slight shift over time toward higher numbers of level 4 and level 5 
visits relative to the lower level visits, when comparing the 
distributions of Type A emergency department visit levels from CY 2005 
claims data to those from CY 2010. We also note that, in aggregate, 
hospitals' charges for these higher level emergency department visits 
seem to be trending upward year over year. We welcome comment on 
whether this is consistent with individual hospitals' experiences in 
developing, implementing, and refining their own guidelines over the 
last several years. We continue to believe that generally, hospitals 
are billing in an appropriate and consistent manner that distinguishes 
among different levels of visits based on their required hospital 
resources. We are encouraging hospitals to continue to report visits 
during CY 2012 according to their own internal hospital guidelines. As 
originally noted in detail in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66648), we continue to expect that hospitals will 
not purposely change their visit guidelines or otherwise upcode clinic 
and emergency department visits for purposes of extended assessment and 
management composite APC payment.
    In addition, we note our continued expectation that hospitals' 
internal guidelines will comport with the principles listed in the CY 
2008 OPPS/ASC final rule with comment period (72 FR 66805). We 
encourage hospitals with more specific questions related to the 
creation of internal guidelines to contact their servicing fiscal 
intermediary or MAC.

VIII. Proposed Payment for Partial Hospitalization Services

A. Background

    Partial hospitalization is an intensive outpatient program of 
psychiatric services provided to patients as an alternative to 
inpatient psychiatric care for individuals who have an acute mental 
illness. Sections 1861(ff)(1) and (ff)(2) of the Act specify the items 
and services that are defined as partial hospitalization services and 
some conditions under which Medicare payment for the items and services 
will be made. Section 1861(ff)(3) of the Act specifies that a partial 
hospitalization program (PHP) is one that is furnished by a hospital or 
community mental health center (CMHC) that meets the requirements 
specified under that subsection of the Act.
    In CY 2011, in accordance with section 1301(b) of the Health Care 
and Education Reconciliation Act of 2010 (HCERA 2010), we amended the 
description of a PHP in our regulations to specify that the program 
must be a distinct and organized intensive ambulatory treatment program 
offering less than 24-hour daily care ``other than in an individual's 
home or in an inpatient or residential setting.'' In addition, in 
accordance with section 1301(a) of HCERA 2010, we revised the 
definition of a CMHC in the regulations to conform to the definition 
set forth at section 1861(ff)(3)(B) of the Act. We discussed our 
finalized policies for these two provisions of HCERA 2010 under section 
X.C. of the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71990). Section 1833(t)(1)(B)(i) of the Act provides the Secretary with 
the authority to designate the OPD services to be covered under the 
OPPS. The existing Medicare regulations that implement this provision 
specify, at 42 CFR 419.21, that payments under the OPPS will be made 
for partial hospitalization services furnished by CMHCs as well as 
those services furnished by hospitals to their outpatients. Section 
1833(t)(2)(C) of the Act, in pertinent part, requires the Secretary to 
``establish relative payment weights for covered OPD services (and any 
groups of such services described in subparagraph (B)) based on median 
(or, at the election of the Secretary, mean) hospital costs'' using 
data on claims from 1996 and data from the most recent available cost 
reports. In pertinent part, subparagraph (B) provides that the 
Secretary may establish groups of covered OPD services, within a 
classification system developed by the Secretary for covered OPD 
services, so that services classified within each group are comparable 
clinically and with respect to the use of resources. In accordance with 
these provisions, CMS developed the APCs. Section 1833(t)(9)(A) of the 
Act requires the Secretary to ``review not less often than annually and 
revise the groups, the relative payment weights, and the wage and other 
adjustments described in paragraph (2) to take into account changes in 
medical practice, changes in technology, the addition of new services, 
new cost data, and other relevant information and factors.'' Because a 
day of care is the unit that defines the structure and scheduling of 
partial hospitalization services, we

[[Page 42273]]

established a per diem payment methodology for the PHP APCs, effective 
for services furnished on or after August 1, 2000 (65 FR 18452 through 
18455). Under this methodology, the median per diem costs are used to 
calculate the relative payment weights for PHP APCs.
    From CY 2003 through CY 2006, the median per diem cost for CMHCs 
fluctuated significantly from year to year, while the median per diem 
cost for hospital-based PHPs remained relatively constant. We were 
concerned that CMHCs may have increased and decreased their charges in 
response to Medicare payment policies. Therefore, we began efforts to 
strengthen the PHP benefit through extensive data analysis and policy 
and payment changes in the CY 2008 update (72 FR 66670 through 66676). 
We made two refinements to the methodology for computing the PHP 
median: the first remapped 10 revenue codes that are common among 
hospital-based PHP claims to the most appropriate cost centers; and the 
second refined our methodology for computing the PHP median per diem 
costs by computing a separate per diem cost for each day rather than 
for each bill. A complete discussion of these refinements can be found 
in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66671 
through 66676).
    In CY 2009, we implemented several regulatory, policy, and payment 
changes, including a two-tiered payment approach for PHP services under 
which we pay one amount for days with 3 services (APC 0172 (Level I 
Partial Hospitalization)) and a higher amount for days with 4 or more 
services (APC 0173 (Level II Partial Hospitalization)). We refer 
readers to section X.C.2. of the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68688 through 68693) for a full discussion of the 
two-tiered payment system. In addition, for CY 2009, we finalized our 
policy to deny payment for any PHP claims for days when fewer than 3 
units of therapeutic services are provided.
    Furthermore, for CY 2009, we revised the regulations at 42 CFR 
410.43 to codify existing basic PHP patient eligibility criteria and to 
add a reference to current physician certification requirements at 42 
CFR 424.24 to conform our regulations to our longstanding policy (73 FR 
68694 through 68695). We believe these changes have helped to 
strengthen the PHP benefit. We also revised the partial hospitalization 
benefit to include several coding updates. We refer readers to section 
X.C.2. of the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68695 through 68697) for a full discussion of these requirements.
    For CY 2010, we retained the two-tiered payment approach for PHP 
services and used only hospital-based PHP data in computing the 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.
    In the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71994), we established four separate PHP APC per diem payment rates, 
two for CMHC PHPs (for Level I and Level II services for CMHCs) and two 
for hospital-based PHPs (Level I and Level II services for hospital-
based PHPs). We proposed that CMHC PHP APC rates would be based only on 
CMHC data and hospital-based PHP APC rates would be based only on 
hospital-based PHP data (75 FR 46300). As stated in the CY 2011 OPPS/
ASC proposed rule (75 FR 46300) and final rule with comment period (75 
FR 71991), for CY 2011, using CY 2009 cost data, CMHC costs had 
significantly decreased again. We attributed the decrease to the lower 
cost structure of CMHCs compared to hospitals, and not the impact of CY 
2009 policies. CMHCs had a lower cost structure than 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 would be 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 were 
concerned that paying hospital-based PHP programs at a lower rate than 
their cost structure reflects could lead to closures and possible 
access problems for hospital-based programs for Medicare beneficiaries. 
Creating the four payment rates (two for CMHC PHPs and two for 
hospital-based PHPs) supported continued access to the PHP benefit, 
including a more intensive level of care, while also providing 
appropriate payment based on the unique cost structures of CMHC PHPs 
and hospital-based PHPs. In addition, separation of cost data by 
provider type was supported by several hospital-based PHP commenters 
who responded to the CY 2011 OPPS/ASC proposed rule (75 FR 71992).
    For CY 2011, we instituted a 2-year transition period for CMHC 
providers to CMHC rates based solely on CMHC data for the two CMHC PHP 
APC per diem payments. For the transition period, we calculated the 
CMHC PHP APC Level I and Level II rates by taking 50 percent of the 
difference between the CY 2010 final hospital-based medians and the CY 
2011 final CMHC medians and then adding that number to the CY 2011 
final CMHC medians. A 2-year transition under this methodology would 
move us in the direction of our goal, which is to pay appropriately for 
PHP services based on each provider type's cost data, while at the same 
time allow providers time to adjust their business operations and 
protect access to care for beneficiaries. We refer readers to section 
X.B. of the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71991 through 71994) for a full discussion of these four payment rates.
    After publication of the CY 2011 OPPS/ASC final rule with comment 
period, in the case of Paladin Community Mental Health Center v. 
Sebelius (No. 1:10-CV-00949-LY (W.D. Tex.)), a CMHC and one of its 
outpatients challenged the OPPS rates for PHP services provided by 
CMHCs in CY 2011 as adopted in the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71995). Specifically, the plaintiffs in the case 
challenged the use of cost data derived from both hospitals and CMHCs 
in determining the relative payment weights for the OPPS rates for PHP 
services furnished by CMHCs. The plaintiffs alleged that section 
1833(t)(2)(C) of the Act requires that such relative payment weights be 
based on cost data derived solely from hospitals. The Secretary has 
filed a motion to dismiss in this case, which is pending before the 
district court.
    In addition to raising various jurisdictional defenses in the 
Paladin case, the Secretary argued that the agency had permissibly 
interpreted the statute in determining the relative payment weights for 
the OPPS rates for PHP services for CMHCs in CY 2011 on the basis of 
cost data derived from both hospitals and CMHCs. As discussed above, 
section 1833(t)(2)(C) of the Act requires the Secretary to ``establish 
relative payment weights for covered OPD services (and any groups of 
such services * * *) * * * based on * * * hospital costs.'' Numerous 
courts have held that ``based on'' does not mean ``based exclusively 
on.'' Thus, it was reasonable to interpret the statute to permit the 
use of cost data from CMHCs as well as from hospitals.
    For CY 2012, as discussed in section VII.B. of this proposed rule, 
we are

[[Page 42274]]

proposing to determine the relative payment weights for PHP services by 
CMHCs based on cost data derived solely from CMHCs and the relative 
payment weights for hospital-based PHP services based exclusively on 
hospital cost data. We believe that, for purposes of this proposed rule 
for CY 2012, the statute is reasonably interpreted to allow the 
relative payment weights for the OPPS rates for PHP services provided 
by CMHCs to be based solely on CMHC cost data, whereas the 
corresponding relative payment weights for hospital-provided PHP 
services would be based exclusively on hospital cost data. Section 
1833(t)(2)(C) of the Act requires the Secretary to ``establish relative 
payment weights for covered OPD services (and any groups of such 
services described in subparagraph (B)) based on * * * hospital 
costs.'' In pertinent part, subparagraph (B) provides that ``the 
Secretary may establish groups of covered OPD services * * * so that 
services classified within each group are comparable clinically and 
with respect to the use of resources.'' In accordance with subparagraph 
(B), CMS developed the APCs, as set forth in Sec.  419.31 of the 
regulations (65 FR 18446 and 18447; 63 FR 47559 and 47560). As 
discussed in section X.B. of this proposed rule, PHP services are 
grouped into APCs.
    Based on section 1833(t)(2)(C) of the Act, we believe that the word 
``establish'' can be interpreted as applying to APCs at the inception 
of the OPPS in 2000 or whenever a new APC is added to the OPPS. In 
creating the original APC for PHP services (APC 0033), we did 
``establish'' the initial relative payment weight for PHP services, 
provided in hospital-based and CMHC-based settings, on the basis of 
only hospital data. Subsequently, from CY 2003 through CY 2008, the 
relative payment weights for PHP services were based on a combination 
of hospital and CMHC data. Similarly, we subsequently established new 
APCs for PHP services based exclusively on hospital costs. For CY 2009, 
we adopted a two-tiered APC methodology (in lieu of the original APC 
0033) under which CMS paid one rate for days with 3 services (APC 0172) 
and a different payment rate for days with 4 or more services (APC 
0173). These two new APCs were established using only hospital data. 
For CY 2011, we added two new APCs (APCs 0175 and 0176) for PHP 
services provided by hospitals and based the relative payment weights 
for these APCs solely on hospital data. APCs 0172 and 0173 were 
designated for PHP services provided by CMHCs and were based on a 
mixture of hospital and CMHC data. As the Secretary argued in the 
Paladin case, the courts have consistently held that the phrase ``based 
on'' does not mean ``based solely on.'' Thus, the relative payment 
weights for the two APCs for CMHC-provided PHP services in CY 2011 were 
``based on'' hospital data, no less than the relative payment weights 
for the two APCs for hospital-provided PHP services.
    Although we used only hospital data to establish the original 
relative payment weights for APC 0033 and later used hospital data to 
establish four new relative payment weights for PHP services, we 
believe that we have the authority to discontinue the use of hospital 
data after the original establishment of the relative payment weights 
for a given APC. Other parts of section 1833(t)(2)(C) of the Act make 
plain that the data source for the relative payment weights is subject 
to change from one period to another. Section 1833(t)(2)(C) of the Act 
provides that, in establishing the relative payment weights, ``the 
Secretary shall [ ] us[e] data on claims from 1996 and us[e] data from 
the most recent available cost reports.'' However, we used 1996 data 
(plus 1997 data) in determining only the original relative payment 
weights for 2000; in the ensuing calendar year updates, we continually 
used more recent cost report data.
    Moreover, section 1833(t)(9)(A) of the Act requires the Secretary 
to ``review not less often than annually and revise the groups, the 
relative payment weights, and the wage and other adjustments described 
in paragraph (2) to take into account changes in medical practice, 
changes in technology, the addition of new services, new cost data, and 
other relevant information and factors.'' For purposes of the CY 2012 
update, we exercised our authority under section 1833(t)(9)(A) of the 
Act to change the data source for the relative payment weights for PHP 
services by CMHCs based on ``new cost data, and other relevant 
information and factors.''
B. Proposed PHP APC Update for CY 2012
    To develop the proposed payment rates for the PHP APCs for CY 2012, 
we used CY 2010 claims data and computed median per diem costs in the 
following categories: (1) days with 3 services; and (2) days with 4 or 
more services. These proposed median per diem costs were computed 
separately for CMHC PHPs and hospital-based PHPs, as shown in Table 37 
below.

Table 37--Proposed PHP Median Per Diem Costs for CMHC and Hospital-Based
             PHPs, by Category, Based on CY 2010 Claims Data
------------------------------------------------------------------------
                                                          Hospital-based
                Category                     CMHC PHPs         PHPs
------------------------------------------------------------------------
Days with 3 services....................          $97.78         $162.34
Days with 4 or more services............          113.62          189.87
------------------------------------------------------------------------

    Using CY 2010 claims data and the refined methodology for computing 
PHP per diem costs adopted in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66671 through 66676), we computed proposed median 
per diem costs for CY 2012 for each provider type using its own claims 
data. The data results indicate that, although both CMHCs and hospital-
based PHPs have decreased costs for Level I and Level II services from 
CY 2011 to CY 2012, the median per diem costs for CMHC PHPs continue to 
be substantially lower than the median per diem costs for hospital-
based PHPs, given the same units of service. The approximate median per 
diem costs for 3 services are $98 for CMHC PHPs compared to $162 for 
hospital-based PHPs. Furthermore, the approximate median per diem costs 
for 4 or more services are $114 for CMHC PHPs compared to $190 for 
hospital-based PHPs. The difference in costs between CMHC PHPs and 
hospital-based PHPs underscores the need to pay each provider type 
based on use of its own data.
    In the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71991), we noted that CMHCs' costs decreased from $139 in CY 2009 
(using CY 2007 data) to $118 for CY 2011 (using CY 2009 claims data) 
for Level I services (3 services); and from $172 for CY 2009 to $123 
for CY 2011 for Level II services (4 or more services). For this CY 
2012 proposed rule, our analysis of claims data (using CY 2010 claims 
data) shows

[[Page 42275]]

that CMHCs' approximate median per diem costs continue to decrease from 
$118 for CY 2011 (using CY 2009 claims data) to $98 for CY 2012 for 
Level I services (3 services), and from $123 for CY 2011 (using CY 2009 
claims data) to $114 for CY 2012 for Level II services (4 or more 
services). We can reasonably attribute some of the decrease in costs to 
targeted fraud and abuse efforts implemented by the Department's Center 
for Program Integrity and the Office of Inspector General, and by the 
U.S. Department of Justice, collectively.
    We note that hospital-based PHPs also show a decrease in costs for 
CY 2012 (using CY 2010 claims data). Although hospital-based PHPs have 
historically been consistent in their median costs since the inception 
of the OPPS, the CY 2010 claims data indicated a decrease in their 
median per diem costs since last year. Hospital-based PHPs' approximate 
median per diem costs decreased from $184 for CY 2011 (using CY 2009 
claims data) to $162 for CY 2012 (using CY 2010 claims data) for Level 
I services (3 services), and from $236 for CY 2011 (using CY 2009 
claims data) to $190 for CY 2012 (using CY 2010 claims data) for Level 
II services (4 or more services). We can attribute this decrease in 
costs to one provider whose costs inflated the CY 2011 hospital-based 
cost data and increased the CY 2011 hospital-based PHP median for Level 
II services by approximately $30. We included this provider in the CY 
2011 ratesetting because this provider had paid claims in CY 2009. 
Subsequently, this provider did not bill for PHP services during CY 
2010 and, therefore, was not included in the proposed CY 2012 
ratesetting.
    Based on the results of our analysis of the CY 2010 claims data, 
for CY 2012, we are proposing to calculate the proposed CMHC PHP APC 
per diem payment rates for Level I and Level II services using only 
CMHC data and calculating the proposed hospital-based PHPs APC per diem 
payment rates for Level I and Level II services using only hospital-
based PHP data. Basing payment rates specific to each type of 
provider's own data would continue to support access to the PHP 
benefit, including a more intensive level of care, while also providing 
appropriate payment commensurate with the cost structures of CMHC PHPs 
and hospital-based PHPs. We invite public comments on our proposal to 
calculate the CMHC PHP APC per diem payment rates using only CMHC 
claims data and the hospital-based PHP APC per diem rates using only 
hospital data.
    We are proposing the following APC median per diem costs for PHP 
services for CY 2012:

 Table 38--Proposed CY 2012 Median Per Diem Costs for CMHC PHP Services
------------------------------------------------------------------------
                                                             Proposed
          Proposed APC                 Group title          median per
                                                            diem costs
------------------------------------------------------------------------
0172...........................  Level I Partial                  $97.78
                                  Hospitalization (3
                                  services) for CMHCs.
0173...........................  Level II Partial                 113.62
                                  Hospitalization (4 or
                                  more services) for
                                  CMHCs.
------------------------------------------------------------------------

 Table 39--Proposed CY 2012 Median Per Diem Costs for Hospital-Based PHP
                                Services
------------------------------------------------------------------------
                                                             Proposed
          Proposed APC                 Group title          median per
                                                            diem costs
------------------------------------------------------------------------
0175...........................  Level I Partial                 $162.34
                                  Hospitalization (3
                                  services) for hospital-
                                  based PHPs.
0176...........................  Level II Partial                 189.87
                                  Hospitalization (4 or
                                  more services) for
                                  hospital-based PHPs.
------------------------------------------------------------------------

C. Proposed Separate Threshold for Outlier Payments to CMHCs

    In the CY 2004 OPPS final rule with comment period (68 FR 63469 
through 63470), we indicated that, given the difference in PHP charges 
between hospitals and CMHCs, we did not believe it was appropriate to 
make outlier payments to CMHCs using the outlier percentage target 
amount and threshold established for hospitals. Prior to that time, 
there was a significant difference in the amount of outlier payments 
made to hospitals and CMHCs for PHP services. In addition, further 
analysis indicated that using the same OPPS outlier threshold for both 
hospitals and CMHCs did not limit outlier payments to high-cost cases 
and resulted in excessive outlier payments to CMHCs. Therefore, 
beginning in CY 2004, we established a separate outlier threshold for 
CMHCs. The separate outlier threshold for CMHCs has resulted in more 
commensurate outlier payments.
    The separate outlier threshold for CMHCs resulted in $1.8 million 
in outlier payments to CMHCs in CY 2004 and $0.5 million in outlier 
payments to CMHCs in CY 2005. In contrast, in CY 2003, more than $30 
million was paid to CMHCs in outlier payments. We believe this 
difference in outlier payments indicates that the separate outlier 
threshold for CMHCs has been successful in keeping outlier payments to 
CMHCs in line with the percentage of OPPS payments made to CMHCs.
    We are proposing to continue our policy of identifying 1.0 percent 
of the aggregate total payments under the OPPS for outlier payments for 
CY 2012. We are proposing that a portion of that 1.0 percent, an amount 
equal to 0.14 percent of outlier payments (or 0.0014 percent of total 
OPPS payments), would be allocated to CMHCs for PHP outlier payments. 
In section II.G. of this proposed rule, we are proposing to set a 
dollar threshold in addition to an APC multiplier threshold for OPPS 
outlier payments. However, because the PHP APCs are the only APCs for 
which CMHCs may receive payment under the OPPS, we would not expect to 
redirect outlier payments by imposing a dollar threshold. Therefore, we 
are not proposing to set a dollar threshold for CMHC outlier payments. 
We are proposing to set the outlier threshold for CMHCs for CY 2012 at 
3.40 times the APC payment amount and the CY 2012 outlier payment 
percentage applicable to costs in excess of the threshold at 50 
percent. Specifically, we are proposing to establish that if a CMHC's 
cost for partial hospitalization services, paid under either APC 0172 
or APC 0173, exceeds 3.40 times the payment for APC 0173, the outlier 
payment would be calculated as 50 percent of the amount by which the 
cost exceeds 3.40 times the APC 0173 payment rate.

[[Page 42276]]

IX. Proposed Procedures That Would Be Paid Only as Inpatient Procedures

A. Background

    Section 1833(t)(1)(B)(i) of the Act gives the Secretary broad 
authority to determine the services to be covered and paid for under 
the OPPS. Before implementation of the OPPS in August 2000, Medicare 
paid reasonable costs for services provided in the HOPD. The claims 
submitted were subject to medical review by the fiscal intermediaries 
to determine the appropriateness of providing certain services in the 
outpatient setting. We did not specify in our regulations those 
services that were appropriate to provide only in the inpatient setting 
and that, therefore, should be payable only when provided in that 
setting.
    In the April 7, 2000 final rule with comment period (65 FR 18455), 
we identified procedures that are typically provided only in an 
inpatient setting and, therefore, would not be paid by Medicare under 
the OPPS. These procedures comprise what is referred to as the 
``inpatient list.'' The inpatient list specifies those services for 
which the hospital will be paid only when provided in the inpatient 
setting because of the nature of the procedure, the underlying physical 
condition of the patient, or the need for at least 24 hours of 
postoperative recovery time or monitoring before the patient can be 
safely discharged. As we discussed in that rule and in the November 30, 
2001 final rule with comment period (66 FR 59884), we may use any of a 
number of criteria we have specified when reviewing procedures to 
determine whether or not they should be removed from the inpatient list 
and assigned to an APC group for payment under the OPPS when provided 
in the hospital outpatient setting. Those criteria include the 
following:
     Most outpatient departments are equipped to provide the 
services to the Medicare population.
     The simplest procedure described by the code may be 
performed in most outpatient departments.
     The procedure is related to codes that we have already 
removed from the inpatient list.
    In the November 1, 2002 final rule with comment period (67 FR 
66741), we added the following criteria for use in reviewing procedures 
to determine whether they should be removed from the inpatient list and 
assigned to an APC group for payment under the OPPS:
     A determination is made that the procedure is being 
performed in numerous hospitals on an outpatient basis; or
     A determination is made that the procedure can be 
appropriately and safely performed in an ASC, and is on the list of 
approved ASC procedures or has been proposed by us for addition to the 
ASC list.
    The list of codes that we are proposing to be paid by Medicare in 
CY 2012 only as inpatient procedures is included as Addendum E to this 
proposed rule (which is referenced in section XVII. of this proposed 
rule and available via the Internet on the CMS Web site).

B. Proposed Changes to the Inpatient List

    For the CY 2012 OPPS, we are proposing to use the same methodology 
described in the November 15, 2004 final rule with comment period (69 
FR 65835) to identify a subset of procedures currently on the inpatient 
list that are being performed a significant amount of the time on an 
outpatient basis. Using this methodology, we identified two procedures 
that met the criteria for potential removal from the inpatient list for 
CY 2012. We then clinically reviewed these two potential procedures for 
possible removal from the inpatient list and found them to be 
appropriate candidates for removal from the inpatient list. During the 
February 28-March 1, 2011 meeting of the APC Panel, we solicited the 
APC Panel's input on the appropriateness of removing these two 
procedures from the CY 2012 inpatient list: CPT codes 21346 (Open 
treatment of nasomaxillary complex fracture (Lefort II type); with 
wiring and/or local fixation) and 54411 (Removal and replacement of all 
components of a multi-component inflatable penile prosthesis through an 
infected field at the same operative session, including irrigation and 
debridement of infected tissue).
    As we indicated in the CY 2011 final rule with comment period (75 
FR 71996), we solicited the APC Panel's input on the appropriateness of 
removing the procedures described by CPT codes 35045 (Direct repair of 
aneurysm, pseudoaneurysm, or excision (partial or total) and graft 
insertion, with or without patch graft; for aneurysm, pseudoaneurysm, 
and associated occlusive disease, radial or ulnar artery) and 54650 
(Orchiopexy, abdominal approach, for intra-abdominal testis (eg, 
Fowler-Stephens)), from the CY 2012 inpatient list. We also solicited 
the APC Panel's input on the appropriateness of removing the following 
procedures identified in a comment letter addressed to the APC Panel: 
CPT codes 61154 (Burr hole(s) with evacuation and/or drainage of 
hematoma, extradural or subdural); 61156 (Burr hole(s); with aspiration 
of hematoma or cyst, intracerebral); and 61210 (Burr hole(s); for 
implanting ventricular catheter, reservoir, eeg electrode(s), pressure 
recording device, or other cerebral monitoring device (separate 
procedure)). Following the discussion at its February 28-March 1, 2011 
meeting, the APC Panel recommended that CMS remove from the CY 2012 
inpatient list CPT codes 21346, 54411, 35045, 54650, and 61210. The APC 
Panel made no recommendation regarding CPT codes 61154 and 61156.
    Additionally, during the February 28-March 1, 2011 meeting of the 
APC Panel, an APC Panel member requested removal of the following CPT 
codes from the CY 2012 inpatient list: 22551 (Arthrodesis, anterior 
interbody, including disc space preparation, discectomy, 
osteophytectomy and decompression of spinal cord and/or nerve roots; 
cervical below C2); 22552 (Arthrodesis, anterior interbody, including 
disc space preparation, discectomy, osteophytectomy and decompression 
of spinal cord and/or nerve roots; cervical below C2, each additional 
interspace (List separately in addition to code for separate 
procedure)); 22554 (Arthrodesis, anterior interbody technique, 
including minimal discectomy to prepare interspace (other than for 
decompression); cervical below C2); 22585 (Arthrodesis, anterior 
interbody technique, including minimal discectomy to prepare interspace 
(other than for decompression); cervical below C2, each additional 
interspace (List separately in addition to code for primary 
procedure)); 61107 (Twist drill hole(s) for subdural, intracerebral, or 
ventricular puncture; for implanting ventricular catheter, pressure 
recording device, or other intracerebral monitoring device); and 63267 
(Laminectomy for excision or evacuation of intraspinal lesion other 
than neoplasm, extradural; lumbar). Following the discussion at its 
February 28-March 1, 2011 meeting, the APC Panel recommended that CMS 
remove from the CY 2012 inpatient list CPT codes 22551, 22552, 22554, 
22585, 61107, and 63267.
    For CY 2012, we are proposing to accept the APC Panel's 
recommendations to remove the procedures described by CPT codes 21346, 
35045, and 54650 from the inpatient list because we agree with the APC 
Panel that the procedures may be appropriately provided as hospital 
outpatient procedures for some Medicare beneficiaries, based upon the

[[Page 42277]]

evaluation criteria mentioned above. We also are proposing to not 
accept the APC Panel's recommendations to remove the procedures 
described by CPT codes 22551, 22552, 22554, 22585, 54411, 61107, 61210, 
and 63267, because upon further clinical review subsequent to the 
February 28-March 1, 2011 APC Panel meeting, we do not believe that 
these procedures may be appropriately provided as hospital outpatient 
procedures for some Medicare beneficiaries, based upon the evaluation 
criteria mentioned above, due to the clinical intensity of services 
provided. Furthermore, according to our utilization data, the 
procedures described by CPT codes 22551, 22552, 22554, 22585, 54411, 
61107, 61210, and 63267 have very low volume in the outpatient hospital 
setting. We note that despite its low overall volume, CPT code 54411 is 
performed a significant percentage of the time in the outpatient 
hospital setting; however, we do not believe that the outpatient 
procedures being performed are truly reflective of the intensity of 
services requisite when performing the procedure as described by the 
CPT code's long descriptor. We invite public comment on the inclusion 
of CPT code 54411 on the CY 2012 inpatient list. The three procedures 
we are proposing to remove from the inpatient list for CY 2012 and 
their CPT codes, long descriptors, proposed APC assignments, and 
proposed status indictors are displayed in Table 40 below.

Table 40--Procedures Proposed for Removal from the Inpatient List and Their Proposed APC Assignments for CY 2012
----------------------------------------------------------------------------------------------------------------
                                                                     Proposed CY
              HCPCS code                     Long descriptor          2012 APC        Proposed CY 2012 status
                                                                     assignment              indicator
----------------------------------------------------------------------------------------------------------------
21346.................................  Open treatment of                    0254  T
                                         nasomaxillary complex
                                         fracture (Lefort II
                                         type); with wiring and/
                                         or local fixation.
35045.................................  Direct repair of                     0093  T
                                         aneurysm,
                                         pseudoaneurysm, or
                                         excision (partial or
                                         total) and graft
                                         insertion, with or
                                         without patch graft; for
                                         aneurysm,
                                         pseudoaneurysm, and
                                         associated occlusive
                                         disease, radial or ulnar
                                         artery.
54650.................................  Orchiopexy, abdominal                0154  T
                                         approach, for intra-
                                         abdominal testis (e.g.,
                                         Fowler-Stephens).
----------------------------------------------------------------------------------------------------------------

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

A. Background

    In the CY 2000 OPPS final rule with comment period, CMS established 
the hospital OPPS and indicated that direct supervision is the standard 
for all hospital outpatient therapeutic services covered and paid by 
Medicare in hospitals and in provider-based departments (PBDs) of 
hospitals (65 FR 18524 through 18526). Currently, as discussed in the 
CY 2011 OPPS/ASC final rule with comment period (75 FR 72008), this 
standard requires the supervisory practitioner to be immediately 
available to furnish assistance and direction throughout the 
performance of a hospital outpatient therapeutic service or procedure. 
In the CY 2000 OPPS final rule with comment period, we established in 
regulation at Sec.  410.28(e) that outpatient diagnostic services 
furnished in PBDs of hospitals must be supervised at the level 
indicated in the Medicare Physician Fee Schedule (MPFS) for each 
service, that is, general, direct or personal supervision. Since that 
time, we have clarified and refined these rules in several ways. In the 
CY 2011 OPPS/ASC final rule with comment period (75 FR 71998 through 
72001), we provided a comprehensive review of the history of the 
supervision policies for both outpatient therapeutic and diagnostic 
services from the inception of the OPPS through CY 2010. In this 
section, we provide a more condensed overview of our supervision policy 
during that time period, and present background on issues that have 
arisen during the CY 2011 payment year.
    By way of overview, we have defined supervision in the hospital 
outpatient setting by drawing on the three levels of supervision that 
CMS defined for the physician office setting at Sec.  410.32(b) prior 
to establishment of the OPPS: General, direct, and personal 
supervision. Over time, we have tailored these definitions as needed to 
apply them in the hospital outpatient setting, so the definitions or 
applications in the OPPS may differ slightly from those in the 
physician office setting. This is the case in defining direct 
supervision, where the MPFS requires presence ``in the office suite,'' 
and the OPPS currently does not require presence within any specific 
physical boundary (in the past, the OPPS rules for direct supervision 
required presence on the hospital campus or in the PBD) (75 FR 72008, 
72012).
    To date, for purposes of the hospital outpatient setting, we have 
only defined direct and general supervision, and we have only defined 
general supervision insofar as it applies to the provision of 
nonsurgical extended duration therapeutic services (extended duration 
services) for which we require direct supervision during an initiation 
period, followed by a minimum standard of general supervision for the 
duration of the service (75 FR 72012). Under the OPPS, general 
supervision means that the service is furnished under the overall 
direction and control of the physician or appropriate nonphysician 
practitioner, but his or her physical presence is not required during 
the performance of the service. Direct supervision means that the 
physician or appropriate nonphysician practitioner is immediately 
available to furnish assistance and direction throughout the 
performance of a therapeutic service or procedure; however, he or she 
does not have to be present in the room where the service or procedure 
is being performed.
    In the CY 2000 OPPS final rule with comment period (65 FR 18524 
through 18526), we adopted physician supervision policies as a 
condition of payment under the OPPS to ensure that Medicare pays for 
high quality hospital outpatient services that are furnished in a safe 
and effective manner and consistent with Medicare requirements. The 
agency has long divided hospital outpatient services into the two 
categories of ``diagnostic'' services and other ``therapeutic'' 
services that aid the physician in the treatment of patients (Section 
3112 of the Medicare Part A Intermediary Manual (July 1987)). Thus, we 
considered all nondiagnostic services to be ``therapeutic services'' 
which would include, but not be limited to, the services listed under 
section 1861(s)(2)(B) of the Act as incident to the services of 
physicians. As early as

[[Page 42278]]

1985, the agency defined therapeutic services as those services and 
supplies (including the use of hospital facilities) which are incident 
to the services of physicians in the treatment of patients (Section 
3112.4 of the Medicare Part A Intermediary Manual (May 1985)). In 
recognition of this historic classification of services, we established 
a direct supervision standard for outpatient therapeutic services under 
our regulation at Sec.  410.27, which establishes the conditions for 
payment for outpatient hospital services provided ``incident to'' 
physicians' services. In the text of Sec.  410.27, we also established 
standards requiring that these services be furnished either by or under 
arrangements made by the participating hospital (Sec.  
410.27(a)(1)(i)), either in the hospital or in a location that the 
agency designates as a department of a provider under Sec.  413.65 of 
the regulations (Sec.  410.27(a)(1)(iii)). Since 2000, we have 
maintained the classification of services as either diagnostic or 
therapeutic in our manual guidance that establishes the conditions of 
payment for hospital outpatient services under the OPPS (Sections 20.4 
and 20.5, Chapter 6 of the Medicare Benefit Policy Manual (Pub. 100-
02)). In the requirements for therapeutic services, in addition to the 
direct supervision standard, we applied the requirements of Sec. Sec.  
410.27(a)(1)(i) and (a)(1)(iii) regarding under arrangement and 
provider-based site of service to all outpatient therapeutic services 
that are paid under the OPPS (Section 20.5, Chapter 6 of the Medicare 
Benefit Policy Manual (Pub. 100-02)).
    In the CY 2000 OPPS final rule with comment period, we amended our 
regulation at Sec.  410.27 to specify that direct supervision is 
required for outpatient hospital services and supplies furnished 
incident to a physician's service in a location we designate as a 
department of a provider under Sec.  413.65 of our regulations. We 
specified further in the regulation that direct supervision means the 
physician must be present on the premises of the location and 
immediately available to furnish assistance and direction throughout 
the performance of the service or procedure. The requirement to be 
``immediately available'' was included in the regulation, although at 
that time we did not define the term. Although the regulation required 
the physician to be present on the premises of the location where 
services were being furnished, it specified that the physician did not 
have to be present in the room when the procedure was performed. In the 
CY 2000 OPPS final rule with comment period (65 FR 18525), we 
emphasized the importance of establishing a supervision standard for 
services furnished in departments of the hospital that are not located 
on campus, indicating that our amendment applies to services furnished 
at an entity that is located off the campus of a hospital that we 
designate as having provider-based status in accordance with the 
provisions of Sec.  413.65. In response to a commenter, we stated that, 
in accordance with Section 3112.4(A) of the Intermediary Manual, we 
assume the direct supervision standard is met when outpatient 
therapeutic services are provided incident to a physician's service in 
an on-campus department of a hospital.
    In the CY 2000 OPPS final rule with comment period, we also defined 
the supervision standards for outpatient hospital diagnostic services 
furnished in PBDs of hospitals in Sec.  410.28(e) of our regulations. 
The regulation at Sec.  410.28(e) provided that diagnostic services 
furnished at facilities having provider-based status must be performed 
under the level of supervision indicated for the diagnostic test under 
the MPFS in accordance with the definitions in Sec. Sec.  
410.32(b)(3)(i), (b)(3)(ii), and (b)(3)(iii). In the CY 2010 OPPS/ASC 
final rule with comment period (74 FR 60588 through 60591, and 60680), 
we revised Sec.  410.28(e) to extend the supervision standards we had 
established for outpatient diagnostic tests furnished in PBDs to also 
apply to services furnished in the hospital setting or any other 
location where diagnostic services may be provided under arrangement. 
The supervision rules for diagnostic services under the regulation at 
Sec.  410.28(e) explicitly apply to hospitals that are paid in 
accordance with section 1833(t) of the Act, which is the statutory 
authority for the OPPS. As noted in the CY 2010 OPPS/ASC final rule 
with comment period, Medicare makes payments to CAHs in accordance with 
section 1834(g) of the Act. Accordingly, CAHs are not subject to the 
supervision requirements for outpatient diagnostic services at this 
time. The supervision requirements for outpatient diagnostic services 
were also set forth in Section 20.4, Chapter 6, of the Medicare Benefit 
Policy Manual.
    In the years following establishment of the initial OPPS 
regulations, we began to receive inquiries from providers about the 
supervision requirements. Many of these inquiries led us to believe 
that some hospitals may have misunderstood our statement to the effect 
that we assume physician supervision requirements are met for services 
furnished on the hospital premises, and were providing either general 
supervision or no supervision for therapeutic services furnished 
incident to physicians' services in the outpatient setting and for 
which we had established a requirement of direct supervision. 
Therefore, in the CY 2009 OPPS/ASC proposed rule and final rule with 
comment period (73 FR 41518 through 41519 and 73 FR 68702 through 
68704, respectively), we clarified and restated the various supervision 
requirements for outpatient hospital therapeutic and diagnostic 
services. We clarified that therapeutic services furnished in the 
hospital and in all PBDs of the hospital, specifically both on-campus 
and off-campus PBDs, must be provided under the direct supervision of 
physicians. We also reiterated that all diagnostic services furnished 
in PBDs, whether on or off the hospital's main campus, should be 
supervised according to the levels assigned for the individual tests 
under the MPFS. We received very few public comments regarding this 
clarification and restatement during the comment period.
    In response to concerns about our policy restatement articulated by 
stakeholders after publication of the CY 2009 OPPS/ASC final rule with 
comment period, we further refined our supervision policies in the CY 
2010 OPPS/ASC proposed rule and final rule with comment period (74 FR 
35365 and 74 FR 60679 through 60680, respectively). We established 
rules for diagnostic services furnished in locations other than PBDs 
(that is, in the hospital and under arrangement in nonhospital 
facilities). Accordingly, we expanded and refined the regulatory 
language regarding direct supervision of diagnostic services in those 
locations to refer to presence of the supervisory practitioner in the 
hospital or PBD (for services furnished in those locations) or in the 
office suite (for services furnished under arrangement in nonhospital 
space). For therapeutic services, we increased hospitals' flexibility 
regarding the direct supervision requirement by allowing all 
nonphysician practitioners whose services are those the practitioner is 
legally authorized to perform under State law that ``would otherwise be 
covered if furnished by a physician or as an incident to a physician's 
service'' (``would be physicians' services'') to supervise outpatient 
therapeutic services that are within their scope of practice under 
State law and their hospital-granted or CAH-granted privileges 
(sections 1861(s)(2)(K) through (N) of the Act; Sec. Sec.  410.71 
through 410.77 of the regulations). However, in implementing the new

[[Page 42279]]

benefits for pulmonary rehabilitation (PR), cardiac rehabilitation (CR) 
and intensive cardiac rehabilitation (ICR) services, we required that 
direct supervision of those services furnished in the hospital 
outpatient setting must be provided by a doctor of medicine or a doctor 
of osteopathy because, as we discussed in the CY 2010 and CY 2011 OPPS/
ASC final rules with comment period (74 FR 60573 and 60582 and 75 FR 
72009, respectively), the statute specifies that these services are 
physician-supervised (section 144(a) of the Medicare Improvements for 
Patients and Providers Act of 2008, Pub. L. 110-275). In addition, in 
the CY 2011 OPPS/ASC final rule with comment period, we revised our 
regulations at Sec.  410.27 to remove the physical boundary 
requirements for direct supervision, and instead to allow the 
supervisory practitioner simply to be ``immediately available,'' 
meaning physically present, interruptible, and able to furnish 
assistance and direction throughout the performance of the procedure, 
but without reference to any particular physical boundary.
    In the CY 2010 OPPS/ASC final rule with comment period, we 
finalized a technical correction to the regulation at Sec.  410.27 to 
clarify that the direct supervision requirement under that section 
applies to services furnished in CAHs as well as hospitals. 
Specifically, we added the phrase ``or CAH'' in the title and 
throughout the regulation text wherever the text referred only to 
``hospital,'' to clarify that the requirements for payment of hospital 
outpatient therapeutic services in that section apply to CAHs as well 
as other types of hospitals. As we discussed in the CY 2011 OPPS/ASC 
final rule with comment period (75 FR 72000), we viewed this as a 
technical correction because the Act applies the same regulations to 
hospitals and CAHs when appropriate (CAHs are included if ``the context 
otherwise requires'' under section 1861(e) of the Act).
    In response to our clarification that CAHs are subject to the 
direct supervision standard for payment of outpatient therapeutic 
services, CAHs and the hospital community at large suggested that CAHs 
should be exempt from this requirement because the requirement is at 
odds with longstanding and prevailing practices of many CAHs. For 
example, commenters noted that, due to low volume of services, a 
practitioner retained on the campus of a small rural hospital or CAH to 
meet supervision requirements may not have other concurrent 
responsibilities or patient care, which could lead to inefficiencies. 
In their correspondence and discussion in public forums, CAHs and small 
rural hospitals explicitly raised concerns about services that extend 
after regular operating hours, especially observation services. They 
asserted that direct supervision is not clinically necessary for some 
services that have a significant monitoring component that is typically 
performed by nursing or other auxiliary staff, including IV hydration, 
blood transfusions, and chemotherapy. They stated that their facilities 
have protocols to safely deliver all of these services, relying on 
nursing or other hospital staff to provide the service and having a 
physician or nonphysician practitioner available by phone to furnish 
assistance and direction throughout the duration of the therapeutic 
service.
    We provided guidance regarding the flexibility that we believe 
exists within our requirement for direct supervision for an emergency 
physician or nonphysician practitioner, who would be the most likely 
practitioners staffing a small rural hospital or CAH, to provide the 
supervision, on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/05_OPPSGuidance.asp#TopOfPage. However, these 
hospitals continued to express difficulty in meeting the standard. 
Small rural hospitals and CAHs indicated that, regulations 
notwithstanding, many of them did not have appropriate staff 
arrangements to provide the required supervision of some services, 
particularly services being provided after hours or consisting of a 
significant monitoring component that last for an extended period of 
time. In addition, the broader hospital community began requesting that 
we modify our policy to permit a lower level of supervision for 
therapeutic services for all hospitals.
    After consideration of these requests, on March 15, 2010, we issued 
a Federal Register notice of nonenforcement of the requirement for 
direct supervision of outpatient therapeutic services in CAHs (which is 
available on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/Downloads/CMS_1504FC_OPPS_2011_FR_Physician_Supervision_Nonenf_Notice.pdf). While CAHs remained 
subject to the direct supervision standard, we instructed our 
contractors not to evaluate or enforce the standard in CY 2010 until 
the agency could revisit the supervision policy during the CY 2011 
rulemaking cycle.
    As indicated above, in the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 71998 through 72013), we further adjusted the direct 
supervision standard to increase flexibility for hospitals while 
maintaining an appropriate level of quality and safety and consistent 
with the incident to statutory provision. Specifically, we redefined 
direct supervision to remove all requirements that the supervisory 
practitioner remain present within a particular physical boundary, 
although we continued to require immediate availability. We also 
established a new category of services, ``nonsurgical extended duration 
therapeutic services'' (extended duration services), which have a 
substantial monitoring component. We specified that direct supervision 
is required for these services during an initiation period, but once 
the supervising physician or nonphysician practitioner has determined 
the patient is stable, the service can continue under general 
supervision.
    In addition, in response to concerns expressed by the industry 
about appropriate levels of supervision for certain services furnished 
in various settings (for example, chemotherapy administration, and 
post-operative recovery services), we stated our intent to create 
through the CY 2012 rulemaking cycle an independent advisory review 
process for consideration of stakeholder requests for assignment of 
supervision levels other than direct supervision for specific 
outpatient hospital therapeutic services. We stated that the review 
entity would evaluate services for assignment of both higher (personal) 
and lower (general) levels of supervision because, in the course of 
evaluating a given service, the review entity may find that personal 
supervision is the most appropriate level (75 FR 72006). We also 
indicated that, as an interim measure while we are in the process of 
establishing an advisory review body, we would extend the 
nonenforcement policy for direct supervision of outpatient therapeutic 
services provided in CAHs for a second year through CY 2011 (which is 
available at the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/Downloads/CMS_1504FC_OPPS_2011_FR_Physician_Supervision_Nonenf_Notice.pdf). In addition, we expanded 
the nonenforcement notice to include small and rural hospitals that 
have 100 or fewer beds, as defined by TOPs criteria, because we believe 
that these hospitals experience resource constraints that are similar 
to CAHs.
    We indicated that we would consider the Federal Advisory Ambulatory 
Payment Classification (APC) Panel as a potential candidate to serve as 
the independent review entity to consider requests for alternative 
service-specific

[[Page 42280]]

supervision standards, and we requested public comment both on that 
idea and on other aspects of the review process, such as evaluation 
criteria and the potential structure of the process. We suggested the 
APC Panel could serve as the review entity because it is already funded 
and established by law under the Federal Advisory Committee Act (FACA, 
Pub. L. 92-463) to make independent recommendations to CMS. The APC 
Panel membership is geographically diverse, and it includes members 
with clinical as well as administrative, hospital billing, and coding 
expertise. In response to our discussion in the CY 2011 OPPS/ASC final 
rule with comment period, we received public comments and other 
considerable input on these topics from the hospital and CAH community 
and from rural stakeholders. In this proposed rule, we discuss these 
comments and our proposals for the independent review process in CY 
2012, taking into account the comments received in response to the CY 
2011 OPPS/ASC final rule with comment period.
    With respect to outpatient hospital diagnostic services, following 
our revisions to the regulation at Sec.  410.28(e) in the CY 2010 OPPS/
ASC final rule with comment period described above, we have received 
very few comments from stakeholders regarding our revised policy. 
Therefore, we are not proposing any changes to those requirements in 
this proposed rule.

B. Issues Regarding the Supervision of Hospital Outpatient Therapeutic 
Services Raised by Hospitals and Other Stakeholders

1. Independent Review Process
    In the CY 2011 OPPS/ASC final rule with comment period (75 FR 
72012), we stated our intent to develop an independent technical review 
process through our CY 2012 rulemaking. Public comments that we 
received on this statement of intent focused on three primary topics: 
the potential nature of the review entity; the potential nature and 
structure of the review process; and potential means of evaluating 
services.
    Commenters were generally favorable towards the establishment of an 
independent review entity, including use of the APC Panel as that 
entity, provided that CMS expand the APC Panel charter and its 
membership to include representatives of CAHs. They also were concerned 
that CMS ensure an adequate representation of clinicians on the Panel 
to provide the appropriate clinical review of supervision levels. Some 
commenters supported creation by law of a new committee comprised 
solely of clinicians (at least 15 multi-specialty physicians and mid-
levels). Citing the potentially significant impact of the supervision 
rules on rural and CAH providers, these commenters also recommended 
that at least 50 percent of committee members be comprised of 
representatives of CAHs and other providers from rural States, with 
recommendations for supervision levels decided by majority vote. Other 
commenters preferred use of an existing body (for example, the APC 
Panel or the Relative Value Scale Update Committee (RUC)) and 
emphasized inclusion of nonclinical professionals with expertise in 
hospital/facility resource consumption in order to balance the panel's 
expertise. Some commenters sought to assure that if the APC Panel were 
selected, it would remain appropriately balanced and qualified to carry 
out its current role in APC deliberations under section 1833(t)(9)(A) 
of the Act. Commenters also were supportive of CMS using its authority 
to convene a Technical Expert Panel (TEP) as the review entity, but 
noted potential lack of available funding.
    In considering these issues, we believe that the best course of 
action is to obtain independent advice with the transparency, formality 
and process associated with a Federal advisory committee. Stakeholders 
may view the recommendations of a FACA Committee as having greater 
legitimacy and, thus, its recommendations could be more useful to CMS 
than the recommendations that would be offered by other types of groups 
such as the American Medical Association's Relative Value Update 
Committee or a TEP. A TEP might be more conducive to in-depth research 
and data analysis, but unless the TEP complies with the Federal 
Advisory Committee Act, the TEP as a group cannot provide advice to 
CMS.
    At this time, funding is not available to CMS to convene a new 
entity; therefore, we believe the most realistic and appropriate option 
is to use an existing body for reviewing supervision levels. We agree 
with commenters that the review body should be representative of all 
types of facilities that are subject to the supervision rules for 
payment, but we disagree that it should be 50 percent representative of 
a specific class of hospitals, particularly if those hospitals 
represent a minority of hospital outpatient service volume and 
payments. In addition, while we agree with commenters that clinical 
expertise is critical to this review process, we believe that 
additional perspectives should be represented, including those of 
hospital administrators and coding representatives. Under the FACA, 
committees and their subcommittees must have balanced membership with 
respect to points of view represented and the topics that are under 
their consideration; therefore, a Federal advisory review entity would 
be required to have a balanced representation of geographic interests, 
including those of CAHs and rural hospitals. It also would be required 
to have a balanced representation of clinical as well as any other 
relevant expertise.
    With respect to structure of the actual review process, most 
commenters requested that we subject the recommendations of the review 
entity and CMS' decisions to notice and comment rulemaking. However, 
most commenters also requested a ``real-time'' process that would be 
more flexible than annual rulemaking and allow for continuous 
evaluation of services. Commenters further requested that there be a 
mechanism for reconsideration of CMS' decisions. In addition, they 
requested that CMS not allow any information presented to the review 
entity in the course of the review process to be used for enforcement 
purposes.
    We believe that employing a subregulatory process to establish CMS' 
final decisions may best serve the interests of beneficiaries and also 
meet the needs of other stakeholders. While rulemaking would arguably 
provide some additional procedural protections to stakeholders in terms 
of an opportunity for notice and comment, due to the time involved in 
rulemaking, stakeholders would only be able to request changes in 
supervision levels once a year. Similarly, if confined to annual 
rulemaking, CMS would not be able to make swift changes to address any 
problems associated with supervision levels, for example access to 
care. Historically, CMS has used subregulatory processes rather than 
rulemaking to issue changes in certain administrative specifications at 
the level of individual CPT codes due to a need for agility in making 
such changes. For example, CMS has used a subregulatory process to set 
supervision levels for individual diagnostic services under the MPFS, 
which are adopted for provision of those services in the hospital 
outpatient setting. Given the strong stakeholder interest in policy 
changes in supervision levels for outpatient hospital therapeutic 
services, we believe we should provide an opportunity for public 
comment on our proposed decisions (which would be based upon

[[Page 42281]]

the review entity's recommendations) prior to finalizing them.
    We agree with commenters that there should be a means of requesting 
reevaluation of CMS' decisions. However, because there is a potential 
for significant administrative burden in reconsidering requests for 
reevaluation, we believe that stakeholders should be required to 
provide significant justification to support consideration of a request 
for a change in supervision levels that has previously been considered, 
such as new clinical evidence, new technology, or new techniques in how 
patient care is furnished. In addition, we believe that new 
consideration of previously considered requests should receive the same 
independent evaluation as the initial request. Therefore, once we 
decide to consider a decision, we would request a new review by the 
independent review entity and follow the same process as a new request. 
The review entity would then deliberate and make a new recommendation 
to CMS, and CMS would then make another determination based on the new 
recommendation.
    We received substantial comment on how we might structure the 
evaluation process. First, stakeholders continued to request that we 
establish a default supervision standard of general supervision for all 
therapeutic services, and assign direct supervision only as indicated 
through the review process. Commenters believed it was important that 
the review entity and CMS not consider services for assignment of 
personal supervision because many services that might qualify for 
personal supervision are already personally performed by a physician or 
nonphysician practitioner. Commenters also noted that certain services 
are not furnished personally by these practitioners and instead are 
furnished personally by auxiliary personnel such as technicians or 
registered nurses (RNs). However, commenters maintained that hospitals 
currently furnish adequate supervision of those services by higher-
level practitioners. Further, they requested that any evaluation for 
personal supervision be based on clinical evidence and evidence of a 
current deficiency in the quality of care.
    In the CY 2011 OPPS/ASC final rule with comment period (75 FR 
72006), we expressed our belief that direct supervision is the most 
appropriate level of supervision for most hospital outpatient 
therapeutic services due to the ``incident to'' nature of most hospital 
outpatient therapeutic services. We discussed how our historic 
requirements for physician (or nonphysician practitioner) orders and 
direct physician involvement in patient care stem from our 
interpretation of the nature of incident to services under the law. We 
reviewed our regulations and other guidance over the years which 
reflect these beliefs and interpretations (75 FR 71999 and 72005).
    We continue to believe that, while the statute does not explicitly 
mandate direct supervision, direct supervision is the most appropriate 
level of supervision for most hospital outpatient services that are 
authorized for payment as ``incident to'' physicians' services unless 
personal supervision is appropriate. We also believe that the 
``incident to'' nature of hospital outpatient therapeutic services 
under the law permits us to recognize specific circumstances in which 
general supervision is appropriate, as we have for extended duration 
services, and that CMS has authority to accept a recommendation by the 
review entity of general supervision for a given service. However, we 
continue to believe that direct supervision is the most appropriate 
level of supervision for the great majority of hospital outpatient 
therapeutic services and, as such, it is the proper choice for a 
default supervision standard.
    In the course of evaluating a stakeholder request for review of the 
supervision level required for a given service, the independent review 
entity may recommend that personal supervision is the most appropriate 
level of supervision for the service. It may also be appropriate to 
assign personal supervision to certain services to ensure that 
auxiliary personnel or personnel in training (such as medical students) 
are adequately supervised. As we indicated in last year's final rule 
with comment period, our supervision policy is designed to preserve 
both the quality and safety of purchased hospital outpatient services 
for Medicare beneficiaries. Accordingly, we believe that the review 
entity should have authority to recommend personal supervision for a 
service if, in the course of its evaluation, it believes that personal 
supervision is most appropriate and safe.
    We believe that the review entity should base its recommendations 
on any clinical evidence that is available. It should also take into 
consideration any known impacts of supervision on the quality of care. 
As we have previously noted (75 FR 72005), while literature or clinical 
opinions may exist on the risk of adverse outcomes and susceptibility 
to medical error associated with the provision of specific hospital 
outpatient procedures when a physician is not present, we do not know 
of any analyses that have directly examined levels of supervision and 
patient outcomes in the hospital outpatient setting. This may be an 
area for future study.
    With respect to an initial agenda of services for the review 
entity, commenters recommended that CMS begin evaluating services with 
work Relative Value Units (RVUs) ASC final 
rule with comment period, we noted that, long before the OPPS, we 
required that hospital services and supplies furnished to outpatients 
incident to a physician's service must be furnished ``on a physician's 
order by hospital personnel and under a physician's supervision'' 
(section 3112.4 of the Medicare Intermediary Manual). We also clearly 
treated all nondiagnostic services that are furnished to hospital 
outpatients as ``incident to services'' (sections 3112 and 3112.4 of 
the Medicare Intermediary Manual; Section 20.5, Chapter 6, of the 
Medicare Benefit Policy Manual (Pub. 100-02)). While we have not 
delineated this position as clearly in the regulations, and while the 
regulation text of Sec.  410.27 only explicitly refers to ``incident 
to'' services, we note that our policy is longstanding and, in fact, 
predates the OPPS. In longstanding manual guidance, we have expressed 
our view that direct supervision is required for hospital outpatient 
therapeutic services, and suggested that this requirement stems from 
the ``incident to'' nature of those services. In the CY 2010 OPPS/ASC 
final rule with comment period, we stated, ``Therapeutic services and 
supplies which hospitals provide on an outpatient basis are those 
services and supplies (including the use of hospital facilities) which 
are incident to the services of physicians and practitioners in the 
treatment of patients'' (74 FR 60584 through 60585). We indicated that 
outpatient therapeutic services and supplies must be furnished under 
the order of a physician or other appropriate nonphysician 
practitioner, and by hospital personnel under the direct supervision of 
a physician or appropriate nonphysician practitioner.
    Thus, we have long maintained that all hospital outpatient 
therapeutic services are, in some sense, furnished ``incident to'' a 
physician's service even when described by benefit categories other 
than the specific ``incident to'' provision in section 1861(s)(2)(B) of 
the Act. Because hospital outpatient therapeutic services are furnished 
``incident to'' a physician's professional service, we believe the 
conditions for payment, including the direct supervision standard, 
should apply to all of these services. As discussed above, because the 
statute includes specific requirements for physician supervision of PR, 
CR, and ICR, we believe that those statutory specifications take 
precedence over the agency's general requirements.

C. Proposed Policies on Supervision Standards for Outpatient 
Therapeutic Services in Hospitals and CAHs

    In this proposed rule, we are proposing policies for the 
independent review process, grouped under three key topics: selection 
of a review body; structure of the review process; and evaluation 
criteria.
1. Selection of Review Entity
    We are proposing that the existing APC Panel serve as the 
independent review entity. However, we would make some modifications to 
the APC Panel scope and composition in order to create a body that is 
prepared to address supervision standards and reflects the full range 
of parties subject to the standards. Specifically, we would use the 
discretionary authority in the Panel charter to expand its scope to 
include the topic of supervision standards. We are proposing to add 
several (2 to 4) representatives of CAHs as Panel members so that all 
hospitals subject to the supervision rules for payment would be 
represented. However, CAHs would not participate in deliberations about 
APC assignments under the OPPS, as these assignments do not affect 
CAHs. According to customary practice for the APC Panel, we are 
proposing to create a supervision subcommittee on the Panel, with 
balanced representation, that is charged to evaluate appropriate 
supervision standards for individual services and present its 
deliberations to the full Panel. Each member of the full

[[Page 42283]]

Panel would then vote to decide on the Panel's recommendation to CMS.
    We are proposing to use the APC Panel for many reasons. As we 
discussed above, funding is not available to CMS at this time to 
convene a new entity. Also, it is not clear that the entire resources 
of a new body are necessary to accomplish the consideration of service-
specific supervision standards, especially once initial determinations 
are made regarding key services. We are also proposing to use the APC 
Panel because we believe it is important to obtain advice that carries 
the weight of a Federal advisory recommendation, which may have greater 
legitimacy both with stakeholders and with CMS compared to the opinions 
of other types of groups.
    In addition to being already established and funded, the APC Panel 
would necessarily be inclusive and well-balanced because it is subject 
to the FACA rules. Consistent with stakeholders' requests that the 
review entity have balanced representation from all hospitals that are 
subject to the supervision rules, the Federal Advisory APC Panel would 
be required by the FACA to have balanced membership on committees and 
their subcommittees with respect to the topics--in this case, 
supervision--that are under their consideration. In addition, the Panel 
incorporates clinical as well as facility, administrative, and coding 
perspectives. Commenters have been generally favorable towards 
selection of the APC Panel, provided we make the changes to the APC 
Panel that we are proposing in this proposed rule.
2. Review Process
    We are proposing to issue agency decisions based on APC Panel 
recommendations through sub-regulatory guidance. We would use a process 
similar to the one currently used to set supervision levels for 
diagnostic services under the MPFS, which are adopted for provision of 
those services in the hospital outpatient setting. CMS' decisions 
(which would be based upon the Panel's recommendations) would be posted 
on the OPPS Web site for public review and comment, and would be 
effective either in July or January following the most recent APC Panel 
meeting, or only in January of the upcoming payment year. In setting 
the diagnostic supervision levels under the MPFS, there is no provision 
for public comment. However, given the strong stakeholder interest in 
this topic and the extent of prior dialogue with the various 
stakeholders, we believe it is important to provide some means of 
notice and comment on our proposed decisions prior to finalizing them.
    The flexibility of a subregulatory process in comparison to 
rulemaking would allow stakeholders to submit requests for evaluations 
of services on a more frequent basis (at least twice a year at APC 
Panel meetings) rather than only annually, which most commenters 
requested. It also would give CMS the ability to respond more rapidly 
to any issues that may arise in access to care or patterns of care. 
Subjecting CMS' decisions to notice and comment rulemaking would 
provide a more structured, formal review of decisions, but changes 
could only be requested or made once a year due to the annual OPPS/ASC 
rulemaking cycle.
3. Evaluation Criteria
    To begin evaluating services in CY 2012, we are proposing to use 
the same APC Panel process that is used to solicit services or 
categories of services from stakeholders to construct the agenda to 
solicit potential services for consideration of a change in supervision 
level. In addition, as discussed in section X.C.2. of this proposed 
rule, we are proposing that CMS would have the ability independently to 
ask the Panel to review the supervision level for one or more services 
as necessary. If we receive an unmanageable number of requests, we are 
proposing to prioritize requests by service volume, total expenditures 
and/or frequency of requests. We also are proposing to prioritize 
services requested for review through public comment on the CY 2010 and 
CY 2011 OPPS/ASC proposed rules. We are proposing to require requests 
to include justification for the change in supervision level that is 
sought, supported to the extent possible with clinical evidence. We 
also would consider these justifications in deciding which services to 
forward to the APC Panel for evaluation.
    We are proposing to charge the Panel with recommending a 
supervision level (general, direct, or personal) to ensure an 
appropriate level of quality and safety for delivery of a given 
service, as defined by a CPT code. The Panel should take into 
consideration the context in which the service is delivered, that is, 
the clinical, payment, and quality context of a patient encounter. In 
recommending a supervision level to CMS, we are proposing that the 
Panel assess whether there is a significant likelihood that the 
supervisory practitioner would need to reassess the patient and modify 
treatment during or immediately following the therapeutic intervention, 
or provide guidance or advice to the individual who provides the 
service. In answering that question, the Panel would consider--
     Complexity of the service;
     Acuity of the patients receiving the service;
     Probability of unexpected or adverse patient event; and
     Expectation of rapid clinical changes during the 
therapeutic service or procedure.
    These criteria include, but extend well beyond, the likelihood of 
the need to manage medical emergencies during or after the provision of 
the service. As we have stated in previous rules (74 FR 60580 and 75 FR 
72007 and 72010), the supervisory responsibility is more than the mere 
capacity to respond to an emergency. It also includes being available 
to reassess the patient and potentially modify treatment as needed on a 
nonemergency basis. It includes the ability to redirect or take over 
performance of the service and to issue any additional necessary 
orders.
    We are proposing that, in the event there has been a previous 
consideration and decision on the supervision standard for a service, 
we would consider the request and, as warranted, forward the request to 
the APC Panel for its review. For requests for review of a service that 
has already been considered, we are proposing to require the requestor 
to submit new evidence to support a change in policy, for example, 
evidence of a change in clinical practice patterns due to new 
techniques or new technology. If sufficient new information was 
provided with the request, CMS would send the request to the APC Panel, 
and the Panel would reconsider the service and make another 
recommendation to CMS, which could be the same or a different level of 
supervision than the current level for the service.
    Finally, in the interim period while we work toward establishing 
the independent review process, we anticipate that we will extend the 
notice of nonenforcement of the requirement for direct supervision in 
CAHs and small rural hospitals as defined by the notice (available on 
the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/01_overview.asp) another year, through CY 2012. The purpose of this 
proposed policy would continue to be to allow these facilities time to 
meet the direct supervision standard while we continue to deliberate on 
any policy alternatives. Under our current timeline, we would not 
complete policy decisions on many key services until sometime in 2012.

[[Page 42284]]

    We note that we have not yet defined the terms ``personal 
supervision'' or ``general supervision'' for the hospital outpatient 
setting, except, as explained above, for general supervision in 
relation to extended duration services in Sec.  410.27(a)(1)(v)(A). 
Because we are proposing to allow the independent review entity to 
recommend that CMS assign either personal or general supervision to 
other hospital outpatient therapeutic services, we are proposing to 
define these terms in the regulations at proposed new Sec.  
410.27(b)(1)(vi). We are proposing to use the definitions established 
for purposes of the MPFS as specified at Sec.  410.32(b)(3). 
Specifically, ``personal supervision'' would have the same meaning as 
the definition specified at Sec.  410.32(b)(3)(iii) and ``general 
supervision'' would have the same meaning as the definition specified 
in Sec.  410.32(b)(3)(i), which is the same definition that we 
established for the general supervision portion of an extended duration 
service.
4. Conditions of Payment and Hospital Outpatient Therapeutic Services 
Described by Different Benefit Categories
    With respect to the issue of application of the payment conditions 
in Sec.  410.27 to services described by benefit categories other than 
section 1861(s)(2)(B) of the Act, we are proposing to amend our 
regulations to clarify our policy. Therapeutic services and supplies 
described by benefit categories other than the hospital outpatient 
``incident to'' services under section 1861(s)(2)(B) of the Act are 
nevertheless subject to the conditions of payment in Sec.  410.27 when 
they are furnished to hospital outpatients and paid under the OPPS or 
to CAHs under section 1834(g) of the Act.
    We believe that this clarification could most readily be 
accomplished by more specifically defining the services and supplies 
described in the regulation text to which the requirements at Sec.  
410.27 apply. Accordingly, we are proposing to revise the description 
of the services and supplies addressed in Sec.  410.27(a) by adding the 
term ``therapeutic'' so that paragraph (a) would read, ``Medicare Part 
B pays for therapeutic hospital or CAH services and supplies furnished 
incident to a physician's or nonphysician practitioner's service'' to 
outpatients. We are proposing to define these services, similar to the 
way they are currently defined in Section 20.5, Chapter 6, of the 
Medicare Benefit Policy Manual, to mean ``all services and supplies 
furnished to hospital or CAH outpatients that are not diagnostic 
services and that aid the physician or practitioner in the treatment of 
the patient.'' We would also add the term ``therapeutic'' to the title 
of Sec.  410.27 so that it would read, ``Therapeutic outpatient 
hospital or CAH services and supplies incident to a physician's or 
nonphysician practitioner's service: Conditions.''
    We believe it is important that we continue to apply the 
requirements in Sec.  410.27 to all hospital outpatient therapeutic 
services and supplies that are paid under the OPPS and to services 
furnished in CAHs that are paid under section 1834(g) of the Act. In 
addition to the supervision rules, the payment conditions in Sec.  
410.27 include rules regarding services furnished under arrangements 
and in PBDs. The goals of the ``under arrangements'' and PBD rules are 
different from the safety and quality goals of the supervision rules. 
They ensure clinical and financial integration between the main 
hospital and any on-campus or off-campus departments of hospitals. In 
particular, Sec.  410.27(a)(1)(iii) subjects hospital outpatient 
services to the requirements in Sec.  413.65 for PBDs of hospitals. The 
provider-based regulations in Sec.  413.65 govern numerous aspects of 
PBD operations including quality assurance, accountability to hospital 
medical director staff, licensure, personnel management, how far the 
departments can be located from the main hospital, and assurance that 
the departments are serving the same population as the main provider. 
Section 410.27(e) subjects services to the ``under arrangement'' 
regulations at Sec.  410.42(a) which govern the liabilities of the 
beneficiary and other parties when hospitals contract services out. It 
is important to reiterate that Sec.  410.27 is applicable to all 
hospital outpatient therapeutic services. We note, for example, that 
ASCs are not permitted to enter into arrangements with hospitals to 
furnish hospital outpatient services. We believe we should clarify and 
reinforce our longstanding policy that hospitals are not permitted to 
furnish therapeutic services or surgery under arrangement with ASCs 
because under Sec.  413.65(a)(1)(ii)(A), CMS does not make provider-
based determinations regarding ASCs and under Sec.  410.27(a)(1)(iii) 
therapeutic services must be furnished in provider-based space. 
Moreover, a hospital is not permitted to furnish services to hospital 
outpatients under arrangements with an ASC because ASCs are paid under 
section 1833(i)(2)(D) of the Act (the ASC payment system), not under 
section 1833(t) of the Act (the OPPS payment system). As a result, an 
ASC could not be a provider-based department of a hospital for purposes 
of Sec.  410.27. If Sec.  410.27 did not apply, an ASC could furnish 
hospital outpatient therapeutic services under arrangements and obtain 
payment at the OPPS rate rather than the ASC rate. This practice would 
distort the financial incentives within those payment systems, and 
would be contrary to the advice and determinations that have 
historically been made by CMS and other enforcement bodies such as the 
Office of the Inspector General.
    In addition, Sec.  410.27(a)(1)(ii) subjects hospital outpatient 
services to the incident to rules that CMS has historically applied to 
all therapeutic services. As we discussed above, these rules ensure 
that services are ordered by a physician (or appropriate nonphysician 
practitioner) and that he or she is directly involved in the delivery 
of care. Sections 410.27(b) and (c) subject services to other 
significant rules governing drugs and biologicals and emergency 
services.
    Additionally, we believe that there is a similar level of clinical 
risk in the therapeutic hospital outpatient services covered under 
other benefit categories that are not explicitly defined as ``incident 
to'' services. For example, stereotactic radiosurgery (a radiation 
therapy service under section 1861(s)(4) of the Act) is a high risk and 
technically demanding surgical procedure. We do not believe that the 
current requirements under Sec.  410.27 regarding supervision, under 
arrangement, provider-based, and other aspects of service, were 
intended to apply only to a subset of hospital outpatient therapeutic 
services and supplies, or that the agency ever intended to omit large 
classes of services that are routinely furnished to hospital 
outpatients from being governed by this regulation.
5. Technical Corrections to the Supervision Standards for Hospital 
Outpatient Therapeutic Services Furnished in Hospitals or CAHs
    We recently noted that the text of Sec. Sec.  410.27(b) and (c) 
includes cross-references to section Sec.  410.168 of the regulations, 
which is obsolete. We believe that Sec.  410.27(b) refers to Sec.  
410.168 in error and should instead reference Sec.  410.29 (Limitations 
on drugs and biologicals). We are proposing to correct Sec.  410.27(b) 
so that it cross-references Sec.  410.29. It would then read, ``Drugs 
and biological are also subject to the limitations specified in Sec.  
410.29.'' In addition, we are proposing to update Sec.  410.27(c) to 
cross-reference the

[[Page 42285]]

sections of the regulation that have replaced Sec.  410.168, that is, 
Part 424, Subparts G and H. For this update, we are proposing to revise 
paragraph (c) to read, ``Rules on emergency services furnished to 
outpatients by nonparticipating hospitals are specified in subpart G of 
Part 424 of this chapter'' and to add a new paragraph (d) to read, 
``Rules on emergency services furnished to outpatients in a foreign 
country are specified in subpart H of Part 424 of this chapter''. 
Accordingly, we are proposing to redesignate the existing paragraphs 
(d) through (f) of Sec.  410.27 as paragraphs (e) through (g), 
respectively.
    In addition, we noted that CAHs are not specifically named in the 
definition of nonsurgical extended duration therapeutic services at 
Sec.  410.27(a)(1)(iv)(E). We are making a technical correction to 
insert the words ``or CAH'' after ``hospital'' in this paragraph. This 
is the same technical correction that we made throughout Sec.  410.27 
in the CY 2010 OPPS/ASC final rule with comment period, discussed 
above. This technical correction clarifies that CAHs are subject to all 
of the requirements of Sec.  410.27 in the same manner as all other 
types of hospitals.
6. Summary
    In summary, we are proposing to establish the Federal Advisory APC 
Panel as an independent review body that would evaluate individual 
outpatient therapeutic services for potential assignment by CMS of 
general (lower) or personal (higher) supervision. We are proposing to 
amend the APC Panel charter to render the Panel more appropriate for 
this task by expanding its scope to include the topic of supervision. 
We also are proposing to add two to four members to the Panel who would 
be representative of CAHs, so that there is broad representation of the 
types of hospitals that are subject to the supervision rules for 
payment. We are proposing to use the standard APC Panel protocols with 
respect to frequency of meetings and receiving requests for evaluation 
and reconsideration of services. However, CMS' decisions based on the 
Panel's recommendations would not be subject to notice and comment 
rulemaking, in contrast to recommendations by the Panel on issues other 
than supervision. We are proposing several means of prioritizing 
requests for evaluations, particularly if the Panel agenda could not 
accommodate all timely requests at a particular meeting. We also are 
proposing clinical and other evaluation criteria that the Panel would 
use in recommending a supervision level that would apply at the 
individual CPT code level. As we have not yet defined personal 
supervision or general supervision for all hospital outpatient 
therapeutic services, we are proposing definitions for these terms in 
this proposed rule.
    We anticipate extending the notice of nonenforcement for direct 
supervision in CAHs and small rural hospitals as defined by the notice 
through CY 2012, because, even if the new APC Panel review process is 
adopted, we likely will not have finalized our policy decisions on many 
key services that are reviewed during that year. In addition, we are 
proposing to clarify our policy that the requirements under Sec.  
410.27 apply to outpatient therapeutic services and supplies furnished 
in hospitals and in CAHs, which includes services and supplies 
described by Medicare benefit categories other than section 
1861(s)(2)(B) of the Act. To that end, we are proposing to redefine the 
services described in that section to clarify the nature and scope of 
the included services.

XI. Proposed OPPS Payment Status and Comment Indicators

A. Proposed OPPS Payment Status Indicator Definitions

    Payment status indicators (SIs) that we assign to HCPCS codes and 
APCs play an important role in determining payment for services under 
the OPPS. They indicate whether a service represented by a HCPCS code 
is payable under the OPPS or another payment system and also whether 
particular OPPS policies apply to the code. The proposed CY 2012 status 
indicator assignments for APCs and HCPCS codes are shown in Addendum A 
and Addendum B, respectively on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS. We note that, in the past, a 
majority of the Addenda referred to throughout the preamble of our 
OPPS/ASC proposed and final rules appeared in the printed version of 
the Federal Register as part of the annual rulemakings. However, 
beginning with this CY 2012 proposed rule, the Addenda will no longer 
appear in the printed version of the OPPS/ASC rules that are found in 
the Federal Register. Instead, these Addenda will be published and 
available only via the Internet on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS.
    For CY 2012, we are not proposing to make any changes to the 
definitions of status indicators that were listed in Addendum D1 of the 
CY 2011 OPPS/ASC final rule with comment period. The proposed CY 2012 
status indicators and their definitions are listed in the tables under 
sections XI.A.1., 2., 3., and 4. of this proposed rule.
1. Proposed Payment Status Indicators to Designate Services That Are 
Paid under the OPPS

------------------------------------------------------------------------
           Indicator            Item/code/service   OPPS payment status
------------------------------------------------------------------------
G.............................  Pass-Through       Paid under OPPS;
                                 Drugs and          separate APC
                                 Biologicals.       payment.
H.............................  Pass-Through       Separate cost-based
                                 Device             pass-through
                                 Categories.        payment; not subject
                                                    to copayment.
K.............................  Nonpass-Through    Paid under OPPS;
                                 Drugs and          separate APC
                                 Nonimplantable     payment.
                                 Biologicals,
                                 including
                                 Therapeutic
                                 Radiopharmaceuti
                                 cals.
N.............................  Items and          Paid under OPPS;
                                 Services           payment is packaged
                                 Packaged into      into payment for
                                 APC Rates.         other services.
                                                    Therefore, there is
                                                    no separate APC
                                                    payment.
P.............................  Partial            Paid under OPPS; per
                                 Hospitalization.   diem APC payment.
Q1............................  STVX-Packaged      Paid under OPPS;
                                 Codes.             Addendum B displays
                                                    APC assignments when
                                                    services are
                                                    separately payable.
                                                   (1) Packaged APC
                                                    payment if billed on
                                                    the same date of
                                                    service as a HCPCS
                                                    code assigned status
                                                    indicator ``S,''
                                                    ``T,'' ``V,'' or
                                                    ``X.''
                                                   (2) In all other
                                                    circumstances,
                                                    payment is made
                                                    through a separate
                                                    APC payment.

[[Page 42286]]

 
Q2............................  T-Packaged Codes.  Paid under OPPS;
                                                    Addendum B displays
                                                    APC assignments when
                                                    services are
                                                    separately payable.
                                                   (1) Packaged APC
                                                    payment if billed on
                                                    the same date of
                                                    service as a HCPCS
                                                    code assigned status
                                                    indicator ``T.''
                                                   (2) In all other
                                                    circumstances,
                                                    payment is made
                                                    through a separate
                                                    APC payment.
Q3............................  Codes that may be  Paid under OPPS;
                                 paid through a     Addendum B displays
                                 composite APC.     APC assignments when
                                                    services are
                                                    separately payable.
                                                    Addendum M displays
                                                    composite APC
                                                    assignments when
                                                    codes are paid
                                                    through a composite
                                                    APC.
                                                   (1) Composite APC
                                                    payment based on
                                                    OPPS composite-
                                                    specific payment
                                                    criteria. Payment is
                                                    packaged into a
                                                    single payment for
                                                    specific
                                                    combinations of
                                                    services.
                                                   (2) In all other
                                                    circumstances,
                                                    payment is made
                                                    through a separate
                                                    APC payment or
                                                    packaged into
                                                    payment for other
                                                    services.
R.............................  Blood and Blood    Paid under OPPS;
                                 Products.          separate APC
                                                    payment.
S.............................  Significant        Paid under OPPS;
                                 Procedure, Not     separate APC
                                 Discounted When    payment.
                                 Multiple.
T.............................  Significant        Paid under OPPS;
                                 Procedure,         separate APC
                                 Multiple           payment.
                                 Reduction
                                 Applies.
U.............................  Brachytherapy      Paid under OPPS;
                                 Sources.           separate APC
                                                    payment.
V.............................  Clinic or          Paid under OPPS;
                                 Emergency          separate APC
                                 Department Visit.  payment.
X.............................  Ancillary          Paid under OPPS;
                                 Services.          separate APC
                                                    payment.
------------------------------------------------------------------------

    We are not proposing any changes to the definitions of status 
indicators listed above for the CY 2012 OPPS. The proposed CY 2012 
status indicators and their definitions are displayed in both the table 
above and in Addendum D1 on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS.
2. Proposed Payment Status Indicators to Designate Services That Are 
Paid under a Payment System Other Than the OPPS
    We are not proposing to make any changes to the definitions of 
status indicators listed below for the CY 2012 OPPS.

------------------------------------------------------------------------
     Indicator          Item/code/service         OPPS payment status
------------------------------------------------------------------------
A.................  Services furnished to a    Not paid under OPPS. Paid
                     hospital outpatient that   by fiscal intermediaries/
                     are paid under a fee       MACs under a fee
                     schedule or payment        schedule or payment
                     system other than OPPS,    system other than OPPS.
                     for example.               Services are subject to
                                                the deductible and
                                                coinsurance unless
                                                indicated otherwise.
                     Ambulance         .........................
                     Services
                     Clinical          Not subject to deductible
                     Diagnostic Laboratory      or coinsurance.
                     Services
                     Non-Implantable   .........................
                     Prosthetic and Orthotic
                     Devices
                     EPO for ESRD      .........................
                     Patients
                     Physical,         .........................
                     Occupational, and Speech
                     Therapy
                     Routine Dialysis  .........................
                     Services for ESRD
                     Patients Provided in a
                     Certified Dialysis Unit
                     of a Hospital
                     Diagnostic        .........................
                     Mammography
                     Screening         Not subject to deductible
                     Mammography                or coinsurance.
C.................  Inpatient Procedures.....  Not paid under OPPS.
                                                Admit patient. Bill as
                                                inpatient.
F.................  Corneal Tissue             Not paid under OPPS. Paid
                     Acquisition; Certain       at reasonable cost.
                     CRNA Services; and
                     Hepatitis B Vaccines.
L.................  Influenza Vaccine;         Not paid under OPPS. Paid
                     Pneumococcal Pneumonia     at reasonable cost; not
                     Vaccine.                   subject to deductible or
                                                coinsurance.
M.................  Items and Services Not     Not paid under OPPS.
                     Billable to the Fiscal
                     Intermediary/MAC.
Y.................  Non-Implantable Durable    Not paid under OPPS. All
                     Medical Equipment.         institutional providers
                                                other than home health
                                                agencies bill to DMERC.
------------------------------------------------------------------------

    The proposed CY 2012 status indicators and their definitions 
displayed in the table above are also displayed in Addendum D1 on the 
CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS.
    3. Proposed Payment Status Indicators to Designate Services That 
Are Not Recognized under the OPPS But That May Be Recognized by Other 
Institutional Providers
    We are not proposing changes to the definitions of status 
indicators listed below for the CY 2012 OPPS.

------------------------------------------------------------------------
     Indicator          Item/code/service         OPPS payment status
------------------------------------------------------------------------
B.................  Codes that are not         Not paid under OPPS.
                     recognized by OPPS when
                     submitted on an
                     outpatient hospital Part
                     B bill type (12x and13x).

[[Page 42287]]

 
                                                May be paid by
                                                fiscal intermediaries/
                                                MACs when submitted on a
                                                different bill type, for
                                                example, 75x (CORF), but
                                                not paid under OPPS.
                                                An alternate
                                                code that is recognized
                                                by OPPS when submitted
                                                on an outpatient
                                                hospital Part B bill
                                                type (12x and 13x) may
                                                be available.
------------------------------------------------------------------------

    The proposed status indicators and their definitions listed in the 
table above are also displayed in Addendum D1 on the CMS Web site at: 
http://www.cms.hhs.gov/HospitalOutpatientPPS.
4. Proposed Payment Status Indicators to Designate Services That Are 
Not Payable by Medicare on Outpatient Claims
    We are not proposing changes to the definitions of payment status 
indicators listed below for the CY 2012 OPPS.

------------------------------------------------------------------------
          Indicator             Item/code/service    OPPS payment status
------------------------------------------------------------------------
D...........................  Discontinued Codes..  Not paid under OPPS
                                                     or any other
                                                     Medicare payment
                                                     system.
E...........................  Items, Codes, and     Not paid by Medicare
                               Services:             when submitted on
                               That are      outpatient claims
                               not covered by any    (any outpatient
                               Medicare outpatient   bill type).
                               benefit based on
                               statutory exclusion.
                                  That are
                                  not covered by
                                  any Medicare
                                  outpatient
                                  benefit for
                                  reasons other
                                  than statutory
                                  exclusion.
                                  That are
                                  not recognized
                                  by Medicare for
                                  outpatient
                                  claims;
                                  alternate code
                                  for the same
                                  item or service
                                  may be available.
                                  For
                                  which separate
                                  payment is not
                                  provided on
                                  outpatient
                                  claims.
------------------------------------------------------------------------

    The proposed CY 2012 payment status indicators and their 
definitions listed in the table above are also displayed in Addendum D1 
on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS.

B. Proposed Comment Indicator Definitions

    For the CY 2012 OPPS, we are proposing to use the same two comment 
indicators that are in effect for the CY 2011 OPPS.
     ``CH''--Active HCPCS codes in current and next calendar 
year; status indicator and/or APC assignment have changed or active 
HCPCS code that will be discontinued at the end of the current calendar 
year.
     ``NI''--New code for the next calendar year or existing 
code with substantial revision to its code descriptor in the next 
calendar year as compared to current calendar year, interim APC 
assignment; comments will be accepted on the interim APC assignment for 
the new code.
    We are using the ``CH'' indicator in this proposed rule to call 
attention to proposed changes in the payment status indicator and/or 
APC assignment for HCPCS codes for CY 2012 compared to their assignment 
as of June 30, 2011. We believe that using the ``CH'' indicator in this 
proposed rule will help facilitate the public's review of the changes 
that we are proposing for CY 2012.
    We are proposing to use the ``CH'' comment indicator in the CY 2012 
OPPS/ASC final rule with comment period to indicate HCPCS codes for 
which the status indicator or APC assignment, or both, would change in 
CY 2012 compared to their assignment as of December 31, 2011. We 
believe that using the ``CH'' indicator in the CY 2012 OPPS/ASC final 
rule with comment period will facilitate the public's review of the 
changes that we will make for CY 2012. The use of the comment indicator 
``CH'' in association with a composite APC indicates that the 
configuration of the composite APC has changed from the CY 2012 OPPS/
ASC final rule with comment period.
    We are proposing to continue our current policy regarding the use 
of comment indicator ``NI.''
    Any existing HCPCS code numbers with substantial revisions to the 
code descriptors for CY 2012 compared to the CY 2011 descriptors will 
be labeled with comment indicator ``NI'' in Addendum B to the CY 2012 
OPPS/ASC final rule with comment period. However, in order to receive 
the comment indicator ``NI,'' the CY 2012 revision to the code 
descriptor (compared to the CY 2011 descriptor) must be significant 
such that the new code descriptor describes a new service or procedure 
for which the OPPS treatment may change. We use comment indicator 
``NI'' to indicate that these HCPCS codes are open to comment on the CY 
2012 OPPS/ASC final rule with comment period. Like all codes labeled 
with comment indicator ``NI,'' we will respond to public comments and 
finalize their OPPS treatment in the CY 2013 OPPS/ASC final rule with 
comment period.
    In accordance with our usual practice, CPT and Level II HCPCS code 
numbers that are new for CY 2012 will also be labeled with comment 
indicator ``NI'' in Addendum B to the CY 2012 OPPS/ASC final rule with 
comment period.
    Only HCPCS codes with comment indicator ``NI'' in the CY 2012 OPPS/
ASC final rule with comment period will be subject to comment. HCPCS 
codes that do not appear with comment indicator ``NI'' in the CY 2012 
OPPS/ASC final rule with comment period will not be open to public 
comment, unless we specifically request additional comments elsewhere 
in the final rule with comment period. The CY 2012 treatment of HCPCS 
codes that appear in the CY 2012 OPPS/ASC final rule with comment 
period to which comment indicator ``NI'' is not appended will be open 
to public comment during the comment period

[[Page 42288]]

for this proposed rule, and we will respond to those comments in the CY 
2012 OPPS/ASC final rule with comment period.
    For the CY 2012 OPPS, we are not proposing any changes to the 
definitions of the OPPS comment indicators for CY 2012. Their proposed 
definitions are listed in Addendum D2 on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS.

XII. OPPS Policy and Payment Recommendations

A. MedPAC Recommendations

    MedPAC was established under section 1805 of the Act to advise the 
U.S. Congress on issues affecting the Medicare program. As required 
under the statute, MedPAC submits reports to Congress not later than 
March and June of each year that contain its Medicare payment policy 
recommendations. This section describes recent recommendations relevant 
to the OPPS that have been made by MedPAC.
    The March 1, 2011 MedPAC ``Report to Congress: Medicare Payment 
Policy'' included the following recommendation relating to the Medicare 
hospital IPPS and, in part, to the Medicare hospital OPPS:
    Recommendation 3: ``The Congress should increase payment rates for 
the acute care hospital inpatient and outpatient prospective payment 
systems in 2012 by 1 percent. The Congress should also require the 
Secretary of Health and Human Services to make adjustments to inpatient 
payment rates in future years to fully recover all overpayments due to 
documentation and coding improvements.'' (page 60)
    MedPAC further stated that: ``For outpatient hospital services, the 
Commission is concerned that significant payment disparities among 
Medicare's ambulatory care settings (hospital outpatient departments, 
ambulatory surgical centers, and physician offices) for similar 
services are fostering undesirable financial incentives. Physician 
practices and ambulatory surgical centers are being reorganized as 
hospital outpatient entities in part to receive higher reimbursements. 
The Commission believes that Medicare should seek to pay similar 
amounts for similar services, taking into account differences in 
quality of care and in the relative risks of the patient populations. 
The Commission is concerned by the trend to reorganize for higher 
reimbursement and will examine this issue. However, in the interim, the 
modest update of 1 percent is warranted in the hospital outpatient 
setting to slow the growing payment rate disparities among ambulatory 
care settings.'' (page 61)
    CMS Response: We note that MedPAC's recommendation is for the 
Congress to increase IPPS and OPPS payment rates by 1 percent in 2010. 
Absent action by Congress, we are proposing to follow the statutory 
requirements that govern the amount of the annual OPD fee schedule 
increase factor to the OPPS for CY 2012. We discuss the proposed CY 
2012 OPD fee schedule increase factor in section II.B. of this proposed 
rule.
    We look forward to reviewing the results of MedPAC's examination of 
what it perceives as a trend towards reorganization of ambulatory 
surgical centers and physician offices as hospital outpatient 
departments to maximize program payment.
    The full March 2011 MedPAC report can be downloaded from MedPAC's 
Web site at: http://www.medpac.gov/documents/Mar11_EntireReport.pdf.

B. APC Panel Recommendations

    Recommendations made by the APC Panel meeting held on February 28 
and March 1, 2011 are discussed in the sections of this proposed rule 
that correspond to topics addressed by the APC Panel. The reports and 
recommendations from the APC Panel's February 28 and March 1, 2011 
meeting regarding payment under the OPPS for CY 2012 are available on 
the CMS Web site at: http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.

C. OIG Recommendations

    The mission of the Office of the Inspector General (OIG), as 
mandated by Public Law 95-452, as amended, is to protect the integrity 
of the U.S. Department of Health and Human Services (HHS) programs, as 
well as the health and welfare of beneficiaries served by those 
programs. This statutory mission is carried out through a nationwide 
network of audits, investigations, and inspections.
    On October 22, 2010, the OIG published a memorandum report entitled 
``Payment for Drugs under the Hospital Outpatient Prospective Payment 
System'' (OIG-03-09-00420). The report may be viewed on the Web site 
at: http://oig.hhs.gov/oei/reports/oei-03-09-00420.pdf. The OIG did not 
make any recommendations to CMS regarding Medicare payment for drugs 
and biologicals under the OPPS.
    CMS Response: We appreciate the work of the OIG regarding the 
payment for drugs under the OPPS, and we will take the findings in its 
report into consideration in the development of our proposed payment 
policy for CY 2012.

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

A. Background

1. Legislative Authority for the ASC Payment System
    Section 1832(a)(2)(F)(i) of the Act provides that benefits under 
Medicare Part B include payment for facility services furnished in 
connection with surgical procedures specified by the Secretary that are 
performed in an Ambulatory Surgical Center (ASC). To participate in the 
Medicare program as an ASC, a facility must meet the standards 
specified in section 1832(a)(2)(F)(i) of the Act, which are set forth 
in 42 CFR Part 416, Subpart B and Subpart C of our regulations. The 
regulations at 42 CFR Part 416, Subpart B describe the general 
conditions and requirements for ASCs, and the regulations at Subpart C 
explain the specific conditions for coverage for ASCs.
    Section 141(b) of the Social Security Act Amendments of 1994, 
Public Law 103-432, required establishment of a process for reviewing 
the appropriateness of the payment amount provided under section 
1833(i)(2)(A)(iii) of the Act for intraocular lenses (IOLs) that belong 
to a class of new technology intraocular lenses (NTIOLs). That process 
was the subject of a final rule entitled ``Adjustment in Payment 
Amounts for New Technology Intraocular Lenses Furnished by Ambulatory 
Surgical Centers,'' published on June 16, 1999, in the Federal Register 
(64 FR 32198).
    Section 626(b) of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA), Public Law 108-173, added subparagraph 
(D) to section 1833(i)(2) of the Act, which required the Secretary to 
implement a revised ASC payment system to be effective not later than 
January 1, 2008. Section 626(c) of the MMA amended section 1833(a)(1) 
of the Act by adding new subparagraph (G), which requires that, 
beginning with implementation of the revised ASC payment system, 
payment for surgical procedures furnished in ASCs shall be 80 percent 
of the lesser of the actual charge for the services or the amount 
determined by the Secretary under the revised payment system.
    Section 109(b) of the Medicare Improvements and Extension Act of 
2006 of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA), Public 
Law 109-432, amended section 1833(i)

[[Page 42289]]

of the Act by redesignating clause (iv) as clause (v) and adding a new 
clause (iv) to paragraph (2)(D) and by adding new paragraph (7).
    Section 1833(i)(2)(D)(iv) of the Act authorizes, but does not 
require, the Secretary to implement the revised ASC payment system '' 
in a manner so as to provide for a reduction in any annual update for 
failure to report on quality measures in accordance with paragraph 
(7).'' Section 1833(i)(7)(A) of the Act states that the Secretary may 
provide that any ASC that does not submit quality measures to the 
Secretary in accordance with paragraph (7) will incur a 2.0 percentage 
point reduction to any annual increase provided under the revised ASC 
payment system for such year.
    Section 1833(i)(7)(B) of the Act provides that, ``[e]xcept as the 
Secretary may otherwise provide,'' the hospital outpatient quality data 
provisions of subparagraphs (B) through (E) of section 1833(t)(17) of 
the Act, added by section 109(a) of the MIEA-TRHCA, shall apply to ASCs 
in a similar manner to the manner in which they apply under these 
paragraphs to hospitals under the Hospital OQR Program.
    Sections 4104 and 10406 of the Affordable Care Act, Public Law 111-
148, amended section 1833(a)(1) and (b)(1) of the Act to waive the 
coinsurance and the Part B deductible for those preventive services 
under section 1861(ddd)(3)(A) of the Act as described in section 
1861(ww)(2) of the Act (excluding electrocardiograms) that are 
recommended by the United States Preventive Services Task Force 
(USPSTF) with a grade of A or B for any indication or population and 
that are appropriate for the individual. Section 4104(c) of the 
Affordable Care Act amended section 1833(b)(1) of the Act to waive the 
Part B deductible for colorectal cancer screening tests that become 
diagnostic. These provisions apply to these items and services 
furnished in an ASC on or after January 1, 2011.
    Section 3401(k) of the Affordable Care Act amended section 
1833(i)(2)(D) of the Act to require that, effective for CY 2011 and 
subsequent years, any annual update under the ASC payment system be 
reduced by a productivity adjustment, which is equal to the 10-year 
moving average of changes in annual economy-wide private nonfarm 
business multi-factor productivity (as projected by the Secretary for 
the 10-year period ending with the applicable fiscal year, year, cost 
reporting period, or other annual period). Application of this 
productivity adjustment to the ASC payment system may result in the 
update to the ASC payment system being less than zero for a year and 
may result in payment rates under the ASC payment system for a year 
being less than such payment rates for the preceding year.
    For a detailed discussion of the legislative history related to 
ASCs, we refer readers to the June 12, 1998 proposed rule (63 FR 32291 
through 32292).
2. Prior Rulemaking
    On August 2, 2007, we published in the Federal Register (72 FR 
42470) the final rule for the revised ASC payment system, effective 
January 1, 2008 (the ``August 2, 2007 final rule''). In that final 
rule, we revised our criteria for identifying surgical procedures that 
are eligible for Medicare payment when furnished in ASCs and adopted 
the method we would use to set payment rates for ASC covered surgical 
procedures and covered ancillary services furnished in association with 
those covered surgical procedures beginning in CY 2008. We also 
established a policy for treating new and revised Healthcare Common 
Procedure Coding System (HCPCS) and Current Procedural Terminology 
(CPT) codes under the ASC payment system. This policy is consistent 
with the OPPS to the extent possible (72 FR 42533).
    In addition, we established a standard ASC ratesetting methodology 
that bases payment for most services on the list of ASC covered 
surgical procedures on the OPPS relative payment weight multiplied by 
the ASC conversion factor. We also established modifications to this 
methodology for subsets of services, such as device-intensive services 
(where the estimated device portion of the ASC payment is the same as 
that paid under the OPPS) and services that are predominantly performed 
in the office setting and covered ancillary radiology services (where 
ASC payment may be based on the MPFS non-facility practice expense (PE) 
Relative Value Units (RVUs)). Additionally, we established a policy for 
updating the conversion factor, the relative payment weights, and the 
ASC payment rates on an annual basis. We also annually update the list 
of procedures for which Medicare does not make an ASC payment.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66827), we updated and finalized the CY 2008 ASC rates and lists of 
covered surgical procedures and covered ancillary services. We also 
made regulatory changes to 42 CFR Parts 411, 414, and 416 related to 
our final policies to provide payments to physicians who perform non-
covered ASC procedures in ASCs based on the facility PE RVUs, to 
exclude covered ancillary radiology services and covered ancillary 
drugs and biologicals from the categories of designated health services 
(DHS) that are subject to the physician self-referral prohibition, and 
to reduce ASC payments for surgical procedures when the ASC receives 
full or partial credit toward the cost of the implantable device.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68722), we updated and finalized the CY 2009 ASC rates and lists of 
covered surgical procedures and covered ancillary services.
    In the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60596), we updated and finalized the CY 2010 ASC rates and lists of 
covered surgical procedures and covered ancillary services. We also 
corrected some of those ASC rates in a correction notice published in 
the Federal Register on December 31, 2009 (74 FR 69502). In that 
correction notice, we revised the ASC rates to reflect changes in the 
MPFS conversion factor and PE RVUs listed for some CPT codes in 
Addendum B to the CY 2010 MPFS final rule with comment period (74 FR 
62017), which were incorrect due to methodological errors and were 
subsequently corrected in a correction notice to that final rule with 
comment period (74 FR 65449). We also published a second correction 
notice in the Federal Register, to address changes to the ASC rates 
resulting from corrections to the PE RVUs identified subsequent to 
publication of the December 31, 2009 correction notice (75 FR 45700). 
Finally, we published a notice in the Federal Register, to reflect 
changes to CY 2010 ASC payment rates for certain ASC services due to 
changes to the OPPS and MPFS under the Affordable Care Act and to 
reflect technical changes to the ASC payment rates announced in prior 
correction notices (75 FR 45769).
    In the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71800), we updated and finalized the CY 2011 ASC rates and lists of 
covered surgical procedures and covered ancillary services. We 
corrected some of the ASC rates that were published in Addenda AA and 
BB, as well as errors in the preamble text, in a correction notice 
published in the Federal Register on March 11, 2011 (76 FR 13292). The 
corrections to the ASC Addenda were primarily due to changes to the 
MPFS conversion factor and PE RVUs listed for some CPT codes in 
Addendum B and Addendum C to the MPFS for CY 2011 which, in turn, 
affected office-

[[Page 42290]]

based and ancillary radiology payment under the ASC payment system. 
Following legislative changes to the MPFS for CY 2011 associated with 
passage of section 101 of the Medicare and Medicaid Extenders Act of 
2010 that occurred after publication of the CY 2011 OPPS/ASC and MPFS 
final rules with comment periods, we posted revised ASC Addenda on our 
Web site to reflect associated changes to office-based and ancillary 
radiology payment under the ASC payment system.
3. Policies Governing Changes to the Lists of Codes and Payment Rates 
for ASC Covered Surgical Procedures and Covered Ancillary Services
    The August 2, 2007 final rule established our policies for 
determining which procedures are ASC covered surgical procedures and 
covered ancillary services. Under Sec. Sec.  416.2 and 416.166 of the 
regulations, subject to certain exclusions, covered surgical procedures 
are surgical procedures that are separately paid under the OPPS, that 
would not be expected to pose a significant risk to beneficiary safety 
when performed in an ASC, and that would not be expected to require 
active medical monitoring and care at midnight following the procedure 
(``overnight stay''). We adopted this standard for defining which 
surgical procedures are covered surgical procedures under the ASC 
payment system as an indicator of the complexity of the procedure and 
its appropriateness for Medicare payment in ASCs. We use this standard 
only for purposes of evaluating procedures to determine whether or not 
they are appropriate for Medicare beneficiaries in ASCs. We define 
surgical procedures as those described by Category I CPT codes in the 
surgical range from 10000 through 69999, as well as those Category III 
CPT codes and Level II HCPCS codes that crosswalk or are clinically 
similar to ASC covered surgical procedures (72 FR 42478). We note that 
we added over 800 surgical procedures to the list of covered surgical 
procedures for ASC payment in CY 2008, the first year of the revised 
ASC payment system, based on the criteria for payment that we adopted 
in the August 2, 2007 final rule as described above in this section.
    In the August 2, 2007 final rule, we also established our policy to 
make separate ASC payments for the following ancillary items and 
services when they are provided integral to ASC covered surgical 
procedures: Brachytherapy sources; certain implantable items that have 
pass-through status under the OPPS; certain items and services that we 
designate as contractor-priced, including, but not limited to, 
procurement of corneal tissue; certain drugs and biologicals for which 
separate payment is allowed under the OPPS; and certain radiology 
services for which separate payment is allowed under the OPPS. These 
covered ancillary services are specified in Sec.  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 (Sec.  416.173; 72 FR 42535). In addition, as 
discussed in detail in section XIII.B. of this proposed rule, because 
we base ASC payment policies for covered surgical procedures, drugs, 
biologicals, and certain other covered ancillary services on the OPPS 
payment policies, we also provide quarterly updates for ASC services 
throughout the year (January, April, July, and October). The updates 
are to implement newly created Level II HCPCS and Category III CPT 
codes for ASC payment and to update the payment rates for separately 
paid drugs and biologicals based on the most recently submitted ASP 
data. New Category I CPT codes, except vaccine codes, are released only 
once a year and, therefore, are implemented through the January 
quarterly update. New Category I CPT vaccine codes are released twice a 
year and thus are implemented through the January and July quarterly 
updates.
    In our annual updates to the ASC list of, and payment rates for, 
covered surgical procedures and covered ancillary services, we 
undertake a review of excluded surgical procedures (including all 
procedures newly proposed for removal from the OPPS inpatient list), 
new procedures, and procedures for which there is revised coding, to 
identify any that we believe meet the criteria for designation as ASC 
covered surgical procedures or covered ancillary services. Updating the 
lists of covered surgical procedures and covered ancillary services, as 
well as their payment rates, in association with the annual OPPS 
rulemaking cycle is particularly important because the OPPS relative 
payment weights and, in some cases, payment rates, are used as the 
basis for the payment of covered surgical procedures and covered 
ancillary services under the revised ASC payment system. This joint 
update process ensures that the ASC updates occur in a regular, 
predictable, and timely manner.

B. Proposed Treatment of New Codes

1. Proposed Process for Recognizing New Category I and Category III CPT 
Codes and Level II HCPCS Codes
    CPT and Level II HCPCS codes are used to report procedures, 
services, items, and supplies under the ASC payment system. 
Specifically, we recognize the following codes on ASC claims: (1) 
Category I CPT codes, which describe medical services and procedures; 
(2) Category III CPT codes, which describe new and emerging 
technologies, services, and procedures; and (3) Level II HCPCS codes, 
which are used primarily to identify products, supplies, temporary 
procedures, and services not described by CPT codes. CPT codes are 
established by the American Medical Association (AMA) and the Level II 
HCPCS codes are established by the CMS HCPCS Workgroup. These codes are 
updated and changed throughout the year. CPT and HCPCS code changes 
that affect ASCs are addressed both through the ASC quarterly update 
Change Requests (CRs) and through the annual rulemaking cycle. CMS 
releases new Level II HCPCS codes to the public or recognizes the 
release of new CPT codes by the AMA and makes these codes effective 
(that is, the codes are recognized on Medicare claims) outside of the 
formal rulemaking process via ASC quarterly update CRs. This quarterly 
process offers ASCs access to codes that may more accurately describe 
items or services furnished and/or provides payment or more accurate 
payment for these items or services in a more timely manner than if we 
waited for the annual rulemaking process. We solicit comments on the 
new codes recognized for ASC payment and finalize our proposals related 
to these codes through our annual rulemaking process.
    We finalized a policy in the August 2, 2007 final rule to evaluate 
each year all new Category I and Category III CPT codes and Level II 
HCPCS codes that describe surgical procedures, and to make preliminary 
determinations in the annual OPPS/ASC final rule with comment period 
regarding whether or not they meet the criteria for payment in the ASC 
setting as covered surgical procedures and, if so, whether they are 
office-based procedures (72 FR 42533 through 42535). In addition, we 
identify new codes as ASC covered ancillary services based upon the 
final payment

[[Page 42291]]

policies of the revised ASC payment system.
    In Table 41 below, we summarize our proposed process for updating 
the HCPCS codes recognized under the ASC payment system.

                            Table 41--Proposed Comment Timeframe for New HCPCS Codes
----------------------------------------------------------------------------------------------------------------
  OPPS/ASC quarterly  update CR      Type of code       Effective date      Comments sought     When finalized
----------------------------------------------------------------------------------------------------------------
April 1, 2011...................  Level II HCPCS      April 1, 2011.....  CY 2012 OPPS/ASC    CY 2012 OPPS/ASC
                                   codes.                                  proposed rule.      final rule with
                                                                                               comment period.
July 1, 2011....................  Level II HCPCS      July 1, 2011......  CY 2012 OPPS/ASC    CY 2012 OPPS/ASC
                                   codes.                                  proposed rule.      final rule with
                                                                                               comment period.
                                  Category I          July 1, 2011......  CY 2012 OPPS/ASC    CY 2012 OPPS/ASC
                                   (certain vaccine                        proposed rule.      final rule with
                                   codes) and III                                              comment period.
                                   CPT codes.
October 1, 2011.................  Level II HCPCS      October 1, 2011...  CY 2012 OPPS/ASC    CY 2013 OPPS/ASC
                                   codes.                                  final rule with     final rule with
                                                                           comment period.     comment period.
January 1, 2012.................  Level II HCPCS      January 1, 2012...  CY 2012 OPPS/ASC    CY 2013 OPPS/ASC
                                   codes.                                  final rule with     final rule with
                                                                           comment period.     comment period.
                                  Category I and III  January 1, 2012...  CY 2012 OPPS/ASC    CY 2013 OPPS/ASC
                                   CPT Codes.                              final rule with     final rule with
                                                                           comment period.     comment period.
----------------------------------------------------------------------------------------------------------------

    This process is discussed in detail below. We have separated our 
discussion into two sections based on whether we are proposing to 
solicit public comments in this CY 2012 OPPS/ASC proposed rule (and 
responding to those comments in the CY 2012 OPPS/ASC final rule with 
comment period) or whether we will be soliciting public comments in the 
CY 2012 OPPS/ASC final rule with comment period (and responding to 
those comments in the CY 2013 OPPS/ASC final rule with comment period). 
We note that we sought public comment in the CY 2011 OPPS/ASC final 
rule with comment period on the new CPT and Level II HCPCS codes that 
were effective January 1, 2011. We also sought public comments in the 
CY 2011 OPPS/ASC final rule with comment period on the new Level II 
HCPCS codes effective October 1, 2010. These new codes, with an 
effective date of October 1, 2010, or January 1, 2011, were flagged 
with comment indicator ``N1'' in Addendum AA and BB to the CY 2011 
OPPS/ASC final rule with comment period to indicate that we were 
assigning them an interim payment status and payment rate, if 
applicable, which were subject to public comment following publication 
of the CY 2011 OPPS/ASC final rule with comment period. We will respond 
to public comments and finalize our proposed ASC treatment of these 
codes in the CY 2012 OPPS/ASC final rule with comment period.
2. Proposed Treatment of New Level II HCPCS Codes and Category III CPT 
Codes Implemented in April and July 2011 for Which We Are Soliciting 
Public Comments in This CY 2012 OPPS/ASC Proposed Rule
    In the April and July CRs, we made effective for April 1 or July 1, 
2011, a total of 13 new Level II HCPCS codes and 6 new Category III CPT 
codes that were not addressed in the CY 2011 OPPS/ASC final rule with 
comment period. The 13 new Level II HCPCS codes describe covered 
ancillary services.
    In the April 2011 ASC quarterly update (Transmittal 2185, CR 7343, 
dated March 25, 2011), we added four new drug and biological Level II 
HCPCS codes to the list of covered ancillary services. Specifically, as 
displayed in Table 42 below, these included HCPCS codes C9280 
(Injection, eribulin mesylate, 1 mg), C9281 (Injection, pegloticase, 1 
mg), C9282 (Injection, ceftaroline fosamil, 10 mg), and Q2040 
(Injection, incobotulinumtoxin A, 1 unit). We note that HCPCS code 
Q2040 replaced HCPCS code C9278 (Injection, incobotulinumtoxin A, 1 
unit) beginning April 1, 2011. HCPCS code C9278 was effective January 
1, 2011, and deleted for dates of service April 1, 2011 and forward, 
because it was replaced with HCPCS code Q2040.
    In the July 2011 quarterly update (Transmittal 2235, Change Request 
7445, dated June 03, 2011), we added nine new drug and biological Level 
II HCPCS codes to the list of covered ancillary services. Specifically, 
as displayed in Table 43, we provided separate payment for HCPCS codes 
C9283 (Injection, acetaminophen, 10 mg), C9284 (Injection, ipilimumab, 
1 mg), C9285 (Lidocaine 70 mg/tetracaine 70mg, per patch), C9365 (Oasis 
Ultra Tri-Layer matrix, per square centimeter), C9406 (Iodine I-123 
ioflupane, diagnostic, per study dose, up to 5 millicuries), Q2041 
(Injection, von willebrand factor complex (human), Wilate, 1 i.u. 
vwf:rco), Q2042 (Injection, hydroxyprogesterone caproate, 1 mg), Q2043 
(Sipuleucel-t, minimum of 50 million autologous cd54+ cells activated 
with pap-gm-csf, including leukapheresis and all other preparatory 
procedures, per infusion), and Q2044 (Injection, belimumab, 10 mg). We 
note that HCPCS code Q2041 is replacing HCPCS code J7184 and HCPCS code 
Q2043 is replacing HCPCS code C9273 beginning July 1, 2011.
    We assigned payment indicator ``K2'' (Drugs and biologicals paid 
separately when provided integral to a surgical procedure on the ASC 
list; payment based on OPPS rate) to these 13 new Level II HCPCS codes 
to indicate that they are separately paid when provided in ASCs. We are 
soliciting public comment on the proposed CY 2012 ASC payment 
indicators and payment rates for the drugs and biologicals, as listed 
in Tables 42 and 43 below. Those HCPCS codes became payable in ASCs, 
beginning in April or July 2011, respectively, and are paid at the ASC 
rates posted for the appropriate calendar quarter on the CMS Web site 
at http://www.cms.gov/ASCPayment/.
    The HCPCS codes listed in Table 42 are included in Addendum BB to 
this proposed rule. We note that all ASC addenda are referenced in 
section XVII. of this proposed rule and are only available via the 
Internet on the CMS Web site. Because HCPCS codes that became effective 
for July (listed in Table 43) are not available to us in time for 
incorporation into the Addenda to this OPPS/ASC proposed rule, our 
policy is to include these HCPCS codes and their proposed payment 
indicators and payment rates in the preamble to the proposed rule but 
not in the Addenda to the proposed rule. These codes and their final 
payment indicators and rates will be included in the appropriate 
Addendum to the CY 2012 OPPS/ASC final rule with comment period. Thus, 
the codes implemented by the July 2011 ASC quarterly update CR and 
their proposed CY 2012 payment rates (based

[[Page 42292]]

on July 2011 ASP data) that are displayed in Table 43 are not included 
in Addendum BB to this proposed rule. The final list of covered 
ancillary services and the associated payment weights and payment 
indicators will be included in Addendum BB to the CY 2012 OPPS/ASC 
final rule with comment period, consistent with our annual update 
policy.

    Table 42--New Level II HCPCS Codes for Covered Ancillary Services
                        Implemented in April 2011
------------------------------------------------------------------------
                                                             Proposed CY
                                                                 2012
     CY 2011 HCPCS Code          CY 2011 Long descriptor       payment
                                                              indicator
------------------------------------------------------------------------
C9280.......................  Injection, eribulin mesylate,           K2
                               1 mg.
C9281.......................  Injection, pegloticase, 1 mg.           K2
C9282.......................  Injection, ceftaroline                  K2
                               fosamil, 10 mg.
Q2040.......................  Injection, incobotulinumtoxin           K2
                               A, 1 unit.
------------------------------------------------------------------------

    Table 43--New Level II HCPCS Codes for Covered Ancillary Services
                        Implemented in July 2011
------------------------------------------------------------------------
                                            Proposed CY     Proposed CY
CY 2011 HCPCS Code   CY 2011 Descriptor    2012 payment      2012 ASC
                                             indicator     payment rate
------------------------------------------------------------------------
C9283.............  Injection,                        K2           $0.11
                     acetaminophen, 10
                     mg.
C9284.............  Injection,                        K2          127.20
                     ipilimumab, 1 mg.
C9285.............  Lidocaine 70 mg/                  K2           13.57
                     tetracaine 70mg,
                     per patch.
C9365.............  Oasis Ultra Tri-                  K2           10.60
                     Layer matrix, per
                     square centimeter.
C9406.............  Iodine I-123                      K2        1,908.00
                     ioflupane,
                     diagnostic, per
                     study dose, up to 5
                     millicuries.
Q2041.............  Injection, von                    K2            0.88
                     willebrand factor
                     complex (human),
                     Wilate, 1 i.u.
                     vwf:rco.
Q2042.............  Injection,                        K2            2.90
                     hydroxyprogesterone
                     caproate, 1 mg.
Q2043.............  Sipuleucel-t,                     K2       32,860.00
                     minimum of 50
                     million autologous
                     cd54+ cells
                     activated with pap-
                     gm-csf, including
                     leukapheresis and
                     all other
                     preparatory
                     procedures, per
                     infusion.
Q2044.............  Injection,                        K2           39.15
                     belimumab, 10 mg.
------------------------------------------------------------------------

    Through the July 2011 quarterly update CR, we also implemented ASC 
payment for six new Category III CPT codes as ASC covered surgical 
procedures, effective July 1, 2011. These codes are listed in Table 44 
below, along with their proposed payment indicators and proposed 
payment rates for CY 2011. Because new Category III CPT and Level II 
HCPCS codes that become effective for July are not available to us in 
time for incorporation into the Addenda to the OPPS/ASC proposed rule, 
our policy is to include the codes, their proposed payment indicators, 
and proposed payment rates in the preamble to the proposed rule but not 
in the Addenda to the proposed rule. These codes and their final 
payment indicators and rates will be included in Addendum AA to the CY 
2012 OPPS/ASC final rule with comment period.
    We are proposing to assign payment indicator ``G2'' (Non-office-
based surgical procedure added in CY 2008 or later; payment based on 
OPPS relative payment weight) to all six of the new Category III CPT 
codes to be implemented in July 2011. We believe that these procedures 
would not pose a significant safety risk to Medicare beneficiaries or 
would not require an overnight stay if performed in ASCs. We are 
soliciting public comment on these proposed payment indicators and the 
payment rates for the new Category III CPT codes that were newly 
recognized as ASC covered surgical procedures in July 2011 through the 
quarterly update CR, as listed in Table 44 below. We are proposing to 
finalize their payment indicators and their payment rates in the CY 
2012 OPPS/ASC final rule with comment period.

        Table 44--New Category III CPT Codes Implemented in July 2011 as ASC Covered Surgical Procedures
----------------------------------------------------------------------------------------------------------------
                                                                                                    Proposed CY
          CY 2011 HCPCS Code             CY 2011 Long descriptor      Proposed CY 2012 payment       2012 ASC
                                                                             indicator             payment rate
----------------------------------------------------------------------------------------------------------------
0263T.................................  Intramuscular autologous   G2                                  $1,218.58
                                         bone marrow cell
                                         therapy, with
                                         preparation of harvested
                                         cells, multiple
                                         injections, one leg,
                                         including ultrasound
                                         guidance, if performed;
                                         complete procedure
                                         including unilateral or
                                         bilateral bone marrow
                                         harvest.
0264T.................................  Intramuscular autologous   G2                                   1,218.58
                                         bone marrow cell
                                         therapy, with
                                         preparation of harvested
                                         cells, multiple
                                         injections, one leg,
                                         including ultrasound
                                         guidance, if performed;
                                         complete procedure
                                         excluding bone marrow
                                         harvest.
0265T.................................  Intramuscular autologous   G2                                   1,218.58
                                         bone marrow cell
                                         therapy, with
                                         preparation of harvested
                                         cells, multiple
                                         injections, one leg,
                                         including ultrasound
                                         guidance, if performed;
                                         unilateral or bilateral
                                         bone marrow harvest only
                                         for intramuscular
                                         autologous bone marrow
                                         cell therapy.
0269T.................................  Revision or removal of     G2                                   1,444.14
                                         carotid sinus baroreflex
                                         activation device; total
                                         system (includes
                                         generator placement,
                                         unilateral or bilateral
                                         lead placement, intra-
                                         operative interrogation,
                                         programming, and
                                         repositioning, when
                                         performed).

[[Page 42293]]

 
0270T.................................  Revision or removal of     G2                                     841.60
                                         carotid sinus baroreflex
                                         activation device; lead
                                         only, unilateral
                                         (includes intra-
                                         operative interrogation,
                                         programming, and
                                         repositioning, when
                                         performed).
0271T.................................  Revision or removal of     G2                                   1,126.88
                                         carotid sinus baroreflex
                                         activation device; pulse
                                         generator only (includes
                                         intra-operative
                                         interrogation,
                                         programming, and
                                         repositioning, when
                                         performed).
----------------------------------------------------------------------------------------------------------------

    In summary, for CY 2011, we are soliciting public comments on the 
proposed payment indicators and the payment rates, if applicable, for 
the new Level II HCPCS codes and Category III CPT codes that were newly 
recognized in April or July 2011 through the respective quarterly 
update CRs. These codes are listed in Tables 42, 43 and 44 of this 
proposed rule. We are proposing to finalize their payment indicators 
and their payment rates, if applicable, in the CY 2012 OPPS/ASC final 
rule with comment period.
3. Proposed Process for New Level II HCPCS Codes and Category I and III 
CPT Codes for Which We Will Be Soliciting Public Comments in the CY 
2012 OPPS/ASC Final Rule With Comment Period
    As has been our practice in the past, we incorporate those new 
Category I and Category III CPT codes and new Level II HCPCS codes that 
are effective January 1 in the final rule with comment period updating 
the ASC payment system for the following calendar year. These codes are 
released to the public via the CMS HCPCS (for Level II HCPCS codes) and 
AMA Web sites (for CPT codes), and also through the January ASC 
quarterly update CRs. In the past, we also have released new Level II 
HCPCS codes that are effective October 1 through the October ASC 
quarterly update CRs and incorporated these new codes in the final rule 
with comment period updating the ASC payment system for the following 
calendar year. All of these codes are flagged with comment indicator 
``NI'' in Addenda AA and BB to the OPPS/ASC final rule with comment 
period to indicate that we are assigning them an interim payment status 
which is subject to public comment. The payment indicator and payment 
rate, if applicable, for all such codes flagged with comment indicator 
``NI'' are open to public comment in the OPPS/ASC final rule with 
comment period, and we respond to these comments in the final rule with 
comment period for the next calendar year's OPPS/ASC update.
    We are proposing to continue this process for CY 2012. 
Specifically, for CY 2012, we are proposing to include in Addenda AA 
and BB to the CY 2012 OPPS/ASC final rule with comment period the new 
Category I and III CPT codes effective January 1, 2012 that would be 
incorporated in the January 2012 ASC quarterly update CR and the new 
Level II HCPCS codes, effective October 1, 2011 or January 1, 2012, 
that would be released by CMS in its October 2011 and January 2012 ASC 
quarterly update CRs. These codes would be flagged with comment 
indicator ``NI'' in Addenda AA and BB to the CY 2012 OPPS/ASC final 
rule with comment period to indicate that we have assigned them an 
interim payment status. Their payment indicators and payment rates, if 
applicable, would be open to public comment in the CY 2012 OPPS/ASC 
final rule with comment period and would be finalized in the CY 2013 
OPPS/ASC final rule with comment period.

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

1. Covered Surgical Procedures
a. Proposed Additions to the List of ASC Covered Surgical Procedures
    We conducted a review of all HCPCS codes that currently are paid 
under the OPPS, but not included on the ASC list of covered surgical 
procedures, to determine if changes in technology and/or medical 
practice changed the clinical appropriateness of these procedures for 
the ASC setting. Upon review, we did not identify any procedures that 
are currently excluded from the ASC list of procedures that met the 
definition of a covered surgical procedure based on our expectation 
that they would not pose a significant safety risk to Medicare 
beneficiaries or would require an overnight stay if performed in ASCs. 
Therefore, we are not proposing additions to the list of ASC covered 
surgical procedures for CY 2012.
b. Proposed Covered Surgical Procedures Designated as Office-Based
(1) Background
    In the August 2, 2007 ASC final rule, we finalized our policy to 
designate as ``office-based'' those procedures that are added to the 
ASC list of covered surgical procedures in CY 2008 or later years that 
we determine are performed predominantly (more than 50 percent of the 
time) in physicians' offices based on consideration of the most recent 
available volume and utilization data for each individual procedure 
code and/or, if appropriate, the clinical characteristics, utilization, 
and volume of related codes. In that rule, we also finalized our policy 
to exempt all procedures on the CY 2007 ASC list from application of 
the office-based classification (72 FR 42512). The procedures that were 
added to the ASC list of covered surgical procedures beginning in CY 
2008 that we determined were office-based were identified in Addendum 
AA to that rule by payment indicator ``P2'' (Office-based surgical 
procedure added to ASC list in CY 2008 or later with MPFS non-facility 
PE RVUs; payment based on OPPS relative payment weight); ``P3'' 
(Office-based surgical procedures added to ASC list in CY 2008 or later 
with MPFS non-facility PE RVUs; payment based on MPFS non-facility PE 
RVUs); or ``R2'' (Office-based surgical procedure added to ASC list in 
CY 2008 or later without MPFS non-facility PE RVUs; payment based on 
OPPS relative payment weight), depending on whether we estimated it 
would be paid according to the standard ASC payment methodology based 
on its OPPS relative payment weight or at the MPFS non-facility 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-

[[Page 42294]]

office-based, after taking into account updated volume and utilization 
data.
(2) Proposed Changes for CY 2012 to Covered Surgical Procedures 
Designated as Office-Based
    In developing this proposed rule, we followed our policy to 
annually review and update the surgical procedures for which ASC 
payment is made and to identify new procedures that may be appropriate 
for ASC payment, including their potential designation as office-based. 
We reviewed CY 2010 volume and utilization data and the clinical 
characteristics for all surgical procedures that are assigned payment 
indicator ``G2'' in CY 2011, as well as for those procedures assigned 
one of the temporary office-based payment indicators, specifically 
``P2*,'' ``P3*,'' or ``R2*'' in the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 72033 through 72038).
    Based on our review of the CY 2010 volume and utilization data, we 
identified ten surgical procedures that we believe meet the criteria 
for designation as office-based. The data indicate that the procedures 
are performed more than 50 percent of the time in physicians' offices. 
Our medical advisors believe the services are of a level of complexity 
consistent with other procedures performed routinely in physicians' 
offices. The 10 CPT codes we are proposing to permanently designate as 
office-based are listed in Table 45 below.

       Table 45--ASC Covered Surgical Procedures Proposed for Permanent Office-Based Designation for 2012
----------------------------------------------------------------------------------------------------------------
                                         CY 2011 long          CY 2011 ASC payment        Proposed CY 2012 ASC
         CY 2011 CPT code                 descriptor                indicator              payment indicator
----------------------------------------------------------------------------------------------------------------
0213T.............................  Injection(s),          G2                          R2
                                     diagnostic or
                                     therapeutic agent,
                                     paravertebral facet
                                     (zygapophyseal)
                                     joint (or nerves
                                     innervating that
                                     joint) with
                                     ultrasound guidance,
                                     cervical or
                                     thoracic; single
                                     level.
0214T.............................  Injection(s),          G2                          R2
                                     diagnostic or
                                     therapeutic agent,
                                     paravertebral facet
                                     (zygapophyseal)
                                     joint (or nerves
                                     innervating that
                                     joint) with
                                     ultrasound guidance,
                                     cervical or
                                     thoracic; second
                                     level (list
                                     separately in
                                     addition to code for
                                     primary procedure).
0215T.............................  Injection(s),          G2                          R2
                                     diagnostic or
                                     therapeutic agent,
                                     paravertebral facet
                                     (zygapophyseal)
                                     joint (or nerves
                                     innervating that
                                     joint) with
                                     ultrasound guidance,
                                     cervical or
                                     thoracic; third and
                                     any additional
                                     level(s) (list
                                     separately in
                                     addition to code for
                                     primary procedure).
0216T.............................  Injection(s),          G2                          R2
                                     diagnostic or
                                     therapeutic agent,
                                     paravertebral facet
                                     (zygapophyseal)
                                     joint (or nerves
                                     innervating that
                                     joint) with
                                     ultrasound guidance,
                                     lumbar or sacral;
                                     single level.
0217T.............................  Injection(s),          G2                          R2
                                     diagnostic or
                                     therapeutic agent,
                                     paravertebral facet
                                     (zygapophyseal)
                                     joint (or nerves
                                     innervating that
                                     joint) with
                                     ultrasound guidance,
                                     lumbar or sacral;
                                     second level (list
                                     separately in
                                     addition to code for
                                     primary procedure).
0218T.............................  Injection(s),          G2                          R2
                                     diagnostic or
                                     therapeutic agent,
                                     paravertebral facet
                                     (zygapophyseal)
                                     joint (or nerves
                                     innervating that
                                     joint) with
                                     ultrasound guidance,
                                     lumbar or sacral;
                                     third and any
                                     additional level(s)
                                     (list separately in
                                     addition to code for
                                     primary procedure).
35475.............................  Transluminal balloon   G2                          P3
                                     angioplasty,
                                     percutaneous;
                                     brachiocephalic
                                     trunk or branches,
                                     each vessel.
35476.............................  Transluminal balloon   G2                          P3
                                     angioplasty,
                                     percutaneous; venous.
41530.............................  Submucosal ablation    G2                          P2
                                     of the tongue base,
                                     radiofrequency, one
                                     or more sites, per
                                     session.
69801.............................  Labyrinthotomy, with   G2                          P3
                                     or without
                                     cryosurgery
                                     including other
                                     nonexcisional
                                     destructive
                                     procedures or
                                     perfusion of
                                     vestibuloactive
                                     drugs (single or
                                     multiple
                                     perfusions);
                                     transcanal.
----------------------------------------------------------------------------------------------------------------

    We also reviewed CY 2010 volume and utilization data and other 
information for the 23 procedures finalized for temporary office-based 
status in the CY 2011 OPPS/ASC final rule with comment period (75 FR 
72036 through 72038). Among these 23 procedures, there were very few 
claims data for eight procedures: CPT code 0099T (Implantation of 
intrastromal corneal ring segments); CPT code 0124T (Conjunctival 
incision with posterior extrascleral placement of pharmacological agent 
(does not include supply of medication)); CPT code 0226T (Anoscopy, 
high resolution (HRA) (with magnification and chemical agent 
enhancement); diagnostic, including collection of specimen(s) by 
brushing or washing when performed); CPT code 0227T (Anoscopy, high 
resolution (HRA) (with magnification and chemical agent enhancement); 
with biopsy(ies)); CPT code 0232T (Injection(s), platelet rich plasma, 
any tissue, including image guidance, harvesting and preparation when 
performed); CPT code C9800 (Dermal injection procedure(s) for facial 
lipodystrophy syndrome (LDS) and provision of Radiesse or Sculptra 
dermal filler, including all items and supplies); CPT code 37761 
(Ligation of perforator vein(s), subfascial, open, including ultrasound 
guidance, when performed, 1 leg); and CPT code 67229 (Treatment of 
extensive or progressive retinopathy, one or more sessions; preterm 
infant (less than 37 weeks gestation at birth), performed from birth up 
to 1 year of age (e.g., retinopathy of prematurity), photocoagulation 
or cryotherapy). Consequently, we are proposing to maintain their 
temporary office-based designations for CY 2012.
    As a result of our review of the remaining fifteen procedures that 
have temporary office-based designations for CY 2011 for which we do 
have claims data, we are proposing that none of the procedures be 
designated as office-based in CY 2012. The 15 surgical procedure codes 
are:
     CPT code 21015 (Radical resection of tumor (e.g., 
malignant neoplasm), soft tissue of face or scalp; less than 2 cm);
     CPT code 21555 (Excision, tumor, soft tissue of neck or 
anterior thorax, subcutaneous; less than 3 cm);

[[Page 42295]]

     CPT code 21930 (Excision, tumor, soft tissue of back or 
flank, subcutaneous; less than 3 cm);
     CPT code 23075 (Excision, tumor, soft tissue of shoulder 
area, subcutaneous; less than 3 cm);
     CPT code 24075 (Excision, tumor, soft tissue of upper arm 
or elbow area, subcutaneous; less than 3 cm);
     CPT code 25075 (Excision, tumor, soft tissue of forearm 
and/or wrist area, subcutaneous; less than 3 cm);
     CPT code 26115 (Excision, tumor or vascular malformation, 
soft tissue of hand or finger, subcutaneous; less than 1.5 cm);
     CPT code 27047 (Excision, tumor, soft tissue of pelvis and 
hip area, subcutaneous; less than 3 cm);
     CPT code 27327 (Excision, tumor, soft tissue of thigh or 
knee area, subcutaneous; less than 3 cm);
     CPT code 27618 (Excision, tumor, soft tissue of leg or 
ankle area, subcutaneous; less than 3 cm);
     CPT code 28039 (Excision, tumor, soft tissue of foot or 
toe, subcutaneous; 1.5 cm or greater);
     CPT code 28041 (Excision, tumor, soft tissue of foot or 
toe, subfascial (e.g., intramuscular); 1.5 cm or greater);
     CPT code 28043 (Excision, tumor, soft tissue of foot or 
toe, subcutaneous; less than 1.5 cm);
     CPT code 28045 (Excision, tumor, soft tissue of foot or 
toe, subfascial (e.g., intramuscular); less than 1.5 cm); and
     CPT code 28046 (Radical resection of tumor (e.g., 
malignant neoplasm), soft tissue of foot or toe; less than 3 cm).
    The volume and utilization data for these CPT codes are sufficient 
to indicate that these procedures are not performed predominantly in 
physicians' offices and, therefore, should not be assigned an office-
based payment indicator in CY 2012.
    The proposed CY 2012 payment indicator designations for the 23 
procedures that were temporarily designated as office-based in CY 2011 
are displayed in Table 46 below. The procedures for which the proposed 
office-based designations for CY 2012 are temporary also are indicated 
by asterisks in Addendum AA to this proposed rule (which is referenced 
in section XVII. of this proposed rule and available via the Internet 
on the CMS Web site).

 Table 46--Proposed CY 2012 Payment Indicators for ASC Covered Surgical
 Procedures Designated as Temporarily Office-Based in the CY 2011 OPPS/
                   ASC Final Rule With Comment Period
------------------------------------------------------------------------
                                                            Proposed CY
                        CY 2011 long        CY 2011 ASC      2012 ASC
 CY 2011 CPT code        descriptor           payment         payment
                                             indicator     indicator **
------------------------------------------------------------------------
21015.............  Radical resection of            R2 *              G2
                     tumor (e.g.,
                     malignant
                     neoplasm), soft
                     tissue of face or
                     scalp; less than 2
                     cm).
21555.............  Excision, tumor,                P3 *              G2
                     soft tissue of neck
                     or anterior thorax,
                     subcutaneous; less
                     than 3 cm.
21930.............  Excision, tumor,                P3 *              G2
                     soft tissue of back
                     or flank,
                     subcutaneous; less
                     than 3 cm.
23075.............  Excision, tumor,                P3 *              G2
                     soft tissue of
                     shoulder area,
                     subcutaneous; less
                     than 3 cm.
24075.............  Excision, tumor,                P3 *              G2
                     soft tissue of
                     upper arm or elbow
                     area, subcutaneous;
                     less than 3 cm.
25075.............  Excision, tumor,                P3 *              G2
                     soft tissue of
                     forearm and/or
                     wrist area,
                     subcutaneous; less
                     than 3 cm.
26115.............  Excision, tumor or              P3 *              G2
                     vascular
                     malformation, soft
                     tissue of hand or
                     finger,
                     subcutaneous; less
                     than 1.5 cm.
27047.............  Excision, tumor,                P3 *              G2
                     soft tissue of
                     pelvis and hip
                     area, subcutaneous;
                     less than 3 cm.
27327.............  Excision, tumor,                P3 *              G2
                     soft tissue of
                     thigh or knee area,
                     subcutaneous; less
                     than 3 cm.
27618.............  Excision, tumor,                P3 *              G2
                     soft tissue of leg
                     or ankle area,
                     subcutaneous; less
                     than 3 cm.
28039.............  Excision, tumor,                P3 *              G2
                     soft tissue of foot
                     or toe,
                     subcutaneous; 1.5
                     cm or greater.
28041.............  Excision, tumor,                R2 *              G2
                     soft tissue of foot
                     or toe, subfascial
                     (e.g.,
                     intramuscular); 1.5
                     cm or greater.
28043.............  Excision, tumor,                P3 *              G2
                     soft tissue of foot
                     or toe,
                     subcutaneous; less
                     than 1.5 cm.
28045.............  Excision, tumor,                P3 *              G2
                     soft tissue of foot
                     or toe, subfascial
                     (e.g.,
                     intramuscular);
                     less than 1.5 cm.
28046.............  Radical resection of            R2 *              G2
                     tumor (e.g.,
                     malignant
                     neoplasm), soft
                     tissue of foot or
                     toe; less than 3 cm.
37761.............  Ligation of                     R2 *            R2 *
                     perforator vein(s),
                     subfascial, open,
                     including
                     ultrasound
                     guidance, when
                     performed, 1 leg.
67229.............  Treatment of                    R2 *            R2 *
                     extensive or
                     progressive
                     retinopathy, one or
                     more sessions;
                     preterm infant
                     (less than 37 weeks
                     gestation at
                     birth), performed
                     from birth up to 1
                     year of age (e.g.,
                     retinopathy of
                     prematurity),
                     photocoagulation or
                     cryotherapy.
0099T.............  Implantation of                 R2 *            R2 *
                     intrastromal
                     corneal ring
                     segments.
0124T.............  Conjunctival                    R2 *            R2 *
                     incision with
                     posterior
                     extrascleral
                     placement of
                     pharmacological
                     agent (does not
                     include supply of
                     medication).
0226T.............  Anoscopy, high                  R2 *            R2 *
                     resolution (HRA)
                     (with magnification
                     and chemical agent
                     enhancement);
                     diagnostic,
                     including
                     collection of
                     specimen(s) by
                     brushing or washing
                     when performed.
0227T.............  Anoscopy, high                  R2 *            R2 *
                     resolution (HRA)
                     (with magnification
                     and chemical agent
                     enhancement); with
                     biopsy(ies).
0232T.............  Injection(s),                   R2 *            R2 *
                     platelet rich
                     plasma, any tissue,
                     including image
                     guidance,
                     harvesting and
                     preparation when
                     performed.
C9800.............  Dermal injection                R2 *            R2 *
                     procedure(s) for
                     facial
                     lipodystrophy
                     syndrome (LDS) and
                     provision of
                     Radiesse or
                     Sculptra dermal
                     filler, including
                     all items and
                     supplies.
------------------------------------------------------------------------
* If designation is temporary.
** Payment indicators are based on a comparison of the proposed rates
  according to the ASC standard ratesetting methodology and the MPFS
  proposed rates. At the time this proposed rule is being finalized for
  publication, current law authorizes a negative update to the MPFS
  payment rates for CY 2012. For a discussion of those rates, we refer
  readers to the CY 2012 MPFS proposed rule.

[[Page 42296]]

    We invite public comment on these proposals.
c. ASC Covered Surgical Procedures Designated as Device-Intensive
(1) Background
    As discussed in the August 2, 2007 final rule (72 FR 42503 through 
42508), we adopted a modified payment methodology for calculating the 
ASC payment rates for covered surgical procedures that are assigned to 
the subset of OPPS device-dependent APCs with a device offset 
percentage greater than 50 percent of the APC cost under the OPPS, in 
order to ensure that payment for the procedure is adequate to provide 
packaged payment for the high-cost implantable devices used in those 
procedures. We assigned payment indicators ``H8'' (Device-intensive 
procedure on ASC list in CY 2007; paid at adjusted rate) and ``J8'' 
(Device-intensive procedure added to ASC list in CY 2008 or later; paid 
at adjusted rate) to identify the procedures that were eligible for ASC 
payment calculated according to the modified methodology, depending on 
whether the procedure was included on the ASC list of covered surgical 
procedures prior to CY 2008 and, therefore, subject to transitional 
payment as discussed in the CY 2009 OPPS/ASC final rule with comment 
period (73 FR 68739 through 68742).
    As discussed in section XIII.F.2. of this proposed rule, because 
the 4-year transition to the ASC payment rates under the standard 
methodology is complete and, therefore, identification of device-
intensive procedures that are subject to transitional payment 
methodology is no longer necessary, we are proposing to delete payment 
indicator ``H8'' (Device-intensive procedure on ASC list in CY 2007; 
paid at adjusted rate). The device-intensive procedures for which the 
device-intensive payment methodology will apply in CY 2012 or later 
will be assigned payment indicator ``J8'' (Device-intensive procedure; 
paid at adjusted rate).
(2) Proposed Changes to List of Covered Surgical Procedures Designated 
as Device-Intensive for CY 2012
    We are proposing to update the ASC list of covered surgical 
procedures that are eligible for payment according to the device-
intensive procedure payment methodology for CY 2012, consistent with 
the proposed OPPS 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 2010 OPPS claims and 
cost report data available for this proposed rule. The OPPS device-
dependent APCs are discussed further in section II.A.2.d.(1) of this 
proposed rule.
    The ASC covered surgical procedures that we are proposing to 
designate as device-intensive and that would be subject to the device-
intensive procedure payment methodology for CY 2012 are listed in Table 
47 below. The CPT code, the CPT code short descriptor, the proposed CY 
2012 ASC payment indicator, the proposed CY 2012 OPPS APC assignment 
and title, and the proposed CY 2012 OPPS APC device offset percentage 
are also listed in Table 47 below. All of these procedures are included 
in Addendum AA to this proposed rule (which is referenced in section 
XVII. of this proposed rule and available via the Internet on the CMS 
Web site).

         Table 47--ASC Covered Surgical Procedures Proposed for Device-Intensive Designation for CY 2012
----------------------------------------------------------------------------------------------------------------
                                                                                                     Proposed CY
                                                                       Proposed CY    Proposed CY    2012 device-
           CPT Code            Short descriptor  Proposed CY 2012 ASC   2012 OPPS    2012 OPPS APC    dependent
                                                   payment indicator       APC           title        APC offset
                                                                                                      percentage
----------------------------------------------------------------------------------------------------------------
24361........................  Reconstruct       J8                           0425  Level II                  60
                                elbow joint.                                         Arthroplasty
                                                                                     or
                                                                                     Implantation
                                                                                     with
                                                                                     Prosthesis.
24363........................  Replace elbow     J8                           0425  Level II                  60
                                joint.                                               Arthroplasty
                                                                                     or
                                                                                     Implantation
                                                                                     with
                                                                                     Prosthesis.
24366........................  Reconstruct head  J8                           0425  Level II                  60
                                of radius.                                           Arthroplasty
                                                                                     or
                                                                                     Implantation
                                                                                     with
                                                                                     Prosthesis.
25441........................  Reconstruct       J8                           0425  Level II                  60
                                wrist joint.                                         Arthroplasty
                                                                                     or
                                                                                     Implantation
                                                                                     with
                                                                                     Prosthesis.
25442........................  Reconstruct       J8                           0425  Level II                  60
                                wrist joint.                                         Arthroplasty
                                                                                     or
                                                                                     Implantation
                                                                                     with
                                                                                     Prosthesis.
25446........................  Wrist             J8                           0425  Level II                  60
                                replacement.                                         Arthroplasty
                                                                                     or
                                                                                     Implantation
                                                                                     with
                                                                                     Prosthesis.
27446........................  Revision of knee  J8                           0425  Level II                  60
                                joint.                                               Arthroplasty
                                                                                     or
                                                                                     Implantation
                                                                                     with
                                                                                     Prosthesis.
33206........................  Insertion of      J8                           0089  Insertion/                71
                                heart pacemaker.                                     Replacement of
                                                                                     Permanent
                                                                                     Pacemaker and
                                                                                     Electrodes.
33207........................  Insertion of      J8                           0089  Insertion/                71
                                heart pacemaker.                                     Replacement of
                                                                                     Permanent
                                                                                     Pacemaker and
                                                                                     Electrodes.
33208........................  Insertion of      J8                           0655  Insertion/                73
                                heart pacemaker.                                     Replacement/
                                                                                     Conversion of
                                                                                     a permanent
                                                                                     dual chamber
                                                                                     pacemaker.
33212........................  Insertion of      J8                           0090  Insertion/                73
                                pulse generator.                                     Replacement of
                                                                                     Pacemaker
                                                                                     Pulse
                                                                                     Generator.
33213........................  Insertion of      J8                           0654  Insertion/                74
                                pulse generator.                                     Replacement of
                                                                                     a permanent
                                                                                     dual chamber
                                                                                     pacemaker.
33214........................  Upgrade of        J8                           0655  Insertion/                73
                                pacemaker                                            Replacement/
                                system.                                              Conversion of
                                                                                     a permanent
                                                                                     dual chamber
                                                                                     pacemaker.
33224........................  Insert pacing     J8                           0655  Insertion/                73
                                lead & connect.                                      Replacement/
                                                                                     Conversion of
                                                                                     a permanent
                                                                                     dual chamber
                                                                                     pacemaker.
33225........................  Lventric pacing   J8                           0108  Insertion/                87
                                lead add-on.                                         Replacement/
                                                                                     Repair of
                                                                                     Cardioverter-
                                                                                     Defibrillator
                                                                                     Leads.
33240........................  Insert pulse      J8                           0107  Insertion of              88
                                generator.                                           Cardioverter-
                                                                                     Defibrillator.

[[Page 42297]]

 
33249........................  Eltrd/insert      J8                           0108  Insertion/                87
                                pace-defib.                                          Replacement/
                                                                                     Repair of
                                                                                     Cardioverter-
                                                                                     Defibrillator
                                                                                     Leads.
33282........................  Implant pat-      J8                           0680  Insertion of              72
                                active ht                                            Patient
                                record.                                              Activated
                                                                                     Event
                                                                                     Recorders.
53440........................  Male sling        J8                           0385  Level I                   61
                                procedure.                                           Prosthetic
                                                                                     Urological
                                                                                     Procedures.
53444........................  Insert tandem     J8                           0385  Level I                   61
                                cuff.                                                Prosthetic
                                                                                     Urological
                                                                                     Procedures.
53445........................  Insert uro/ves    J8                           0386  Level II                  70
                                nck sphincter.                                       Prosthetic
                                                                                     Urological
                                                                                     Procedures.
53447........................  Remove/replace    J8                           0386  Level II                  70
                                ur sphincter.                                        Prosthetic
                                                                                     Urological
                                                                                     Procedures.
54400........................  Insert semi-      J8                           0385  Level I                   61
                                rigid                                                Prosthetic
                                prosthesis.                                          Urological
                                                                                     Procedures.
54401........................  Insert self-      J8                           0386  Level II                  70
                                contd                                                Prosthetic
                                prosthesis.                                          Urological
                                                                                     Procedures.
54405........................  Insert multi-     J8                           0386  Level II                  70
                                comp penis pros.                                     Prosthetic
                                                                                     Urological
                                                                                     Procedures.
54410........................  Remove/replace    J8                           0386  Level II                  70
                                penis prosth.                                        Prosthetic
                                                                                     Urological
                                                                                     Procedures.
54416........................  Remv/repl penis   J8                           0386  Level II                  70
                                contain pros.                                        Prosthetic
                                                                                     Urological
                                                                                     Procedures.
55873........................  Cryoablate        J8                           0674  Prostate                  57
                                prostate.                                            Cryoablation.
61885........................  Insrt/redo        J8                           0039  Level I                   85
                                neurostim 1                                          Implantation
                                array.                                               of
                                                                                     Neurostimulato
                                                                                     r Generator.
61886........................  Implant           J8                           0315  Level II                  88
                                neurostim                                            Implantation
                                arrays.                                              of
                                                                                     Neurostimulato
                                                                                     r Generator.
62361........................  Implant spine     J8                           0227  Implantation of           81
                                infusion pump.                                       Drug Infusion
                                                                                     Device.
62362........................  Implant spine     J8                           0227  Implantation of           81
                                infusion pump.                                       Drug Infusion
                                                                                     Device.
63650........................  Implant           J8                           0040  Level I                   55
                                neuroelectrodes.                                     Implantation/
                                                                                     Revision/
                                                                                     Replacement of
                                                                                     Neurostimulato
                                                                                     r Electrodes.
63655........................  Implant neuro-    J8                           0061  Level II                  64
                                electrodes.                                          Implantation/
                                                                                     Revision/
                                                                                     Replacement of
                                                                                     Neurostimulato
                                                                                     r Electrodes.
63663........................  Revise spine      J8                           0040  Level I                   55
                                eltrd perq aray.                                     Implantation/
                                                                                     Revision/
                                                                                     Replacement of
                                                                                     Neurostimulato
                                                                                     r Electrodes.
63664........................  Revise spine      J8                           0040  Level I                   55
                                eltrd plate.                                         Implantation/
                                                                                     Revision/
                                                                                     Replacement of
                                                                                     Neurostimulato
                                                                                     r Electrodes.
63685........................  Insrt/redo spine  J8                           0039  Level I                   85
                                n generator.                                         Implantation
                                                                                     of
                                                                                     Neurostimulato
                                                                                     r Generator.
64553........................  Implant neuro-    J8                           0040  Level I                   55
                                electrodes.                                          Implantation/
                                                                                     Revision/
                                                                                     Replacement of
                                                                                     Neurostimulato
                                                                                     r Electrodes.
64555........................  Implant neuro-    J8                           0040  Level I                   55
                                electrodes.                                          Implantation/
                                                                                     Revision/
                                                                                     Replacement of
                                                                                     Neurostimulato
                                                                                     r Electrodes.
64560........................  Implant neuro-    J8                           0040  Level I                   55
                                electrodes.                                          Implantation/
                                                                                     Revision/
                                                                                     Replacement of
                                                                                     Neurostimulato
                                                                                     r Electrodes.
64561........................  Implant neuro-    J8                           0040  Level I                   55
                                electrodes.                                          Implantation/
                                                                                     Revision/
                                                                                     Replacement of
                                                                                     Neurostimulato
                                                                                     r Electrodes.
64565........................  Implant neuro-    J8                           0040  Level I                   55
                                electrodes.                                          Implantation/
                                                                                     Revision/
                                                                                     Replacement of
                                                                                     Neurostimulato
                                                                                     r Electrodes.
64568........................  Implant neuro-    J8                           0318  Implantation of           86
                                electrodes.                                          Neurostimulato
                                                                                     r Electrodes,
                                                                                     Cranial Nerve.
64575........................  Implant neuro-    J8                           0061  Laminectomy,              64
                                electrodes.                                          Laparoscopy,
                                                                                     or Incision
                                                                                     for
                                                                                     Implantation
                                                                                     of
                                                                                     Neurostimulato
                                                                                     r Electr.
64577........................  Implant neuro-    J8                           0061  Laminectomy,              64
                                electrodes.                                          Laparoscopy,
                                                                                     or Incision
                                                                                     for
                                                                                     Implantation
                                                                                     of
                                                                                     Neurostimulato
                                                                                     r Electr.
64580........................  Implant neuro-    J8                           0061  Laminectomy,              64
                                electrodes.                                          Laparoscopy,
                                                                                     or Incision
                                                                                     for
                                                                                     Implantation
                                                                                     of
                                                                                     Neurostimulato
                                                                                     r Electr.
64581........................  Implant neuro-    J8                           0061  Laminectomy,              64
                                electrodes.                                          Laparoscopy,
                                                                                     or Incision
                                                                                     for
                                                                                     Implantation
                                                                                     of
                                                                                     Neurostimulato
                                                                                     r Electr.
64590........................  Insrt/redo pn/    J8                           0039  Level I                   85
                                gastr stimul.                                        Implantation
                                                                                     of
                                                                                     Neurostimulato
                                                                                     r Generator.
65770........................  Revise cornea     J8                           0293  Level VI                  67
                                with implant.                                        Anterior
                                                                                     Segment Eye
                                                                                     Procedures.
69714........................  Implant temple    J8                           0425  Level II                  60
                                bone w/stimul.                                       Arthroplasty
                                                                                     or
                                                                                     Implantation
                                                                                     with
                                                                                     Prosthesis.
69715........................  Temple bne        J8                           0425  Level II                  60
                                implnt w/                                            Arthroplasty
                                stimulat.                                            or
                                                                                     Implantation
                                                                                     with
                                                                                     Prosthesis.
69717........................  Temple bone       J8                           0425  Level II                  60
                                implant                                              Arthroplasty
                                revision.                                            or
                                                                                     Implantation
                                                                                     with
                                                                                     Prosthesis.
69718........................  Revise temple     J8                           0425  Level II                  60
                                bone implant.                                        Arthroplasty
                                                                                     or
                                                                                     Implantation
                                                                                     with
                                                                                     Prosthesis.
69930........................  Implant cochlear  J8                           0259  Level VII ENT             83
                                device.                                              Procedures.
----------------------------------------------------------------------------------------------------------------

[[Page 42298]]

    We invite public comment on these proposals.
d. ASC Treatment of Surgical Procedures Proposed for Removal From the 
OPPS Inpatient List for CY 2012
    As we discussed in the CY 2009 OPPS/ASC final rule with comment 
period (73 FR 68724), we adopted a policy to include in our annual 
evaluation of the ASC list of covered surgical procedures, a review of 
the procedures that are being proposed for removal from the OPPS 
inpatient list for possible inclusion on the ASC list of covered 
surgical procedures. We evaluated each of the three procedures we are 
proposing to remove from the OPPS inpatient list for CY 2012 according 
to the criteria for exclusion from the list of covered ASC surgical 
procedures. We believe that these three procedures should continue to 
be excluded from the ASC list of covered surgical procedures for CY 
2012 because they would be expected to pose a significant risk to 
beneficiary safety or to require an overnight stay in ASCs. A full 
discussion about the APC Panel's recommendations regarding the 
procedures we are proposing to remove from the OPPS inpatient list for 
CY 2012 may be found in section IX.B. of this proposed rule. The HCPCS 
codes for these three procedures and their long descriptors are listed 
in Table 48 below.

Table 48--Procedures Proposed for Exclusion From the ASC List of Covered
  Procedures for CY 2012 That Are Proposed for Removal From the CY 2012
                           OPPS Inpatient List
------------------------------------------------------------------------
             CPT Code                          Long descriptor
------------------------------------------------------------------------
21346.............................  Open treatment of nasomaxillary
                                     complex fracture (Lefort II type);
                                     with wiring and/or local fixation.
35045.............................  Direct repair of aneurysm,
                                     pseudoaneurysm, or excision
                                     (partial or total) and graft
                                     insertion, with or without patch
                                     graft; for aneurysm,
                                     pseudoaneurysm, and associated
                                     occlusive disease, radial or ulnar
                                     artery.
54650.............................  Orchiopexy, abdominal approach, for
                                     intra-abdominal testis (e.g.,
                                     Fowler-Stephens).
------------------------------------------------------------------------

    We invite public comment on this proposal.
2. Covered Ancillary Services
    Consistent with the established ASC payment system policy, we are 
proposing to update the ASC list of covered ancillary services to 
reflect the proposed payment status for the services under the CY 2012 
OPPS. Maintaining consistency with the OPPS may result in proposed 
changes to ASC payment indicators for some covered ancillary items and 
services because of changes that are being proposed under the OPPS for 
CY 2012. For example, a covered ancillary service that was separately 
paid under the revised ASC payment system in CY 2011 may be proposed 
for packaged status under the CY 2012 OPPS and, therefore, also under 
the ASC payment system for CY 2012. Comment indicator ``CH,'' discussed 
in section XIII.F. of this proposed rule, is used in Addendum BB to 
this proposed rule (which is referenced in section XVII. of this 
proposed rule and available via the Internet on the CMS Web site) to 
indicate covered ancillary services for which we are proposing a change 
in the ASC payment indicator to reflect a proposed change in the OPPS 
treatment of the service for CY 2012.
    Except for the Level II HCPCS codes listed in Table 43 of this 
proposed rule, all ASC covered ancillary services and their proposed 
payment indicators for CY 2012 are included in Addendum BB to this 
proposed rule.

D. Proposed ASC Payment for Covered Surgical Procedures and Covered 
Ancillary Services

1. Proposed Payment for Covered Surgical Procedures
a. Background
    Our ASC payment policies for covered surgical procedures under the 
revised ASC payment system are fully described in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66828 through 66831). Under our 
established policy for the revised ASC payment system, the ASC standard 
ratesetting methodology of multiplying the ASC relative payment weight 
for the procedure by the ASC conversion factor for that same year is 
used to calculate the national unadjusted payment rates for procedures 
with payment indicator ``G2.'' For procedures assigned payment 
indicator ``A2,'' our final policy established blended rates to be used 
during the transitional period and, beginning in CY 2011, ASC rates 
calculated according to the ASC standard ratesetting methodology. The 
rate calculation established for 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 2011 OPPS/ASC final rule with comment period (75 FR 72024 through 
72064), we updated the CY 2010 ASC payment rates for ASC covered 
surgical procedures with payment indicators of ``A2,'' ``G2,'' ``H8,'' 
and ``J8'' using CY 2009 data, consistent with the CY 2011 OPPS update. 
Payment rates for device-intensive procedures also were updated to 
incorporate the CY 2011 OPPS device offset percentages. Because 
transitional payments were no longer required in CY 2011, we calculated 
CY 2011 payments for procedures formerly subject to the transitional 
payment methodology (payment indicators ``A2'' and ``H8'') using the 
standard rate setting methodology, incorporating the device-intensive 
methodology, as appropriate.
    Payment rates for office-based procedures (payment indicators 
``P2,'' ``P3,'' and ``R2'') are the lower of the MPFS non-facility PE 
RVU-based amount (we refer readers to the CY 2012 MPFS proposed rule) 
or the amount calculated using the ASC standard ratesetting methodology 
for the procedure. In the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 72024 through 72064), we updated the payment amounts for 
office-based procedures (payment indicators ``P2,'' ``P3,'' and ``R2'') 
using the most recent available MPFS and OPPS data. We compared the 
estimated CY 2011 rate for each of the office-based procedures, 
calculated according to the ASC standard ratesetting methodology, to 
the MPFS nonfacility PE RVU-based amount to determine which was lower 
and, therefore, would be the CY 2011 payment rate for the procedure 
according to the final policy of the revised ASC payment system (Sec.  
416.171(d)).
b. Proposed Update to ASC-Covered Surgical Procedure Payment Rates for 
CY 2012
    We are proposing to update ASC payment rates for CY 2012 using the 
established rate calculation methodologies under Sec.  416.171. Under 
Sec.  416.171(c)(4), the transitional payment

[[Page 42299]]

rates are no longer used for CY 2011 and subsequent calendar years for 
a covered surgical procedure designated in accordance with Sec.  
416.166. Thus, we are proposing to calculate CY 2012 payments for 
procedures formerly subject to the transitional payment methodology 
(payment indicators ``A2'' and ``H8'') using the proposed CY 2012 ASC 
rate calculated according to the ASC standard ratesetting methodology, 
incorporating the device-intensive procedure methodology, as 
appropriate. We are proposing to continue to use the amount calculated 
under the ASC standard ratesetting methodology for procedures assigned 
payment indicator ``G2.'' We are proposing to modify or delete the 
payment indicators for procedures that were subject to transitional 
payment prior to CY 2011 (we refer readers to our discussion in section 
XIII.F.2. of this proposed rule).
    We are proposing that payment rates for office-based procedures 
(payment indicators ``P2,'' ``P3,'' and ``R2'') and device-intensive 
procedures that were not subject to transitional payment (payment 
indicator ``J8'') be calculated according to our established policies, 
incorporating the device-intensive procedure methodology as 
appropriate. Thus, we are proposing to update the payment amounts for 
device-intensive procedures based on the CY 2012 OPPS proposal that 
reflects updated OPPS device offset percentages, and to make payment 
for office-based procedures at the lesser of the CY 2012 proposed MPFS 
non-facility PE RVU-based amount or the proposed CY 2012 ASC payment 
amount calculated according to the standard ratesetting methodology.
c. Proposed Adjustment to ASC Payments for No Cost/Full Credit and 
Partial Credit Devices
    Our ASC policy with regard to payment for costly devices implanted 
in ASCs at no cost or with full or partial credit as set forth in Sec.  
416.179 is consistent with the OPPS policy. The proposed CY 2012 OPPS 
APCs and devices subject to the adjustment policy are discussed in 
section IV.B.2. of this proposed rule. The established ASC policy 
includes adoption of the OPPS policy for reduced payment to providers 
when a specified device is furnished without cost or with full or 
partial credit for the cost of the device for those ASC covered 
surgical procedures that are assigned to APCs under the OPPS to which 
this policy applies. We refer readers to the CY 2009 OPPS/ASC final 
rule with comment period for a full discussion of the ASC payment 
adjustment policy for no cost/full credit and partial credit devices 
(73 FR 68742 through 68745).
    Consistent with the OPPS, we are proposing to update the list of 
ASC covered device-intensive procedures and devices that would be 
subject to the no cost/full credit and partial credit device adjustment 
policy for CY 2012. Table 49 below displays the ASC covered device-
intensive procedures that we are proposing would be subject to the no 
cost/full credit and partial credit device adjustment policy for CY 
2012. Specifically, when a procedure that is listed in Table 49 is 
performed to implant a device that is listed in Table 50 below, where 
that device is furnished at no cost or with full credit from the 
manufacturer, the ASC would append the HCPCS ``FB'' modifier on the 
line with the procedure to implant the device. The contractor would 
reduce payment to the ASC by the device offset amount that we estimate 
represents the cost of the device when the necessary device is 
furnished without cost to the ASC or with full credit. We would provide 
the same amount of payment reduction based on the device offset amount 
in ASCs that would apply under the OPPS under the same circumstances. 
We continue to believe that the reduction of ASC payment in these 
circumstances is necessary to pay appropriately for the covered 
surgical procedure being furnished by the ASC.
    We also are proposing to reduce the payment for implantation 
procedures listed in Table 49 by one-half of the device offset amount 
that would be applied if a device was provided at no cost or with full 
credit, if the credit to the ASC is 50 percent or more of the cost of 
the new device. The ASC would append the HCPCS ``FC'' modifier to the 
HCPCS code for a surgical procedure listed in Table 49 when the 
facility receives a partial credit of 50 percent or more of the cost of 
a device listed in Table 50 below. In order to report that they 
received a partial credit of 50 percent or more of the cost of a new 
device, ASCs would have the option of either: (1) Submitting the claim 
for the device replacement procedure to their Medicare contractor after 
the procedure's performance but prior to manufacturer acknowledgment of 
credit for the device, and subsequently contacting the contractor 
regarding a claim adjustment once the credit determination is made; or 
(2) holding the claim for the device implantation procedure until a 
determination is made by the manufacturer on the partial credit and 
submitting the claim with the ``FC'' modifier appended to the 
implantation procedure HCPCS code if the partial credit is 50 percent 
or more of the cost of the replacement device. Beneficiary coinsurance 
would continue to be based on the reduced payment amount.

   Table 49--Proposed CY 2012 Procedures to Which the No Cost/Full Credit and Partial Credit Device Adjustment
                                               Policy Would Apply
----------------------------------------------------------------------------------------------------------------
                                                                                                       Proposed
                                           Proposed                                       Proposed     CY 2012
                                           CY 2012    Proposed CY                         CY 2012        OPPS
     CPT code        Short descriptor        ASC       2012 OPPS      OPPS APC title     OPPS full     partial
                                           payment        APC                            APC offset   APC offset
                                          indicator                                      percentage   percentage
----------------------------------------------------------------------------------------------------------------
24361............  Reconstruct elbow              J8         0425  Level II                      60           30
                    joint.                                          Arthroplasty or
                                                                    Implantation with
                                                                    Prosthesis.
24363............  Replace elbow joint.           J8         0425  Level II                      60           30
                                                                    Arthroplasty or
                                                                    Implantation with
                                                                    Prosthesis.
24366............  Reconstruct head of            J8         0425  Level II                      60           30
                    radius.                                         Arthroplasty or
                                                                    Implantation with
                                                                    Prosthesis.
25441............  Reconstruct wrist              J8         0425  Level II                      60           30
                    joint.                                          Arthroplasty or
                                                                    Implantation with
                                                                    Prosthesis.
25442............  Reconstruct wrist              J8         0425  Level II                      60           30
                    joint.                                          Arthroplasty or
                                                                    Implantation with
                                                                    Prosthesis.

[[Page 42300]]

 
25446............  Wrist replacement...           J8         0425  Level II                      60           30
                                                                    Arthroplasty or
                                                                    Implantation with
                                                                    Prosthesis.
27446............  Revision of knee               J8         0425  Level II                      60           30
                    joint.                                          Arthroplasty or
                                                                    Implantation with
                                                                    Prosthesis.
33206............  Insertion of heart             J8         0089  Insertion/                    71           35
                    pacemaker.                                      Replacement of
                                                                    Permanent
                                                                    Pacemaker and
                                                                    Electrodes.
33207............  Insertion of heart             J8         0089  Insertion/                    71           35
                    pacemaker.                                      Replacement of
                                                                    Permanent
                                                                    Pacemaker and
                                                                    Electrodes.
33208............  Insertion of heart             J8         0655  Insertion/                    74           37
                    pacemaker.                                      Replacement/
                                                                    Conversion of a
                                                                    permanent dual
                                                                    chamber pacemaker.
33212............  Insertion of pulse             J8         0090  Insertion/                    73           37
                    generator.                                      Replacement of
                                                                    Pacemaker Pulse
                                                                    Generator.
33213............  Insertion of pulse             J8         0654  Insertion/                    74           37
                    generator.                                      Replacement of a
                                                                    permanent dual
                                                                    chamber pacemaker.
33214............  Upgrade of pacemaker           J8         0655  Insertion/                    73           37
                    system.                                         Replacement/
                                                                    Conversion of a
                                                                    permanent dual
                                                                    chamber pacemaker.
33224............  Insert pacing lead &           J8         0655  Insertion/                    73           37
                    connect.                                        Replacement/
                                                                    Conversion of a
                                                                    permanent dual
                                                                    chamber pacemaker.
33225............  Lventric pacing lead           J8         0108  Insertion/                    87           43
                    add-on.                                         Replacement/Repair
                                                                    of Cardioverter-
                                                                    Defibrillator
                                                                    Leads.
33240............  Insert pulse                   J8         0107  Insertion of                  88           44
                    generator.                                      Cardioverter-
                                                                    Defibrillator.
33249............  Eltrd/insert pace-             J8         0108  Insertion/                    87           43
                    defib.                                          Replacement/Repair
                                                                    of Cardioverter-
                                                                    Defibrillator
                                                                    Leads.
33282............  Implant pat-active             J8         0680  Insertion of                  72           36
                    ht record.                                      Patient Activated
                                                                    Event Recorders.
53440............  Male sling procedure           J8         0385  Level I Prosthetic            61           30
                                                                    Urological
                                                                    Procedures.
53444............  Insert tandem cuff..           J8         0385  Level I Prosthetic            61           30
                                                                    Urological
                                                                    Procedures.
53445............  Insert uro/ves nck             J8         0386  Level II Prosthetic           70           35
                    sphincter.                                      Urological
                                                                    Procedures.
53447............  Remove/replace ur              J8         0386  Level II Prosthetic           70           35
                    sphincter.                                      Urological
                                                                    Procedures.
54400............  Insert semi-rigid              J8         0385  Level I Prosthetic            61           30
                    prosthesis.                                     Urological
                                                                    Procedures.
54401............  Insert self-contd              J8         0386  Level II Prosthetic           70           35
                    prosthesis.                                     Urological
                                                                    Procedures.
54405............  Insert multi-comp              J8         0386  Level II Prosthetic           70           35
                    penis pros.                                     Urological
                                                                    Procedures.
54410............  Remove/replace penis           J8         0386  Level II Prosthetic           70           35
                    prosth.                                         Urological
                                                                    Procedures.
54416............  Remv/repl penis                J8         0386  Level II Prosthetic           70           35
                    contain pros.                                   Urological
                                                                    Procedures.
61885............  Insrt/redo neurostim           J8         0039  Level I                       85           43
                    1 array.                                        Implantation of
                                                                    Neurostimulator
                                                                    Generator.
61886............  Implant neurostim              J8         0315  Level II                      88           44
                    arrays.                                         Implantation of
                                                                    Neurostimulator
                                                                    Generator.
62361............  Implant spine                  J8         0227  Implantation of               81           40
                    infusion pump.                                  Drug Infusion
                                                                    Device.
62362............  Implant spine                  J8         0227  Implantation of               81           40
                    infusion pump.                                  Drug Infusion
                                                                    Device.
63650............  Implant                        J8         0040  Level I                       55           27
                    neuroelectrodes.                                Implantation/
                                                                    Revision/
                                                                    Replacement of
                                                                    Neurostimulator
                                                                    Electrodes.
63655............  Implant                        J8         0061  Level II                      64           32
                    neuroelectrodes.                                Implantation/
                                                                    Revision/
                                                                    Replacement of
                                                                    Neurostimulator
                                                                    Electrodes.
63663............  Revise spine eltrd             J8         0040  Level I                       55           27
                    perq aray.                                      Implantation/
                                                                    Revision/
                                                                    Replacement of
                                                                    Neurostimulator
                                                                    Electrodes.
63664............  Revise spine eltrd             J8         0040  Level I                       55           27
                    plate.                                          Implantation/
                                                                    Revision/
                                                                    Replacement of
                                                                    Neurostimulator
                                                                    Electrodes.
63685............  Insrt/redo spine n             J8         0039  Level I                       85           43
                    generator.                                      Implantation of
                                                                    Neurostimulator
                                                                    Generator.
64553............  Implant                        J8         0040  Level I                       55           27
                    neuroelectrodes.                                Implantation/
                                                                    Revision/
                                                                    Replacement of
                                                                    Neurostimulator
                                                                    Electrodes.
64555............  Implant                        J8         0040  Level I                       55           27
                    neuroelectrodes.                                Implantation/
                                                                    Revision/
                                                                    Replacement of
                                                                    Neurostimulator
                                                                    Electrodes.
64560............  Implant                        J8         0040  Level I                       55           27
                    neuroelectrodes.                                Implantation/
                                                                    Revision/
                                                                    Replacement of
                                                                    Neurostimulator
                                                                    Electrodes.
64561............  Implant                        J8         0040  Percutaneous                  55           27
                    neuroelectrodes.                                Implantation of
                                                                    Neurostimulator
                                                                    Electrodes.
64565............  Implant                        J8         0040  Percutaneous                  55           27
                    neuroelectrodes.                                Implantation of
                                                                    Neurostimulator
                                                                    Electrodes.
64568............  Implant                        J8         0318  Implantation of               86           43
                    neuroelectrodes.                                Neurostimulator
                                                                    Electrodes,
                                                                    Cranial Nerve.

[[Page 42301]]

 
64575............  Implant                        J8         0061  Laminectomy,                  64           32
                    neuroelectrodes.                                Laparoscopy, or
                                                                    Incision for
                                                                    Implantation of
                                                                    Neurostimulator
                                                                    Electr.
64577............  Implant                        J8         0061  Laminectomy,                  64           32
                    neuroelectrodes.                                Laparoscopy, or
                                                                    Incision for
                                                                    Implantation of
                                                                    Neurostimulator
                                                                    Electr.
64580............  Implant                        J8         0061  Laminectomy,                  64           32
                    neuroelectrodes.                                Laparoscopy, or
                                                                    Incision for
                                                                    Implantation of
                                                                    Neurostimulator
                                                                    Electr.
64581............  Implant                        J8         0061  Laminectomy,                  64           32
                    neuroelectrodes.                                Laparoscopy, or
                                                                    Incision for
                                                                    Implantation of
                                                                    Neurostimulator
                                                                    Electr.
64590............  Insrt/redo pn/gastr            J8         0039  Level I                       85           43
                    stimul.                                         Implantation of
                                                                    Neurostimulator
                                                                    Generator.
69714............  Implant temple bone            J8         0425  Level II                      60           30
                    w/stimul.                                       Arthroplasty or
                                                                    Implantation with
                                                                    Prosthesis.
69715............  Temple bne implnt w/           J8         0425  Level II                      60           30
                    stimulat.                                       Arthroplasty or
                                                                    Implantation with
                                                                    Prosthesis.
69717............  Temple bone implant            J8         0425  Level II                      60           30
                    revision.                                       Arthroplasty or
                                                                    Implantation with
                                                                    Prosthesis.
69718............  Revise temple bone             J8         0425  Level II                      60           30
                    implant.                                        Arthroplasty or
                                                                    Implantation with
                                                                    Prosthesis.
69930............  Implant cochlear               J8         0259  Level VII ENT                 83           41
                    device.                                         Procedures.
----------------------------------------------------------------------------------------------------------------

 Table 50--Proposed Devices for Which the ``FB'' or ``FC'' Modifier Must
Be Reported With the Procedure Code in CY 2012 When Furnished at No Cost
                     or With Full or Partial Credit
------------------------------------------------------------------------
     CY 2011 Device HCPCS code            CY 2011 Short descriptor
------------------------------------------------------------------------
C1721.............................  AICD, dual chamber.
C1722.............................  AICD, single chamber.
C1762.............................  Conn tiss, human(inc fascia).
C1763.............................  Conn tiss, non-human.
C1764.............................  Event recorder, cardiac.
C1767.............................  Generator, neurostim, imp.
C1771.............................  Rep dev, urinary, w/sling.
C1772.............................  Infusion pump, programmable.
C1776.............................  Joint device (implantable).
C1778.............................  Lead, neurostimulator.
C1779.............................  Lead, pmkr, transvenous VDD.
C1781.............................  Mesh (implantable).
C1785.............................  Pmkr, dual, rate-resp.
C1786.............................  Pmkr, single, rate-resp.
C1813.............................  Prosthesis, penile, inflatab.
C1815.............................  Pros, urinary sph, imp.
C1820.............................  Generator, neuro rechg bat sys.
C1881.............................  Dialysis access system.
C1882.............................  AICD, other than sing/dual.
C1891.............................  Infusion pump, non-prog, perm.
C1897.............................  Lead, neurostim, test kit.
C1898.............................  Lead, pmkr, other than trans.
C1900.............................  Lead coronary venous.
C2618.............................  Probe, cryoablation.
C2619.............................  Pmkr, dual, non rate-resp.
C2620.............................  Pmkr, single, non rate-resp.
C2621.............................  Pmkr, other than sing/dual.
C2622.............................  Prosthesis, penile, non-inf.
C2626.............................  Infusion pump, non-prog, temp.
C2631.............................  Rep dev, urinary, w/o sling.
L8614.............................  Cochlear device/system.
L8680.............................  Implt neurostim elctr each.
L8685.............................  Implt nrostm pls gen sng rec.
L8686.............................  Implt nrostm pls gen sng non.
L8687.............................  Implt nrostm pls gen dua rec.
L8688.............................  Implt nrostm pls gen dua non.
L8690.............................  Aud osseo dev, int/ext comp.
------------------------------------------------------------------------

    We invite public comment on these proposals.
d. Waiver of Coinsurance and Deductible for Certain Preventive Services
    Section 1833(a)(1) and (b)(1) of the Act waives the coinsurance and 
the Part B deductible for those preventive services under section 
1861(ddd)(3)(A) of the Act as described in section 1861(ww)(2) of the 
Act (excluding electrocardiograms) that are recommended by the United 
States Preventive Services Task Force (USPSTF) with a grade of A or B 
for any indication or population and that are appropriate for the 
individual. Section 1833(b) of the Act also waives the Part B 
deductible for colorectal cancer screening tests that become 
diagnostic. In the CY 2011 OPPS/ASC final rule with comment period, we 
finalized our policies with respect to these provisions and identified 
the ASC covered surgical and ancillary services that are preventive 
services that are recommended by the USPSTF with a grade of A or B for 
which the coinsurance and the deductible are waived. For a complete 
discussion of our policies and identified services, please see the CY 
2011 OPPS/ASC final rule with comment period (75 FR 72047 through 
72049). We are proposing no changes to our policies or the list of 
services. We have identified these services with a double asterisk in 
Addenda AA and BB to this proposed rule.
e. Proposed Payment for the Cardiac Resynchronization Therapy Composite
    Cardiac resynchronization therapy (CRT) uses electronic devices to 
sequentially pace both sides of the heart to improve its output. CRT 
utilizes a pacing electrode implanted in combination with either a 
pacemaker or an implantable cardioverter defibrillator (ICD). CRT 
performed by the implantation of an ICD along with a pacing electrode 
is referred to as ``CRT-D.'' As detailed in section II.A.2.e.(6) of 
this proposed rule, we are proposing to create an OPPS composite APC 
(Composite APC 8009 (Cardiac Resynchronization Therapy--ICD Pulse 
Generator and Leads)) which would be used when CPT code 33225 
(Insertion of pacing electrode, cardiac venous system, for left 
ventricular pacing, at time of insertion of pacing cardioverter-
defibrillator or pacemaker pulse generator (including upgrade to dual

[[Page 42302]]

chamber system)) and CPT code 33249 (Insertion or repositioning of 
electrode lead(s) for single or dual chamber pacing cardioverter-
defibrillator and insertion of pulse generator) are performed on the 
same date of service. We also are proposing to cap the OPPS payment 
rate for composite APC 8009 at the most comparable Medicare severity 
diagnosis-related group (MS-DRG) payment rate established under the 
IPPS that would be provided to acute care hospitals for providing CRT-D 
services to hospital inpatients. In other words, we are proposing to 
pay APC 8009 at the lesser of the APC 8009 median cost or the IPPS 
standardized payment rate for MS-DRG 227 (Cardiac Defibrillator Implant 
without Cardiac Catheterization without Major Complication or 
Comorbidity). This would ensure appropriate and equitable payment to 
hospitals and that we do not create an inappropriate payment incentive 
to provide CRT-D services in one setting of care over another by paying 
more for CRT-D in the outpatient setting compared to the inpatient 
setting. Specifically, for the CY 2012 OPPS, we are proposing that if 
the APC 8009 median cost that we will calculate for the CY 2012 OPPS/
ASC final rule with comment period exceeds the FY 2012 IPPS 
standardized payment rate for MS-DRG 227, we would establish the OPPS 
payment amount at the FY 2012 IPPS standardized payment amount for MS-
DRG 227 (currently estimated at $26,365).
    Because CPT code 33225 and CPT code 33249 are on the list of ASC 
covered surgical procedures, we are proposing to establish an ASC 
payment rate that is based on the OPPS payment rate applicable to APC 
8009 when these procedures are performed on the same date of service in 
an ASC. Again, we do not want to create an inappropriate payment 
incentive to provide CRT-D services in one setting of care over another 
by paying more for CRT-D in ASCs compared to the hospital outpatient 
setting. Because CPT codes 33225 and 33249 are on the proposed list of 
device-intensive procedures for CY 2012, we are proposing to apply the 
usual device-intensive methodology based on the OPPS payment rate 
applicable to APC 8009 (which is the lesser of the APC 8009 median cost 
that we will calculate for the CY 2012 OPPS/ASC final rule with comment 
period or the FY 2012 IPPS standardized payment rate for MS-DRG 227). 
We also are proposing to create a HCPCS Level II G-code so that ASCs 
can properly report when the procedures described by CPT codes 33225 
and 33249 are performed on the same date of service to receive the 
appropriate CRT-D composite payment.
    In a related issue, as detailed in section III.D.6 of this proposed 
rule, CPT codes 33225 and 33249 are the only procedures proposed for 
inclusion in APC 0108. We are proposing that these codes would be paid 
under APC 0108 only if they are not reported on the same date of 
service. Further, we are proposing to pay the OPPS payment rate for 
services that are assigned to APC 0108 at the lesser of the APC 0108 
median cost or the IPPS standardized payment rate for MS-DRG 227. For 
ASC payment in CY 2012, we are proposing to apply the device-intensive 
methodology to calculate payment for CPT codes 33225 and 33249 based on 
the OPPS payment rate applicable to APC 0108 (which is the lesser of 
the APC 0108 median cost that we will calculate for the CY 2012 OPPS/
ASC final rule with comment period or the FY 2012 IPPS standardized 
payment rate for MS-DRG 227).
    We invite public comment on these proposals.
2. Proposed Payment for Covered Ancillary Services
a. Background
    Our final payment policies under the revised ASC payment system for 
covered ancillary services vary according to the particular type of 
service and its payment policy under the OPPS. Our overall policy 
provides separate ASC payment for certain ancillary items and services 
integrally related to the provision of ASC covered surgical procedures 
that are paid separately under the OPPS and provides packaged ASC 
payment for other ancillary items and services that are packaged under 
the OPPS. Thus, we established a final policy to align ASC payment 
bundles with those under the OPPS (72 FR 42495). In all cases, in order 
for those ancillary services also to be paid, ancillary items and 
services must be provided integral to the performance of ASC covered 
surgical procedures for which the ASC bills Medicare.
    Our ASC payment policies provide separate payment for drugs and 
biologicals that are separately paid under the OPPS at the OPPS rates, 
while we generally pay for separately payable radiology services at the 
lower of the MPFS non-facility PE RVU-based (or technical component) 
amount or the rate calculated according to the ASC standard ratesetting 
methodology (72 FR 42497). However, as finalized in the CY 2011 OPPS/
ASC final rule with comment period (75 FR 72050), payment indicators 
for all nuclear medicine procedures (defined as CPT codes in the range 
of 78000 through 78999) that are designated as radiology services that 
are paid separately when provided integral to a surgical procedure on 
the ASC list are set to ``Z2'' so that payment is made based on the 
OPPS relative payment weights rather than the MPFS non-facility RE RVU 
amount, regardless of which is lower. This modification to the ASC 
payment methodology for ancillary services was finalized in response to 
a CY 2011 OPPS/ASC proposed rule comment that suggested it is 
inappropriate to use the MPFS-based payment methodology for nuclear 
medicine procedures because the associated diagnostic 
radiopharmaceutical, though packaged under the ASC payment system, is 
separately paid under the MFPS. We set the payment indicator to ``Z2'' 
for nuclear medicine procedures in the ASC setting so that payment for 
these procedures would be based on the OPPS relative payment weight 
rather than the MPFS non-facility PE RVU-based amount to ensure that 
the ASC will be compensated for the cost associated with the diagnostic 
radiopharmaceuticals.
    ASC payment policy for brachytherapy sources generally mirrors the 
payment policy under the OPPS. We finalized our policy in the CY 2008 
OPPS/ASC final rule with comment period (72 FR 42499) to pay for 
brachytherapy sources applied in ASCs at the same prospective rates 
that were adopted under the OPPS or, if OPPS rates were unavailable, at 
contractor-priced rates. After publication of that rule, section 106 of 
the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 110-
173) mandated that, for the period January 1, 2008 through June 30, 
2008, brachytherapy sources be paid under the OPPS at charges adjusted 
to cost. Therefore, consistent with our final overall ASC payment 
policy, we paid ASCs at contractor-priced rates for brachytherapy 
sources provided in ASCs during that period of time. Beginning July 1, 
2008, brachytherapy sources applied in ASCs were to be paid at the same 
prospectively set rates that were finalized in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 67165 through 67188). Immediately 
prior to the publication of the CY 2009 OPPS/ASC proposed rule, section 
142 of the Medicare Improvements for Patients and Providers Act of 2008 
(Pub. L. 110-275) amended section 1833(t)(16)(C) of the Act (as amended 
by section 106 of

[[Page 42303]]

the Medicare, Medicaid, and SCHIP Extension Act of 2007, Pub. L. 110-
173) to extend the requirement that brachytherapy sources be paid under 
the OPPS at charges adjusted to cost through December 31, 2009. 
Therefore, consistent with final ASC payment policy, ASCs continued to 
be paid at contractor-priced rates for brachytherapy sources provided 
integral to ASC covered surgical procedures during that period of time.
    Other separately paid covered ancillary services in ASCs, 
specifically corneal tissue acquisition and device categories with OPPS 
pass-through status, do not have prospectively established ASC payment 
rates according to the final policies of the revised ASC payment system 
(72 FR 42502 and 42509; Sec.  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 only 
device that is eligible for pass-through payment in the OPPS is 
described by HCPCS code C1749 (Endoscope, retrograde imaging/
illumination colonoscope device (Implantable)). Payment for HCPCS code 
C1749 under the ASC payment system is contractor priced.
b. Proposed Payment for Covered Ancillary Services for CY 2012
    For CY 2012, we are proposing to update the ASC payment rates and 
make changes to ASC payment indicators as necessary to maintain 
consistency between the OPPS and ASC payment system regarding the 
packaged or separately payable status of services and the proposed CY 
2012 OPPS and ASC payment rates. The proposed CY 2012 OPPS payment 
methodologies for separately payable drugs and biologicals and 
brachytherapy sources are discussed in section II.A. and section V.B. 
of this proposed rule, respectively, and we are proposing to set the CY 
2012 ASC payment rates for those services equal to the proposed CY 2012 
OPPS rates.
    Consistent with established ASC payment policy (72 FR 42497), the 
proposed CY 2012 payment for separately payable covered radiology 
services is based on a comparison of the CY 2012 proposed MPFS non-
facility PE RVU-based amounts (we refer readers to the CY 2012 MPFS 
proposed rule) and the proposed CY 2012 ASC payment rates calculated 
according to the ASC standard ratesetting methodology and then set at 
the lower of the two amounts. Alternatively, payment for a radiology 
service may be packaged into the payment for the ASC covered surgical 
procedure if the radiology service is packaged under the OPPS. The 
payment indicators in Addendum BB to this proposed rule indicate 
whether the proposed payment rates for radiology services are based on 
the MPFS nonfacility PE RVU-based amount or the ASC standard 
ratesetting methodology, or whether payment for a radiology service is 
packaged into the payment for the covered surgical procedure (payment 
indicator ``N1''). Radiology services that we are proposing to pay 
based on the ASC standard ratesetting methodology are assigned payment 
indicator ``Z2'' (Radiology service paid separately when provided 
integral to a surgical procedure on ASC list; payment based on OPPS 
relative payment weight) and those for which the proposed payment is 
based on the MPFS non-facility PE RVU-based amount are assigned payment 
indicator ``Z3'' (Radiology service paid separately when provided 
integral to a surgical procedure on ASC list; payment based on MPFS 
non-facility 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 non-facility PE RVU-based amount, regardless of which is 
lower. We are proposing to continue this modification to the payment 
methodology and, therefore, set the payment indicator to ``Z2'' for 
these nuclear medicine procedures in CY 2012. In addition, because the 
same issue exists for radiology procedures that use contrast agents 
(the contrast agent is packaged under the ASC payment system but is 
separately paid under the MFPS), we are proposing to set the payment 
indicator to ``Z2'' for radiology services that use contrast agents so 
that payment for these procedures will be based on the OPPS relative 
payment weight and will, therefore, include the cost for the contrast 
agent. We have made proposed changes to the regulation text at Sec.  
416.171(d) to reflect this proposal.
    Most covered ancillary services and their proposed payment 
indicators are listed in Addendum BB to this proposed rule (which is 
referenced in section XVII. of this proposed rule and available via the 
Internet on the CMS Web site).

E. New Technology Intraocular Lenses (NTIOLs)

1. NTIOL Cycle and Evaluation Criteria
    In the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68176), we finalized our current process for reviewing applications to 
establish new classes of new technology intraocular lenses (NTIOLs) and 
for recognizing new candidate intraocular lenses (IOLs) inserted during 
or subsequent to cataract extraction as belonging to an NTIOL class 
that is qualified for a payment adjustment. Specifically, we 
established the following process:
     We announce annually in the proposed rule updating the ASC 
and OPPS payment rates for the following calendar year, a list of all 
requests to establish new NTIOL classes accepted for review during the 
calendar year in which the proposal is published and the deadline for 
submission of public comments regarding those requests. In accordance 
with section 141(b)(3) of Public Law 103-432 and our regulations at 
Sec.  416.185(b), the deadline for receipt of public comments is 30 
days following publication of the list of requests.
     In the final rule updating the ASC and OPPS payment rates 
for the following calendar year, we--
    [cir] Provide a list of determinations made as a result of our 
review of all new NTIOL class requests and public comments; and
    [cir] Announce the deadline for submitting requests for review of 
an application for a new NTIOL class for the following calendar year.
    In the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68227), we finalized our proposal to base our determinations on 
consideration of the following three major criteria set out at 42 CFR 
416.195:
     Criterion 1 (42 CFR 416.195(a)(1), (2)): The IOL must have 
been approved by the FDA and claims of specific clinical benefits and/
or lens characteristics with established clinical relevance in 
comparison with currently available IOLs must have been approved by the 
FDA for use in labeling and advertising;
     Criterion 2 (42 CFR 416.195(a)(3)): The IOL is not 
described by an active or expired NTIOL class; that is, it does not 
share the predominant, class-defining characteristic associated with 
the improved clinical outcome with designated members of an active or 
expired NTIOL class; and
     Criterion 3 (42 CFR 416.195(a)(4)): Evidence demonstrates 
that use of the

[[Page 42304]]

IOL results in measurable, clinically meaningful, improved outcomes in 
comparison with use of currently available IOLs. The statute requires 
us to consider the following superior outcomes:
    [cir] Reduced risk of intraoperative or postoperative complication 
or trauma;
    [cir] Accelerated postoperative recovery;
    [cir] Reduced induced astigmatism;
    [cir] Improved postoperative visual acuity;
    [cir] More stable postoperative vision; or
    [cir] Other comparable clinical advantages.
    Since implementation of the process for adjustment of payment 
amounts for NTIOLs that was established in the June 16, 1999 Federal 
Register, we have approved three classes of NTIOLs, as shown in the 
table entitled CMS Approved NTIOLs, with the associated qualifying IOL 
models, posted on the CMS Web site at: http://www.cms.gov/ASCPayment/08_NTIOLs.asp#TopOfPage.
2. NTIOL Application Process for Payment Adjustment
    For a request to be considered complete, we require submission of 
the information that is found in the guidance document entitled 
``Application Process and Information Requirements for Requests for a 
New Class of New Technology Intraocular Lens (NTIOL)'' posted on the 
CMS Web site at: http://www.cms.gov/ASCPayment/08_NTIOLs.asp#TopOfPage. For each completed request for a new class that 
is received by the established deadline, a determination is announced 
annually in the final rule updating the ASC and OPPS payment rates for 
the next calendar year.
    We also summarize briefly in the final rule with comment period the 
evidence that we reviewed, the public comments we received timely, and 
the basis for our determinations in consideration of applications for 
establishment of a new NTIOL class. When a new NTIOL class is created, 
we identify the predominant characteristic of NTIOLs in that class that 
sets them apart from other IOLs (including those previously approved as 
members of other expired or active NTIOL classes) and that is 
associated with an improved clinical outcome. The date of 
implementation of a payment adjustment in the case of approval of an 
IOL as a member of a new NTIOL class would be set prospectively as of 
30 days after publication of the ASC payment update final rule, 
consistent with the statutory requirement.
3. Requests to Establish New NTIOL Classes for CY 2012 and Deadline for 
Public Comments
    We received four requests for review to establish a new NTIOL class 
for CY 2012 by the March 5, 2011 due date. Summaries of these requests 
follow.
    a. Requestor/Manufacturer: Alcon Laboratories, Inc. (Alcon).
    Lens Model Numbers: Acrysof Natural IQ and Acrysof Natural IOLs, 
Models SN60WF (aspheric optic, single piece), SN60AT (spherical optic, 
single piece), MN60MA (spherical optic, multi-piece), MN60AC (spherical 
optic, multi-piece).
    Summary of the Request: Alcon submitted a request for CMS to 
determine that its Acrysof Natural IOLs meet the criteria for 
recognition as NTIOLs and to concurrently establish a new class of 
NTIOLs for ``blue-light-filtering IOLs that improve driving safety 
under glare conditions,'' with these IOLs as members of the class. We 
reviewed a similar request by Alcon during the CY 2011 NTIOL 
application cycle (75 FR 72052). As part of its CY 2012 request, Alcon 
submitted descriptive information about the candidate IOLs as outlined 
in the guidance document that is available on the CMS Web site for the 
establishment of a new class of NTIOLs, as well as information 
regarding approval of the candidate IOLs by the FDA. This information 
included the approved labeling for the candidate IOLs, a summary of the 
IOLs' safety and effectiveness, a copy of the FDA's approval 
notifications, and instructions for their use.
    In its CY 2012 request, Alcon asserts that its request is based on 
studies demonstrating that the Acrysof Natural IOLs with a blue-light-
filtering chromophore filter light in a manner that approximates the 
human crystalline lens in the 400-475 nm blue light wavelength range to 
reduce glare that impairs the ability of the eye to differentiate 
objects from the background. Alcon further states that glare reduction 
can help beneficiaries avoid hazards that can be caused by glare. Alcon 
also states that at present there are no active or expired NTIOL 
classes that describe IOLs similar to the Acrysof Natural IOLs.
    We established in the CY 2007 OPPS/ASC final rule with comment 
period that when reviewing a request for recognition of an IOL as an 
NTIOL and a concurrent request to establish a new class of NTIOLs, we 
would base our determination on consideration of the three major 
criteria at 42 CFR 416.195(a) and listed above. We have begun our 
review of Alcon's request to recognize its Acrysof Natural IOLs as 
NTIOLs and concurrently establish a new class of NTIOLs. We are 
soliciting public comment on these candidate IOLs with respect to the 
established three major NTIOL criteria.
    First, for an IOL to be recognized as an NTIOL we require that the 
IOL must have been approved by the FDA and claims of specific clinical 
benefits and/or lens characteristics with established clinical 
relevance in comparison with currently available IOLs must have been 
approved by the FDA for use in labeling and advertising. The approved 
labels for the Alcon IOLs all state the following: ``Alcon's 
proprietary blue light filtering chromophore filters light in a manner 
that approximates the human crystalline lens in the 400-475 nm blue 
light wavelength range.'' The FDA labels for these IOLs do not 
otherwise reference specific clinical benefits of blue light filtering. 
We are interested in public comments on the clinical relevance of blue 
light filtering in an IOL. Specifically, we are interested in public 
comments regarding the assertion that the specific blue light filtering 
properties associated with the candidate IOLs improve driving safety 
via the reduction of glare disability.
    Second, according to 42 CFR 416.195(a)(3), we also require that the 
candidate IOL not be described by an active or expired NTIOL class; 
that is, it does not share the predominant, class-defining 
characteristic associated with improved clinical outcomes with 
designated members of an active or expired NTIOL class. In the CY 2007 
OPPS final rule, in response to a comment we explained our 
interpretation of 42 CFR 416.195(a)(3) as follows:
    ``[R]evised Sec.  416.195(a)(3) does not preclude from 
consideration as a member of a new class of NTIOL a lens that includes 
as one of its characteristics a class-defining characteristic 
associated with members of an active or expired class. Only if that 
shared characteristic were the predominant characteristic of the lens 
would it be precluded from approval as a new class of NTIOL. However, 
if the lens featured other characteristics, one or more of which 
predominated, that were clearly tied with improved clinical outcomes, 
the lens would not be disqualified from consideration as an NTIOL just 
because it also shared a characteristic with members of an active or 
expired class.'' (71 FR 68178).
    As noted above, since implementation of the process for adjustment 
of payment amounts for NTIOLs that was established in the June 16, 1999 
Federal Register, we have approved three

[[Page 42305]]

classes of NTIOLs: Multifocal and Reduction in Preexisting Astigmatism 
classes, both of which were created in 2000 and expired in 2005, and 
the Reduced Spherical Aberration class, which was created in 2006 and 
expired on February 26, 2011. As mentioned above, a table entitled CMS 
Approved NTIOLs, with the associated qualifying IOL models, is posted 
on the CMS Web site at: http://www.cms.gov/ASCPayment/08_NTIOLs.asp#TopOfPage. The class-defining characteristic specific to 
IOLs that are members of these three expired classes is evident in the 
name assigned to the class. For example, IOLs recognized as members of 
the reduced spherical aberration class are characterized by their 
aspheric design that results in reduced spherical aberration. Based on 
the information in the table entitled CMS Approved NTIOLs, a candidate 
IOL's predominant characteristic may not be described by any of the 
three expired NTIOL classes.
    In the case of one of four of Alcon's candidate IOLs, the Acrysof 
Natural IQ Aspheric IOL model SN60WF, it is a member of the expired 
reduced spherical aberration NTIOL class (75 FR 72052). For the 
purposes of satisfying Sec.  416.195(a)(3), CMS must be able to 
determine which lens characteristic is predominant for Alcon's model 
SN60WF, asphericity (resulting in reduced spherical aberration) or 
blue-light filtering. If the predominant characteristic is asphericity, 
then the model SN60WF IOL would be disqualified under Sec.  
416.195(a)(3). This determination is particularly relevant given that 
the clinical benefit attributed to both of these lens characteristics 
is improved night driving. To our knowledge, Alcon has not compared the 
IOL model SN60WF (a blue-light filtering aspheric IOL) to a non-blue-
light filtering aspheric IOL to determine if there are any night 
driving benefits attributable to the blue-light filtering 
characteristic in addition to the improved night driving attributable 
to the aspheric optic. Such information would assist us in evaluating 
whether blue-light filtering predominates or is subordinate to the 
IOL's asphericity. We are soliciting public comments on whether blue-
light filtering can be considered the predominant IOL characteristic 
for the model SN60WF IOL. We also welcome public comments that address 
whether blue light-filtering and the associated clinical benefits of 
the other three of Alcon's candidate IOLs (that is, SN60AT, MN60MA, 
MN60AC) are described by any of the expired NTIOL classes.
    Third, our NTIOL evaluation criteria also require that an applicant 
submit evidence demonstrating that use of the IOL results in 
measurable, clinically meaningful, improved outcomes in comparison to 
currently available IOLs. We note that in the CY 2007 OPPS/ASC final 
rule with comment period, we sought comments as to what constitutes 
currently available IOLs for purposes of such comparisons, and we 
received several comments in response to our solicitation (71 FR 
68178). We agreed with commenters that we should remain flexible with 
respect to our view of ``currently available lenses'' for purposes of 
reviewing NTIOL requests, in order to allow for consideration of 
technological advances in lenses over time. This means that we do not 
expect that ``currently available lenses'' would remain static over 
time and always necessarily default to the classic spherical monofocal 
IOL for every candidate NTIOL class. Therefore, we believe that 
``currently available lenses'' for purposes of reviewing NTIOL requests 
should depend upon the class-defining characteristic and the associated 
purported improved clinical outcome of the candidate NTIOL. For 
example, for some candidate NTIOLs the most appropriate comparison IOL 
would be a spherical monofocal IOL, while other candidate NTIOLs may be 
more appropriately compared to aspheric IOLs.
    For purposes of reviewing Alcon's request to establish a new NTIOL 
class for CY 2012, we are proposing that aspheric monofocal IOLs 
represent the currently available IOLs against which the candidate 
NTIOLs should be compared in order to establish a new class. According 
to publicly available data from Market Scope, LLC, IOLs with aspheric 
optics accounted for over 86 percent of the IOLs implanted in the 
United States during 2010. In addition, data submitted by Alcon shows 
that the overwhelming majority of IOLs sold by Alcon have aspheric 
optics. Furthermore, the aspheric design that results in reduced 
spherical aberration was the class defining characteristic for IOLs 
recognized as members of the expired reduced spherical aberration NTIOL 
class. The primary clinical outcome associated with reduced spherical 
aberration (for purposes of establishing it as an NTIOL class) was 
safer night driving (71 FR 4588). Alcon asserts that what makes its 
candidate IOLs superior to other currently available IOLs is improved 
driving safety under glare conditions. Glare conditions during driving 
primarily occur at night due to headlights from oncoming cars. The 
primary improved clinical outcome from reduced spherical aberration 
IOLs (an expired NTIOL class) was safer night driving and the purported 
primary improved clinical outcome from Alcon's blue light-filtering 
IOLs is also safer night driving. Therefore, the most relevant type of 
currently available IOLs against which the Alcon blue filtering IOLs 
should be compared is aspheric IOLs. In particular, the relevant 
comparison would be the performance of an aspheric blue-light filtering 
IOL versus an aspheric non-blue light filtering IOL. This comparison 
would test the hypothesis of whether blue-light filtering improved 
night driving in comparison to aspheric optics, which has been shown to 
improve night driving. We seek public comment on our view of 
``currently available lenses'' for the purposes of evaluating Alcon's 
candidate IOLs against currently available IOLs.
    We are reviewing the evidence submitted with Alcon's CY 2012 
request. Although Alcon submitted various types of literature in 
support of its application, it relies primarily on two studies in 
support of its hypothesis that blue light filtering IOLs improve 
driving safety under glare conditions as compared to currently 
available IOLs. The first of these two submitted articles is: Hammond 
B, et al. Contralateral comparison of blue-filtering intraocular 
lenses: glare disability, heterochromic contrast, and photostress 
recovery, Clinical Ophthalmology. 2010;4:1465-1473 (Hammond 2010). This 
article compared visual performance (as measured by glare disability, 
heterochromic contrast threshold, and photostress recovery time) in 
eyes with blue-light-filtering IOLs versus contralateral eyes with IOLs 
that do not filter blue light. The second article, which Alcon 
describes as its ``pivotal study,'' is: Gray R, et al. Reduced effect 
of glare disability on driving performance in patients with blue light-
filtering intraocular lenses, J Cataract Refract Surg. 2011;37:38-44. 
This study compared the effects of glare on driving performance using a 
driving simulator in patients who had implantation of a blue light-
filtering acrylic IOL and those who had implantation of an acrylic IOL 
with no blue-light filter. Overall, the evidence submitted provides us 
with important information that is critical to our review of this 
request. However, in making our decision as to whether to establish a 
new class of NTIOL based on the primary characteristic of the candidate 
lenses, we are also interested in what other information the public

[[Page 42306]]

can contribute related to the asserted benefits of the blue light 
filtering IOL. Specifically, we are seeking public comment and relevant 
data on the following:
     Are there other peer-reviewed studies or other information 
that would support or disprove the claims of clinical benefit made by 
Alcon?
     How do you interpret the results of the Hammond 2010 
study, given that the blue light-filtering group included patients with 
spherical blue light filtering IOLs and patients with aspheric blue 
light filtering IOLs?
     Does the Maxwellian optical system that was employed in 
the Hammond 2010 study mitigate the impact of the aspheric optics of 
some of the study subjects in the blue light-filtering group?
     Is the sample size used in both studies sufficient to 
conclude that a blue light-filtering IOL would reduce glare disability 
and improve driving safety in the Medicare population?
     What kind of study design would be appropriate to prove 
the claim of significant clinical benefit due to glare reduction on 
which the new class would be based?
     Are the submitted data enough to prove that the blue 
filtering optic is responsible for reduction in glare disability as 
asserted by applicant?
     Did these studies use an appropriate comparator IOL?
    Furthermore, in accordance with our established NTIOL review 
process, we are also seeking public comments on all of the review 
criteria for establishing a new NTIOL class that would be based on the 
ability of the Acrysof Natural IOLs to filter blue light and 
subsequently help beneficiaries avoid hazards that can be caused by 
glare while driving. We will give all comments full consideration 
regarding Alcon's candidate IOLs.
    b. Requestor/Manufacturer: Bausch & Lomb, Inc. (B&L).
    Lens Model Numbers: Xact Foldable Hydrophobic Acrylic Ultraviolet 
Light-Absorbing Posterior Chamber Intraocular Lenses, Models X-60 and 
X-70 (Xact IOLs).
    Summary of the Request: B&L submitted a request for CMS to 
determine that its Xact IOLs meet the criteria for recognition as 
NTIOLs and to concurrently establish a new class of NTIOLs for 
``glistening-free'' IOLs. Glistenings are fluid-filled microvacuoles 
that can form within an IOL optic when the IOL is in an aqueous 
environment. According to B&L, ``glistenings have been associated with 
decreased contrast sensitivity, increased glare, decreased visual 
acuity, and impaired fundus visualization.'' B&L further states that 
``in some cases, this has led to IOL explantation and exchange, which 
carries significant risks that increase the longer the IOL is 
implanted.'' As part of its request, B&L submitted descriptive 
information about the candidate IOLs as outlined in the guidance 
document that is available on the CMS Web site for the establishment of 
a new class of NTIOLs, as well as information regarding approval of the 
candidate IOL by the FDA. This information included draft FDA labeling 
for the Xact IOLs. Final FDA labeling is currently pending.
    In its CY 2012 request, B&L asserts that because the Xact IOLs are 
glistening-free, they eliminate the decreased contrast sensitivity, 
increased glare, decreased visual acuity, and impaired fundus 
visualization associated with glistenings, and may likewise decrease 
the need for explantations associated with those conditions. B&L also 
concludes that use of a glistening-free IOL results in measurable, 
clinically meaningful, improved outcomes in comparison with currently 
available IOLs. B&L also states that the glistening-free characteristic 
is not described by a previously-approved NTIOL class.
    As with the other CY 2012 NTIOL applications discussed in this 
proposed rule, we will base our determination of the B&L application on 
consideration of the three major evaluation criteria that are discussed 
above. We have begun our review of B&L's request to recognize its Xact 
IOLs as NTIOLs and concurrently establish a new class of NTIOLs. We are 
soliciting public comment on these candidate IOLs with respect to the 
established NTIOL criteria as discussed above.
    First, for an IOL to be recognized as an NTIOL we require that the 
IOL must have been approved by the FDA and claims of specific clinical 
benefits and/or lens characteristics with established clinical 
relevance in comparison with currently available IOLs must have been 
approved by the FDA for use in labeling and advertising. The submitted 
FDA label for the Xact IOLs states the following:
    ``In the IDE [investigational device exemption] clinical trial, 
`glistenings' were observed in some cases. Glistenings, known to 
sometimes occur in some other hydrophobic acrylic IOLs, are microscopic 
vacuoles within the optic of the IOL that are visible through the slit 
lamp as multiple small refractile specks. Analysis of the clinical data 
confirmed no effect of glistenings on visual outcomes.'' [Emphasis 
added.]
    ``Testing established that glistenings were eliminated by a change 
in the IOL hydration solution from 10.0% saline to 0.9% saline. This 
was confirmed in an additional clinical trial conducted outside of the 
United States. In this study, 172 eyes of 142 patients were examined at 
least once between 1 and 6 months, and 123 eyes of 101 patients were 
examined at least once between 6 months and 2 years. No glistenings 
were observed at any time.''
    The FDA label for the Xact IOLs does not otherwise reference 
specific clinical benefits of the glistening-free property. In fact, 
the italicized sentence in the above-quoted language on the IDE study 
from the FDA label states that an ``[a]nalysis of the clinical data 
confirmed no effect of glistenings on visual outcomes.'' We are 
interested in public comments on the clinical relevance of glistenings 
in IOLs, and the incidence of glistenings severe enough to cause 
measurable visual symptoms in recently pseudophakic Medicare 
beneficiaries. In addition, we are interested in public comments 
regarding the assertion by B&L that the glistening-free property 
associated with the Xact IOLs would eliminate the decreased contrast 
sensitivity, increased glare, decreased visual acuity, and impaired 
fundus visualization associated with glistenings, and may likewise 
decrease the need for explantations associated with those conditions.
    Second, we also require that the candidate IOL not be described by 
an active or expired NTIOL class; that is, it does not share the 
predominant, class-defining characteristic associated with improved 
clinical outcomes with designated members of an active or expired NTIOL 
class. We refer readers to the discussion above for more information on 
the three expired NTIOL classes. The proposed class-defining 
characteristic and associated clinical benefits of the Xact IOLs, 
specifically the glistening-free property, cannot be similar to the 
class-defining characteristics and associated benefits of the three 
expired NTIOL classes. We welcome public comments that address whether 
the proposed class-defining characteristic and associated clinical 
benefits of the candidate B&L IOLs are described by the expired NTIOL 
classes.
    Third, our NTIOL evaluation criteria also require that an applicant 
submit evidence demonstrating that use of the IOL results in 
measurable, clinically meaningful, improved outcomes in comparison to 
currently available IOLs. As discussed above, we remain flexible with 
respect to our view of ``currently available lenses'' for purposes of 
reviewing NTIOL requests, in order to allow for consideration of 
technological advances in lenses over time. We also

[[Page 42307]]

believe that ``currently available lenses'' for purposes of reviewing 
NTIOL requests should depend upon the class-defining characteristic and 
the associated purported improved clinical outcome of the candidate 
NTIOL class. For purposes of reviewing B&L's request to establish a new 
NTIOL class for CY 2012, we believe that the full spectrum of currently 
available IOL materials should be represented in the comparator IOLs, 
but that the particular design of the optic (for example, aspheric 
versus spherical) is less critical to evaluating the benefits of 
glistening-free IOLs as glistenings are related more to the IOL optic 
material than to the optical surface characteristics of the IOL. We are 
seeking public comment on our view of ``currently available lenses'' 
for the purposes of evaluating B&L's candidate IOLs against currently 
available IOLs.
    We are reviewing the evidence submitted with B&L's CY 2012 request. 
B&L submitted a variety of articles including studies and case reports 
focused on IOLs with glistenings. It is apparent from these articles 
that glistenings are a real phenomenon and that glistenings are 
primarily associated with acrylic hydrophobic IOLs, but they can also 
occur to some degree in IOLs of other material types. However, there 
are several significant questions with respect to glistenings, and we 
solicit public comment on these questions as follows:
     Is there a particular IOL material type that is more 
likely to result in symptomatic glistenings relative to other material 
types?
     What is the clinical significance (from the patient's 
perspective) of glistenings? More specifically, what evidence is 
available to demonstrate that glistenings cause any of the following:
    [cir] Decreased contrast sensitivity;
    [cir] Increased glare disability;
    [cir] Decreased visual acuity;
    [cir] Impaired fundus visualization;
    [cir] Symptoms resulting in IOL explantations.
     What is the incidence of glistenings in IOLs currently 
available in the United States?
     If a certain level of severity of glistenings is required 
before they cause symptoms, what is the incidence of glistenings of 
this severity level in IOLs currently available in the United States?
    c. Requestor/Manufacturer: Hoya Surgical Optics, Inc. (Hoya).
    Lens Model Numbers: iSert IOL System, Model PY-60R.
    Summary of the Request: Hoya submitted a request for CMS to 
determine that its iSert IOL System satisfies the criteria for 
recognition as an NTIOL and to concurrently establish a new class of 
NTIOLs for ``aseptically integrated IOL and injector systems.'' The 
iSert IOL System is an IOL preloaded in a plastic, sterile, disposable 
injection system. According to Hoya, the iSert System provides a lens 
injector with an integrated IOL inside it within a single, sterile 
package for delivery to the operating field. According to Hoya, the 
iSert System has the following benefits, in that compared to other IOLs 
it:
     Eliminates the risk of complications associated with 
improper processing of reusable forceps or injectors used for all other 
foldable IOLs;
     Accelerates postoperative recovery through decreased risk 
of ocular damage due to complications associated with improper 
processing of reusable forceps or injectors used for other foldable 
IOLs;
     Provides a clinical advantage compared to existing IOLs by 
allowing the IOL to be placed in the eye without contacting external 
ocular tissues or reusable injection instruments; and
     Improves overall safety of cataract/IOL surgery by 
reducing the number of reusable instruments that must be properly 
cleaned and sterilized between cases.
    As part of its request, Hoya submitted descriptive information 
about the iSert System as outlined in the guidance document described 
above that is available on the CMS Web site for the establishment of a 
new class of NTIOLs, as well as information regarding approval of the 
candidate IOL by the FDA. This information included the FDA labeling, 
the FDA letter of approval, and the summary of safety and effectiveness 
for the iSert System.
    As with the other CY 2012 NTIOL requests, we will base our 
determination of the Hoya request on consideration of the three major 
criteria that are discussed above. We have begun our review of Hoya's 
request to recognize its iSert System as an NTIOL and concurrently 
establish a new class of NTIOLs. We are soliciting public comment on 
this candidate IOL with respect to the established NTIOL criteria.
    First, for an IOL to be recognized as an NTIOL we require that the 
IOL must have been approved by the FDA and claims of specific clinical 
benefits and/or lens characteristics with established clinical 
relevance in comparison with currently available IOLs must have been 
approved by the FDA for use in labeling and advertising. The FDA label 
for the iSert System states the following under the heading DEVICE 
DESCRIPTION:
    ``The Hoya iSert\TM\ Model PY-60R Intraocular Lens (IOL) is an 
ultraviolet absorbing posterior chamber intraocular lens designed to be 
implanted posterior to the iris where the lens will replace the optical 
function of the natural crystalline lens. However, accommodation will 
not be replaced. PY-60R is loaded in a disposable injector consists 
[sic] of Case, Tip, Body, Slider, Rod, Plunger, and Screw.''
    The FDA label for the iSert System states the following under the 
heading INDICATIONS:
    ``The Hoya iSert\TM\ Model PY-60R Intraocular Lens is indicated for 
primary implantation in the capsular bag of the eye for the visual 
correction of aphakia in adult patients in whom a cataractous lens has 
been removed.''
    The FDA label for the iSert\TM\ System does not otherwise reference 
claims of specific clinical benefits and/or lens characteristics with 
established clinical relevance in comparison with currently available 
IOLs. Section 416.195(a)(2) requires that ``[c]laims of specific 
clinical benefits and/or lens characteristics with established clinical 
relevance in comparison with currently available IOLs are approved by 
the FDA for use in labeling and advertising.'' The FDA label for the 
iSert System lacks any such claims. The only statement in the above-
quoted language from the FDA label that is any different from the 
typical device description and indications for a standard spherical 
monofocal IOL is the statement that the ``PY-60R is loaded in a 
disposable injector consists [sic] of Case, Tip, Body, Slider, Rod, 
Plunger, and Screw.'' However, this statement merely describes the IOL 
as loaded in a disposable injector. It does not appear to describe a 
benefit or characteristic of the IOL itself. Therefore, it would appear 
that the Hoya iSert System PY-60R IOL would not satisfy the 
requirements of 42 CFR 416.195(a)(2). However, we are soliciting public 
comments on this matter and will give all comments full consideration 
regarding Hoya's candidate IOL.
d. Requestor/Manufacturer: Lenstec, Inc. (Lenstec)
    Lens Model Numbers: Softec HD PS.
    Summary of the Request: Lenstec submitted a request for CMS to 
determine that its Softec HD PS meets the criteria for recognition as 
an NTIOL and to concurrently establish a new class of NTIOLs that 
result in a ``reduction of postoperative residual refractive error.'' 
According to Lenstec, the Softec HD PS IOL achieves a ``reduction of 
postoperative residual refractive error'' by its availability in 0.25 
diopter (D) increments with a tolerance of 0.11 D, while 
all other

[[Page 42308]]

current monofocal IOLs are available in only 0.50 D increments with 
tolerances allowed up to 0.40 D. According to Lenstec, 
patients implanted with the Softec HD PS are much more likely to be 
closer to the intended refractive outcome than those implanted with 
IOLs available only in 0.50 D increments. This greater refractive 
accuracy of the Softec HD PS is due to the chosen IOL power likely 
being closer to the calculated (desired) IOL power and because the 
tighter tolerance of the 0.25 D increment IOL results in the actual 
power of the implanted IOL to be closer to the power that the surgeon 
expects to implant into the patient. Lenstec also asserts that because 
the 0.25 D increment IOL provides greater IOL power accuracy, patients 
have less postoperative residual refractive error and hence reduced 
postoperative blur. As part of its request, Lenstec submitted 
descriptive information about the candidate IOLs as outlined in the 
guidance document that is available on the CMS Web site for the 
establishment of a new class of NTIOLs, as well as information 
regarding approval of the candidate IOL by the FDA. This information 
included the FDA labeling, FDA approval letter, and summary of safety 
and effectiveness for the Softec HD PS IOL.
    As with the other three CY 2012 NTIOL applications discussed above, 
we will base our determination of the Lenstec application on 
consideration of the three major evaluation criteria that are discussed 
above. We have begun our review of Lenstec's request to recognize its 
Softec HD PS IOL as an NTIOL and concurrently establish a new class of 
NTIOLs. We are soliciting public comment on this candidate IOL with 
respect to the established NTIOL criteria as discussed above.
    First, for an IOL to be recognized as an NTIOL we require that the 
IOL must have been approved by the FDA and claims of specific clinical 
benefits and/or lens characteristics with established clinical 
relevance in comparison with currently available IOLs must have been 
approved by the FDA for use in labeling and advertising. The submitted 
FDA label for the Softec HD PS IOL states under the heading DEVICE 
DESCRIPTION that ``[t]he [LENSTEC Softec HD PS] IOL is offered in 
quarter diopter increments from 15.0 to 25.0.'' The FDA label for the 
Softec HD PS IOL does not otherwise reference claims of specific 
clinical benefits and/or lens characteristics with established clinical 
relevance in comparison with currently available IOLs. We are 
interested in public comments on whether an IOL being offered in 
quarter diopter increments can be considered a ``lens characteristic 
with established clinical relevance in comparison with currently 
available IOLs,'' as required by 42 CFR 416.195(a)(2), or whether IOL 
availability quarter diopter increments is more appropriately 
considered not a lens characteristic per se, but instead just a 
manufacturer specification. We are also interested in public comments 
on the clinical relevance of an IOL being available in quarter diopter 
increments.
    Second, as required by 42 CFR 416.195(a)(3), the candidate IOL must 
not be described by an active or expired NTIOL class; that is, it does 
not share the predominant, class-defining characteristic associated 
with improved clinical outcomes with designated members of an active or 
expired NTIOL class. Refer to the discussion above for more information 
on the three expired NTIOL classes. Lenstec states the following in its 
application:
    ``The Softec HD IOL, the parent to the Softec HD PS, was first 
approved for marketing in the United States on April 17, 2010 and on 
March 15, 2006 in the ``Outside the US'' (OUS) environment. This IOL is 
included in the just-closed ``Reduced Spherical Aberration'' NTIOL 
category. The Softec HD PS was approved for marketing by the FDA on 
February 2, 2011. It is currently pending approval for OUS marketing. 
Both IOLs are single piece, hydrophilic acrylic, aspheric, monofocal 
IOLs. The difference between the two is that the Softec HD has 
previously been available in whole, 0.50 and 0.25 diopter increments, 
based on dioptric power. The Softec HD PS is offered only in the 
dioptric range of 15.0 D to 25.0 D, in 0.25 diopter increments (each of 
which is manufactured to a tolerance of 0.11D).''
    Based on this statement by Lenstec, the Softec HD PS is the same 
lens as the Softec HD, but the Softec HD PS is available only in 0.25 D 
increments for a specific power range instead of being available (as is 
the Softec HD) in 1.0, 0.5, and 0.25 D increments. The Softec HD was 
included in the expired Reduced Spherical Aberration NTIOL class, and 
both of these IOLs share the asphericity characteristic that defines 
the expired Reduced Spherical Aberration NTIOL class. It appears to us 
that the predominant characteristic of the Softec HD PS is asphericity, 
as it affects the optical characteristics of the lens. Although the 
availability of the Softec HD PS in 0.25 D increments allows more IOL 
power choices for the surgeon, it does not appear to affect the 
functionality of the IOL. We request comments regarding what 
characteristic of the Softec HD PS is predominant, asphericity or 
availability of the IOL in 0.25 D increments.
    Third, our NTIOL evaluation criteria also require that an applicant 
submit evidence demonstrating that use of the IOL results in 
measurable, clinically meaningful, improved outcomes in comparison to 
currently available IOLs. As discussed above, we remain flexible with 
respect to our view of ``currently available lenses'' for purposes of 
reviewing NTIOL requests, in order to allow for consideration of 
technological advances in lenses over time. We also believe that 
``currently available lenses'' for purposes of reviewing NTIOL requests 
should depend upon the class-defining characteristic and the associated 
purported improved clinical outcome of the candidate NTIOL class. For 
purposes of reviewing Lenstec's request to establish a new NTIOL class 
for CY 2012, we believe that the full spectrum of currently available 
monofocal IOLs should be represented in the comparator IOLs. Lenstec 
asserts that what makes its candidate IOL superior to other currently 
available IOLs is improved IOL power accuracy as compared to IOLs 
available in 0.50 D increments, and because the Softec HD PS provides 
greater IOL power accuracy patients implanted with it have less 
postoperative residual refractive error and hence reduced post-
operative blur.
    We are reviewing the evidence submitted with Lenstec's CY 2012 
request. Lenstec submitted information and reviewed the literature on 
IOL optics related to the Softec HD PS. Lenstec relies primarily on one 
study that is the subject of an article that is currently in press and 
another unpublished study to support its hypothesis that the Softec HD 
PS IOL results in less postoperative refractive error than other IOLs. 
The first study submitted by Lenstec was the study that it conducted 
under an IDE for FDA approval of the Softec HD PS IOL. This study is 
being published in the journal, Contact Lens and Anterior Eye (Brown 
DC, Gills JP 3rd,& et al. Prospective multicenter trial assessing 
effectiveness, refractive predictability and safety of a new aberration 
free, bi-aspheric intraocular lens. Cont Lens Anterior Eye. 2011 May 
24. [Epub ahead of print]), and is available on the Internet at http://www.sciencedirect.com/science/article/pii/S1367048411000634. Refractive 
accuracy was not a planned outcome variable in this study. There was no 
control group in this study that would have allowed the investigators 
to control for all of the variables that impact post-cataract surgery 
refractive outcome and/or isolate the effect of the availability of the 
Softec HD PS IOL in

[[Page 42309]]

quarter diopter increments. Lenstec compared the postoperative 
refractive errors of these study subjects to the results from an 
unrelated study performed outside of the United States (using IOLs that 
were available only in 0.50 D increments) and concluded based on this 
comparison that implantation of the Softec HD PS IOL, which is 
available in quarter diopter increments, results in superior refractive 
outcomes as compared to other IOLs.
    The second study is a retrospective study of cataract cases with 
aspheric monofocal IOL implantation between 2009 and 2011. Of the 118 
eligible eyes, 67 were implanted with IOLs available in 0.25 D 
increments and labeled with a manufacturing tolerance of 0.11D (the labeled group) and 51 were implanted with IOLs 
available in 0.50 D increments without a labeled manufacturing 
tolerance (the unlabeled group). Postoperative outcomes were assessed, 
and prediction error was calculated and compared between groups. Mean 
error of prediction was -0.03 (0.35) D for the labeled 
group and -0.05 (0.46) D for the unlabeled group (p = 0.64) 
post optimization. Mean absolute error of prediction was statistically 
significantly smaller in the labeled group (0.26  0.23 D) 
than the unlabeled group (0.37  0.28 D, p = 0.04). It was 
observed that within  0.25 D prediction error was achieved 
in 63 percent of the patients in the labeled group compared to 43 
percent in the unlabeled group (p = 0.03), and for within 0.50 D, 84 percent and 69 percent (p = 0.06), respectively. We 
request comments from the public regarding the Lenstec NTIOL request 
and the evidence submitted by Lenstec, and in particular would like the 
public to comment on the following:
     What is the clinical significance (from the patient's 
perspective) of a small amount of residual spherical refractive error 
after cataract surgery?
     What is the likelihood that a Medicare beneficiary 
receiving a monofocal IOL will require some form of postoperative 
refractive correction (that is, post-cataract surgery glasses), which 
is a Medicare benefit?
     If the overwhelming majority of Medicare beneficiaries 
receiving a monofocal IOL will require some form of postoperative 
refractive correction (that is, post-cataract surgery glasses), does 
that lessen the clinical significance of reduced postoperative residual 
refractive error?
     Are the studies described above properly designed to test 
Lenstec's hypothesis?
     Do the studies described above adequately prove Lenstec's 
hypothesis?
    All comments on these requests must be received by August 1, 2011. 
The announcement of CMS's determinations regarding these requests will 
appear in the CY 2012 OPPS/ASC final rule with comment period. If a 
determination of membership of the candidate IOLs in a new NTIOL class 
is made, this determination will be effective 30 days following the 
date that the final rule with comment period is published in the 
Federal Register.
4. Proposed Payment Adjustment
    The current payment adjustment for a five-year period from the 
implementation date of a new NTIOL class is $50 per lens. Since 
implementation of the process for adjustment of payment amounts for 
NTIOLs in 1999, we have not revised the payment adjustment amount, and 
we are not proposing to revise the payment adjustment amount for CY 
2012.

F. Proposed ASC Payment and Comment Indicators

1. Background
    In addition to the payment indicators that we introduced in the 
August 2, 2007 final rule, we also created final comment indicators for 
the ASC payment system in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66855). We created Addendum DD1 to define ASC payment 
indicators that we use in Addenda AA and BB to provide payment 
information regarding covered surgical procedures and covered ancillary 
services, respectively, under the revised ASC payment system. The ASC 
payment indicators in Addendum DD1 are intended to capture policy 
relevant characteristics of HCPCS codes that may receive packaged or 
separate payment in ASCs, such as whether they were on the ASC list of 
covered services prior to CY 2008; payment designation, such as device-
intensive or office-based, and the corresponding ASC payment 
methodology; and their classification as separately payable ancillary 
services including radiology services, brachytherapy sources, OPPS 
pass-through devices, corneal tissue acquisition services, drugs or 
biologicals, or NTIOLs.
    We also created Addendum DD2 that lists the ASC comment indicators. 
The ASC comment indicators used in Addenda AA and BB to the proposed 
rules and final rules with comment period serve to identify, for the 
revised ASC payment system, the status of a specific HCPCS code and its 
payment indicator with respect to the timeframe when comments will be 
accepted. The comment indicator ``NI'' is used in the OPPS/ASC final 
rule with comment period to indicate new HCPCS codes for the next 
calendar year for which the interim payment indicator assigned is 
subject to comment. The comment indicator ``NI'' is also assigned to 
existing codes with substantial revisions to their descriptors such 
that we consider them to be describing new services, as discussed in 
the CY 2010 OPPS/ASC final rule with comment period (74 FR 60622). In 
the CY 2012 OPPS/ASC final rule with comment period, we will respond to 
public comments and finalize the ASC treatment of all codes that are 
labeled with comment indicator ``NI'' in ASC Addendum AA and BB for CY 
2011. These addenda can be found in a file labeled ''January 2011 ASC 
Approved HCPCS Code and Payment Rates to Reflect the Medicare and 
Medicaid Extenders Act of 2010'' in the ASC Addenda Update section of 
the CMS Web site.
    The ``CH'' comment indicator is used in Addenda AA and BB to this 
CY 2012 proposed rule (which are referenced in section XVII. of this 
proposed rule and available via the Internet on the CMS Web site) to 
indicate that a new payment indicator is proposed for assignment to an 
active HCPCS code for the next calendar year; an active HCPCS code is 
proposed for addition to the list of procedures or services payable in 
ASCs; or an active HCPCS code is proposed for deletion at the end of 
the current calendar year. The ``CH'' comment indicators that are 
published in the final rule with comment period are provided to alert 
readers that a change has been made from one calendar year to the next, 
but do not indicate that the change is subject to comment. The full 
definitions of the proposed payment indicators and comment indicators 
are provided in Addenda DD1 and DD2 to this proposed rule (which are 
referenced in section XVII. of this proposed rule and available via the 
Internet on the CMS Web site).
2. Proposed ASC Payment and Comment Indicators
    The revised ASC payment system included a four-year transition to 
payment rates under the standard methodology for the procedures on the 
ASC list in CY 2007. CY 2011 was the first year of full payment under 
the standard methodology for the revised ASC payment system. Payment 
indicators ``A2'' (Surgical procedure on ASC list in CY 2007, payment 
based on OPPS relative payment weight) and ``H8'' (Device-intensive 
procedure on

[[Page 42310]]

ASC list in CY 2007; paid at adjusted rate) were developed to identify 
procedures that were included on the list of ASC covered surgical 
procedures in CY 2007 and were, therefore, subject to transitional 
payment prior to CY 2011.
    Because the four-year transitional payment period has ended and it 
is no longer necessary to identify device-intensive procedures that are 
subject to transitional payments, we are proposing to delete the ASC 
payment indicator ``H8.'' We are proposing that all device-intensive 
procedures, for which the modified rate calculation methodology will 
apply, be assigned payment indicator ``J8'' in CY 2012 and later. In 
addition, we are proposing to modify the definition for payment 
indicator ``J8'' by removing ``added to ASC list in CY 2008 or later'' 
as this distinction is no longer necessary.
    Although payment indicator ``A2'' is no longer required to identify 
surgical procedures subject to transitional payment, we are proposing 
to retain payment indicator ``A2'' because it is used to identify 
procedures that are exempted from application of the office-based 
designation.
    As detailed in section XIV.K. of this proposed rule, we are 
proposing to establish an ASC Quality Reporting Program with the 
collection of seven claims-based quality measures beginning in CY 2012. 
We are proposing to require ASCs to report on ASC claims a quality data 
code (QDC) to be used for reporting quality data. We are proposing that 
an ASC would need to add a QDC to any claim involving a proposed 
claims-based quality measure. CMS is in the process of developing QDCs 
for each proposed claims-based quality measure. The QDC will be a CPT 
Category II code or a HCPCS Level II G-code if an appropriate CPT code 
is not available. More information on the QDCs that will be associated 
with the proposed quality measures will be provided in the CY 2012 
OPPS/ASC final rule with comment period. Additionally, CMS is proposing 
to create a new ASC payment indicator ``M5'' (Quality measurement code 
used for reporting purposes only; no payment made) for assignment to 
the QDC to clarify that no payment is associated with the QDC for that 
claim. We are proposing that this proposed payment indicator be 
effective January 1, 2012.
    We are not proposing any changes to the definitions of the ASC 
comment indicators for CY 2012. We refer readers to Addenda DD1 and DD2 
to this proposed rule (which are referenced in section XVII. of this 
proposed rule and available via the Internet at the CMS Web site) for 
the complete list of ASC payment and comment indicators proposed for 
the CY 2012 update.
    We invite public comment on these proposals.

G. ASC Policy and Payment Recommendations

    MedPAC was established under section 1805 of the Act to advise 
Congress on issues affecting the Medicare program. Subparagraphs (B) 
and (D) of section 1805(b)(1) of the Act require MedPAC to submit 
reports to Congress not later than March 1 and June 15 of each year 
that present its Medicare payment policy reviews and recommendations 
and its examination of issues affecting the Medicare program, 
respectively. The March 2011 MedPAC ``Report to the Congress: Medicare 
Payment Policy'' included the following recommendation relating 
specifically to the ASC payment system for CY 2012:
    Recommendation 5: The Congress should implement a 0.5 percent 
increase in payment rates for ambulatory surgical center services in 
calendar year 2012 concurrent with requiring ambulatory surgical 
centers to submit cost and quality data.
    CMS Response: In the August 2, 2007 final rule (72 FR 42518 through 
42519), we adopted a policy to update the ASC conversion factor for 
consistency with section 1833(i)(2)(C) of the Act, which requires that, 
if the Secretary has not updated the ASC payment amounts in a calendar 
year, the payment amounts shall be increased by the percentage increase 
in the Consumer Price Index for All Urban Consumers (CPI-U) as 
estimated by the Secretary for the 12-month period ending with the 
midpoint of the year involved. The statute set the update at zero for 
CY 2008 and CY 2009. We indicated that we planned to implement the 
annual updates through an adjustment to the conversion factor under the 
ASC payment system beginning in CY 2010 when the statutory requirement 
for a zero update no longer applies. Further, we noted that we would 
update the conversion factor for the CY 2010 ASC payment system by the 
percentage increase in the CPI-U, consistent with our policy as 
codified under Sec.  416.171(a)(2).
    As we indicated in the CY 2010 OPPS/ASC final rule with comment 
period (74 FR 60622), we did not require ASCs to submit cost data to 
the Secretary for CY 2010. We explained that the 2006 GAO report, 
``Medicare: Payment for Ambulatory Surgical Centers Should Be Based on 
the Hospital Outpatient Payment System'' (GAO-07-86), concluded that 
the APC groups in the OPPS reflect the relative costs of surgical 
procedures performed in ASCs in the same way they reflect the relative 
costs of the same procedures when they are performed in HOPDs. 
Consistent with the GAO findings, CMS is using the OPPS as the basis 
for the ASC payment system, which provides for an annual revision of 
the ASC payment rates under the budget neutral ASC payment system.
    In addition, we noted that, under the methodology of the revised 
ASC payment system, we do not utilize ASC cost information to set and 
revise the payment rates for ASCs, but instead rely on the relativity 
of hospital outpatient costs developed for the OPPS, consistent with 
the recommendation of the GAO. Furthermore, we explained that we have 
never required ASCs to routinely submit cost data and expressed our 
concern that a new Medicare requirement for ASCs to do so could be 
administratively burdensome for ASCs.
    In 2009, MedPAC made a similar recommendation to that made in 
Recommendation 5 above. In light of that MedPAC recommendation, in the 
CY 2010 OPPS/ASC proposed rule (74 FR 35391), we solicited public 
comment on the feasibility of ASCs submitting cost information to CMS, 
including whether costs should be collected from a sample or the 
universe of ASCs, the administrative burden associated with such an 
activity, the form that such a submission could take considering 
existing Medicare requirements for other types of facilities and the 
scope of ASC services, the expected accuracy of such cost information, 
and any other issues or concerns of interest to the public on this 
topic.
    In the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60623), we summarized and responded to these comments. As noted in that 
final rule with comment period, commenters expressed varied opinions 
regarding the feasibility of requiring ASCs to submit cost data to the 
Secretary. Some commenters believed that requiring ASC to submit such 
data would not be an insurmountable obstacle and pointed out that other 
small facilities submit cost reports to CMS. They argued that ASC cost 
reports are necessary to assess the adequacy of Medicare payments and 
evaluate the ASC update. Other commenters, however, opposed the 
requirement that ASCs submit cost data to CMS because they believed 
such a requirement would be unnecessary and administratively 
burdensome. Commenters generally supported a requirement that ASCs 
report quality data. We refer readers to the CY 2010

[[Page 42311]]

OPPS/ASC final rule with comment period for a full discussion of the 
comments we received on the feasibility of requiring ASCs to report 
cost and quality data (74 FR 60623). Consistent with our CY 2010 
policy, we proposed not to require ASCs to submit cost data to the 
Secretary for CY 2011 (75 FR 46356 through 463557). We stated that we 
continue to believe that our established methodology results in 
appropriate payment rates for ASCs. For CY 2012, consistent with this 
policy and for the same reasons, we are not proposing to require ASCs 
to submit cost data.
    Section 109(b) of the MIEA-TRHCA (Pub. L. 109-432) gives the 
Secretary the authority to implement ASC quality measure reporting and 
to reduce the payment update for ASCs that fail to report those 
required measures. We are proposing to require ASCs to report seven 
quality measures in CY 2012. Details associated with ASC quality 
reporting proposed for CY 2012 are discussed in section XIV.K. of this 
proposed rule.
    Finally, we are not proposing to implement MedPAC's recommended CY 
2012 ASC update of 0.5 percent. The annual update to the ASC payment 
system is the CPI-U. Section 3401(k) of the Affordable Care Act 
required that the annual ASC payment update be reduced by a 
productivity adjustment. As discussed in section XIII.H.2.b. of this 
proposed rule, the Secretary estimates that the CPI-U is 2.3 percent 
and the MFP adjustment is 1.4 percent. Therefore, we are proposing a 
0.9 percent update for CY 2012.

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

1. Background
    In the August 2, 2007 final rule (72 FR 42493), we established our 
policy to base ASC relative payment weights and payment rates under the 
revised ASC payment system on APC groups and relative payment weights. 
Consistent with that policy and the requirement at section 
1833(i)(2)(D)(ii) of the Act that the revised payment system be 
implemented so that it would be budget neutral, the initial ASC 
conversion factor (CY 2008) was calculated so that estimated total 
Medicare payments under the revised ASC payment system in the first 
year would be budget neutral to estimated total Medicare payments under 
the prior (CY 2007) ASC payment system (the ASC conversion factor is 
multiplied by the relative payment weights calculated for many ASC 
services in order to establish payment rates). That is, application of 
the ASC conversion factor was designed to result in aggregate Medicare 
expenditures under the revised ASC payment system in CY 2008 equal to 
aggregate Medicare expenditures that would have occurred in CY 2008 in 
the absence of the revised system, taking into consideration the cap on 
ASC payments in CY 2007 as required under section 1833(i)(2)(E) of the 
Act (72 FR 42522).
    We note that we consider the term ``expenditures'' in the context 
of the budget neutrality requirement under section 1833(i)(2)(D)(ii) of 
the Act to mean expenditures from the Medicare Part B Trust Fund. We do 
not consider expenditures to include beneficiary coinsurance and 
copayments. This distinction was important for the CY 2008 ASC budget 
neutrality model that considered payments across hospital outpatient, 
ASC, and MPFS payment systems. However, because coinsurance is almost 
always 20 percent for ASC services, this interpretation of expenditures 
has minimal impact for subsequent budget neutrality adjustments 
calculated within the revised ASC payment system.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66857 
through 66858), we set out a step-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 nuclear 
medicine procedures, the established policy is to set the relative 
payment weights so that the national unadjusted ASC payment rate does 
not exceed the MPFS unadjusted non-facility PE RVU-based amount. 
Further, as discussed in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66841 through 66843), we also adopted alternative 
ratesetting methodologies for specific types of services (for example, 
device-intensive procedures).
    As discussed in the August 2, 2007 final rule (72 FR 42518) and as 
codified at Sec.  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 pre-floor and pre-reclassified hospital wage indices 
results in the most appropriate adjustment to the labor portion of ASC 
costs. In addition, use of the unadjusted hospital wage data avoids 
further reductions in certain rural statewide wage index values that 
result from reclassification. We continue to believe that the 
unadjusted hospital wage indices, which are updated yearly and are used 
by many other Medicare payment systems, appropriately account for 
geographic variation in labor costs for ASCs.
    We note that in certain instances there might be urban or rural 
areas for which there is no IPPS hospital whose wage index data would 
be used to set the wage index for that area. For these areas, our 
policy has been to use the average of the wage indices for CBSAs (or 
metropolitan divisions as applicable) that are contiguous to the area 
that has no wage index (where ``contiguous'' is defined as sharing a 
border). We have applied a proxy wage index based on this methodology 
to ASCs located in CBSA 25980 Hinesville-Fort Stewart, GA, and CBSA 22 
Rural Massachusetts. In CY 2011, we identified another area, 
specifically, CBSA 11340 Anderson, SC, for which there is no IPPS 
hospital whose wage index data would be used to set the wage index for 
that area. Generally, we would use the methodology described above; 
however in this situation all of the areas contiguous to CBSA 11340 
Anderson, SC, are rural. Therefore, in the CY 2011 OPPS/ASC final rule 
with comment (75 FR 72058 through 72059), we finalized our proposal to 
set the ASC wage index by calculating the average of all wage indices 
for urban areas in the State when all contiguous areas to a CBSA are 
rural and there is no IPPS hospital

[[Page 42312]]

whose wage index data could be used to set the wage index for that 
area. In other situations, where there are no IPPS hospitals located in 
a relevant labor market area, we will continue our current policy of 
calculating an urban or rural area's wage index by calculating the 
average of the wage indices for CBSAs (or metropolitan divisions where 
applicable) that are contiguous to the area with no wage index.
2. Proposed Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2012 and Future 
Years
    We update the ASC relative payment weights each year using the 
national OPPS relative payment weights (and MPFS non-facility PE RVU-
based amounts, as applicable) for that same calendar year and uniformly 
scale the ASC relative payment weights for each update year to make 
them budget neutral (72 FR 42531 through 42532). Consistent with our 
established policy, we are proposing to scale the CY 2012 relative 
payment weights for ASCs according to the following method. Holding ASC 
utilization and the mix of services constant from CY 2010, we are 
proposing to compare the total payment weight using the CY 2011 ASC 
relative payment weights (calculated under the ASC standard ratesetting 
methodology) with the total payment weight using the CY 2012 ASC 
relative payment weights (calculated under the ASC standard ratesetting 
methodology) to take into account the changes in the OPPS relative 
payment weights between CY 2011 and CY 2012. We would use the ratio of 
CY 2011 to CY 2012 total payment weight (the weight scaler) to scale 
the ASC relative payment weights for CY 2012. The proposed CY 2012 ASC 
scalar is 0.9373 and scaling would apply to the ASC relative payment 
weights of the covered surgical procedures and covered ancillary 
radiology services for which the ASC payment rates are based on OPPS 
relative payment weights.
    Scaling would not apply in the case of ASC payment for separately 
payable covered ancillary services that have a predetermined national 
payment amount (that is, their national ASC payment amounts are not 
based on OPPS relative payment weights), such as drugs and biologicals 
that are separately paid or services that are contractor-priced or paid 
at reasonable cost in ASCs. Any service with a predetermined national 
payment amount would be included in the ASC budget neutrality 
comparison, but scaling of the ASC relative payment weights would not 
apply to those services. The ASC payment weights for those services 
without predetermined national payment amounts (that is, those services 
with national payment amounts that would be based on OPPS relative 
payment weights) would be scaled to eliminate any difference in the 
total payment weight between the current year and the update year.
    For any given year's ratesetting, we typically use the most recent 
full calendar year of claims data to model budget neutrality 
adjustments. We currently have available 98 percent of CY 2010 ASC 
claims data.
    To create an analytic file to support calculation of the weight 
scaler and budget neutrality adjustment for the wage index (discussed 
below), we summarized available CY 2010 ASC claims by provider and by 
HCPCS code. We used the National Provider Identifier for the purpose of 
identifying unique ASCs within the CY 2010 claims data. We used the 
supplier zip code reported on the claim to associate State, county, and 
CBSA with each ASC. This file, available to the public as a supporting 
data file for the proposed rule, is posted on the CMS Web site at: 
http://www.cms.gov/ASCPayment/01_Overview.asp#TopOfPage.
b. Updating the ASC Conversion Factor
    Under the OPPS, we typically apply a budget neutrality adjustment 
for provider level changes, most notably a change in the wage index 
values for the upcoming year, to the conversion factor. Consistent with 
our final ASC payment policy, for the CY 2012 ASC payment system, we 
are proposing to calculate and apply the pre-floor and pre-reclassified 
hospital wage indices that are used for ASC payment adjustment to the 
ASC conversion factor, just as the OPPS wage index adjustment is 
calculated and applied to the OPPS conversion factor. For CY 2012, we 
calculated this proposed adjustment for the ASC payment system by using 
the most recent CY 2010 claims data available and estimating the 
difference in total payment that would be created by introducing the 
proposed CY 2012 pre-floor and pre-reclassified hospital wage indices. 
Specifically, holding CY 2010 ASC utilization and service-mix and the 
proposed CY 2012 national payment rates after application of the weight 
scaler constant, we calculated the total adjusted payment using the CY 
2011 pre-floor and pre-reclassified hospital wage indices and the total 
adjusted payment using the proposed CY 2012 pre-floor and pre-
reclassified hospital wage indices. We used the 50-percent labor-
related share for both total adjusted payment calculations. We then 
compared the total adjusted payment calculated with the CY 2011 pre-
floor and pre-reclassified hospital wage indices to the total adjusted 
payment calculated with the proposed CY 2012 pre-floor and pre-
reclassified hospital wage indices and applied the resulting ratio of 
1.0003 (the proposed CY 2012 ASC wage index budget neutrality 
adjustment) to the CY 2011 ASC conversion factor to calculate the 
proposed CY 2012 ASC conversion factor.
    Section 1833(i)(2)(C)(i) of the Act requires that, if the Secretary 
has not updated the ASC payment amounts in a calendar year, the payment 
amounts ``shall be increased by the percentage increase in the Consumer 
Price Index for all urban consumers (U.S. city average) as estimated by 
the Secretary for the 12-month period ending with the midpoint of the 
year involved.'' Because the Secretary does update the ASC payment 
amounts annually, we adopted a policy, which we codified at Sec.  
416.171(a)(2)(ii), to update the ASC conversion factor using the CPI-U 
for CY 2010 and subsequent calendar years. Therefore, the annual update 
to the ASC payment system is the CPI-U (referred to as the CPI-U update 
factor).
    Section 3401(k) of the Affordable Care Act amended section 
1833(i)(2)(D) of the Act by adding a new clause (v) which requires that 
``any annual update under [the ASC payment] system for the year, after 
application of clause (iv), shall be reduced by the productivity 
adjustment described in section 1886(b)(3)(B)(xi)(II)'' (which we refer 
to as the MFP adjustment) effective with the calendar year beginning 
January 1, 2011. Clause (iv) authorizes the Secretary to provide for a 
reduction in any annual update for failure to report on quality 
measures. Clause (v) states that application of the MFP adjustment to 
the ASC payment system may result in the update to the ASC payment 
system being less than zero for a year and may result in payment rates 
under the ASC payment system for a year being less than such payment 
rates for the preceding year. In the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 72062 through 72064), we revised Sec.  416.160 
and Sec.  416.171 to reflect this provision of the Affordable Care Act 
(we note that these regulations do not reflect any reduction in the 
annual update for failure to report on quality measures because CMS had 
not implemented an ASC quality reporting program).
    As discussed in section XIV.K. of this proposed rule, we are 
proposing that ASCs begin submitting data on quality

[[Page 42313]]

measures in CY 2012 for the CY 2014 payment determination. Because any 
reduction to the annual update under the ASC Quality Reporting Program 
will not occur until CY 2014, we are not proposing any changes to the 
payment methodology. We intend to address payment changes based on 
failure to submit quality data under the ASC Quality Reporting Program 
in a future rulemaking.
    Without regard to the ASC Quality Reporting Program and in 
accordance with section 1833(i)(2)(C)(i) of the Act, before applying 
the MFP adjustment, the Secretary first determines the ``percentage 
increase'' in the CPI-U, which we interpret cannot be a negative 
number. Thus, in the instance where the percentage change in the CPI-U 
for a year is negative, we are proposing to hold the CPI-U update 
factor for the ASC payment system to zero. Section 1833(i)(2)(D)(v) of 
the Act, as added by section 3401(k) of the Affordable Care Act, then 
requires that the Secretary reduce the CPI-U update factor (which would 
be held to zero if the CPI-U percentage change is negative) by the MFP 
adjustment, and states that application of the MFP adjustment may 
reduce this percentage change below zero. If the application of the MFP 
adjustment to the CPI-U percentage increase would result in a MFP-
adjusted CPI-U update factor that is less than zero, then the annual 
update to the ASC payment rates would be negative and payments would 
decrease relative to the prior year. Illustrative examples of how the 
MFP adjustment would be applied to the ASC payment system update are 
found in the CY 2011 OPPS/ASC final rule with comment period (75 FR 
72062 through 72064).
    For this proposed rule, for the 12-month period ending with the 
midpoint of CY 2012, the Secretary estimates that the CPI-U is 2.3 
percent. The Secretary estimates that the MFP adjustment is 1.4 
percentage points based on the methodology for calculating the MFP 
adjustment finalized in the CY 2011 MPFS final rule with comment period 
(75 FR 73391 through 73399) as revised by the proposal discussed in the 
CY 2012 MPFS proposed rule. Therefore, we are proposing to reduce the 
CPI-U of 2.3 percent by the MFP adjustment specific to this CPI-U of 
1.4 percentage points, resulting in an MFP-adjusted CPI-U update factor 
of 0.9 percent. Therefore, we are proposing to apply a 0.9 percent MFP-
adjusted update to the CY 2011 ASC conversion factor.
    For CY 2012, we also are proposing to adjust the CY 2011 ASC 
conversion factor ($41.939) by the wage adjustment for budget 
neutrality of 1.0003 in addition to the MFP-adjusted update factor of 
0.9 percent discussed above, which results in a proposed CY 2012 ASC 
conversion factor of $42.329.
3. Display of Proposed CY 2012 ASC Payment Rates
    Addenda AA and BB to this proposed rule (which are referenced in 
section XVII. of this proposed rule and available via the Internet on 
the CMS Web site) display the proposed updated ASC payment rates for CY 
2012 for covered surgical procedures and covered ancillary services, 
respectively. These addenda contain several types of information 
related to the proposed CY 2012 payment rates. Specifically, in 
Addendum AA, a ``Y'' in the column titled ``Subject to Multiple 
Procedure Discounting'' indicates that the surgical procedure will be 
subject to the multiple procedure payment reduction policy. As 
discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66829 through 66830), most covered surgical procedures are subject to a 
50-percent reduction in the ASC payment for the lower-paying procedure 
when more than one procedure is performed in a single operative 
session. Display of the comment indicator ``CH'' in the column titled 
``Comment Indicator'' indicates a change in payment policy for the item 
or service, including identifying discontinued HCPCS codes, designating 
items or services newly payable under the ASC payment system, and 
identifying items or services with changes in the ASC payment indicator 
for CY 2012. Display of the comment indicator ``NI'' in the column 
titled ``Comment Indicator'' indicates that the code is new (or 
substantially revised) and that the payment indicator assignment is an 
interim assignment that is open to comment on the final rule with 
comment period.
    The values displayed in the column titled ``CY 2012 Payment 
Weight'' are the proposed relative payment weights for each of the 
listed services for CY 2012. The payment weights for all covered 
surgical procedures and covered ancillary services whose ASC payment 
rates are based on OPPS relative payment weights are scaled for budget 
neutrality. Thus, scaling was not applied to the device portion of the 
device-intensive procedures, services that are paid at the MPFS 
nonfacility PE RVU-based amount, separately payable covered ancillary 
services that have a predetermined national payment amount, such as 
drugs and biologicals that are separately paid under the OPPS, or 
services that are contractor-priced or paid at reasonable cost in ASCs.
    To derive the proposed CY 2012 payment rate displayed in the ``CY 
2012 Payment'' column, each ASC payment weight in the ``CY 2012 Payment 
Weight'' column is multiplied by the proposed CY 2012 conversion factor 
of $42.329. The conversion factor includes a budget neutrality 
adjustment for changes in the wage index values and the CPI-U update 
factor as reduced by the productivity adjustment (as discussed in 
section XV.H.2.b. of this proposed rule).
    In Addendum BB, there are no relative payment weights displayed in 
the ``CY 2012 Payment Weight'' column for items and services with 
predetermined national payment amounts, such as separately payable 
drugs and biologicals. The ``CY 2012 Payment'' column displays the 
proposed CY 2012 national unadjusted ASC payment rates for all items 
and services. The proposed CY 2012 ASC payment rates listed in Addendum 
BB for separately payable drugs and biologicals are based on ASP data 
used for payment in physicians' offices in April 2011.

XIV. Hospital Outpatient Quality Reporting Program Updates and ASC 
Quality Reporting Program

A. Background

1. Overview
    CMS has implemented quality measure reporting programs for multiple 
settings of care. These programs promote higher quality, more efficient 
health care for Medicare beneficiaries. The quality data reporting 
program for hospital outpatient care, known as the Hospital Outpatient 
Quality Reporting (Hospital OQR) Program, formerly known as the 
Hospital Outpatient Quality Data Reporting Program (HOP QDRP), has been 
generally modeled after the quality data reporting program for hospital 
inpatient services known as the Hospital Inpatient Quality Reporting 
(Hospital IQR) Program (formerly known as the Reporting Hospital 
Quality Data for Annual Payment Update (RHQDAPU) Program). Both of 
these quality reporting programs for hospital services, as well as the 
program for physicians and other eligible professionals, known as the 
Physician Quality Reporting System (formerly known as the Physician 
Quality Reporting Initiative (PQRI)), have financial incentives for the 
reporting of quality data to CMS. CMS also has implemented quality 
reporting programs for home health agencies and skilled nursing 
facilities that are based on conditions of participation, and an end-
stage renal disease (ESRD) Quality

[[Page 42314]]

Incentive Program (76 FR 628 through 646) that links payment to 
performance.
    In implementing the Hospital OQR Program and other quality 
reporting programs, we have focused on measures that have high impact 
and support CMS and HHS priorities for improved quality and efficiency 
of care for Medicare beneficiaries. Our goal is ultimately to align the 
clinical quality measure requirements of the Hospital OQR Program and 
various other programs, including the Hospital IQR Program, and the 
proposed ASC Quality Reporting Program, with the reporting requirements 
implemented under the Health Information Technology for Economic and 
Clinical Health (HITECH) Act, so that the burden of reporting can be 
reduced. In developing this and other quality reporting programs, as 
well as the Hospital Inpatient Value-Based Purchasing (Hospital 
Inpatient VBP) Program, we applied the following principles for the 
development and use of measures:
     Pay-for-reporting, public reporting, and value-based 
purchasing programs should rely on a mix of standards, processes, 
outcomes, and patient experience of care measures, including measures 
of care transitions and changes in patient functional status. Across 
all programs, we seek to move as quickly as possible to the use of 
primarily outcome and patient experience of care measures. To the 
extent practicable and appropriate, outcome and patient experience of 
care measures should be adjusted for risk factors or other appropriate 
patient population or provider characteristics.
     To the extent possible and recognizing differences in 
payment system maturity and statutory authorities, measures should be 
aligned across public reporting and payment systems under Medicare and 
Medicaid. The measure sets should evolve so that they include a focused 
set of measures appropriate to the specific provider category that 
reflects the level of care and the most important areas of service and 
measures for that provider category.
     The collection of information burden on providers should 
be minimized to the extent possible. To this end, we continuously seek 
to align our measures with the adoption of meaningful use standards for 
health information technology (HIT), so that data can be submitted and 
calculated via certified EHR technology with minimal burden.
     To the extent practicable and feasible, and recognizing 
differences in statutory authorities, measures used by CMS should be 
endorsed by a national, multi-stakeholder organization. Measures should 
be aligned with best practices among other payers and the needs of the 
end users of the measures.
    We invite public comment on these principles.

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

    We refer readers to the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 72064) for a detailed discussion of the statutory history 
of the Hospital OQR Program.
3. Technical Specification Updates and Data Publication
a. Maintenance of Technical Specifications for Quality Measures
    Technical specifications for each Hospital OQR measure are listed 
in the Hospital OQR Specifications Manual, which is posted on the CMS 
QualityNet Web site at http://www.QualityNet.org. We maintain the 
technical specifications for the measures by updating this Hospital OQR 
Specifications Manual and including detailed instructions and 
calculation algorithms. In some cases where the specifications are 
available elsewhere, we may include links to Web sites hosting 
technical specifications. These resources are for hospitals to use when 
collecting and submitting data on required measures.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68766 
through 68767), we established a subregulatory process for making 
updates to the technical specifications that we use to calculate 
Hospital OQR measures. This process is used when changes to the measure 
specifications are necessary due to changes in scientific evidence, 
treatment guidelines, or consensus among affected parties. Changes due 
to these reasons may not coincide with the timing of our regulatory 
actions, but nevertheless should be made so that the Hospital OQR 
measures are calculated based on the most up-to-date scientific and 
consensus standards. We indicated that notification of technical 
changes to the measure specifications is made via the QualityNet Web 
site, http://www.QualityNet.org, and in the Hospital OQR Specifications 
Manual. The notification of changes to the measure technical 
specifications occurs no less than 3 months before any changes become 
effective for purposes of reporting under the Hospital OQR Program.
    The Hospital OQR Specifications Manual is released every 6 months 
and addenda are released as necessary. This release schedule provides 
at least 3 months of advance notice for substantial changes such as 
changes to ICD-9, CPT, NUBC, and HCPCS codes, and at least 6 months of 
advance notice for changes to data elements that would require 
significant systems changes.
b. Publication of Hospital OQR Program Data
    Section 1833(t)(17)(E) of the Act requires that the Secretary 
establish procedures to make data collected under Hospital OQR 
available to the public. It also states that such procedures must 
ensure that a hospital has the opportunity to review the data that are 
to be made public with respect to the hospital prior to such data being 
made public. To meet these requirements, data that a hospital has 
submitted for the Hospital OQR Program are typically displayed on CMS 
Web sites such as the Hospital Compare Web site, http://www.hospitalcompare.hhs.gov, after a preview period. The Hospital 
Compare Web site is an interactive Web tool that assists beneficiaries 
by providing information on hospital quality of care. This information 
motivates beneficiaries to work with their doctors and hospitals to 
discuss the quality of care hospitals provide to patients, providing 
additional incentives to hospitals to improve the quality of care that 
they furnish.
    Under our current policy, we publish quality data by the 
corresponding hospital CCN, and indicate instances where data from two 
or more hospitals are combined to form the publicly reported measures 
on the Hospital Compare Web site. This approach is consistent with the 
approach taken under the Hospital IQR Program. Consistent with our 
current policy, we make Hospital OQR data publicly available whether or 
not the data have been validated for payment purposes.
    In general, we strive to display hospital quality measures on the 
Hospital Compare Web site as soon as possible after they have been 
adopted and have been reported to CMS. However, if there are unresolved 
display issues or pending design considerations, we may make the data 
available on other, non-interactive, CMS Web sites such as http://www.cms.hhs.gov/HospitalQualityInits/. Publicly reporting the 
information in this manner, though not on the interactive Hospital 
Compare Web site, allows us to meet the requirement under section 
1833(t)(17)(E) of the Act for establishing procedures to make quality 
data submitted available to the public following a preview period. When 
we display hospital quality information on

[[Page 42315]]

non-interactive CMS Web sites, affected parties would be notified via 
CMS listservs, CMS e-mail blasts, national provider calls, and 
QualityNet announcements regarding the release of preview reports 
followed by the posting of data on a Web site other than Hospital 
Compare.
    We also require hospitals to complete and submit a registration 
form (``participation form'') in order to participate in the Hospital 
OQR Program. With submission of this participation form, participating 
hospitals agree that they will allow CMS to publicly report the quality 
measure data submitted under the Hospital IQR Program, including 
measures that we calculate using Medicare claims.

B. Proposed Revision to Measures Previously Adopted for the Hospital 
OQR Program for the CY 2012, CY 2013, and CY 2014 Payment 
Determinations

1. Background
    We refer readers to the following OPPS/ASC final rules with comment 
periods for a history of measures adopted for the Hospital OQR Program, 
including lists of: 11 measures adopted for the CY 2011 payment 
determination (74 FR 60637); 15 measures adopted for the CY 2012 
payment determination (75 FR 72083 through 72084); 23 measures adopted 
for the CY 2013 payment determination (75 FR 72090); and 23 measures 
adopted for the CY 2014 payment determination (75 FR 72094). The table 
below also shows the 23 measures previously adopted for these payment 
determinations:

  Hospital OQR Program Measures Previously Adopted for the CY 2011, CY
          2012, CY 2013, and CY 2014 *** Payment Determinations
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
OP-1: Median Time to Fibrinolysis.
OP-2: Fibrinolytic Therapy Received Within 30 Minutes.
OP-3: Median Time to Transfer to Another Facility for Acute Coronary
 Intervention.
OP-4: Aspirin at Arrival.
OP-5: Median Time to ECG.
OP-6: Timing of Antibiotic Prophylaxis.
OP-7: Prophylactic Antibiotic Selection for Surgical Patients.
OP-8: MRI Lumbar Spine for Low Back Pain.
OP-9: Mammography Follow-up Rates.
OP-10: Abdomen CT--Use of Contrast Material.
OP-11: Thorax CT--Use of Contrast Material.
OP-12: The Ability for Providers with HIT to Receive Laboratory Data
 Electronically Directly into their Qualified/Certified EHR System as
 Discrete Searchable Data.*
OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac
 Low Risk Surgery.*
OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus
 Computed Tomography (CT).*
OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department
 for Atraumatic Headache.*
OP-16: Troponin Results for Emergency Department acute myocardial
 infarction (AMI) patients or chest pain patients (with Probable Cardiac
 Chest Pain) Received Within 60 minutes of Arrival.**
OP-17: Tracking Clinical Results between Visits.**
OP-18: Median Time from ED Arrival to ED Departure for Discharged ED
 Patients.**
OP-19: Transition Record with Specified Elements Received by Discharged
 Patients.**
OP-20: Door to Diagnostic Evaluation by a Qualified Medical
 Professional.**
OP-21: ED-Median Time to Pain Management for Long Bone Fracture.**
OP-22: ED-Left Without Being Seen.**
OP-23: ED-Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic
 Stroke who Received Head CT Scan Interpretation Within 45 minutes of
 Arrival.**
------------------------------------------------------------------------
* New measure adopted beginning with the CY 2012 payment determination.
** New measure adopted beginning with the CY 2013 payment determination.
*** All 23 measures were adopted for the CY 2014 payment determination.

2. Proposed Revision to Hospital OQR Program Measures Previously 
Adopted for the CY 2013 Payment Determination
    In the CY 2011 OPPS/ASC final rule with comment period, we 
finalized the adoption of the chart-abstracted measure OP-22--Left 
Without Being Seen (75 FR 72088 through 72089). This measure was 
endorsed (NQF 0499) as part of an NQF project entitled 
``National Voluntary Consensus Standards for Emergency Care.'' This 
measure assesses the percentage of patients who leave the Emergency 
Department (ED) without being evaluated by qualified medical personnel, 
which is an indication of ED overcrowding, and lack of timely access to 
care. We are proposing that beginning with the CY 2013 payment 
determination, hospitals would submit aggregate numerator and 
denominator counts once a year using a Web-based form available through 
the QualityNet Web site for this measure. This proposed process is 
different from that which is used to collect other chart-abstracted 
measures because it would not require hospitals to submit patient-level 
information for this measure, and would not require quarterly 
submission of data. We believe this proposed process will reduce the 
potential data collection and submission burden for this measure.
    We are proposing that for the CY 2013 payment determination, data 
submission for this measure would occur between July 1, 2012 and August 
15, 2012. We also are proposing that for the CY 2013 payment 
determination, the aggregate counts for the numerator (the total number 
of patients who left without being evaluated by a physician/advance 
practice nurse/physician's assistant) and the denominator (total number 
of patients who signed in to be evaluated for emergency services) would 
be submitted by hospitals and would span the time period from January 
1, 2011 through December 31, 2011. We invite public comment on this 
proposed approach to data collection for OP-22 for the CY 2013 Hospital 
OQR Program and subsequent payment determinations, and on the time 
period to be assessed for this measure for the CY 2013 payment 
determination. The updated specifications for this measure will be made 
available in the July 2011 Hospital OQR Specifications Manual.

[[Page 42316]]

C. Proposed New Quality Measures for the CY 2014 and CY 2015 Payment 
Determinations

1. Considerations in Expanding and Updating Quality Measures Under the 
Hospital OQR Program
    In general, when selecting measures for the Hospital OQR Program, 
we take into account several considerations and goals. These include: 
(a) expanding the types of measures beyond process of care measures to 
include an increased number of outcome measures, efficiency measures, 
and patients' experience-of-care measures; (b) expanding the scope of 
hospital services to which the measures apply; (c) considering the 
burden on hospitals in collecting chart-abstracted data; (d) 
harmonizing the measures used in the Hospital OQR Program with other 
CMS quality programs to align incentives and promote coordinated 
efforts to improve quality; (e) seeking to use measures based on 
alternative sources of data that do not require chart abstraction or 
that utilize data already being reported by many hospitals, such as 
data that hospitals report to clinical data registries, or all-payer 
claims data bases; and (f) weighing the relevance and utility of the 
measures compared to the burden on hospitals in submitting data under 
the Hospital OQR Program.
    Specifically, we assign priority to quality measures that assess 
performance on: (a) conditions that result in the greatest mortality 
and morbidity in the Medicare population; (b) conditions that are high 
volume and high cost for the Medicare program; and (c) conditions for 
which wide cost and treatment variations have been reported, despite 
established clinical guidelines. We used and continue to use these 
criteria to guide our decisions regarding what measures to add to the 
Hospital OQR Program measure set.
    In the CY 2009 OPPS/ASC final rule with comment period, we adopted 
four claims-based quality measures that do not require a hospital to 
submit chart-abstracted clinical data (73 FR 68766). This supports our 
goal of expanding the measures for the Hospital OQR Program while 
minimizing the burden upon hospitals and, in particular, without 
significantly increasing the chart abstraction burden. In addition to 
claims-based measures, we are considering registries and EHRs as 
alternative ways to collect data from hospitals.
    A registry is a collection of clinical data for purposes of 
assessing clinical performance, quality of care, and opportunities for 
quality improvement. Many hospitals submit data to and participate in 
existing registries. In addition, registries often capture outcome 
information and provide ongoing quality improvement feedback to 
registry participants. Instead of requiring hospitals to submit the 
same data to CMS that they are already submitting to registries, we 
could collect the data directly from the registries with the permission 
of the hospital, thereby enabling us to expand the Hospital OQR Program 
measure set without increasing the burden of data collection for those 
hospitals participating in the registries. The data that we would 
receive from registries would be used to calculate quality measures 
required under the Hospital OQR Program, and would be publicly reported 
like other Hospital OQR Program quality measures, encouraging 
improvements in the quality of care. In the CY 2010 OPPS/ASC final rule 
with comment period (74 FR 60633), we responded to public comments on 
such an approach.
    In the CY 2009 OPPS/ASC final rule with comment period, we also 
stated our intention to explore mechanisms for data submission using 
EHRs (73 FR 68769). When we refer to the term Qualified EHR, we intend 
for it to have the same meaning as set forth by the Office of the 
National Coordinator for Health Information Technology (ONC) (45 CFR 
170.102) which has adopted the statutory definition of Qualified EHR 
found in section 3000(13) of the Public Health Service Act. That 
section defines a Qualified EHR as ``an electronic record of health-
related information on an individual that--(A) includes patient 
demographic and clinical health information, such as medical history 
and problem lists; and (B) has the capacity--(i) to provide clinical 
decision support; (ii) to support physician order entry; (iii) to 
capture and query information relevant to health care quality; and (iv) 
to exchange electronic health information with, and integrate such 
information from other sources.'' Additionally, when we refer to the 
term, Certified EHR Technology, we intend for it to have the same 
meaning as set forth by the ONC at 45 CFR 170.102 as follows: 
``Certified EHR Technology'' means (1) A complete EHR that meets the 
requirements included in the definition of a Qualified EHR and has been 
tested and certified in accordance with the certification program 
established by the National Coordinator as having met all applicable 
certification criteria adopted by the Secretary; or (2) a combination 
of EHR Modules in which each constituent EHR Module of the combination 
has been tested and certified in accordance with the certification 
program established by the National Coordinator as having met all 
applicable certification criteria adopted by the Secretary, and the 
resultant combination also meets the requirements included in the 
definition of a Qualified EHR.
    Establishing a data submission mechanism using EHRs will require 
interoperability between EHRs and our data collection systems, 
additional infrastructure development on the part of hospitals and CMS, 
and the adoption of standards for the capturing, formatting, and 
transmission of data elements that make up the measures. However, once 
these activities are accomplished, the adoption of measures that rely 
on data obtained directly from EHRs would enable us to expand the 
Hospital OQR Program measure set with less cost and burden to 
hospitals. In the CY 2010 OPPS/ASC final rule with comment period (74 
FR 60633 through 60634), we responded to public comments on such an 
approach.
    Continuing to reduce our reliance on the chart-abstraction 
mechanism would allow us and hospital outpatient departments to devote 
available resources towards maximizing the potential of registries and 
EHRs for quality measurement reporting. Both mechanisms hold the 
promise of more sophisticated and timely reporting of clinical quality 
measures. Clinical data registries allow the collection of more 
detailed data, including outcomes. Registries can also provide feedback 
and quality improvement information based on reported data. Finally, 
clinical data registries can also receive data from EHRs, and 
therefore, serve as an alternative means to reporting clinical quality 
data extracted from an EHR.
    In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72071 
through 72174), we added new measures over a three year period for the 
CY 2012, CY 2013, and CY 2014 payment determinations. We believe this 
process will assist hospitals in planning, meeting future reporting 
requirements, and implementing quality improvement efforts. We will 
also have more time to develop, align, and implement the infrastructure 
necessary to collect data on the measures and make payment 
determinations. The fact that we finalized measures for a three year 
period of time (for example, for the CY 2012, CY 2013 and CY 2014 
payment determinations in the CY 2011 OPPS/ASC final rule with comment 
period) does not preclude us from proposing to adopt additional 
measures or changing the list of measures for these payment 
determinations through

[[Page 42317]]

subsequent rulemaking cycles that affect these future payment 
determinations.
    We have previously expanded the Hospital OQR Program measure set 
dramatically by adopting measures over several payment determinations 
in order to allow hospital outpatient departments adequate time to plan 
and implement the reporting of quality data for the CY 2012, CY 2013 
and CY 2014 payment determinations. In this proposed rule, we are 
proposing to add new measures to the existing Hospital OQR measure set 
for the CY 2014 payment determination and are proposing to add new 
measures for the CY 2015 payment determination.
2. Proposed New Hospital OQR Program Quality Measures for the CY 2014 
Payment Determination
    As stated above, the CY 2014 measure set for the Hospital OQR 
Program currently contains 23 measures that we adopted in the CY 2011 
OPPS/ASC final rule with comment period (75 FR 72094). In this proposed 
rule, we are proposing to adopt a number of additional measures for the 
CY 2014 measure set.
a. Proposed New National Healthcare Safety Network (NHSN) Healthcare 
Associated Infection (HAI) Measure for the CY 2014 Payment 
Determination: Surgical Site Infection (NQF 0299)
    Healthcare Associated Infections (HAIs) is a topic area widely 
acknowledged by HHS, the Institute of Medicine (IOM), the National 
Priorities Partnership, and others as a high priority requiring 
measurement and improvement. HAIs are among the leading causes of death 
in the United States. CDC estimates that as many as 2 million 
infections are acquired each year in hospitals and result in 
approximately 90,000 deaths.\1\ It is estimated that more Americans die 
each year from HAIs than from auto accidents and homicides combined. 
HAIs not only put the patient at risk, but also increase the days of 
hospitalization required for patients and add considerable health care 
costs. HAIs are largely preventable through interventions such as 
better hygiene and advanced scientifically tested techniques for 
surgical patients. Therefore, many health care consumers and 
organizations are calling for public disclosure of HAIs, arguing that 
public reporting of HAI rates provides the information health care 
consumers need to choose the safest hospitals, and gives hospitals an 
incentive to improve infection control efforts. This proposed measure 
is currently collected by the National Healthcare Safety Network (NHSN) 
as part of State-mandated reporting and surveillance requirements for 
hospitals in some States. Additionally, data submission for this 
measure through EHRs may be possible in the near future.
---------------------------------------------------------------------------

    \1\ McKibben L., Horan, T.: Guidance on public reporting of 
healthcare-associated infections: recommendations of the Healthcare 
Infection Control Practices Advisory Committee. AJIC 2005; 33:217-
26.
---------------------------------------------------------------------------

    The NHSN is a secure, Internet-based surveillance system maintained 
and managed by the CDC, and can be utilized by all types of healthcare 
facilities in the United States, including acute care hospitals, long 
term acute care hospitals, psychiatric hospitals, rehabilitation 
hospitals, outpatient dialysis centers, ambulatory surgery centers, and 
long term care facilities. The NHSN is provided free of charge to 
hospitals. The NHSN enables healthcare facilities to collect and use 
data about HAIs, clinical practices known to prevent HAIs, the 
incidence or prevalence of multidrug-resistant organisms within their 
organizations, and other adverse events. Some States use the NHSN as a 
means for healthcare facilities to submit data on HAIs mandated through 
their specific State legislation. Currently, 21 States require 
hospitals to report HAIs using the NHSN, and the CDC supports more than 
4,000 hospitals that are using NHSN.
    Increasingly, more surgical procedures are being performed in 
hospital outpatient department settings and ASCs. Therefore, we have 
determined that this measure is ``appropriate for the measurement of 
the quality of care furnished by hospitals in outpatient settings'' as 
required under section 1833(t)(17)(C)(i) of the Act. This proposed HAI 
measure assesses the percentage of surgical site infections occurring 
within 30 days after an NHSN-defined operative procedure if no implant 
is left in place or within one year if an implant is in place, and the 
infection appears to be related to the operative procedure. Infections 
are identified on original admission or upon readmission to the 
facility of original operative procedure within the relevant time frame 
(30 days for no implants; within 1 year for implants). The 
specifications for this proposed HAI measure can be found at http://www.cdc.gov/nhsn/psc.html.
    We also believe that this measure meets the requirement under 
section 1833(t)(17)(C)(i) of the Act that measures selected for the 
Hospital OQR Program ``reflect consensus among affected parties and, to 
the extent feasible and practicable, shall include measures set forth 
by one or more national consensus building entities.'' This measure was 
NQF-endorsed in 2007 and was adopted by the Hospital Quality Alliance 
in 2008. We note that this measure also was adopted for the Hospital 
IQR Program beginning with the FY 2014 payment determination (75 FR 
50211) and its adoption into the Hospital OQR Program would further our 
goal of aligning measures across programs where feasible.
    We are proposing that submission of data for this proposed NHSN 
measure for the CY 2014 payment determination would relate to infection 
events occurring between January 1, 2013 and June 30, 2013. We are 
proposing that hospital outpatient departments use the existing NHSN 
infrastructure and protocols that already exist for this proposed 
measure to report it for Hospital OQR Program purposes. We invite 
public comment on our proposal to adopt this HAI measure into the 
Hospital OQR Program for the CY 2014 payment determination.
b. Proposed New Chart-Abstracted Measures for the CY 2014 Payment 
Determination
    In the CY 2011 OPPS/ASC final rule with comment period, we stated 
that we would not finalize five proposed NQF-endorsed diabetes care 
measures because we were in the process of refining the chart-
abstracted numerator definitions for these measures (75 FR 72091). We 
also stated that we intended to again propose to adopt these measures 
for the CY 2014 payment determination. We now are proposing to adopt 
these five diabetes care measures for the CY 2014 payment determination 
as chart-abstracted measures. These five measures are: (1) Hemoglobin 
A1c Management (NQF 0059); (2) Diabetes Measure Pair: A. Lipid 
Management: Low Density Lipoprotein Cholesterol (LDL-C) 0064); (3) Diabetes: Blood 
Pressure Management (NQF 0061); (4) Diabetes: Eye Exam (NQF 
0055); and (5) Diabetes: Urine Protein Screening (NQF 
0062). We note that these five measures are electronically 
specified. We hope to be able to collect such information via EHRs in 
the future, and we solicit comments on using EHR for data collection in 
the future. In addition, we are proposing to adopt another new chart-
abstracted measure, Cardiac Rehabilitation Patient Referral from an 
Outpatient Setting (NQF 0643), for the CY 2014 payment 
determination. Below are descriptions of each of these six proposed new 
chart-abstracted measures.

[[Page 42318]]

(1) Proposed Diabetes Measure: Hemoglobin A1c Management (NQF 
0059)
    In general, diabetes mellitus is a chronic disease that impacts the 
lives of a large portion of the population and consumes a significant 
amount of U.S. healthcare dollars. With the prevalence of diabetes in 
the Medicare-eligible population expected to double, costs are expected 
to increase almost fourfold to $171 million.\2\ Uncontrolled diabetes 
often leads to biochemical imbalances that can lead to acute life-
threatening events, such as diabetic ketoacidosis and hyperosmolar, or 
nonketotic coma. In patients with insulin-dependent diabetes, the risk 
of development or progression of retinopathy, nephropathy, and 
neuropathy can be reduced by 50 to 75 percent by intensive outpatient 
treatment of hyperglycemia compared to conventional treatment. Early 
treatment may help slow or halt the progression of diabetic 
complications, and following the guidelines for screening may assist 
those patients with no outward sign of diabetic complications to be 
identified earlier through regular screening tests. Some guidelines 
recommend that the HgA1c level be tested during an initial assessment 
and in follow-up assessments which should occur at no longer than 3-
month intervals.\3\ Other guidelines recommend that the HgA1c level be 
tested at least twice a year in patients with stable glycemic control 
and who are meeting treatment goals, and quarterly in patients whose 
HgA1c level does not meet target glycemic goals.\4\
---------------------------------------------------------------------------

    \2\ Huang, E.S., Basu, A., O'Grady, M., Capretta, J.C.: 
Projecting the future diabetes population size and related costs for 
the U.S. Diabetes Care. 2009;32 (12):2225-29.
    \3\ The American Association of Clinical Endocrinologists 
Medical Guidelines for the Management of Diabetes Mellitus: The AACE 
System of Intensive Diabetes Self-Management--2002 Update.
    \4\ American Diabetes Association. Standards of Medical Care in 
Diabetes. Diabetes Care. 2008 Jan:31 (Suppl 1):S12-54.
---------------------------------------------------------------------------

    Section 1833(t)(17)(C)(i) of the Act requires the Secretary to 
develop measures appropriate for the measurement of the quality of care 
furnished by hospitals in outpatient settings, that these measures 
reflect consensus among affected parties and, to the extent feasible 
and practicable, that these measures include measures set forth by one 
or more national consensus building entities. Because this measure is 
NQF-endorsed, we believe that this measure meets the requirement of 
reflecting consensus among affected parties. However, we note that 
consensus among affected parties can be reflected through means other 
than NQF endorsement. As discussed above, this measure is appropriate 
for measuring quality of care in the hospital outpatient department 
setting, in which many patients with diabetes are treated.
    Lower HgA1c levels are associated with reduced microvascular and 
neuropathic complications of diabetes. This NQF-endorsed measure 
measures the percentage of adult patients with diabetes aged 18-75 
years with a most recent HgA1c level greater than 9 percent (poor 
control). The specifications for this measure are located in Appendix A 
(beginning page A-60) of the 2008 NQF Report titled ``National 
Voluntary Consensus Standards for Ambulatory Care--Part 1'' available 
at the following link: http://www.qualityforum.org/Publications/2008/03/National_Voluntary_Consensus_Standards_for_Ambulatory_Care%E2%80%93Part_1.aspx.
    Glycosylated hemoglobin (HA1c) assay measures average blood glucose 
over the preceding two to three months, rather than just one point in 
time. HgA1c values fluctuate less frequently than fasting glucose 
values and give clinicians a better integrated view of the patient's 
average blood sugar over time. High HgA1c is a more reliable indicator 
of chronic high blood sugar. We invite public comment on this proposed 
measure.
(2) Proposed Diabetes Measure Pair: A. Lipid Management: Low Density 
Lipoprotein Cholesterol (LDL-C) 0064)
    LDL-C measures the development of atherosclerotic plaque which 
increases the cardiac events risk for diabetic patients, who already 
face heart disease death rates that are about two to four times higher 
than these rates are for non-diabetic patients.\5\ Improved 
dyslipidemia management helps to mitigate the risk for cardiovascular 
disease. Lipid-lowering therapy for diabetics has been a consistent 
recommendation in several guidelines, prompted by randomized trials 
supporting statin therapy to lower the risk of cardiovascular 
involvement for this population. Despite the evidence basis and 
guideline support, only a minority of patients with diabetes are 
prescribed statin treatment or achieve target LDL-C goals.\6\
---------------------------------------------------------------------------

    \5\ American Diabetes Association. Standards of Medical Care in 
Diabetes. Diabetes Care. 2007 Jan;30 (Suppl 1):S8-15.
    \6\ Das, S.R., Vaeth, P.A., Stanek, H.G., de Lemos, J.A., 
Dobbins, R.L., McGuire, D.K.: Increased cardiovascular risk 
associated with diabetes in Dallas County. Am Heart J 2006;151:1087-
93.
---------------------------------------------------------------------------

    Section 1833(t)(17)(C)(i) of the Act requires the Secretary to 
develop measures appropriate for the measurement of the quality of care 
furnished by hospitals in outpatient settings, that these measures 
reflect consensus among affected parties and, to the extent feasible 
and practicable, that these measures include measures set forth by one 
or more national consensus building entities. Because this measure is 
NQF-endorsed, we believe that this measure meets the requirement of 
reflecting consensus among affected parties. However, we note that 
consensus among affected parties can be reflected through means other 
than NQF endorsement. As discussed above, this measure is appropriate 
for measuring quality of care in the hospital outpatient department 
setting which serves many patients with diabetes who often have high 
level of LDL-C.
    Early treatment of hyperlipidemia as indicated by high level of 
LDL-C may help to slow or halt the progression of cardiovascular 
disease and impact the quality of the life of the diabetic patient, 
affecting the patient's life expectancy and decreasing costs involved 
in treating diabetic complications. This NQF-endorsed measure assesses: 
(i) The percentage of adult patients with diabetes aged 18-75 years 
whose most recent LDL-C test result was dl; and (ii) the 
percentage of adult patients with diabetes aged 18-75 years whose most 
recent LDL-C test result during the measurement year was dl. 
The specifications for this measure are located in Appendix A 
(beginning page A-60) of the 2008 NQF Report titled ``National 
Voluntary Consensus Standards for Ambulatory Care--Part 1'' available 
at the following link: http://www.qualityforum.org/Publications/2008/03/National_Voluntary_Consensus_Standards_for_Ambulatory_Care%E2%80%93Part_1.aspx. We invite public comment on this proposed 
measure.
(3) Proposed Diabetes Measure: Blood Pressure Management (NQF 
0061)
    Blood pressure control reduces the risk of cardiovascular disease 
and microvascular complications in patients with diabetes. Well-
controlled blood pressure impacts the quality of the life of the 
diabetic patient, affects the patient's life expectancy, and decreases 
the costs involved in treating diabetic complications.

[[Page 42319]]

    Section 1833(t)(17)(C)(i) of the Act requires the Secretary to 
develop measures appropriate for the measurement of the quality of care 
furnished by hospitals in outpatient settings, that these measures 
reflect consensus among affected parties and, to the extent feasible 
and practicable, that these measures include measures set forth by one 
or more national consensus building entities. Because this measure is 
NQF-endorsed, we believe that this measure meets the requirement of 
reflecting consensus among affected parties. However, we note that 
consensus among affected parties can be reflected through means other 
than NQF endorsement. This measure is appropriate for measuring the 
quality of care in the hospital outpatient departments which serve many 
patients with diabetes and suffer from high blood pressure.
    Early treatment of high blood pressure may help slow or halt the 
progression of kidney involvement and damage.\7\ This NQF-endorsed 
measure measures the percentage of patient visits with blood pressure 
measurement recorded among all patient visits by patients aged > 18 
years with diagnosed hypertension. The specifications for this measure 
are located in Appendix A (beginning page A-60) of the 2008 NQF Report 
titled ``National Voluntary Consensus Standards for Ambulatory Care--
Part 1'' available at the following link: http://www.qualityforum.org/Publications/2008/03/National_Voluntary_Consensus_Standards_for_Ambulatory_Care%E2%80%93Part_1.aspx. We invite public comment on this 
proposed measure.
---------------------------------------------------------------------------

    \7\ Centers for Disease Control and Prevention. National 
diabetes fact sheet: general information and national estimates on 
diabetes in the United States, 20112007. Atlanta, GA: U.S. 
Department of Health and Human Services, Centers for Disease Control 
and Prevention, 20112008.
---------------------------------------------------------------------------

(4) Proposed Diabetes Measure: Eye Exam (NQF 0055)
    A dilated eye exam helps to detect the risk for vision-threatening 
diabetic retinopathy which is prevalent among people with diabetes. 
Data from the 2011 National Diabetes Fact Sheet shows that diabetes is 
the leading cause of new cases of blindness among adults aged 20-74 
years.\8\ However, dilated eye exams for diabetic patients can prevent 
retinopathy through early detection \9\ and stereoscopic retinal 
photography is sometimes used to grade diabetic retinopathy severity.
---------------------------------------------------------------------------

    \8\ Centers for Disease Control and Prevention. National 
diabetes fact sheet: general information and national estimates on 
diabetes in the United States, 20112007. Atlanta, GA: U.S. 
Department of Health and Human Services, Centers for Disease Control 
and Prevention, 20112008.
    \9\ American Diabetes Association. Standards of medical care in 
diabetes. Diabetes Care. 2007 Jan;30 (Suppl 1):S8-15.
---------------------------------------------------------------------------

    Section 1833(t)(17)(C)(i) of the Act requires the Secretary to 
develop measures appropriate for the measurement of the quality of care 
furnished by hospitals in outpatient settings, that these measures 
reflect consensus among affected parties and, to the extent feasible 
and practicable, that these measures include measures set forth by one 
or more national consensus building entities. Because this measure is 
NQF-endorsed, we believe that this measure meets the requirement of 
reflecting consensus among affected parties. However, we note that 
consensus among affected parties can be reflected through means other 
than NQF endorsement. This measure is appropriate for measuring quality 
of care in the hospital outpatient departments which serve many 
patients with diabetes who are at risk for diabetic retinopathy.
    This NQF-endorsed measure measures the percentage of adult patients 
with diabetes age 18 to 75 years who received a dilated eye exam or 
seven standard field stereoscopic photos with interpretation by an 
ophthalmologist or optometrist, or imaging to verify diagnosis from 
stereoscopic photos during the reporting year, or during the prior 
year, if the patient is at low risk for retinopathy. A patient is 
considered low risk if the patient has no evidence of retinopathy in 
the prior year. The specifications for this measure are located in 
Appendix A (beginning page A-60) of the 2008 NQF Report titled 
``National Voluntary Consensus Standards for Ambulatory Care--Part 1'' 
available at the following link: http://www.qualityforum.org/Publications/2008/03/National_Voluntary_Consensus_Standards_for_Ambulatory_Care%E2%80%93Part_1.aspx. We invite public comment on this 
proposed measure.
(5) Proposed Diabetes Measure: Urine Protein Screening (NQF 
0062)
    Urine protein screening for microalbumin detects an abnormal amount 
of protein albumin leaks in the urine by the capillaries of the kidney. 
High levels of blood sugar in uncontrolled diabetes can cause damage to 
the capillaries in the kidneys. Diabetics accounted for 44 percent of 
new cases of kidney disease. In 2005, a total of 178,689 diabetics with 
ESRD were on dialysis or received a kidney transplant in the United 
States and Puerto Rico.\10\ In 2009, MedPAC reported costs for the 
330,000 Medicare recipients receiving dialysis treatment for ESRD at 
over $8 billion.\11\
---------------------------------------------------------------------------

    \10\ Centers for Disease Control and Prevention. National 
diabetes fact sheet: general information and national estimates on 
diabetes in the United States, 2007. Atlanta, GA: U.S. Department of 
Health and Human Services, Centers for Disease Control and 
Prevention, 2008.
    \11\ MedPAC. Outpatient dialysis service: assessing payment 
adequacy and updating payments. Report to the Congress: Medicare 
payment policy. 2009 Mar; 131-56.
---------------------------------------------------------------------------

    Section 1833(t)(17)(C)(i) of the Act requires the Secretary to 
develop measures appropriate for the measurement of the quality of care 
furnished by hospitals in outpatient settings, that these measures 
reflect consensus among affected parties and, to the extent feasible 
and practicable, that these measures include measures set forth by one 
or more national consensus building entities. Because this measure is 
NQF-endorsed, we believe that this measure meets the requirement of 
reflecting consensus among affected parties. However, we note that 
consensus among affected parties can be reflected through means other 
than NQF endorsement. As discussed above, this measure is appropriate 
for measuring quality of care in the hospital outpatient departments 
which serve many patients with diabetes who are at risk for kidney 
diseases.
    Early urine screenings for microalbumin may prevent kidney disease 
from worsening to ESRD. This NQF-endorsed measure measures the 
percentage of adult diabetic patients ages 18-75 years with at least 
one test for microalbumin during the measurement year or who had 
evidence of medical attention for existing nephropathy (diagnosis of 
nephropathy or documentation of microalbuminuria or albuminuria). The 
specifications for this measure are located in Appendix A (beginning 
page A-60) of the 2008 NQF Report titled ``National Voluntary Consensus 
Standards for Ambulatory Care--Part 1'' available at the following 
link: http://www.qualityforum.org/Publications/2008/03/National_Voluntary_Consensus_Standards_for_Ambulatory_Care%E2%80%93Part_1.aspx. We invite public comment on this proposed measure.
(6) Proposed Cardiac Rehabilitation Measure: Patient Referral From an 
Outpatient Setting (NQF 0643)
    Cardiac rehabilitation improves the quality of life, reduces 
modifiable cardiovascular risk factors, enhances adherence to 
medications, and lowers

[[Page 42320]]

morbidity and mortality.\12\ Despite these benefits, cardiac 
rehabilitation is significantly underutilized by patients with heart 
disease and there is significant geographical variation in referral 
rates and lower use in women, non-whites, older patients and patients 
on Medicaid.\13\ A recent study of Medicare beneficiaries, using 70,040 
matched pairs of patients hospitalized for coronary conditions or 
revascularization procedures, found that mortality rates were 21 
percent to 34 percent lower in cardiac rehabilitation users compared to 
nonusers.\14\ Evidence from registries which include a cardiac 
rehabilitation performance measure indicated that only about 18 percent 
of eligible patients were referred to cardiac rehabilitation.\15\ Under 
our regulations, 42 CFR 410.49, cardiac rehabilitation is covered for 
patients who have had one or more of the following: an acute myocardial 
infarction within the preceding 12 months, current stable angina, 
individuals who have undergone coronary bypass surgery, a percutaneous 
coronary intervention or coronary stenting, heart valve repair or 
replacement, or a heart-lung transplant.
---------------------------------------------------------------------------

    \12\ Wenger, N.K.: Current status of cardiac rehabilitation. J. 
Am Coll Cardiol 2008; 51:1619-1631.
    \13\ Suaya, J.A., Shepard, D.S., Normand, S.L., et al.: Use of 
cardiac rehabilitation by Medicare beneficiaries after myocardial 
infarction or coronary bypass surgery. Circulation. 2007; 116:1653-
62.
    \14\ Suaya, J.A., Stason, W.B.; Ades, P.A., et al.: Cardiac 
rehabilitation and survival in older coronary patients. J. Am Coll 
Cardiol. 2009;54:25-33.
    \15\ Chan, P.S., Oetgen, W.J., Buchanan, D., Mitchell, K., et 
al.: Cardiac performance measure compliance on outpatients: the 
American College of Cardiology and National Cardiovascular Data 
Registry's PINNACLE (Practice Innovation and Clinical Excellence) 
program. J. Am Coll Cardiol 2010;561(1): 8-14.
---------------------------------------------------------------------------

    In May 2010, the NQF endorsed two cardiac rehabilitation referral 
performance measures as part of the call for care coordination 
performance measures. These measures are: (1) Cardiac Rehabilitation: 
Patient Referral From an Inpatient Setting (NQF 0642)--The 
percentage of patients admitted to the hospital with a qualifying 
cardiovascular disease (CVD) event who are referred to an early 
outpatient cardiac rehabilitation/secondary prevention program; and (2) 
Cardiac Rehabilitation: Patient Referral From an Outpatient Setting 
(NQF 0643)--The percentage of patients evaluated in an 
outpatient setting who in the previous 12 months experienced an acute 
myocardial infarction or chronic stable angina or who have undergone 
coronary artery bypass (CABG) surgery, a percutaneous coronary 
intervention (PCI), cardiac valve surgery (CVS), or cardiac 
transplantation who have not already participated in an early 
outpatient cardiac rehabilitation/secondary prevention program for the 
qualifying event and who are referred to an early outpatient cardiac 
rehabilitation/secondary prevention program unless there is a 
documented medical or patient oriented reason why a referral was not 
made. We are proposing to adopt the second (NQF 0643) of these 
measures for the CY 2014 Hospital OQR Program. The measure 
specifications are located in Appendix A (Pages A4 and A5) of the 2010 
NQF consensus report entitled '' Preferred Practices and Performance 
Measures for Measuring and Reporting Care Coordination'' which is 
available at the following link: http://www.qualityforum.org/Publications/2010/10/Preferred_Practices_and_Performance_Measures_for_Measuring_and_Reporting_Care_Coordination.aspx.
    This proposed measure targets patients who have experienced a 
qualifying cardiovascular event. These patients are commonly seen in 
hospital outpatient departments and, for this reason, we believe that 
the proposed measure is appropriate for the measurement of the quality 
of care (including medication errors) furnished by hospitals in 
outpatient settings as required under section 1833(t)(17)(C)(i) of the 
Act. The measure also is NQF-endorsed, and therefore meets the 
requirement that measures selected for the program ``reflect consensus 
among affected parties and, to the extent feasible and practicable, 
that these measures include measures set forth by one or more national 
consensus building entities'' under section 1833(t)(17)(C)(i) of the 
Act.
    We are proposing to adopt the NQF-endorsed Cardiac Rehabilitation 
Patient Referral from an Outpatient Setting measure for CY 2014 payment 
determination. The goal of this measure is to improve the delivery of 
cardiac care in order to reduce cardiovascular mortality and morbidity 
and optimize the health of patients suffering from CVD.
    We invite public comment on this proposed measure.
c. Proposed New Structural Measures
    For the CY 2014 payment determination, we are proposing to add two 
structural measures: 1) Safe Surgery Checklist Use; and 2) Hospital 
Outpatient Volume for Selected Outpatient Surgical Procedures. In 
general, structural measures assess the characteristics and capacity of 
the provider to deliver quality health care.
(1) Proposed Safe Surgery Checklist Use Measure
    This proposed structural measure assesses whether a hospital 
outpatient department utilizes a Safe Surgery checklist that assesses 
whether effective communication and safe practices are performed during 
three distinct perioperative periods: (1) the period prior to the 
administration of anesthesia; (2) the period prior to skin incision; 
and (3) the period of closure of incision and prior to the patient 
leaving the operating room. The use of such checklists has been 
credited with dramatic decreases in preventable harm, complications and 
post-surgical mortality.\16\ In November 2010, the New England Journal 
of Medicine (NEJM) published a study concluding that surgical 
complications were reduced by one-third, and mortality by nearly half, 
when a safe surgery checklist was used.\17\
---------------------------------------------------------------------------

    \16\ Haynes, A.B.; Weiser, T.G.; Berry, W.G. et. al (2009). ``A 
Surgical Safety Checklist to Reduce Morbidity and Mortality in a 
Global Population.''. New England Journal of Medicine. 360: 491-499.
    \17\ de Vries En, Prins HA, Crolla RMPH, et al. Effect of a 
comprehensive surgical safety system on patient outcomes. N Engl J 
Med 2010;363: 1928-37.
---------------------------------------------------------------------------

    We believe that effective communication and the use of safe 
surgical practices during surgical procedures will significantly reduce 
preventable surgical deaths and complications. For example, mistakes in 
surgery can be prevented by ensuring that the correct surgery is 
performed on the correct patient and at the correct place on the 
patient's body.\18\ A safe surgery checklist would also reduce the 
potential for human error, which we believe would increase the safety 
of the surgical environment.
---------------------------------------------------------------------------

    \18\ Hospital National Patient Safety Goals. The Joint 
Commission Accreditation Hospital Manual, 2011. http://www.jointcommission.org/standards_information/npsgs.aspx
---------------------------------------------------------------------------

    The safe surgery checklists of which we are aware typically include 
safe surgery practices corresponding to three critical perioperative 
periods: the period prior to the administration of anesthesia, the 
period prior to skin incision, and the period of closure of incision 
and prior to the patient leaving the operating room. Some examples of 
safe surgery practices that can be performed during each of these three 
perioperative periods are shown in the table below:

[[Page 42321]]

----------------------------------------------------------------------------------------------------------------
                                                                               Third critical point (period of
 First critical point (period prior    Second critical point (period prior    closure of incision and prior to
    to administering anesthesia)                to skin incision)            patient leaving the operating room)
----------------------------------------------------------------------------------------------------------------
 Verbal confirmation of        Confirm surgical team         Confirm the procedure.
 patient identity.                     members and roles.                    Complete count of surgical
 Mark surgical site.           Confirm patient identity,     instruments and accessories.
 Check anesthesia machine/     procedure, and surgical incision      Identify key patient
 medication.                           site.                                 concerns for recovery and
 Assessment of allergies,      Administration of             management of the patient.
 airway and aspiration risk.           antibiotic prophylaxis within 60
                                       minutes before incision.
                                       Communication among
                                       surgical team members of
                                       anticipated critical events.
                                       Display of essential
                                       imaging as appropriate.
----------------------------------------------------------------------------------------------------------------

    One example of a checklist that lists safe surgery practices during 
each of these three perioperative periods is the World Health 
Organization Surgical Safety Checklist, which was adopted by The World 
Federation of Societies of Anesthesiologists as an international 
standard of practice. This checklist can be found at: http://www.who.int/patientsafety/safesurgery/ss_checklist/en/index.html.
    The adoption of a structural measure that assesses Safe Surgery 
Checklist use would align our patient safety initiatives with those of 
several surgical specialty societies including: The American College of 
Surgeons' Nora Institute for Patient Safety, the American Society of 
Anesthesiologists, The Joint Commission, the National Association for 
Healthcare Quality and the Association of periOperative Registered 
Nurses (AORN). For this proposed structural measure, a hospital 
outpatient department would indicate whether or not it uses a safe 
surgery checklist for its surgical procedures that includes safe 
surgery practices during each of the three critical perioperative 
periods discussed above. The measure would assess whether the hospital 
uses a safe surgery checklist in the hospital outpatient department for 
surgical procedures, but would not require a hospital to report whether 
it uses a checklist in connection with any individual outpatient 
procedures.
    The proposed Safe Surgery Checklist structural measure is not NQF-
endorsed. However, we believe that consensus among affected parties can 
be reflected through means other than NQF endorsement including: 
consensus achieved during the measure development process; consensus 
shown through broad acceptance and use of measures; and consensus 
through public comment. The proposed safe surgery checklist measure 
assesses the adoption of a best practice for surgical care that is 
broadly accepted and in widespread use among affected parties. In 
addition to being adopted by The World Federal of Societies of 
Anesthesiologists, the use of a safe surgery checklist is one of the 
safe surgery principles endorsed by the Council on Surgical and 
Perioperative Safety, which is comprised of the American Association of 
Nurse Anesthetists, American College of Surgeons, American Association 
of Surgical Physician Assistants, American Society of 
Anesthesiologists, American Society of PeriAnesthesia Nurses, AORN, and 
Association of Surgical Technologists. Two State agencies (Oregon, 
South Carolina), the Veterans Health Administration,\19\ numerous 
hospital systems, State hospital associations (such as California, and 
South Carolina), national accrediting organizations and large private 
insurers have endorsed the use of a safe surgery checklist as a best 
practice for reducing morbidity, mortality, and medical 
errors.20, 21 Because the use of a safe surgery checklist is 
a widely accepted best practice for surgical care, we believe that the 
proposed structural measure of Safe Surgery Checklist use reflects 
consensus among affected parties. We also note that The Joint 
Commission has included safe surgery checklist practices among those to 
be used to achieve National Patient Safety Goals adopted for 2011 for 
surgeries performed in ambulatory settings and hospitals.
---------------------------------------------------------------------------

    \19\ Neily, J; Mills, PD, Young-Xu, Y. (2010). ``Association 
between implementation of a Medical Team Training Program and 
Surgical Mortality''. JAMA. 304 (15): 1693-1700.
    \20\ Haynes, AB; Weiser, TG; Berry, WR et al (2009) ``A Surgical 
Safety Checklist to Reduce Morbidity and Mortality in a Global 
Population''. NEJM. 360:491-499.
    \21\ Birkmeyer, JD (2010) ``Strategies for Improving Surgical 
Quality--Checklists and Beyond.'' NEJM. 363: 1963-1965.
---------------------------------------------------------------------------

    For CY 2014 payment determination, we are proposing that data 
collection for this structural measure for hospital outpatient 
departments will be from July 1, 2013 through August 15, 2013 for the 
time period January 1, 2012 through December 31, 2012. These data will 
be collected via a Web-based tool available on the QualityNet Web site 
that is currently employed for the collection of structural measures 
for the Hospital IQR Program and the Hospital OQR Program. We invite 
public comments on our proposal to add this new structural measure to 
the CY 2014 Hospital OQR Program measure set.
(2) Proposed Hospital Outpatient Department Volume for Selected 
Outpatient Surgical Procedures Measure
    There is substantial evidence in recent peer-reviewed clinical 
literature that volume of surgical procedures, particularly of high 
risk surgical procedures, is related to better patient outcomes, 
including decreased surgical errors and mortality 
[1], [2], [3]. This may be attributable to greater 
experience and/or surgical skill, greater comfort with and, hence, 
likelihood of application of standardized best practices, and increased 
experience in monitoring and management of surgical patients for the 
particular procedure. For this reason, the National Quality Forum has 
previously endorsed measures of total all-patient surgical volume for 
Isolated CABG and Valve Surgeries (NQF 0124), Percutaneous 
Coronary Intervention (PCI) (NQF 0165), Pediatric Heart 
Surgery (NQF 0340), Abdominal Aortic Aneurism Repair (NQF 
357), Esophageal Resection (0361), and Pancreatic 
Resection (NQF 0366). Additionally, many consumer-oriented Web 
sites that display health care quality information required to be 
reported under State law (California, New York, Texas, Washington, 
Florida, Illinois, Michigan, Oregon) and private organizations 
(Leapfrog Group, U.S. News & World Report) are reporting procedure 
volume, in addition to provider performance on surgical process (SCIP 
measures) and outcome measures (SSI, Patient Safety

[[Page 42322]]

Indicators, and Mortality), in order to provide more context to 
consumers choosing a health care provider. The currently NQF-endorsed 
measures of procedure volume (noted above) relate to surgeries 
performed only in inpatient settings, and would not be applicable to 
the types of procedures approved to be performed in HOPDs and ASCs.
---------------------------------------------------------------------------

    \[1]\ Livingston, E.H.; Cao, J ``Procedure Volume as a Predictor 
of Surgical Outcomes''. JAMA. 2010;304(1):95-97.
    \[2]\ David R. Flum, D.R.; Salem, L.; Elrod, J.B.; Dellinger, 
E.P.; Cheadle, A. Chan, L. ``Early Mortality Among Medicare 
Beneficiaries Undergoing Bariatric Surgical Procedures''. JAMA. 
2005;294(15):1903-1908.
    \[3]\ Schrag, D; Cramer, L.D.; Bach, P.B.; Cohen, A.M.; Warren, 
J.L.; Begg, C.B ``Influence of Hospital Procedure Volume on Outcomes 
Following Surgery for Colon Cancer'' JAMA. 2000; 284 (23): 3028-
3035.
---------------------------------------------------------------------------

    The table below, which shows the proportion of procedures during 
calendar year 2010 performed in hospital outpatient departments 
stratified by broad categories, reveals that most hospital outpatient 
procedures (99%) fall into one of 8 categories: Cardiovascular, Eye, 
Gastrointestinal, Genitourinary, Musculoskeletal, Nervous System, 
Respiratory, and Skin.

                    CY 2010 Hospital Outpatient Data
------------------------------------------------------------------------
                                                            Percent of
                   Procedure category                     total services
------------------------------------------------------------------------
Cardiovascular..........................................           75.50
Chest...................................................            0.00
Ear.....................................................            0.20
Endocrine...............................................            0.10
Eye.....................................................            1.70
Gastrointestinal........................................            5.70
Genitourinary...........................................            2.70
Hemic & Lymphatic.......................................            0.30
Maternity...............................................            0.00
Musculoskeletal.........................................            3.80
Nervous System..........................................            2.80
Radiology...............................................            0.10
Respiratory.............................................            1.00
Skin....................................................            6.20
                                                         ---------------
    Total...............................................          100.00
------------------------------------------------------------------------

    Because surgical volume is associated with better quality, and 
surgical procedures are performed in hospital outpatient departments, 
we believe that surgical volume is appropriate for measuring the 
quality of these eight categories of surgical procedures performed in 
an HOPD. For the CY 2014 payment determination, we are proposing that 
HOPDs would report all-patient volume data with respect to these eight 
categories between the dates July 1, 2013 and August 15, 2013 with 
respect to the time period January 1, 2012 through December 31, 2012. 
In other words, under this proposal, an HOPD would report its CY 2012 
all-patient volume data for these eight categories of procedures during 
the 45 day window of July 1, 2013 to August 15, 2013. The table below 
lists the specific HCPCS codes for each of the 8 procedure categories 
for which hospitals would be required to report the all-patient volume 
data. Like the other structural measures in the Hospital OQR program, 
data on this proposed measure would be collected via an online Web-
based tool that will be made available to HOPDs via the QualityNet Web 
site.
    We invite public comment on this proposal.
    In summary, for the CY 2014 payment determination, in addition to 
the 23 measures we previously adopted in the CY 2011 OPPS/ASC final 
with comment period, we are proposing to adopt 1 new NHSN HAI measure, 
6 additional new chart-abstracted measures, and 2 new structural 
measures. With respect to the proposed surgical site infection HAI 
measure, HOPDs would be required to report the data to the NHSN 
beginning with January 1, 2013 to through June 30, 2013 infection 
events and would be required to use the procedures set out by the NHSN. 
We are proposing that submission of data on the five proposed diabetes 
measures and the proposed cardiac rehabilitation measure would begin 
with first quarter CY 2013 (January 1, 2013 to March 31, 2013) 
encounters. With respect to the proposed structural measures, we are 
proposing that HOPDs submit data between July 1, 2013 and August 15, 
2013 with respect to a calendar year 2012 reporting time period.
    We invite public comments on these proposals for the CY 2014 
payment determination. The proposed complete measure set for the 
Hospital OQR Program CY 2014 payment determination, including the 
measures we adopted in the CY 2011 OPPS/ASC final rule with comment 
period, is reflected in the table below.

 CY 2014 Hospital OQR Program Measure Set Reflecting Measures Previously
    Adopted and the Proposed Addition of 1 NHSN HAI Measure, 6 Chart-
             Abstracted Measures, and 2 Structural Measures
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
OP-1: Median Time to Fibrinolysis.
OP-2: Fibrinolytic Therapy Received Within 30 Minutes.
OP-3: Median Time to Transfer to Another Facility for Acute Coronary
 Intervention.
OP-4: Aspirin at Arrival.
OP-5: Median Time to ECG.
OP-6: Timing of Antibiotic Prophylaxis.
OP-7: Prophylactic Antibiotic Selection for Surgical Patients.
OP-8: MRI Lumbar Spine for Low Back Pain.
OP-9: Mammography Follow-up Rates.
OP-10: Abdomen CT--Use of Contrast Material.
OP-11: Thorax CT--Use of Contrast Material.
OP-12: The Ability for Providers with HIT to Receive. Laboratory Data
 Electronically Directly into their Qualified/Certified EHR System as
 Discrete Searchable Data.*
OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac
 Low Risk Surgery.*
OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus
 Computed Tomography (CT).*
OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department
 for Atraumatic Headache.*
OP-16: Troponin Results for Emergency Department acute myocardial
 infarction (AMI) patients or chest pain patients (with Probable Cardiac
 Chest Pain) Received Within 60 minutes of Arrival.**
OP-17: Tracking Clinical Results between Visits.**
OP-18: Median Time from ED Arrival to ED Departure for Discharged ED
 Patients.**
OP-19: Transition Record with Specified Elements Received by Discharged
 Patients.**
OP-20: Door to Diagnostic Evaluation by a Qualified Medical
 Professional.**
OP-21: ED-Median Time to Pain Management for Long Bone Fracture.**
OP-22: ED-Patient Left Without Being Seen.**
OP-23: ED-Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic
 Stroke who Received Head CT Scan Interpretation Within 45 minutes of
 Arrival.**
OP-24: Surgical Site Infection.***
OP-25: Diabetes: Hemoglobin A1c Management.***
OP-26: Diabetes Measure Pair: A Lipid management: low density
 lipoprotein cholesterol (LDL-C) 0431). This measure is currently collected by the 
CDC via the NHSN.
    Rates of serious illness and death resulting from influenza and its 
complications are increased in high-risk populations such as persons 
over 50 years or under four years of age, and persons of any age who 
have underlying conditions that put them at an increased risk. HCP can 
acquire influenza from patients and can transmit influenza to patients 
and other HCP. Many HCP provide care for, or are in frequent contact 
with, patients with influenza or patients at high risk for 
complications of influenza. The involvement of HCP in influenza 
transmission has been a long-standing concern.22 23 24
---------------------------------------------------------------------------

    \22\ Maltezou, H.C., Drancourt, M.: Nosocomial influenza in 
children. Journal of Hospital Infection 2003; 55:83-91
    \23\ Hurley, J.C., Flockhart, S.: An influenza outbreak in a 
regional residential facility. Journal of Infection Prevention 2010; 
11:58-61
    \24\ Salgado, C.D., Farr, B.M., Hall, K.K., Hayden, F.G.: 
Influenza in the acute hospital setting. The Lancet Infectious 
Diseases 2002; 2:145-155.
---------------------------------------------------------------------------

    Vaccination is an effective preventive measure against influenza, 
and can prevent many illnesses, deaths, and losses in productivity.\25\ 
HCP are considered a high priority for expanding influenza vaccine use. 
Achieving and sustaining high influenza vaccination coverage among HCP 
is intended to help protect HCP and their patients and reduce disease 
burden and healthcare costs. Results of several studies indicate that 
higher vaccination coverage among HCP is associated with lower 
incidence of nosocomial influenza.26 27 28 Such findings 
have led some to call for mandatory influenza vaccination of 
HCP.29 30 31 32 33
---------------------------------------------------------------------------

    \25\ Wilde, J.A., McMillan, J.A., Serwint, J., Butta, J., 
O'Riordan, M.A., Steinhoff, M.C.: Effectiveness of influenza vaccine 
in health care professionals: a randomized trial. The Journal of the 
American Medical Association 1999; 281:908-913.
    \26\ Salgado, C.D., Giannetta, E.T., Hayden, F.G., Farr, B.M.: 
Preventing influenza by improving the vaccine acceptance rate of 
clinicians. Infection Control and Hospital Epidemiology 2004; 25: 
923-928.
    \27\ Potter, J., Stott, D.J., Roberts, M.A., et al.: Influenza 
vaccination of health-care workers in long-term-care hospitals 
reduces the mortality of elderly patients. Journal of Infectious 
Diseases 1997; 175:1-6.
    \28\ Hayward, A.C., Harling, R., Wetten, S., et al.: 
Effectiveness of an influenza vaccine programme for care home staff 
to prevent death, morbidity, and health service use among residents: 
cluster randomised controlled trial. British Medical Journal 2006; 
333:1241-1246.
    \29\ Talbot, T.R., Bradley, S.F., Cosgrove, S.E., et al.: SHEA 
position paper: Influenza vaccination of healthcare workers and 
vaccine allocation for healthcare workers during vaccine shortages. 
Infection Control and Hospital Epidemiology 2005; 26:882-890
    \30\ American College of Physicians (ACP), ACP policy on 
influenza vaccination of health care workers. http://www.acponline.org/running_practice/quality_improvement/projects/adult_immunization/flu_hcw.pdf.
    \31\ Greene, L.R., Cain, T.A., Dolan, S.A. et al.: APIC position 
paper: influenza immunization of healthcare personnel. Association 
of Professionals in Infection Control (APIC). November 2008.http://
www.apic.org/Content/NavigationMenu/PracticeGuidance/Topics/Influenza/APIC_Position_Paper_Influenza_11_7_08final_revised.pdfhttp://www.apic.org/Content/NavigationMenu/PracticeGuidance/Topics/Influenza/APIC_Position_Paper_Influenza_11_7_08final_revised.pdf.
    \32\ National Patient Safety Foundation (NPSF), Mandatory flu 
vaccinations for healthcare workers. Press Release, November 18, 
2009. http://www.npsf.org/pr/pressrel/2009-11-18.php.
    \33\ Infectious Diseases Society of America (IDSA), IDSA policy 
on mandatory immunization of health care workers against seasonal 
and 2009 H1N1 influenza. Infectious Diseases Society of America 
(IDSA). September 30, 2009. http://www.idsociety.org/HCWimmunization/.
---------------------------------------------------------------------------

    Until recently, vaccination coverage among HCP has been well below 
the national Healthy People 2010 target of 60 percent,\34\ but 
preliminary data suggest 62 percent of HCP reported receiving seasonal 
influenza vaccine in 2009-2010.\35\ Only 37 percent reported

[[Page 42324]]

receiving the 2009 pandemic A/H1N1 vaccine.\36\
---------------------------------------------------------------------------

    \34\ Walker, F.J., Singleton, J.A., Lu, P., Wooten, K.G., 
Strikas, R.A.: Influenza vaccination of healthcare workers in the 
United States, 1989-2002. Infection Control and Hospital 
Epidemiology 2006; 27:257-265.
    \35\ http://www.cdc.gov/mmwr/preview/mmwrhtml/rr55e209a1.htm 
Influenza Vaccination of Health-Care Personnel.
    Recommendations of the Healthcare Infection Control Practices 
Advisory Committee (HICPAC) and the Advisory Committee on 
Immunization Practices.
    \36\ Centers for Disease Control and Prevention., Interim 
results: Influenza A (H1N1) 2009 and Monovalent Seasonal Influenza 
Vaccination Coverage Among Health-Care Personnel--United States 
August 2009- January 2010. Morbidity and Mortality Weekly Report 
(MMWR); 59:357-362. Available at: http://www.cdc.gov/mmwr/preview/mmwrhtml/mm5912a1.htm.
---------------------------------------------------------------------------

    HCP refers to all personnel working in healthcare settings who have 
the potential for exposure to patients and/or to infectious materials, 
including body substances, contaminated medical supplies and equipment, 
contaminated environmental surfaces, or contaminated air.\37\ HCP may 
include (but are not limited to) physicians, nurses, nursing 
assistants, therapists, technicians, emergency medical service 
personnel, dental personnel, pharmacists, laboratory personnel, autopsy 
personnel, students and trainees, contractual staff not employed by the 
healthcare facility, and persons (for example, clerical, dietary, 
house-keeping, laundry, security, maintenance, billing, and volunteers) 
not directly involved in patient care but potentially exposed to 
infectious agents that can be transmitted to and from HCP and patients. 
Settings in which HCP may work include, but are not limited to, acute 
care hospitals, long-term care facilities, skilled nursing facilities, 
rehabilitation centers, physicians' offices, urgent care centers, 
outpatient clinics, home health agencies, and emergency medical 
services.
---------------------------------------------------------------------------

    \37\ Adapted from: Pearson ML., Bridges CB., Harper SA.,: 
Influenza vaccination of health-care personnel: Recommendations of 
the Healthcare Infection Control Practices Advisory Committee 
(HICPAC) and the Advisory Committee on Immunization Practices 
(ACIP). Morbidity and Mortality Weekly Report (MMWR) 2006; 55:1-16. 
Available at: http://www.cdc.gov/mmwr/preview/mmwrhtml/rr5502a1.htm.
---------------------------------------------------------------------------

    Currently, four States have ``offer'' laws for influenza 
vaccination of HCP, meaning that vaccine must be offered to HCP by 
healthcare facilities; and three States (Alabama, California, and New 
Hampshire) have ``ensure'' laws for influenza vaccination of HCP, 
meaning that vaccination of non-immune HCP is mandatory in the absence 
of a specified exemption or refusal; and, additionally, numerous 
hospitals and other healthcare facilities have established policies 
requiring mandatory influenza vaccination of their HCP.\38\
---------------------------------------------------------------------------

    \38\ For additional information regarding healthcare facilities' 
influenza vaccine policies, please see: http://www.immunize.org/honor%2Droll/.http://www.immunize.org/honor%2Droll/.
---------------------------------------------------------------------------

    Currently, no State requires that hospitals report this measure to 
NHSN. However, approximately 13 hospitals (including long term acute 
care and rehabilitation), outpatient hemodialysis centers, long term 
care facilities, and ambulatory surgical centers are currently 
reporting HCP immunization data to NHSN. In September 2009, CDC 
released the Healthcare Personnel Safety (HPS) Component of NHSN, which 
complements Patient Safety and Biovigilance components available in 
NHSN. The HPS Component replaced CDC's National Surveillance System for 
Health Care Workers (NaSH) and is comprised of two modules: the Blood/
Body Fluid Exposure Module and the Influenza Vaccination and Management 
and Exposure Module.\39\ Currently, participation in either module is 
voluntary. The current Influenza Vaccination and Management and 
Exposure Module may soon offer options for healthcare facilities to 
submit vaccination summary data. NHSN plans to partner with vendor-
based surveillance systems to permit periodic data extractions into 
NHSN.
---------------------------------------------------------------------------

    \39\ Available at: http://www.cdc.gov/nhsn/hps.htmlhttp://www.cdc.gov/nhsn/hps.html.
---------------------------------------------------------------------------

    The modules feature basic, custom, and advanced analysis 
capabilities available in real-time, which allow individual healthcare 
facilities to compile and analyze their own data, as well as benchmark 
these results to aggregate NHSN estimates. The HPS Component can assist 
participating facilities in developing surveillance and analysis 
capabilities to permit the timely recognition of HCP safety problems 
and prompt interventions with appropriate measures. Influenza 
vaccination data submitted to CDC will ultimately capture regional 
trends on the yearly uptake of the vaccine, prophylaxis and treatment 
for healthcare personnel, as well as the elements within yearly 
influenza campaigns that succeed or require improvement. At the State 
and national levels, the HPS Component will aid in monitoring rates and 
trends.
    Due to the significant impact of HCP influenza vaccination on 
patient outcomes, we believe this measure is appropriate for measuring 
the quality of care in hospital outpatient departments. Healthcare 
Personnel (HCP) Influenza Vaccination is one of the HAI measures that 
we proposed to adopt for the FY 2015 Hospital IQR Program in the FY 
2012 IPPS/LTCH PPS proposed rule. This measure assesses the percentage 
of healthcare personnel who have been immunized for influenza during 
the flu season. The specifications for this measure are available at 
http://www.cdc.gov/nhsn/PDFs/HSPmanual/HPS_Manual.pdf.
    The proposed HCP Influenza Vaccination measure is NQF-endorsed for 
the hospital setting and applies to the hospital outpatient setting. 
Therefore, this measure meets the requirement for measure selection 
under section 1833(t)(17)(C)(i) of the Act. We are proposing to adopt 
the Influenza Vaccination Coverage among Healthcare Personnel measure 
that is collected by the CDC via the NHSN. The NHSN proposed reporting 
mechanism for this proposed HAI measure is discussed in greater detail 
in section XIV.C.2.a. of this proposed rule. Data submission for this 
NHSN proposed measure would relate to immunizations from October 1, 
2013 through March 31, 2014 for the CY 2015 payment determination. We 
are proposing that hospital outpatient departments use the NHSN 
infrastructure and protocol to report the measure for Hospital OQR 
purposes. We invite public comment on our proposal to adopt this HAI 
measure into the Hospital OQR Program for the CY 2015 payment 
determination.

    Proposed Hospital OQR Program Measure Set for the CY 2015 Payment
                              Determination
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
OP-1: Median Time to Fibrinolysis.
OP-2: Fibrinolytic Therapy Received Within 30 Minutes.
OP-3: Median Time to Transfer to Another Facility for Acute Coronary
 Intervention.
OP-4: Aspirin at Arrival.
OP-5: Median Time to ECG.
OP-6: Timing of Antibiotic Prophylaxis.
OP-7: Prophylactic Antibiotic Selection for Surgical Patients.
OP-8: MRI Lumbar Spine for Low Back Pain.
OP-9: Mammography Follow-up Rates.
OP-10: Abdomen CT--Use of Contrast Material.
OP-11: Thorax CT--Use of Contrast Material.

[[Page 42325]]

 
OP-12: The Ability for Providers with HIT to Receive Laboratory Data
 Electronically Directly into their Qualified/Certified EHR System as
 Discrete Searchable Data.*
OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac
 Low Risk Surgery.*
OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus
 Computed Tomography (CT).*
OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department
 for Atraumatic Headache.*
OP-16: Troponin Results for Emergency Department acute myocardial
 infarction (AMI) patients or chest pain patients (with Probable Cardiac
 Chest Pain) Received Within 60 minutes of Arrival.**
OP-17: Tracking Clinical Results between Visits.**
OP-18: Median Time from ED Arrival to ED Departure for Discharged ED
 Patients.**
OP-19: Transition Record with Specified Elements Received by Discharged
 Patients.**
OP-20: Door to Diagnostic Evaluation by a Qualified Medical
 Professional.**
OP-21: ED-Median Time to Pain Management for Long Bone Fracture.**
OP-22: ED-Patient Left Without Being Seen.**
OP-23: ED-Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic
 Stroke who Received Head CT Scan .Interpretation Within 45 minutes of
 Arrival.**
OP-24: Surgical Site Infection (via NHSN).***
OP-25: Diabetes: Hemoglobin A1c Management.***
OP-26: Diabetes Measure Pair: A Lipid management: low density
 lipoprotein cholesterol (LDL-C) groups and the CAHPS Surgical Care 
Survey, sponsored and submitted by the American College of Surgeons 
(ACS) and the Surgical Quality Alliance (SQA).
    We also intend to align the surgical safety measures across the 
HOPD and ASC settings and would seek to utilize comparable data to 
assess patient safety in these settings. We seek comment on the 
potential submission of such measures by HOPDs via quality codes 
submitted on claims in the future. We also seek comment on the 
inclusion of measures of Anesthesia related Complications in the 
Hospital OQR measurement set.

 Measures and Measurement Topics Under Consideration for Future Hospital
        OQR Program Payment Determinations Beginning With CY 2015
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Measures for future development:
Procedure Specific Measures:
    Colonoscopy and other Endoscopy measures.
    Cataract Surgery measures.
Cancer Care:
    Adjuvant Chemotherapy is Considered or Administered within 4 Months
     of Surgery to Patients Under Age 80 with AJCC III Colon Cancer.

[[Page 42326]]

 
    Adjuvant Hormonal Therapy for Patients with Breast Cancer.
    Needle Biopsy to Establish Diagnosis of Cancer Precedes Surgical
     Excision/Resection.
Heart Failure:
    Heart Failure: Angiotensin-Converting Enzyme (ACE) Inhibitor or
     Angiotensin Receptor Blocker (ARB) Therapy for Left Ventricular
     Systolic Dysfunction (LVSD)
    Heart Failure: Left Ventricular Ejection Fraction Assessment.
    Heart Failure: Combination Medical Therapy for Left Ventricular
     Systolic Dysfunction.
    Heart Failure: Beta-Blocker Therapy for Left Ventricular Systolic
     Dysfunction.
    Heart Failure: Counseling regarding Implantable Cardioverter-
     Defibrillator (ICD) Implantation for Patients with Left Ventricular
     Systolic Dysfunction on Combination Medical Therapy.
    Heart Failure: Patients with Left Ventricular Systolic Dysfunction
     on Combination Medical Therapy.
    Heart Failure: Symptom Management.
    Heart Failure: Symptom and Activity Assessment.
    Heart Failure: Patient Education.
    Heart Failure: Overuse of Echocardiography.
    Heart Failure: Post-Discharge Appointment for Heart Failure
     Patients.
Surgical Safety:
    Patient Fall.
    Patient Burn.
    Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong
     Implant.
    Hospital Transfer/Admission.
Patient Experience-of-Care:
    Consumer Assessment of Healthcare Providers and Systems (CAHPS)
     surveys for clinicians/groups.
    CAHPS Surgical Care Survey.
Anesthesia Related Complications:
    Death.
    Cardiac Arrest.
    Perioperative Myocardial Infarction.
    Anaphylaxis.
    Hyperthermia.
    Transfusion Reaction.
    Stroke, Cerebral Vascular Accident, or Coma following anesthesia.
    Visual Loss.
    Medication Error.
    Unplanned ICU admission.
    Patient intraoperative awareness.
    Unrecognized difficult airway.
    Reintubation.
    Dental Trauma.
    Perioperative aspiration.
    Vascular access complication, including vascular injury or
     pneumothorax.
    Pneumothorax following attempted vascular access or regional
     anesthesia.
    Infection following epidural or spinal anesthesia.
    Epidural hematoma following spinal or epidural anesthesia.
    High Spinal.
    Postdural puncture headache.
    Major systemic local anesthetic toxicity.
    Peripheral neurologic deficit following regional anesthesia.
    Infection following peripheral nerve block.
Additional Measurement Topics:
    NQF Serious Reportable Events in Healthcare.
    Medication Reconciliation.
    Chemotherapy.
    Post-discharge follow up.
    Post-discharge ED visit within 72 hours.
    Breast cancer detection rate.
------------------------------------------------------------------------

    We invite public comment on these measures and other topics that we 
might consider proposing to adopt beginning with the Hospital OQR 
Program CY 2015 payment determination. We also are seeking suggestions 
and rationales to support the adoption of measures and topics for the 
Hospital OQR Program which do not appear in the table above.

E. Proposed Payment Reduction for Hospitals That Fail To Meet the 
Hospital OQR Program Requirements for the CY 2012 Payment Update

1. Background
    Section 1833(t)(17)(A) of the Act, which applies to subsection (d) 
hospitals (as defined under section 1886(d)(1)(B) of the Act), requires 
that hospitals that fail to report data required to be submitted on the 
measures selected by the Secretary, in the form and manner, and at a 
time, required by the Secretary under section 1833(t)(17) of the Act, 
incur a 2.0 percentage point reduction to their OPD fee schedule 
increase factor, that is, the annual payment update factor. Section 
1833(t)(17)(A)(ii) of the Act specifies that any reduction applies only 
to the payment year involved and will not be taken into account in 
computing the

[[Page 42327]]

applicable OPD fee schedule increase factor for a subsequent payment 
year.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68769 
through 68772), we discussed how the payment reduction for failure to 
meet the administrative, data collection, and data submission 
requirements of the Hospital OQR Program affected the CY 2009 payment 
update applicable to OPPS payments for HOPD services furnished by the 
hospitals defined under section 1886(d)(1)(B) of the Act to which the 
program applies. The application of a reduced OPD fee schedule increase 
factor results in reduced national unadjusted payment rates that apply 
to certain outpatient items and services provided by hospitals that are 
required to report outpatient quality data and that fail to meet the 
Hospital OQR Program requirements. All other hospitals paid under the 
OPPS receive the full OPPS payment update without the reduction.
    The national unadjusted payment rates for many services paid under 
the OPPS equal the product of the OPPS conversion factor and the scaled 
relative weight for the APC to which the service is assigned. The OPPS 
conversion factor, which is updated annually by the OPD fee schedule 
increase factor, is used to calculate the OPPS payment rate for 
services with the following status indicators (listed in Addendum B to 
this proposed rule, which is available via the Internet on the CMS Web 
site): ``P,'' ``Q1,'' ``Q2,'' ``Q3,'' ``R,'' ``S,'' ``T,'' ``V,'' 
``U,'' or ``X.'' In the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68770), we adopted a policy that payment for all services 
assigned these status indicators would be subject to the reduction of 
the national unadjusted payment rates for applicable hospitals, with 
the exception of services assigned to New Technology APCs with assigned 
status indicator ``S'' or ``T,'' and brachytherapy sources with 
assigned status indicator ``U,'' which were paid at charges adjusted to 
cost in CY 2009. We excluded services assigned to New Technology APCs 
from the list of services subject to the reduced national unadjusted 
payment rates because the OPD fee schedule increase factor is not used 
to update the payment rates for these APCs.
    In addition, section 1833(t)(16)(C) of the Act, as amended by 
section 142 of the Medicare Improvements for Patients and Providers Act 
of 2008 (MIPPA) (Pub. L. 110-275), specifically required that 
brachytherapy sources be paid during CY 2009 on the basis of charges 
adjusted to cost, rather than under the standard OPPS methodology. 
Therefore, the reduced conversion factor also was not applicable to CY 
2009 payment for brachytherapy sources because payment would not be 
based on the OPPS conversion factor and, consequently, the payment 
rates for these services were not updated by the OPD fee schedule 
increase factor. However, in accordance with section 1833(t)(16)(C) of 
the Act, as amended by section 142 of the MIPPA, payment for 
brachytherapy sources at charges adjusted to cost expired on January 1, 
2010. Therefore, in the CY 2010 OPPS/ASC final rule with comment period 
(74 FR 60641), we finalized our CY 2010 proposal, without modification, 
to apply the reduction to payment for brachytherapy sources to 
hospitals that fail to meet the quality data reporting requirements of 
the Hospital OQR Program for brachytherapy services furnished on and 
after January 1, 2010.
    The OPD fee schedule increase factor, or market basket update, is 
an input into the OPPS conversion factor, which is used to calculate 
OPPS payment rates. To implement the requirement to reduce the market 
basket update for hospitals that fail to meet reporting requirements, 
we calculate two conversion factors: a full market basket conversion 
factor (that is, the full conversion factor), and a reduced market 
basket conversion factor (that is, the reduced conversion factor). We 
then calculate a reduction ratio by dividing the reduced conversion 
factor by the full conversion factor. We refer to this reduction ratio 
as the ``reporting ratio'' to indicate that it applies to payment for 
hospitals that fail to meet their reporting requirements. Applying this 
reporting ratio to the OPPS payment amounts results in reduced national 
unadjusted payment rates that are mathematically equivalent to the 
reduced national unadjusted payment rates that would result if we 
multiplied the scaled OPPS relative weights by the reduced conversion 
factor. To determine the reduced national unadjusted payment rates that 
applied to hospitals that failed to meet their quality reporting 
requirements for the CY 2010 OPPS, we multiply the final full national 
unadjusted payment rate in Addendum B to the CY 2010 OPPS/ASC final 
rule with comment period by the CY 2010 OPPS final reporting ratio of 
0.980 (74 FR 60642).
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68771 
through 68772), we established a policy that the Medicare beneficiary's 
minimum unadjusted copayment and national unadjusted copayment for a 
service to which a reduced national unadjusted payment rate applies 
would each equal the product of the reporting ratio and the national 
unadjusted copayment or the minimum unadjusted copayment, as 
applicable, for the service. Under this policy, we apply the reporting 
ratio to both the minimum unadjusted copayment and national unadjusted 
copayment for those hospitals that receive the payment reduction for 
failure to meet the Hospital OQR Program reporting requirements. This 
application of the reporting ratio to the national unadjusted and 
minimum unadjusted copayments is calculated according to Sec.  419.41 
of our regulations, prior to any adjustment for a hospital's failure to 
meet the quality reporting standards according to Sec.  419.43(h). 
Beneficiaries and secondary payers thereby share in the reduction of 
payments to these hospitals.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68772), we established the policy that all other applicable adjustments 
to the OPPS national unadjusted payment rates apply in those cases when 
the OPD fee schedule increase factor is reduced for hospitals that fail 
to meet the requirements of the Hospital OQR Program. For example, the 
following standard adjustments apply to the reduced national unadjusted 
payment rates: the wage index adjustment; the multiple procedure 
adjustment; the interrupted procedure adjustment; the rural sole 
community hospital adjustment; and the adjustment for devices furnished 
with full or partial credit or without cost. We believe that these 
adjustments continue to be equally applicable to payments for hospitals 
that do not meet the Hospital OQR Program requirements. Similarly, 
outlier payments will continue to be made when the criteria are met. 
For hospitals that fail to meet the quality data reporting 
requirements, the hospitals' costs are compared to the reduced payments 
for purposes of outlier eligibility and payment calculation. This 
policy conforms to current practice under the IPPS. We continued this 
policy in the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60642), and in the CY 2011 OPPS/ASC final rule with comment period (75 
FR 72099). For a complete discussion of the OPPS outlier calculation 
and eligibility criteria, we refer readers to section II.G. of this CY 
2012 OPPS/ASC proposed rule.

2. Proposed Reporting Ratio Application and Associated Adjustment 
Policy for CY 2012

    We are proposing to continue our established policy of applying the 
reduction of the OPD fee schedule increase factor through the use of a

[[Page 42328]]

reporting ratio for those hospitals that fail to meet the Hospital OQR 
Program requirements for the full CY 2012 annual payment update factor. 
For the CY 2012 OPPS, the proposed reporting ratio is 0.980, calculated 
by dividing the proposed reduced conversion factor of $68.052 by the 
proposed full conversion factor of $69.420. We are proposing to 
continue to apply the reporting ratio to all services calculated using 
the OPPS conversion factor. For the CY 2012 OPPS, we are proposing to 
apply the reporting ratio, when applicable, to all HCPCS codes to which 
we have assigned status indicators ``P,'' ``Q1,'' ``Q2,'' ``Q3,'' 
``R,'' ``S,'' ``T,'' ``V,'' ``U,'' and ``X'' (other than new technology 
APCs to which we have assigned status indicators ``S'' and ``T''). We 
are proposing to continue to exclude services paid under New Technology 
APCs. We are proposing to continue to apply the reporting ratio to the 
national unadjusted payment rates and the minimum unadjusted and 
national unadjusted copayment rates of all applicable services for 
those hospitals that fail to meet the Hospital OQR Program reporting 
requirements. We also are proposing to continue to apply all other 
applicable standard adjustments to the OPPS national unadjusted payment 
rates for hospitals that fail to meet the requirements of the Hospital 
OQR Program. Similarly, we are proposing to continue to calculate OPPS 
outlier eligibility and outlier payment based on the reduced payment 
rates for those hospitals that fail to meet the reporting requirements.
    We invite public comments on these proposals.

F. Extraordinary Circumstances Extension or Waiver for CY 2012 and 
Subsequent Years

    In our experience, there have been times when hospitals have been 
unable to submit required quality data due to extraordinary 
circumstances that are not within their control. It is our goal to not 
penalize hospitals for such circumstances and we do not want to unduly 
increase their burden during these times. Therefore, in the CY 2010 
OPPS/ASC final rule with comment period (74 FR 60046 through 60047), we 
adopted a process for hospitals to request and for CMS to grant 
extensions or waivers with respect to the reporting of required quality 
data when there are extraordinary circumstances beyond the control of 
the hospital. In the CY 2011 OPPS/ASC final rule with comment period 
(75 FR 72103), we retained these procedures with some modifications. 
For CY 2012 and subsequent years, we are proposing to retain these 
procedures with one modification. We are proposing to extend these 
procedures to the submission of medical record documentation for 
purposes of complying with our validation requirement for the Hospital 
OQR Program.
    Under this process, in the event of extraordinary circumstances, 
such as a natural disaster, not within the control of the hospital, for 
the hospital to receive consideration for an extension or waiver of the 
requirement to submit quality data or medical record documentation for 
one or more quarters, a hospital would submit to CMS a request form 
that would be made available on the QualityNet Web site. The following 
information should be noted on the form:
     Hospital CCN;
     Hospital Name;
     CEO and any other designated personnel contact 
information, including name, e-mail address, telephone number, and 
mailing address (must include a physical address, a post office box 
address is not acceptable);
     Hospital's reason for requesting an extension or waiver;
     Evidence of the impact of the extraordinary circumstances, 
including but not limited to photographs, newspaper and other media 
articles; and
     A date when the hospital would again be able to submit 
Hospital OQR data and/or medical record documentation, and a 
justification for the proposed date.
    The request form would be signed by the hospital's CEO. A request 
form would be required to be submitted within 45 days of the date that 
the extraordinary circumstance occurred.
    Following receipt of such a request, CMS would--
    (1) Provide a written acknowledgement using the contact information 
provided in the request, to the CEO and any additional designated 
hospital personnel, notifying them that the hospital's request has been 
received;
    (2) Provide a formal response to the CEO and any additional 
designated hospital personnel using the contact information provided in 
the request notifying them of our decision; and
    (3) Complete our review of any CY 2012 request and communicate our 
response within 90 days following our receipt of such a request.
    We note that we might also decide to grant waivers or extensions to 
hospitals that have not requested them when we determine that an 
extraordinary circumstance, such as an act of nature (for example, 
hurricane) affects an entire region or locale. If we make the 
determination to grant a waiver or extension to hospitals in a region 
or locale, we would communicate this decision to hospitals and vendors 
through routine communication channels, including but not limited to e-
mails and notices on the QualityNet Web site.
    We invite public comment on this proposal to retain our existing 
process for granting extraordinary circumstances extensions or waivers, 
and to extend this process to the submission of medical record 
documentation, for the Hospital OQR Program.

G. Proposed Requirements for Reporting of Hospital OQR Data for CY 2013 
and Subsequent Years

    To participate in the Hospital OQR Program, hospitals must meet 
administrative, data collection and submission, and data validation 
requirements (if applicable). Hospitals that do not meet Hospital OQR 
Program requirements, as well as hospitals not participating in the 
Program and hospitals that withdraw from the Program, will not receive 
the full OPPS payment rate update. Instead, in accordance with section 
1833(t)(17)(A) of the Act, those hospitals will receive a reduction of 
2.0 percentage points to their OPD fee schedule increase factor for the 
applicable payment year. We established the payment determination 
requirements for the CY 2012 payment update in the CY 2011 OPPS/ASC 
final rule with comment period (75 FR 72099 through 72106).
    With respect to the payment determinations for CY 2013 and 
subsequent years, we are proposing to implement the requirements listed 
below. Most of these requirements are the same as the requirements we 
implemented for the CY 2012 payment determination, with some proposed 
modifications.
1. Administrative Requirements for CY 2013 and Subsequent Years
    To participate in the Hospital OQR Program, we are proposing that 
several administrative steps be completed. These steps are the same as 
those we finalized for the CY 2012 payment determination and would 
require the hospital to:
     Identify a QualityNet security administrator who follows 
the registration process located on the QualityNet Web site (http://www.QualityNet.org) and submits the information to the appropriate CMS-
designated contractor. All CMS-designated contractors would be 
identified on the QualityNet Web site. The same person may be the 
QualityNet security administrator for both the

[[Page 42329]]

Hospital IQR Program and the Hospital OQR Program. Based on our 
experience, we believe that the QualityNet security administrator 
typically fulfills a variety of tasks related to the hospital's ability 
to participate in the Hospital OQR Program, such as: creating, 
approving, editing and/or terminating QualityNet user accounts within 
the organization; monitoring QualityNet usage to maintain proper 
security and confidentiality measures; and serving as a point of 
contact for information regarding QualityNet and the Hospital OQR 
Program. However, the main purpose of the QualityNet Administrator is 
to serve as a contact for security purposes. Because of CMS information 
systems security requirements, the hospital would be required to 
maintain a current QualityNet security administrator for as long as the 
hospital participates in the program. While only a single QualityNet 
security administrator would be required for program purposes, we 
suggest to hospitals that it may be beneficial to have more than one 
QualityNet security administrator for back-up purposes.
     Register with QualityNet, regardless of the method used 
for data submission.
     Complete and submit an online participation form if this 
form (or a paper Notice of Participation form) has not been previously 
completed, if a hospital has previously withdrawn, or if the hospital 
acquires a new CCN. For Hospital OQR Program purposes, hospitals that 
share the same CCN would be required to complete a single online 
participation form. At this time, the participation form for the 
Hospital OQR Program is separate from the participation form required 
for the Hospital IQR Program and completing a form for each program is 
required. Agreeing to participate includes acknowledging that the data 
submitted to the CMS-designated contractor would be submitted to CMS, 
shared with one or more other CMS contractors that support the 
implementation of the Hospital OQR Program, and be publicly reported.
    We are proposing to retain the procedures and update the deadlines 
for submitting the participation form which we established in the CY 
2011 OPPS/ASC final rule with comment period (75 FR 72100):
    Hospitals with Medicare acceptance dates on or after January 1 of 
the year prior to the annual payment update affected: For the CY 2013 
and subsequent years payment updates, we are proposing that any 
hospital that has a Medicare acceptance date on or after January 1 of 
the year prior to the annual payment update affected (for example, 2012 
would be the year prior to the affected CY 2013 annual payment update), 
including a new hospital and hospitals that have merged, must submit a 
completed participation form no later than 180 days from the date 
identified as its Medicare acceptance date on the CMS Certification and 
Survey Provider Enhanced Reporting (CASPER) system. Hospitals typically 
receive a package notifying them of their new CCN after they receive 
their Medicare acceptance date. The Medicare acceptance date is the 
earliest date that a hospital can receive Medicare payment for the 
services that it furnishes. Completing the participation form would 
include supplying the name and address of each hospital campus that 
shares the same CCN.
    The use of the Medicare acceptance date as beginning the timeline 
for Hospital OQR Program participation allows us to monitor more 
effectively hospital compliance with the requirement to complete a 
participation form because a hospital's Medicare acceptance date is 
readily available to CMS through its data systems. In addition, 
providing an extended time period to register for the program would 
allow newly functioning hospitals sufficient time to get their 
operations fully functional before having to collect and submit quality 
data.
    We are aware that Medicare acceptance dates may be back-dated. In 
that event, we would consider a hospital's request to allow additional 
time to elect to participate.
    Hospitals with Medicare acceptance dates before January 1 of the 
year prior to the affected annual payment update: For the CY 2013 and 
subsequent years payment update, we are proposing that any hospital 
that has a Medicare acceptance date before January 1 of the year prior 
to the affected annual payment update (for example, 2012 would be the 
year prior to the affected CY 2013 annual payment update) that is not 
currently participating in Hospital OQR and wishes to participate in 
the Hospital OQR Program must submit a participation form by March 31 
of the year prior to the affected annual payment update. We are 
proposing a deadline of March 31, because we believe it would give 
hospitals sufficient time to decide whether they wish to participate in 
the Hospital OQR Program, as well as put into place the necessary staff 
and resources to timely report data for first quarter of the year's 
services. This requirement would apply to all hospitals whether or not 
the hospital billed for payment under the OPPS.
    For the CY 2013 and subsequent years payment updates, we are 
proposing that any Hospital OQR participating hospital that wants to 
withdraw may do so at any time from January 1 to November 1 of the year 
prior to the affected annual payment update. A hospital that withdraws 
during this time period for any annual payment update would not be able 
to later sign up to participate for that payment update, would receive 
a 2.0 percentage point reduction to its OPD fee schedule increase 
factor for that year, and would be required to submit a new 
participation form in order to participate in any future year of the 
Hospital OQR Program. We note that once a hospital has submitted a 
participation form, it is considered to be an active Hospital OQR 
Program participant until such time as the hospital submits a 
withdrawal form to CMS or is designated as closed in the CMS CASPER 
system.
    We invite public comment on these proposed Hospital OQR Program 
administrative requirements for the CY 2013 and subsequent years' 
payment determinations.
2. Form, Manner, and Timing of Data Submission for CY 2013 and 
Subsequent Years
    We are proposing that, to be eligible to receive the full OPD fee 
schedule increase factor for any payment determination, hospitals must 
comply with our submission requirements for chart-abstracted data, 
population and sampling data, claims-based measure data, and structural 
quality measure data, including all-patient volume data.
a. Proposed CY 2013 and CY 2014 Data Submission Requirements for Chart-
Abstracted Measure Data Submitted Directly to CMS
    With respect to the proposed chart-abstracted measures for which 
hospitals would submit data directly to CMS, we are proposing for CY 
2013 and CY 2014 that participating hospitals submit chart-abstracted 
data for each applicable quarter by the deadline posted on the 
QualityNet Web site; there must be no lapse in data submission. For the 
CY 2013 program, we are proposing that the applicable quarters would be 
as follows: 3rd quarter CY 2011, 4th quarter CY 2011, 1st quarter CY 
2012, and 2nd quarter CY 2012. Hospitals that did not participate in 
the CY 2012 Hospital OQR Program, but would like to participate in the 
CY 2013 Hospital OQR Program, and that have a Medicare acceptance date 
on the CASPER system before January 1, 2012, would begin data 
submission with respect to 1st quarter CY 2012 encounters using the

[[Page 42330]]

CY 2013 measure set that was finalized in the CY 2012 OPPS/ASC final 
rule with comment period. For those hospitals with Medicare acceptance 
dates on or after January 1, 2012, data submission must begin with the 
first full quarter following the submission of a completed online 
participation form.
    For the CY 2014 program, we are proposing that the applicable 
quarters for previously finalized measures would be as follows: 3rd 
quarter CY 2012, 4th quarter CY 2012, 1st quarter CY 2013, and 2nd 
quarter CY 2013. With respect to our proposed measures (5 Diabetes 
measures and 1 Cardiac Rehabilitation measure), the applicable quarters 
would be 1st quarter CY 2013 and 2nd quarter CY 2013. Hospitals that 
did not participate in the CY 2013 Hospital OQR Program, but would like 
to participate in the CY 2014 Hospital OQR Program, and that have a 
Medicare acceptance date on the CASPER system before January 1, 2013, 
would begin data submission with respect to 1st quarter CY 2013 
encounters using the CY 2014 measure set that was finalized in the CY 
2013 OPPS/ASC final rule with comment period. For those hospitals with 
Medicare acceptance dates on or after January 1, 2013, data submission 
must begin with the first full quarter following the submission of a 
completed online participation form.
    We are proposing that hospitals must submit all required data 
according to the data submission schedule that is made available on the 
QualityNet Web site (https://www.QualityNet.org). This Web site meets 
or exceeds all current HIPAA requirements. Submission deadlines would 
be, in general, approximately 4 months after the last day of each 
calendar quarter. Thus, for example, the proposed submission deadline 
for data for services furnished during the first quarter of CY 2012 
(January-March, 2012) would be on or around August 1, 2012. The actual 
submission deadlines would be posted on the http://www.QualityNet.org 
Web site.
    We are proposing that hospitals submit chart-abstracted data to the 
OPPS Clinical Warehouse using either the CMS Abstraction and Reporting 
Tool for Outpatient Department (CART-OPD) measures or the tool of a 
third-party vendor that meets the measure specification requirements 
for data transmission to QualityNet.
    We are proposing that hospitals must collect Hospital OQR data from 
outpatient hospital encounters to which the required measures apply. In 
previous rulemakings, we have utilized various terms for describing the 
unit of care for outpatient hospital reporting, including encounter, 
episode, episode of care, and discharge. We note that for outpatient 
hospital services, the term encounter is explicitly used and defined in 
the Medicare Benefit Policy Manual (Pub. 100-02), Chapter 6, Section 
20.3, which states ``A hospital outpatient `encounter' is a direct 
personal contact between a patient and a physician, or other person who 
is authorized by State licensure law and, if applicable, by hospital or 
CAH staff bylaws, to order or furnish hospital services for diagnosis 
or treatment of the patient.'' For Medicare outpatient services, the 
terms episode and episode of care also are used. When discussing 
inpatient services, the Medicare Benefit Policy Manual specifically 
refers to discharges; the term encounter is not used in reference to 
inpatient services. Thus, for Hospital OQR, we are examining 
encounters, episodes, or episodes of care and would use these terms in 
connection with the Hospital OQR Program.
    We will make every effort to ensure that data elements common to 
both inpatient and outpatient settings are defined consistently for 
purposes of quality reporting (such as ``time of arrival'').
    We are proposing that hospitals must submit quality data using the 
CCN under which the care was furnished.
    To be accepted into the OPPS Clinical Warehouse and to meet data 
submission requirements, data submissions, at a minimum, must be 
timely, complete, and accurate. Data submissions are considered to be 
``timely'' when data are successfully accepted into the OPPS Clinical 
Warehouse on or before the reporting deadline. A ``complete'' 
submission would be determined based on whether the data satisfy the 
sampling criteria that are published and maintained in the Hospital OQR 
Specifications Manual, and must correspond to both the aggregate number 
of encounters submitted by a hospital and the number of Medicare claims 
the hospital submits for payment; requirements for utilizing the option 
of sampling are discussed below.
    We strongly recommend that hospitals review OPPS Clinical Warehouse 
feedback reports and the Hospital OQR Provider Participation Reports 
that are accessible through their QualityNet accounts. These reports 
enable hospitals to verify whether the data they or their vendors 
submitted were accepted into the OPPS Clinical Warehouse and the date/
time that such acceptance occurred. We also note that irrespective of 
whether a hospital submits data to the OPPS Clinical Warehouse itself 
or uses a vendor to complete the submissions, the hospital is 
responsible for ensuring that Hospital OQR requirements are met.
b. Eligibility To Voluntarily Sample and Proposed Data Submission 
Exception for Low Patient Volume for CY 2013 and Subsequent Years
    If a hospital has a sufficiently large number of eligible 
encounters with respect to a measure, the hospital has the option to 
sample those encounters and submit data only for these sampled 
encounters, rather than submitting data on all of the eligible 
encounters. This sampling scheme, which includes the minimum number of 
encounters that a hospital must have in order to sample, is set out in 
the Hospital OQR Specifications Manual at least 3 months in advance of 
each data submission deadline. We note that sampling is not required 
and hospitals may submit more cases than the minimum set by our 
sampling scheme and may submit up to all of their cases if they desire 
to do so. We changed the notification timeframe for this sampling 
scheme to at least 3 months from at least 4 months to be consistent 
with the Hospital OQR Specifications Manual release schedule. If a 
hospital chooses to sample for a particular quarter, the hospital must 
meet the sampling requirements for the required chart-abstracted 
measures that quarter.
    In addition, to reduce the burden on hospitals that treat a low 
number of patients but otherwise meet the submission requirements for a 
particular quality measure, we are proposing to continue our policy 
that hospitals that have five or fewer encounters (both Medicare and 
non-Medicare) for any measure included in a measure topic in a quarter 
would not be required to submit patient level data for the entire 
measure topic for that quarter. Even if hospitals would not be required 
to submit patient level data because they have five or fewer encounters 
(both Medicare and non-Medicare) for any measure included in a measure 
topic in a quarter, we note that they may voluntarily do so.
c. Proposed Population and Sampling Data Requirements Beginning With 
the CY 2013 Payment Determination and for Subsequent Years
    During the past three years of the Hospital OQR Program, the 
submission of population and sampling data was not required, though 
hospitals could submit, on a voluntary basis, the aggregate numbers of 
outpatient encounters which are eligible for submission under the 
Hospital OQR Program and sample size counts. These aggregated numbers 
of outpatient

[[Page 42331]]

encounters represent the number of outpatient encounters in the 
universe of all possible cases eligible for data reporting under the 
Hospital OQR Program. For the CY 2012 payment update, we proposed, but 
did not adopt, a policy to require submission of this population and 
sample size data.
    We are now proposing that beginning with the CY 2013 payment 
determination, hospitals must submit on a quarterly basis, aggregate 
population and sample size counts for Medicare and non-Medicare 
encounters for the measure populations for which chart-abstracted data 
must be submitted.
    Under this proposal, a hospital would submit on a quarterly basis 
an aggregate population and sample size count with respect to each 
measure regardless of whether any patients met the inclusion criteria 
for the measure population. For example, if a hospital did not treat 
any patients who met the inclusion criteria for a specific measure, the 
hospital would still be required to submit a zero for its quarterly 
aggregate population and sample count to meet the requirement.
    Our analysis of third quarter CY 2010 outpatient hospital submitted 
data shows that for hospitals that submitted abstracted data for 
encounters, at least 99 percent of these providers voluntarily reported 
both population and sampling data. Data completeness was also assessed 
by comparing reported Medicare cases to submitted claim counts, minimum 
encounter count thresholds based on reported population sizes, and 
minimum sample size thresholds based on reported population sizes. We 
found that less than 10 percent of hospitals differed significantly in 
their Medicare self-reported encounters versus Medicare claim counts in 
the Clinical Warehouse, and less than 20 percent did not meet case 
count or sample size minimum thresholds. Based upon this analysis, we 
believe that hospitals have had sufficient time to become familiar with 
Hospital OQR data reporting and have developed data systems necessary 
to support this proposed requirement; in fact recent data suggest that 
the vast majority of hospitals have done so.
    We are proposing that the deadlines for the reporting of aggregate 
numbers of outpatient hospital encounters and sample size counts would 
be the same as those for reporting data for chart-abstracted measures, 
and these deadlines would be posted on the data submission schedule 
that would be available on the QualityNet Web site. Hospitals would be 
permitted to submit this information prior to the deadline; this would 
allow us to advise hospitals regarding their incomplete submission 
status as appropriate and give hospitals sufficient time to make 
appropriate revisions before the data submission deadline.
    We plan to use the aggregate population and sample size data to 
assess data submission completeness to the OPPS Clinical Warehouse and 
adherence to sampling requirements for Medicare and non-Medicare 
patients.
d. Proposed Claims-Based Measure Data Requirements for the CY 2013 and 
CY 2014 Payment Determinations
    For the claims-based measures, we are proposing to calculate the 
measures using the hospital's Medicare claims data as specified in the 
Hospital OQR Specifications Manual; no additional data submission is 
required for hospitals. For the CY 2013 and CY 2014 payment updates, we 
would utilize paid Medicare FFS claims for services furnished from 
January 1, 2010 to December 31, 2010 and January 1, 2011 to December 
31, 2011, respectively.
e. Proposed Structural Measure Data Requirements for the CY 2013 and CY 
2014 Payment Determinations
    For the CY 2013 payment determination, we are proposing that 
hospitals would be required to submit data on the structural measures, 
including OP-17: Tracking Clinical Results between Visits, between July 
1, 2012 and August 15, 2012 with respect to the time period of January 
1, 2011 to December 31, 2011.
    As discussed above, we are proposing to adopt two new structural 
measures for the CY 2014 payment determination, OP-31: Safe Surgery 
Checklist Use, and OP-32: Hospital Outpatient Department Volume for 
Selected Outpatient Surgical Procedures. We are proposing that for the 
CY 2014 payment determination, hospitals would be required to submit 
data on all structural measures between July 1, 2013 and August 15, 
2013 with respect to the time period from January 1, 2012 to December 
31, 2012.
f. Proposed Data Submission Deadlines for the Proposed NHSN HAI 
Surgical Site Infection Measure for the CY 2014 Payment Determination
    As discussed above, we are proposing to adopt a new HAI measure for 
the CY 2014 payment determination: surgical site infection. We are 
proposing to use the data submission and reporting standard procedures 
that have been set forth by CDC for NHSN participation in general and 
for submission of this measure to NHSN. We refer readers to the CDC's 
NHSN Web site (http://www.cdc.gov/nhsn) for detailed data submission 
and reporting procedures. We believe that these procedures are feasible 
because they are already widely used by over 4,000 hospitals reporting 
HAI data to the NHSN. Our proposal seeks to reduce hospital burden by 
aligning CMS data submission and reporting procedures with NHSN 
procedures currently used by hospitals, including hospitals complying 
with 28 State HAI reporting requirements. The submission timeframes for 
the CY 2014 payment determination that we are proposing to use for the 
proposed HAI measure are shown below. Hospitals would be required to 
submit their quarterly data to the NHSN for Hospital OQR purposes 
according to the schedule shown in the table below (any updates to this 
schedule made by CMS will be posted on the QualityNet Web site).

     Proposed Submission Timeframe for the Proposed Surgical Site Infection Measure for the CY 2014 Payment
                                                  Determination
----------------------------------------------------------------------------------------------------------------
                                                                               Final submission deadline for
        CY 2013 Infection events              CDC-NHSN collection and       hospital OQR program CY 2014 payment
                                                  quarterly report                     determination
----------------------------------------------------------------------------------------------------------------
Q1 (Jan 1 to Mar 31, 2013)..............  January 31st to August 1st.....  August 1, 2013.
Q2 (Apr 1 to Jun 30, 2013)..............  April 30th to November 1st.....  November 1, 2013.
----------------------------------------------------------------------------------------------------------------

    Hospitals would have until the Hospital OQR final submission 
deadline to submit their quarterly data to NHSN. After the final 
Hospital OQR Program submission deadline has occurred for each CY 2013 
quarter to be used toward

[[Page 42332]]

the CY 2014 payment determination, we will obtain the hospital-specific 
calculations generated by the NHSN for the Hospital OQR Program.
g. Proposed Data Submission Requirements for OP-22, ED-Patient Left 
Without Being Seen, for the CY 2013 and CY 2014 Payment Determinations
    With respect to OP-22: ED-Patient Left Without Being Seen, we are 
proposing that hospitals would be required to submit data once for each 
of the CY 2013 and CY 2014 payment determinations via a Web-based tool 
located on the QualityNet Web site. For the CY 2013 payment 
determination, hospitals would be required to submit data between July 
1, 2012 and August 15, 2012 with respect to the time period from 
January 1, 2011 to December 31, 2011. For the CY 2014 payment 
determination, hospitals would be required to submit data between July 
1, 2013 and August 15, 2013 with respect to the time period of January 
1, 2012 to December 31, 2012.
    We invite public comment on these proposals for data collection and 
submission requirements.
3. Hospital OQR Program Validation Requirements for Chart-Abstracted 
Measure Data Submitted Directly to CMS: Proposed Data Validation 
Approach for the CY 2013 Payment Determination
a. Randomly Selected Hospitals
    Similar to our approach for the CY 2012 payment determination(75 FR 
72103 through 72106), we are proposing to validate chart-abstracted 
data submitted directly to CMS from randomly selected hospitals for the 
CY 2013 payment determination. To reduce hospital burden and to 
facilitate our efforts to reallocate resources in the event that we 
finalize the targeting proposal discussed below, for the CY 2013 
payment determination, we are proposing to reduce the number of 
randomly selected hospitals from 800 to 450. We have found that 
hospitals are consistently reporting high accuracy rates for chart-
abstracted measures and that variation among hospitals is relatively 
low. We believe that this low level of variation between hospitals will 
allow us to reduce the sample size while not diminishing our ability to 
make statistical inferences from the sample. Thus, we believe that we 
can safely reduce sample size and still have sufficient case numbers 
for purposes of validation. Because these 450 hospitals will be 
selected randomly, every Hospital OQR Program participating hospital 
will be eligible each year for validation selection. To be eligible for 
random selection for validation, a hospital must be coded as open in 
the OSCAR system at the time of selection and must have submitted at 
least 10 encounters to the OPPS Clinical Warehouse during the data 
collection period for the CY 2013 payment determination. We are 
proposing this 10 encounter minimum so that we have a sufficient sample 
size for calculating a statistically valid validation score.
b. Proposed Use of Targeting Criteria for Data Validation Selection for 
CY 2013
(1) Background
    In the CY 2011 OPPS/ASC proposed rule (75 FR 46381), we stated that 
we were considering building upon what we proposed as a validation 
approach for the Hospital OQR Program. We noted that we were 
considering, in addition to selecting a random sample of hospitals for 
validation purposes, selecting targeted hospitals based on criteria 
designed to measure whether the data these hospitals have reported 
raises a concern regarding data accuracy. Because hospitals had gained 
little experience with validation under the Hospital OQR at that time, 
we noted that we were considering this approach for possible use 
beginning with the CY 2013 payment determination. Examples of targeting 
criteria suggested for inclusion:
     Abnormal data patterns identified such as consistently 
high Hospital OQR measure denominator exclusion rates resulting in 
unexpectedly low denominator counts;
     Whether a hospital had previously failed validation;
     Whether a hospital had not been previously selected for 
validation for 2 or more consecutive years;
     Whether a hospital had low submitted case numbers relative 
to population sizes; or
     Whether a hospital had any extreme outlier values for 
submitted data elements.
    We invited comment on whether, in addition to random sampling for 
validation, we should use targeted validation and, if so, what criteria 
for targeting we should adopt.
    In the CY 2011 OPPS/ASC final rule with comment period (75 FR 
72106) we responded to the comments we received and noted that for the 
CY 2013 payment determination, Hospital OQR Program data reporting will 
have been completed for four payment determinations: CYs 2009, 2010, 
2011, and 2012. Further, hospitals will have had the opportunity to 
learn from the validation process. We also stated that we intended to 
propose to implement validation targeting criteria for CY 2013 and 
subsequent years in the CY 2012 OPPS/ASC proposed rule.
(2) Proposed Targeting Criteria for Data Validation Selection for CY 
2013
    In addition to proposing to randomly select 450 hospitals for 
validation, we are proposing to select up to an additional 50 hospitals 
based upon targeting criteria. A hospital could be selected for 
validation based on targeting criteria if it:
     Fails the validation requirement that applies to the CY 
2012 payment determination; or
     Has an outlier value for a measure based on the data it 
submits. We are proposing to define an ``outlier value'' for purposes 
of this targeting as a measure value that appears to deviate markedly 
from the measure values for other hospitals. For a normally distributed 
variable, nearly all values of the variable lie within 3 standard 
deviations of the mean; very few values lie past the 3 standard 
deviation mark. One definition of an outlier is a value that exceeds 
this threshold.\40\ In order to target very extreme values, we are 
proposing to target hospitals that greatly exceed this threshold; such 
extreme values strongly suggest that data submitted is inaccurate. 
Specifically, we are proposing to select hospitals for validation if 
their measure value for a measure is greater than 5 standard deviations 
from the mean, placing the expected occurrence of such a value outside 
of this range at 1 in 1,744,278. If more than 50 hospitals meet either 
of the above targeting criteria, then up to 50 would be selected 
randomly from this pool of hospitals.
---------------------------------------------------------------------------

    \40\ Ruan, Da, Chen, Guoguing, Kerre, Etienne E., and Wets, 
Geert, (2010), Intelligent Data Mining: Techniques and Applications, 
Studies in Computational Intelligence, Vol. 5, Page 318.
---------------------------------------------------------------------------

c. Encounter Selection
    For each selected hospital (random or targeted), we are proposing 
to validate up to 48 randomly selected patient encounters (12 per 
quarter; 48 per year) from the total number of encounters that the 
hospital successfully submitted to the OPPS Clinical Warehouse. If a 
selected hospital has submitted less than 12 encounters in one or more 
quarters, only those encounters available would be validated. For each 
selected encounter, a designated CMS contractor would request that the 
hospital submit the supporting medical record documentation that 
corresponds to the encounter.

[[Page 42333]]

    We continue to believe that validating a larger number of 
encounters per hospital for fewer hospitals at the measure level has 
several benefits. We believe that this approach is suitable for the 
Hospital OQR Program because it will: produce a more reliable estimate 
of whether a hospital's submitted data have been abstracted accurately; 
provide more statistically reliable estimates of the quality of care 
delivered in each measured hospital as well as at a national level; and 
reduce overall burden, for example in submitting validation 
documentation, because hospitals most likely will not be selected to 
undergo validation each year, and a smaller number hospitals per year 
will be selected.
    For all selected hospitals, we will not be selecting cases 
stratified by measure or topic; our interest is whether the data 
submitted by hospitals accurately reflects the care delivered and 
documented in the medical record, not what the accuracy is by measure 
or whether there are differences by measure or topic. We are proposing 
to validate data for April 1, 2011 to March 31, 2012 encounters as this 
provides a full year of the most recent data possible to use for 
purposes of completing the validation in time to make the CY 2013 
payment determinations.
d. Validation Score Calculation
    For the CY 2013 payment determination, we are proposing to use the 
validation calculation approach finalized for the CY 2012 payment 
determination with validation being done for each selected hospital. 
Specifically, we are proposing to conduct a measures level validation 
by calculating each measure within a submitted record using the 
independently abstracted data and then comparing this to the measure 
reported by the hospital; a percent agreement would then be calculated. 
We would also compare the measure category for quality measures with 
continuous units of measurement, such as time, so that for these 
measures, both the category and the measure would need to match.
    To receive the full OPPS OPD fee schedule increase factor for CY 
2013, we are proposing that hospitals must attain at least a 75 percent 
reliability score, based upon the proposed validation process. We are 
proposing to use the upper bound of a two-tailed 95 percent confidence 
interval to estimate the validation score. If the calculated upper 
limit is above the required 75 percent reliability threshold, we would 
consider a hospital's data to be ``validated'' for payment purposes. 
Because we are more interested in whether the measure has been 
accurately reported, we would continue to focus on whether the measure 
data reported by the hospital matches the data documented in the 
medical record as determined by our reabstraction. We are proposing to 
calculate the validation score using the same methodology we finalized 
for the CY 2012 payment determination (75 FR 72105). We also are 
proposing to utilize the same medical record documentation submission 
procedures that we also finalized for the CY 2012 payment determination 
(75 FR 72104) with one modification; we are proposing to shorten the 
time period given to hospitals to submit medical record documentation 
to the CMS contractor from 45 calendar days to 30 calendar days. This 
proposed change in submission timeframe will align the process with 
requirements in 42 CFR 476.78(b)(2), which allow 30 days for chart 
submission in the context of QIO review. We are proposing this deadline 
of 30 days also to reduce the time for data validation completion to 
increase timeliness of providing hospitals with feedback on their 
abstraction accuracy.
4. Additional Data Validation Conditions Under Consideration for CY 
2014 and Subsequent Years
    We continue to consider building upon our validation approach of 
targeting hospitals to address data quality concerns and to ensure that 
our payment decisions are made using accurate data. Thus, we are 
requesting public comment on the following additional targeting 
criteria to select hospitals for validation:
     Whether a hospital that was open under its current CCN and 
had not been selected for validation in the previous 3 years. This is 
consistent with validation targeting criteria we recently proposed to 
implement for the CY 2015 Hospital IQR Program (76 FR 25920 through 
25921).
     Whether a hospital had submitted a low number of 
encounters relative to population sizes; or
     Whether a hospital reported significant numbers of 
``Unable to Determine'' data elements.
    We welcome public comment on these proposals, and are specifically 
interested in receiving public comments on definitions of what low 
numbers relative to population sizes and what would constitute 
significant numbers of ``Unable to Determine'' data elements.

H. Proposed Hospital OQR Reconsideration and Appeals Procedures for CY 
2013 and Subsequent Years

    When the Hospital IQR Program was initially implemented, it did not 
include a reconsideration process for hospitals. Subsequently, we 
received many requests for reconsideration of those payment decisions 
and, as a result, established a process by which participating 
hospitals would submit requests for reconsideration. We anticipated 
similar concerns with the Hospital OQR Program and, therefore, in the 
CY 2008 OPPS/ASC final rule with comment period (72 FR 66875), we 
stated our intent to implement for the Hospital OQR Program a 
reconsideration process modeled after the reconsideration process we 
implemented for the Hospital IQR Program. In the CY 2009 OPPS/ASC final 
rule with comment period (73 FR 68779), we adopted a reconsideration 
process that applied to the CY 2010 payment decisions. In the CY 2010 
OPPS/ASC final rule with comment period (74 FR 60654 through 60655), we 
continued this process for the CY 2011 payment update. In the CY 2011 
OPPS/ASC final rule with comment period (75 FR 72106 through 72108), we 
continued this process for the CY 2012 payment update with some 
modification.
    We are proposing to continue this process for the CY 2013 payment 
determination and subsequent years. Under this proposed process, a 
hospital seeking reconsideration must--
     Submit to CMS, via QualityNet, a Reconsideration Request 
form that will be made available on the QualityNet Web site; this form 
must be submitted by February 3 of the affected payment year (for 
example, for the CY 2013 payment determination, the request must be 
submitted by February 3, 2013) and must contain the following 
information:
    oo Hospital CCN.
    oo Hospital Name.
    oo CMS-identified reason for not meeting the requirements of the 
affected payment year's Hospital OQR Program as provided in any CMS 
notification to the hospital.
    oo Hospital basis for requesting reconsideration. This must 
identify the hospital's specific reason(s) for believing it met the 
affected year's Hospital OQR Program requirements and should receive 
the full OPD fee schedule increase factor.
    oo CEO and any additional designated hospital personnel contact 
information, including name, e-mail address, telephone number, and 
mailing address

[[Page 42334]]

(must include physical address, not just a post office box).
    oo A copy of all materials that the hospital submitted to comply 
with the requirements of the affected year's Hospital OQR Program. Such 
material might include, but may not be limited to, the applicable 
Notice of Participation form or completed online registration form, and 
measure data that the hospital submitted via QualityNet.
     Paper copies of all the medical record documentation that 
it submitted for the initial validation (if applicable). We are 
proposing that hospitals would submit this documentation to a 
designated CMS contractor which would have authority to review patient 
level information. We would post the address where hospitals are to 
send this documentation on the QualityNet Web site.
     To the extent that the hospital is requesting 
reconsideration on the basis that CMS has determined it did not meet an 
affected year's validation requirement, the hospital must provide a 
written justification for each appealed data element classified during 
the validation process as a mismatch. Only data elements that affect a 
hospital's validation score would be eligible to be reconsidered. We 
would review the data elements that were labeled as mismatched as well 
as the written justifications provided by the hospital, and make a 
decision on the reconsideration request.
    We note that, consistent with our policy for CY 2012 
reconsiderations, reconsideration request forms would not need to be 
signed by the hospital's CEO.
    Following receipt of a request for reconsideration, CMS would--
     Provide an e-mail acknowledgement, using the contact 
information provided in the reconsideration request, to the CEO and any 
additional designated hospital personnel notifying them that the 
hospital's request has been received.
     Provide a formal response to the hospital CEO and any 
additional designated hospital personnel, using the contact information 
provided in the reconsideration request, notifying the hospital of the 
outcome of the reconsideration process.
    We intend to complete any reconsideration reviews and communicate 
the results of these determinations within 90 days following the 
deadline for submitting requests for reconsideration.
    We also propose to apply the same policies that we finalized for 
the CY 2012 payment determination regarding the scope of our review 
when a hospital requests reconsideration because it failed our 
validation requirement. These policies are as follows:
     If a hospital requests reconsideration on the basis that 
it disagrees with a determination that one or more data elements were 
classified as mismatches, we would only consider the hospital's request 
if the hospital timely submitted all requested medical record 
documentation to the CMS contractor each quarter under the validation 
process.
     If a hospital requests reconsideration on the basis that 
it disagrees with a determination that one or more medical records it 
submitted during the quarterly validation process was classified as an 
invalid record selection (that is, the CMS contractor determined that 
one or more medical records submitted by the hospital did not match 
what was requested, thus resulting in a zero validation score for the 
encounter(s)), our review would initially be limited to determining 
whether the medical documentation submitted in response to the 
designated CMS contractor's request was the correct documentation. If 
we determine that the hospital did submit the correct medical 
documentation, we would abstract the data elements and compute a new 
validation score for the encounter. If we conclude that the hospital 
did not submit the correct medical record documentation, we would not 
further consider the hospital's request.
     If a hospital requests reconsideration on the basis that 
it disagrees with a determination that it did not submit the requested 
medical record documentation to the CMS contractor within the proposed 
30 calendar day timeframe, our review would initially be limited to 
determining whether the CMS contractor received the requested medical 
record documentation within 30 calendar days, and whether the hospital 
received the initial medical record request and reminder notice. If we 
determine that the CMS contractor timely received paper copies of the 
requested medical record documentation, we would abstract data elements 
from the medical record documentation submitted by the hospital and 
compute a validation score for the hospital. If we determine that the 
hospital received two letters requesting medical documentation but did 
not submit the requested documentation within the 30 calendar day 
period, we would not further consider the hospital's request.
    If a hospital is dissatisfied with the result of a Hospital OQR 
reconsideration decision, the hospital would be able to file an appeal 
under 42 CFR Part 405, Subpart R (PRRB appeal).
    We invite public comment on our proposed CY 2013 Hospital OQR 
Program reconsideration and appeals procedures.

I. Electronic Health Records (EHRs)

    Starting with the FY 2006 IPPS final rule, we have encouraged 
hospitals to take steps toward the adoption of EHRs (also referred to 
in previous rulemaking documents as electronic medical records) that 
will allow for reporting of clinical quality data from EHRs to a CMS 
data repository (70 FR 47420 through 47421). We sought to prepare for 
future EHR submission of quality measures by sponsoring the creation of 
electronic specifications for quality measures under consideration for 
the Hospital IQR Program. Through the EHR Incentive Programs we expect 
that the submission of quality data through EHRs will provide a 
foundation for establishing the capacity of hospitals to send, and for 
CMS, in the future, to receive, quality measures via hospital EHRs for 
Hospital IQR Program measures. We expect the Hospital IQR and Hospital 
OQR Programs to transition to the use of certified EHR technology, for 
measures that otherwise require information from the clinical record. 
This would allow us to collect data for measures without the need for 
manual chart abstraction. In the FY 2012 IPPS/LTCH PPS proposed rule 
(75 FR 25894), we identified FY 2015 as a potential transition date to 
move to EHR-based submission and phase out manual chart abstraction. We 
also anticipate such a transition for hospital outpatient measures, 
although likely somewhat after the transition for hospital inpatient 
measures. This is a result of the fact that the clinical quality 
measures in the EHR Incentive Program currently are primarily aligned 
with the Hospital IQR Program, rather than the Hospital OQR Program. 
Our goals are to align the hospital quality reporting programs, to seek 
to avoid redundant and duplicative reporting of quality measures for 
hospitals, and to rely largely on EHR submission for measures based on 
clinical record data.

J. 2012 Medicare EHR Incentive Program Electronic Reporting Pilot for 
Eligible Hospitals and CAHs

1. Background
    Under section 4102(a) of the American Recovery and Reinvestment Act 
of 2009 (ARRA) (Pub. L. 111-5), eligible hospitals and CAHs may qualify 
for incentive payments if they successfully demonstrate meaningful

[[Page 42335]]

use of certified EHR technology. The final rule for the Medicare EHR 
Incentive Program (75 FR 44314) established the Stage 1 criteria for 
meaningful use, which include, among other requirements, that eligible 
hospitals and CAHs report clinical quality measures (CQMs) to CMS, in 
addition to meeting other objectives and measures described in the 
final rule. The final rule also requires that for the 2012 payment year 
and subsequent years, an eligible hospital or CAH using certified EHR 
technology must submit information on the specified clinical quality 
measures electronically. However, for the 2011 payment year, eligible 
hospitals and CAHs are required to submit CQM results as calculated by 
certified EHR technology through attestation, rather than submit the 
information electronically. In the final rule (75 FR 44380), we also 
stated that we anticipated that we would have completed the necessary 
steps to have the capacity to receive information on CQMs 
electronically for the 2012 payment year. However, we also acknowledged 
that if we do not have the capacity to accept electronic reporting of 
CQMs in 2012, consistent with sections 1848(o)(2)(B)(ii) and 
1886(n)(3)(B)(ii) of the Act, we would continue to rely on attestation 
for reporting CQMs as a requirement for demonstrating meaningful use of 
certified EHR technology for the 2012 payment year.
    We also stated in the final rule that, with respect to electronic 
submission of information on clinical quality measures, certified EHR 
technology will be required to transmit calculated clinical quality 
measure results under the PQRI 2009 Registry XML specification. We 
noted that this was the only such standard that the certified EHR 
technology would be able to support based on the standards that have 
been adopted for certified EHR technology (75 FR 44435; see also 45 CFR 
170.205(f)).
    Since the publication of the final rule, we have determined that it 
is not feasible to receive electronically the information necessary for 
clinical quality measure reporting based solely on the use of PQRI 2009 
Registry XML Specification content exchange standard as is required for 
certified EHR technology. This is because the specification is tailored 
to the elements required for 2009 PQRI Registry XML submission, rather 
than constituting a more generic standard. As a result, we are 
proposing to modify the requirement that clinical quality measure 
reporting must be done electronically. Specifically, we are proposing 
that for the 2012 payment year and subsequent years, eligible hospitals 
and CAHs may continue to report clinical quality measure results as 
calculated by certified EHR technology by attestation, as for the 2011 
payment year. Alternatively, for the 2012 payment year, eligible 
hospitals and CAHs would be able to participate in the proposed FY 2012 
Medicare EHR Incentive Program Electronic Reporting Pilot for Eligible 
Hospitals and CAHs (Electronic Reporting Pilot) which is further 
described below. We are proposing to revise our regulations at Sec.  
495.8(b)(2)(ii) and proposing to add Sec.  495.8(b)(2)(vi) that would 
reflect these proposals for reporting CQMs through attestation and the 
Electronic Reporting Pilot.
2. Proposed Electronic Reporting Pilot
    Section 1886(n)(3)(B)(ii) of the Act provides authority for the 
Secretary to accept information on CQMs electronically on a pilot 
basis. For payment year 2012, we are proposing that eligible hospitals 
and CAHs participating in the Medicare EHR Incentive Program may meet 
the CQM reporting requirement of the EHR Incentive Program for payment 
year 2012 by participating in the proposed Electronic Reporting Pilot. 
We are proposing that participation in this Electronic Reporting Pilot 
would be voluntary and that eligible hospitals and CAHs may continue to 
attest to the results of CQMs calculated by certified EHR technology as 
they did for the 2011 payment year.
    We would encourage participation in the proposed Electronic 
Reporting Pilot in view of our desire to adequately pilot electronic 
submission of CQMs and to move to a system of reporting where eligible 
hospitals and CAHs can qualify for CQM reporting for both the Hospital 
IQR and Hospital OQR Programs, and the EHR Incentive Program. We 
strongly encourage eligible hospitals and CAHs to participate in the 
proposed Electronic Reporting Pilot as it provides opportunities to 
test the interoperability and functionality of the certified EHR 
technology that they have implemented. We believe that the 
participation of eligible hospitals and CAHs in the proposed Electronic 
Reporting Pilot would help advance EHR-based reporting in the Hospital 
IQR and Hospital OQR Programs.
    Eligible hospitals and CAHs would need to be registered in order to 
participate in the proposed Electronic Reporting Pilot. Eligible 
hospitals and CAHs wishing to participate in the proposed Electronic 
Reporting Pilot for the CQMs would register by indicating their desire 
and intent to participate in the proposed Electronic Reporting Pilot as 
part of the attestation process for the Medicare EHR Incentive Program. 
We are proposing that eligible hospitals and CAHs that participate in 
the proposed Electronic Reporting Pilot and meet its submission 
requirements would satisfy the requirements for reporting clinical 
quality measures under the Medicare EHR Incentive Program. Such 
eligible hospitals and CAHs would therefore not need to attest to the 
results of clinical quality measures calculated by certified EHR 
technology. As described below, for the purpose of the proposed 
Electronic Reporting Pilot, CMS would calculate the results of the 
clinical quality measures for eligible hospitals and CAHs based on 
patient level data submitted for Medicare patients. The proposed 
Electronic Reporting Pilot would require eligible hospitals and CAHs to 
submit information on the same 15 CQMs that were listed in Table 10 of 
the final rule (75 FR 44418 through 44420) for the Medicare and 
Medicaid EHR Incentive Programs and such information would be obtained 
from the certified EHR technology used by the eligible hospital or CAH.
    We are proposing that electronic submission of the 15 CQMs through 
this proposed Electronic Reporting Pilot would be sufficient to meet 
the core objective for reporting CQMs for the Medicare EHR Incentive 
Program for the 2012 payment year. Since the reporting of CQMs is only 
one of the 14 core meaningful use objectives for eligible hospitals and 
CAHs for the Medicare EHR Incentive Program, an eligible hospital or 
CAH that chooses to participate in the proposed Electronic Reporting 
Pilot would still be required to meet and attest to the other core and 
menu set objectives and their associated measures using the attestation 
module for the program on the CMS Web site.
    After the eligible hospital or CAH had attested and CMS has 
received electronic submission of the CQMs from an eligible hospital or 
CAH participating in the proposed Electronic Reporting Pilot, CMS would 
determine whether the eligible hospital or CAH has successfully met all 
the requirements for the Medicare EHR Incentive Program. We expect this 
determination would be made within 2 months after the end of the 
payment year and not later than November 30, 2013. Eligible hospitals 
and CAHs who do not meet the reporting requirements through the 
Electronic Reporting Pilot may meet such requirement through 
attestation. We are proposing that eligible hospitals and CAHs, 
alternatively, may attest, but still participate in the proposed 
Electronic Reporting Pilot.

[[Page 42336]]

3. CQM Reporting Under the Proposed Electronic Reporting Pilot
    Under Sec.  495.6(f)(9), we require Medicare eligible hospitals and 
CAHs (which would include those participating in the proposed 
Electronic Reporting Pilot) to successfully report hospital clinical 
quality measures to CMS in the manner specified by CMS. We are 
proposing that eligible hospitals and CAHs participating in the 
proposed Electronic Reporting Pilot must submit CQM data on all 15 CQMs 
listed in Table 10 of the final rule (75 FR 44418 through 44420) to 
CMS, via a secure portal based on data obtained from the eligible 
hospital or CAH's certified EHR technology.
    In the final rule for the Medicare and Medicaid EHR Incentive 
Programs, we stated that we will require eligible hospitals and CAHs to 
report aggregate-level CQM data (75 FR 44432). However, we note that 
for the purpose of the proposed Electronic Reporting Pilot, we are 
proposing that eligible hospitals and CAHs participating in the 
proposed Electronic Reporting Pilot would submit patient-level CQM data 
for Medicare patients only. Aside from requiring attestation to other 
objectives/measures based on data for all patients, specifically, we 
are proposing that eligible hospitals and CAHs participating in the 
proposed Electronic Reporting Pilot would: (1) Submit CQM data on 
Medicare patients only; (2) submit Medicare patient-level data from 
which CMS may calculate CQM results using a uniform calculation 
process, rather than aggregate results calculated by the eligible 
hospital or CAH's certified EHR technology; (3) submit one full Federal 
fiscal year of CQM data, regardless of the eligible hospital or CAH's 
year of participation in the Medicare and Medicaid EHR Incentive 
Programs; and (4) use electronic specifications for transmission as 
specified by CMS which we expect would be Level 1 QRDA.
    As noted previously, for the proposed Electronic Reporting Pilot, 
CQM data on which the eligible hospital or CAH's submission is based 
must be obtained from certified EHR technology. However, the 
functionality of reporting these CQMs to CMS will not rely on the 
certification process. Eligible hospitals and CAHs participating in the 
proposed Electronic Reporting Pilot would report CQMs based on a pilot 
measurement period of one full Federal fiscal year (October 1, 2011 
through September 30, 2012), regardless of whether the eligible 
hospital or CAH is in its first year of participation in the Medicare 
and Medicaid EHR Incentive Programs. The period for submitting 
information on CQMs under the proposed Electronic Reporting Pilot would 
be October 1, 2012 through November 30, 2012, which is the 60 days 
following the close of the measurement period. The CQM reporting format 
would be as specified by CMS, which we expect would be Quality Data 
Reporting Architecture (QRDA) Level 1. We would offer a test period 
beginning July 1, 2012, which would allow eligible hospitals, CAHs, or 
their designee to submit CQM reports to CMS with the requirements that 
would be used in the proposed Electronic Reporting Pilot. The test 
period would remain open. Additional details including educational 
materials about participation in the proposed Electronic Reporting 
Pilot would be provided on the QualityNet Web site at http://
www.qualitynet.org.
    We invite public comment on the proposed Electronic Reporting Pilot 
discussed above.

K. Proposed ASC Quality Reporting Program

1. Background
    Section 109(b) of the MIEA TRHCA amended section 1833(i) of the Act 
by re-designating clause (iv) as clause (v) and adding new clause (iv) 
to paragraph (2)(D) and by adding new paragraph (7). Section 
1833(i)(2)(D)(iv) of the Act authorizes, but does not require, the 
Secretary to implement the revised ASC payment system ``in a manner so 
as to provide for a reduction in any annual update for failure to 
report on quality measures in accordance with paragraph (7).'' Section 
1833(i)(7)(A) of the Act states that the Secretary may provide that any 
ASC that does not submit quality measures to the Secretary in 
accordance with paragraph (7) will incur a 2.0 percentage point 
reduction to any annual increase provided under the revised ASC payment 
system for such year. It also specifies that a reduction for one year 
cannot be taken into account in computing any annual increase factor 
for a subsequent year.
    Section 1833(i)(7)(B) of the Act provides that, ``[e]xcept as the 
Secretary may otherwise provide,'' the hospital outpatient quality data 
provisions of subparagraphs (B) through (E) of section 1833(t)(17) of 
the Act shall apply to ASCs in a similar manner to the manner in which 
they apply under these paragraphs to hospitals under the Hospital OQR 
Program and any reference to a hospital, outpatient setting, or 
outpatient hospital services is deemed a reference to an ASC, the 
setting of an ASC, or services of an ASC, respectively. Section 
1833(t)(17)(B) of the Act requires that hospitals submit quality data 
in a form and manner, and at a time, that the Secretary specifies.
    Section 1833(t)(17)(C)(i) of the Act requires the Secretary to 
develop measures appropriate for the measurement of the quality of care 
(including medication errors) furnished by hospitals in outpatient 
settings, that these measures reflect consensus among affected parties 
and, to the extent feasible and practicable, that these measures 
include measures set forth by one or more national consensus building 
entities. Section 1833(t)(17)(C)(ii) of the Act allows the Secretary to 
select measures that are the same as (or a subset of) the measures for 
which data are required to be submitted under the Hospital IQR Program. 
Section 1833(t)(17)(D) of the Act gives the Secretary the authority to 
replace measures or indicators as appropriate, such as where all 
hospitals are effectively in compliance or the measures or indicators 
have been subsequently shown not to represent the best clinical 
practice. Section 1833(t)(17)(E) of the Act requires the Secretary to 
establish procedures for making data submitted under the Hospital OQR 
Program available to the public. Such procedures include providing 
hospitals with the opportunity to review their data before these data 
are released to the public. For a more detailed discussion of the 
provisions in Sec.  1833(t)(17) of the Act, please see section 
XIV.A.3.b. of this proposed rule.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66875), the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68780), the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60656), and the CY 2011 OPPS/ASC final rule with comment period (75 FR 
72109), we did not implement a quality data reporting program for ASCs. 
We determined that it would be more appropriate to allow ASCs to 
acquire some experience with the revised ASC payment system, which was 
implemented for CY 2008, before implementing new requirements, such as 
public reporting of quality measures. However, in these rules, we 
indicated that we intended to implement the provisions of section 
109(b) of the MIEA-TRHCA in the future.
    In preparation for proposing an ASC quality reporting program, in 
the CY 2011 OPPS/ASC proposed rule, we solicited public comment on the 
following measures under consideration for ASC quality data reporting: 
(1) Patient Fall in the ASC; (2) Patient Burn; (3) Hospital Transfer/
Admission; (4) Wrong Site, Side, Patient, Procedure,

[[Page 42337]]

Implant; (5) Prophylactic IV Antibiotic Timing; (6) Appropriate 
Surgical Site Hair Removal; (7) Surgical Site Infection (SSI); (8) 
Medication Administration Variance (MAV); (9) Medication 
Reconciliation; and (10) VTE Measures: Outcome/Assessment/Prophylaxis 
(75 FR 46383).
    In addition to preparing to propose implementation of an ASC 
quality reporting program, the Department developed a plan to implement 
a value-based purchasing (VBP) program for payments under the Medicare 
program under title XVIII of the Act for ASCs as required by section 
3006(f) of the Affordable Care Act, as added by section 10301(a) of the 
Affordable Care Act. We also have recently submitted a Report to 
Congress, as required by section 3006(f)(4) of the Affordable Care Act, 
entitled ``Medicare Ambulatory Surgical Center Value-Based Purchasing 
Implementation Plan'' that contains this plan. This report is found on 
our Web site at: http://www.cms.gov/ASCPayment/downloads/C_ASC_RTC%202011.pdf. Currently, we do not have express statutory authority 
to implement an ASC VBP Program. Should there be legislation to 
authorize CMS to implement an ASC VBP program, we will develop the 
program and propose it through rulemaking.
    In this proposed rule, we are proposing to implement the ASC 
Quality Reporting Program beginning with the CY 2014 payment 
determination, with data collection beginning in CY 2012 for most of 
the measures to be used for the CY 2014 payment determination.
2. ASC Quality Reporting Program Measure Selection
a. Proposed Timetable for Selecting ASC Quality Measures
    We are proposing to adopt measures for three CY payment 
determinations for the ASC Quality Reporting Program in this 
rulemaking. Therefore, in this proposed rule, we are proposing to adopt 
measures for the CYs 2014, 2015, and 2016 payment determinations. To 
the extent that we finalize some or all of the measures for future 
payment determinations, we would not be precluded from proposing to 
adopt additional measures or changing the list of measures for future 
payment determinations through annual rulemaking cycles so that we may 
address changing program needs arising from new legislation or from 
changes in HHS and CMS priorities. Under this approach, in the CY 2013 
or CY 2014 rulemaking cycle, we could propose any additions or 
revisions to the measures we adopted in the CY 2012 rulemaking cycle 
for the CY 2014 payment determination or for future payment 
determinations. This is consistent with our approach to proposing 
measures for multiple payment determinations for the Hospital IQR and 
Hospital OQR Programs. We believe this proposed process will assist 
ASCs in planning, meeting future reporting requirements, and 
implementing quality improvement efforts. We also would have more time 
to develop, align, and implement the infrastructure necessary to 
collect data on the measures and make payment determinations. This 
flexibility would enable us to adapt the program to support changes in 
HHS and CMS priorities and any new legislative requirements. We invite 
public comments on this proposal.
b. Considerations in the Selection of Measures for the ASC Quality 
Reporting Program
    Section 1833(i)(7)(B) of the Act states that Sec.  1833(t)(17)(C) 
of the Act shall apply with respect to ASC services in a similar manner 
in which they apply to hospitals for the Hospital OQR Program, except 
as the Secretary may otherwise provide. The requirements at 
1833(t)(17)(C)(i) of the Act state that measures developed shall ``be 
appropriate for the measurement of the quality of care (including 
medication errors) furnished by hospitals in outpatient settings and 
that reflect consensus among affected parties and, to the extent 
feasible and practicable, shall include measures set forth by one or 
more national consensus building entities.''
    In selecting proposed measures for the ASC Quality Reporting 
Program and other quality reporting programs, we have focused on 
measures that have a high impact on and support HHS and CMS priorities 
for improved health care outcomes, quality, safety, efficiency and 
satisfaction for patients. Our goal for the future is to expand any 
measure set adopted for ASC quality reporting to address these 
priorities more fully and to align ASC quality measure requirements 
with those of other reporting programs as appropriate, including the 
Hospital OQR Program, the Hospital IQR Program, the Physician Quality 
Reporting System, and reporting requirements implemented under the 
HITECH Act so that the burden for reporting will be reduced. In 
general, we prefer to adopt measures that have been endorsed by the NQF 
because it is a national multi-stakeholder organization with a well-
documented and rigorous approach to consensus development. However, as 
we have noted in previous rulemaking for the Hospital OQR Program (75 
FR 72065), the requirement that measures reflect consensus among 
affected parties can be achieved in other ways, including through the 
measure development process, through broad acceptance and use of the 
measure(s), and through public comment.
    In developing this and other quality reporting programs, as well as 
the Hospital Inpatient VBP Program, we applied the following principles 
for the development and use of measures. We invite public comment on 
these principles in the ASC quality reporting context.
     Pay-for-reporting, public reporting, and value-based 
purchasing programs should rely on a mix of standards, process, 
outcomes, and patient experience of care measures, including measures 
of care transitions and changes in patient functional status. Across 
all programs, we seek to move as quickly as possible to the use of 
primarily outcome and patient experience measures. To the extent 
practicable and appropriate, outcome and patient experience measures 
should be adjusted for risk or other appropriate patient population or 
provider/supplier characteristics.
     To the extent possible and recognizing differences in 
payment system maturity and statutory authorities, measures should be 
aligned across public reporting and payment systems under Medicare and 
Medicaid. The measure sets should evolve so that they include a focused 
core set of measures appropriate to the specific provider/supplier 
category that reflects the level of care and the most important areas 
of service and measures for that provider/supplier.
     The collection of information should minimize the burden 
on providers/suppliers to the extent possible. To this end, we will 
continuously seek to align our measures with the adoption of meaningful 
use standards for HIT, so that data can be submitted and calculated via 
certified EHR technology with minimal burden.
     To the extent practicable and feasible, and within the 
scope of our statutory authorities for various quality reporting and 
value-based purchasing programs, measures used by CMS should be 
endorsed by a national, multi-stakeholder organization. Measures should 
be aligned with best practices among other payers and the needs of the 
end users of the measures.
    We believe that ASC facilities are similar, insofar as the delivery 
of surgical and related nonsurgical services, to HOPDs. Similar 
standards and guidelines can be applied between

[[Page 42338]]

hospital outpatient departments and ASCs with respect to surgical care 
improvement, given that many of the same surgical procedures are 
provided in both settings. Measure harmonization assures that 
comparable care in different settings can be evaluated in similar ways, 
which further assures that quality measurement can focus more on the 
needs of a patient with a particular condition rather than on the 
specific program or policy attributes of the setting in which the care 
is provided. In general, our goal is to adopt harmonized measures that 
assess the quality of care given across settings and providers/
suppliers and to use the same measure specifications based on clinical 
evidence and guidelines for the care being assessed regardless of 
provider/supplier type or setting. This harmonization goal is also 
supported by a commenter to the CY 2011 OPPS/ASC proposed rule, who 
recommended CMS align ASC quality measures with State and other Federal 
requirements (75 FR 72109).
    Our CY 2014 measure proposals for ASCs align closely with those 
discussed in the Report to Congress entitled ``Medicare Ambulatory 
Surgical Center Value-Based Purchasing Implementation Plan'' and with 
those proposed for future consideration in the CY 2011 OPPS/ASC 
proposed rule (75 FR 46383). Furthermore, the measures that we are 
proposing for ASCs fall into the parameter of our stated framework for 
the ASC Quality Reporting Program, discussed above. The initial measure 
set that we are proposing for the CY 2014 payment determination 
addresses outcome measures and infection control process measures. Six 
of the eight initial measures that we are proposing for the CY 2014 
payment determination are recommended by the ASC Quality Collaborative 
(ASC QC) and are NQF-endorsed. The seventh measure that we are 
proposing is appropriate for measuring ambulatory surgical care, is 
NQF-endorsed, is currently in use in the Physician Quality Reporting 
System, and is similar to a measure that is being utilized in the 
Hospital OQR program, and therefore aligns across settings in which 
outpatient surgery is performed. We are proposing collecting these 
seven measures via ``quality data codes'' to be placed on Part B claims 
submitted by ASCs for Medicare fee-for-service patients beginning 
January 1, 2012. The eighth measure we are proposing for the ASC 
Quality CY 2014 payment determination is an outcome measure of Surgical 
Site Infection (SSI) to be submitted in 2013 via the CDC's National 
Healthcare Safety Network (NHSN). Similarly, hospital inpatient 
departments will begin reporting this measure to the CDC under the 
Hospital IQR Program in 2012, and we are also currently proposing in 
this rule that hospital outpatient departments begin reporting this 
measure to the CDC under the Hospital OQR Program in 2013. Thus, this 
measure would be aligned across quality reporting programs for 
facilities performing surgery.
3. Proposed ASC Quality Measures for the CY 2014 Payment Determination
a. Proposed Claims-Based Measures Requiring Submission of Quality Data 
Codes (QDCs) Beginning January 1, 2012
    We are proposing to adopt seven NQF-endorsed claims-based measures, 
six of which were developed by the ASC QC. The ASC QC is a cooperative 
effort of organizations and companies formed in 2006 with a common 
interest in ensuring that ASC quality data is measured and reported in 
a meaningful way. Stakeholders in the ASC QC include ASC corporations, 
ASC associations, professional societies and accrediting bodies that 
focus on ASC quality and safety. The ASC QC initiated a process of 
standardizing ASC quality measure development through evaluation of 
existing nationally endorsed quality measures to determine which could 
be directly applied to the outpatient surgery facility setting. The ASC 
QC in its ASC Quality Measure Implementation Guide version 1.4 states 
that ``it focused on outcomes and processes that ASC facilities could 
influence or impact, outcomes that ASC facilities would be aware of 
given their limited contact with the patient, and outcomes that would 
be understandable and important to key stakeholders in ASC care, 
including patients, providers and payers.''
    The ASC QC developed and pilot-tested five facility-level measures 
(Patient Burn; Patient Fall in the ASC; Wrong Site, Wrong Side, Wrong 
Patient, Wrong Procedure, Wrong Implant; Hospital Transfer/Admission, 
and Prophylactic IV Antibiotic Timing) for feasibility and usability. 
On November 15, 2007, these five measures were endorsed by the NQF. On 
September 25, 2008, a sixth ASC QC-developed facility-level measure, 
``Appropriate Surgical Site Hair Removal'' was NQF-endorsed as 
``Ambulatory Surgery Patients with Appropriate Method of Hair 
Removal.'' Of the six ASC QC measures, the Prophylactic IV Antibiotic 
Timing and Ambulatory Surgery Patients with Appropriate Method of Hair 
Removal measures are infection control process measures, and the rest 
are outcome measures. All six of these measures were listed as under 
consideration in the CY 2011 OPPS/ASC proposed rule (75 FR 46383). We 
are proposing these six measures for use in the CY 2014 payment 
determination.
    The seventh claims-based measure we are proposing for the CY 2014 
payment determination is Selection of Prophylactic Antibiotic: First OR 
Second Generation Cephalosporin. This measure was developed by the 
American Medical Association's (AMA's) Physician Consortium for 
Performance Improvement, a national, diverse, physician-led group that 
identifies, develops, and promotes implementation of evidence-based 
clinical performance measures that reflect best practices. This measure 
is NQF-endorsed. It is an infection control process measure and is 
currently adopted in the Hospital IQR Program and Physician Quality 
Reporting System (PQRS).
    We are proposing to collect all seven measures using the claims-
based quality data codes (QDCs) data collection mechanism. We are 
proposing to require ASCs to report on ASC claims a quality data code 
(QDC) to be used for reporting quality data. We are proposing that an 
ASC would need to add a QDC to any claim involving a proposed claims-
based quality measure. CMS is in the process of developing QDCs for 
each proposed claims-based quality measure. The QDC will be a CPT 
Category II code or a HCPCS Level II G-code if an appropriate CPT code 
is not available. More information on the QDCs that will be associated 
with the proposed quality measures will be provided in the CY 2012 
OPPS/ASC final rule with comment period. Additionally, CMS is proposing 
to create a new ASC payment indicator ``M5'' (Quality measurement code 
used for reporting purposes only; no payment made) for assignment to 
the QDC to clarify that no payment is associated with the QDC for that 
claim. If one or more of these measures are finalized as proposed, an 
ASC would need to begin submitting these QDCs on any Medicare Part B 
claims pertaining to the measures on January 1, 2012.
    For the first six measures listed, the ASC QC measures 
specifications can be found at http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pdf.\41\ For the seventh 
measure, the specifications can be found on the PQRS Web site at: 
http://www.cms.gov/apps/ama/license.asp?file=/pqrs/downloads/2011--

[[Page 42339]]

PhysQualRptg--MeasureSpecificationsManual--033111.pdf.
---------------------------------------------------------------------------

    \41\ ASC Quality Measures: Implementation Guide Version 1.4, ASC 
Quality Collaboration, December 2010.
---------------------------------------------------------------------------

    These seven proposed measures are discussed in more detail below:
(1) Patient Burns (NQF 0263)
    The ASC Quality Measures: Implementation Guide Version 1.4 states 
that every patient receiving care in an ASC setting has the potential 
to experience a burn during an episode of care, given the multitude of 
factors that could pose risks for patient burns in the surgical and 
procedural settings. The Guide cited a recent publication from the ECRI 
Institute that relates an increased risk of burns associated with newer 
electrosurgical devices due to their application of higher electrical 
current for longer time intervals. Other common sources of burns in a 
surgical setting include chemical and thermal sources, and radiation, 
scalds, and fires. Clinical practice guidelines for reducing the risk 
of burns have been established by the American Society of 
Anesthesiologists (ASA) and Association of Operating Room Nurses 
(AORN).
    This NQF-endorsed measure assesses the percentage of ASC admissions 
experiencing a burn prior to discharge. The NQF-endorsed specifications 
for ASC QC measure can be found at: http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pdf. The ASC QC in 
their ASC Quality Measure Implementation Guide version 1.4 defines a 
``burn'' for purposes of this measure as ``[u]nintended tissue injury 
caused by any of the six recognized mechanisms: scalds, contact, fire, 
chemical, electrical or radiation (e.g., warming devices, prep 
solutions, and electrosurgical unit or laser).'' We believe that this 
measure would allow stakeholders to develop a better understanding of 
the incidence of these events and further refine means to ensure 
prevention.
    Read together, section 1833(i)(7)(B) of the Act and section 
1833(t)(17)(C)(i) of the Act require the Secretary, except as the 
Secretary may otherwise provide, to develop measures appropriate for 
the measurement of the quality of care (including medication errors) 
furnished by ASCs, that reflect consensus among affected parties and, 
to the extent feasible and practicable, that include measures set forth 
by one or more national consensus building entities. We believe that 
this measure is appropriate to measure quality in ASCs since they serve 
surgical patients who may face the risk of burns during ambulatory 
surgical procedures. Furthermore, we believe that this measure meets 
the consensus requirement and the requirement that it be set forth by a 
national consensus building entity because it was developed by the ASC 
QC and is endorsed by the NQF.
    We invite public comment on our proposal to adopt this measure for 
the CY 2014 payment determination using the claims-based QDC data 
collection mechanism for ASC services furnished for Medicare patients 
from January 1, 2012 through December 31, 2012. While the NQF-endorsed 
specification for this measure includes all ASC admissions, our 
proposal to use information submitted on claims to calculate these 
measures requires that we restrict the measure population to the 
population for which CMS receives claims. Therefore, for this program, 
we would need to calculate the measures based on claims submitted for 
ASC services furnished to Medicare fee-for-service beneficiaries. NQF 
has indicated in recent exchanges that our proposal to use Medicare 
Part B claims submitted by ASCs to calculate the measure consistently 
with the measure specification is an appropriate application of the 
NQF-endorsed measure to a subset of patients that are part of the 
broader population to which the measure applies. If finalized, ASCs 
would need to place QDCs relevant to this measure on Medicare Part B 
claims beginning January 1, 2012 in order to report this measure for 
purposes of the CY 2014 payment determination.
(2) Patient Fall (NQF 0266)
    Falls, particularly in the elderly, can cause injury and loss of 
functional status, and falls in healthcare settings can be prevented 
through assessment of risk, care planning, and patient monitoring. 
Healthcare settings are being called upon to report patient falls and 
to take steps to reduce the risk of falls. The ASC QC indicates in 
their ASC quality measure implementation guide the use of anxiolytics, 
sedatives, and anesthetic agents may put patients undergoing outpatient 
surgery at increased risk for falls. Guidelines and best practices for 
the prevention of falls, and management of patients after falls have 
been made available by the Agency for Healthcare Research and Quality 
(http://www.ahrq.gov/qual/transform.htm), and the National Center for 
Patient Safety (http://www.patientsafety.gov).
    This NQF-endorsed measure assesses the percentage of ASC admissions 
experiencing a fall in the ASC. The NQF-endorsed specifications for 
this ASC QC measure can be found at: http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pdf. The ASC QC in 
their ASC Quality Measure Implementation Guide version 1.4 defines a 
``fall'' as ``a sudden, uncontrolled, unintentional, downward 
displacement of the body to the ground or other object, excluding falls 
resulting from violent blows or other purposeful actions'', which is 
consistent with the definition set forth by the National Center for 
Patient Safety.
    Read together, section 1833(i)(7)(B) of the Act and section 
1833(t)(17)(C)(i) of the Act require the Secretary, except as the 
Secretary may otherwise provide, to develop measures appropriate for 
the measurement of the quality of care (including medication errors) 
furnished by ASCs, that reflect consensus among affected parties and, 
to the extent feasible and practicable, that include measures set forth 
by one or more national consensus building entities. We believe that 
this measure is appropriate to measure quality in ASCs because it was 
specifically developed to measure quality of surgical care furnished by 
ASCs, as measured by patient falls. Furthermore, we believe that this 
measure meets the consensus requirement and the requirement that it be 
set forth by a national consensus building entity because it was 
developed by the ASC QC and is NQF-endorsed.
    We invite public comment on our proposal to adopt this measure for 
the CY 2014 payment determination using the claims-based QDC data 
collection mechanism for ASC services furnished for Medicare fee-for-
service beneficiaries from January 1, 2012 through December 31, 2012. 
While the NQF-endorsed specification for this measure includes all ASC 
admissions, our proposal requires that we restrict the measure 
population to the population for which CMS receives claims. Therefore, 
for this program, we would need to calculate the measures based on 
claims submitted for ASC services furnished to Medicare fee-for-service 
beneficiaries. NQF has indicated in recent exchanges that our proposal 
to use Medicare Part B claims submitted by ASCs to calculate the 
measure consistently with the measure specification is an appropriate 
application of the NQF-endorsed measure to a subset of patients that 
are part of the broader population to which the measure applies. If 
finalized, ASCs would need to place QDCs relevant to this measure on 
Medicare Part B claims beginning January 1, 2012 in order to report 
this measure for purposes of the CY 2014 payment determination.

[[Page 42340]]

(3) Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong 
Implant (NQF 0267)
    Surgeries and procedures performed on the wrong site/side, and 
wrong patient can result in significant impact on patients, including 
complications, serious disability or death. While the prevalence of 
such serious errors may be rare, such events are considered serious 
reportable events, and are included in the NQF's Serious Reportable 
Events in Healthcare 2006 Update.\42\ The Joint Commission (a not-for-
profit organization that accredits and certifies health care 
organizations and programs in the US) has issued a Universal Protocol 
to prevent such serious surgical errors.\43\ The proposed NQF-endorsed 
measure assesses the percentage of ASC admissions experiencing a wrong 
site, wrong side, wrong patient, wrong procedure, or wrong implant. The 
ASC QC in their ASC Quality Measures: Implementation Guide Version 1.4 
defines ``wrong'' as ``not in accordance with intended site, side, 
patient, procedure or implant.'' The NQF-endorsed specifications for 
this ASC QC measure can be found at: http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pdf.
---------------------------------------------------------------------------

    \42\ http://www.qualityforum.org/Publications/2007/03/Serious_Reportable_Events_in_Healthcare%E2%80%932006_Update.aspx.
    \43\ Joint Commission. Universal Protocol for Preventing Wrong 
Site, Wrong Procedure, Wrong Person Surgery. Available at http://www.jointcommission.org/standards_information/up.aspx. Last 
accessed December 14, 2010.
---------------------------------------------------------------------------

    Read together, section 1833(i)(7)(B) of the Act and section 
1833(t)(17)(C)(i) of the Act require the Secretary, except as the 
Secretary may otherwise provide, to develop measures appropriate for 
the measurement of the quality of care (including medication errors) 
furnished by ASCs, that reflect consensus among affected parties and, 
to the extent feasible and practicable, that include measures set forth 
by one or more national consensus building entities. We believe that 
this measure is appropriate to measure quality in ASCs because the 
measure assesses the quality of surgical care provided in ASCs as 
measured by the percentage of surgical errors. Furthermore, we believe 
that this measure meets the consensus requirement and the requirement 
that it be set forth by a national consensus building entity because it 
was developed by the ASC QC and is endorsed by the NQF.
    We invite public comment on our proposal to adopt this measure for 
the CY 2014 payment determination using the claims-based QDC data 
collection mechanism for ASC services furnished for Medicare patients 
from January 1, 2012 through December 31, 2012. While the NQF-endorsed 
specification for this measure includes all ASC admissions, our 
proposal to use information submitted on claims to calculate these 
measures requires that we restrict the measure population to the 
population for which CMS receives claims. Therefore, for this program, 
we would need to calculate the measures based on claims submitted for 
ASC services furnished to Medicare fee-for-service beneficiaries. NQF 
has indicated in recent exchanges that our proposal to use Medicare 
Part B claims submitted by ASCs to calculate the measure consistently 
with the measure specification is an appropriate application of the 
NQF-endorsed measure to a subset of patients that are part of the 
broader population to which the measure applies. If finalized, ASCs 
would need to place QDCs relevant to this measure on Medicare Part B 
claims beginning January 1, 2012 in order to report this measure for 
purposes of the CY 2014 payment determination.
(4) Hospital Transfer/Admission (NQF 0265)
    The transfer or admission of a surgical patient from an outpatient 
setting to an acute care setting can be an indication of a 
complication, serious medical error, or other unplanned negative 
patient outcome. While acute intervention may be necessary in these 
circumstances, a high rate of such incidents may indicate suboptimal 
practices or patient selection criteria. The proposed NQF-endorsed 
measure assesses the rate of ASC admissions requiring a hospital 
transfer or hospital admission upon discharge from the ASC. The ASC QC 
defines ``hospital transfer/admission'' as ``any transfer/admission 
from an ASC directly to an acute care hospital, including hospital 
emergency room.''
    The NQF-endorsed specifications for this ASC QC measure can be 
found at: http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pdf. The ASC QC believes 
that this ``measure would allow ASCs to assess their guidelines for 
procedures performed in the facility and patient selection if 
transfers/admissions are determined to be at a level higher than 
expected. If commonalities are found in patients who are transferred or 
admitted, guidelines may require revision.''
    Read together, section 1833(i)(7)(B) of the Act and section 
1833(t)(17)(C)(i) of the Act require the Secretary, except as the 
Secretary may otherwise provide, to develop measures appropriate for 
the measurement of the quality of care (including medication errors) 
furnished by ASCs, that reflect consensus among affected parties and, 
to the extent feasible and practicable, that include measures set forth 
by one or more national consensus building entities. We believe this 
measure is appropriate to measure quality in ASCs because it assesses 
outpatient surgical care quality in the form of the rate of surgical 
outpatients needing acute care interventions. Furthermore, we believe 
that this measure meets the consensus requirement and the requirement 
that it be set forth by a national consensus building entity because it 
was developed by the ASC QC and is endorsed by the NQF.
    We invite public comment on our proposal to adopt this measure for 
the CY 2014 payment determination using the claims-based QDC data 
collection mechanism for ASC services furnished for Medicare patients 
from January 1, 2012 through December 31, 2012. While the NQF-endorsed 
specification for this measure includes all ASC admissions, our 
proposal to use information submitted on claims to calculate these 
measures requires that we restrict the measure population to the 
population for which CMS receives claims. Therefore, for this program, 
we would need to calculate the measures based on claims submitted for 
ASC services furnished to Medicare fee-for-service beneficiaries. NQF 
has indicated that our proposal to use Medicare Part B claims submitted 
by ASCs to calculate the measure consistently with the measure 
specification is an appropriate application of the NQF-endorsed measure 
to a subset of patients that are part of the broader population to 
which the measure applies. If finalized, ASCs would need to place QDCs 
relevant to this measure on Medicare Part B claims beginning January 1, 
2012 in order to report this measure for purposes of the CY 2014 
payment determination.
(5) Prophylactic Intravenous (IV) Antibiotic Timing (NQF 0264)
    Timely preoperative administration of intravenous antibiotics to 
surgical patients is an effective practice in reducing the risk of 
developing a surgical site infection, which in turn is associated with 
reduced health care burden and cost, and better patient 
outcomes.44 45 46 The measurement of

[[Page 42341]]

timely antibiotic administration for surgical patients is occurring in 
the Hospital IQR Program, Hospital OQR Program and the Physician 
Quality Reporting System. The NQF-endorsed ASC QC measure assesses the 
rate of ASC patients who received IV antibiotics ordered for surgical 
site infection prophylaxis on time. The NQF-endorsed specifications for 
this ASC QC measure can be found at: http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pdf.
---------------------------------------------------------------------------

    \44\ Classen, D. et al.: The timing of prophylactic 
administration of antibiotics and the risk of surgical wound 
infection. NEJM. 1992;326(5):281-286.
    \45\ Silver, A. et al.: Timeliness and use of antibiotic 
prophylaxis in selected inpatient surgical procedures. The 
Antibiotic Prophylaxis Study Group. Am J Surg. 1996;171(6):548-552.
    \46\ Dounis, E., Tsourvakas, S., Kalivas, L., and Giamacellou, 
H.: Effect of time interval on tissue concentrations of 
cephalosporins after tourniquet inflation. Highest levels achieved 
by administration 20 minutes before inflation. Acta Orthop Scand. 
1995;66(2):158-60.
---------------------------------------------------------------------------

    The ASC QC measure implementation guide defines ``antibiotic 
administered on time'' as ``[a]ntibiotic infusion * * * initiated 
within one hour prior to the time of the initial surgical incision or 
the beginning of the procedure (e.g., introduction of endoscope, 
insertion of needle, inflation of tourniquet) or two hours prior if 
vancomycin or fluoroquinolones are administered.'' The measure also 
defines ``prophylactic antibiotic'' as ``an antibiotic prescribed with 
the intent of reducing the probability of an infection related to an 
invasive procedure. For purposes of this measure, the following 
antibiotics are considered prophylaxis for surgical site infections: 
Ampicillin/sulbactam, Aztreonam, Cefazolin, Cefmetazole, Cefotetan, 
Cefoxitin, Cefuroxime, Ciprofloxacin, Clindamycin, Ertapenem, 
Erythromycin, Gatifloxacin, Gentamicin, Levofloxacin, Metronidazole, 
Moxifloxacin, Neomycin and Vancomycin.'' All prophylactic IV 
antibiotics administered for surgical site infection would need to have 
their infusion initiated within the one hour time frame, except for 
vancomycin or fluoroquinolones, where infusion must be initiated within 
the two hours time frame. The ASC QC Guide states that ``[i]n cases 
involving more than one antibiotic, all antibiotics must be given 
within the appropriate time frame in order for the case to meet 
criteria.'' The timing of the antibiotic starts at the time the 
antibiotic is initiated with a preoperative order.
    Read together, section 1833(i)(7)(B) of the Act and section 
1833(t)(17)(C)(i) of the Act require the Secretary, except as the 
Secretary may otherwise provide, to develop measures appropriate for 
the measurement of the quality of care (including medication errors) 
furnished by ASCs, that reflect consensus among affected parties and, 
to the extent feasible and practicable, that include measures set forth 
by one or more national consensus building entities. We believe this 
measure is appropriate to measure quality in ASCs because it assesses 
the quality of care for surgical patients in an outpatient setting as 
measured by timely antibiotic administration. Furthermore, we believe 
that this measure meets the consensus requirement and the requirement 
that it be set forth by a national consensus building entity because it 
was developed by the ASC QC and is endorsed by the NQF.
    We invite public comment on our proposal to adopt this measure for 
the CY 2014 payment determination using the claims-based QDCs data 
collection mechanism for ASC services furnished for Medicare patients 
from January 1, 2012 through December 31, 2012. While the NQF-endorsed 
specification for this measure includes all ASC admissions, our 
proposal to use information submitted on claims to calculate these 
measures requires that we restrict the measure population to the 
population for which CMS receives claims. Therefore, for this program, 
we would need to calculate the measures based on claims submitted for 
ASC services furnished to Medicare fee-for-service beneficiaries. NQF 
has indicated in recent exchanges that our proposal to use Medicare 
Part B claims submitted by ASCs to calculate the measure consistently 
with the measure specification is an appropriate application of the 
NQF-endorsed measure to a subset of patients that are part of the 
broader population to which the measure applies. If finalized, ASCs 
would need to place QDCs relevant to this measure on Medicare Part B 
claims beginning January 1, 2012 in order to report this measure for 
purposes of the CY 2014 payment determination.
(6) Ambulatory Surgery Patients With Appropriate Method of Hair Removal 
(NQF 0515)
    The ASC QC \47\ cited evidence that ``[r]azors can cause 
microscopic cuts and nicks to the skin, not visible to the eye. Use of 
razors prior to surgery increases the incidence of wound infection when 
compared to clipping, depilatory use or no hair removal at all.'' \48\ 
A 1999 guideline issued by the CDC suggests that if hair must be 
removed from a surgical site, that it preferably be done with clippers 
rather than razors in order to minimize cuts and nicks to the skin 
which may increase the risk of a surgical site infection.\49\ In 2002, 
the Association of Operating Room Nurses published similar guidelines 
for appropriate hair removal.\50\ While a similar measure is being 
considered for retirement from the Hospital IQR Program because it 
displays a high degree of performance with little variability or room 
for improvement, we believe that there is significant, variability in 
practice and level of adherence to this guideline in outpatient 
surgical settings such as ASCs is not known, and accordingly, this 
measure is still appropriate for use in the ASC setting. We are 
proposing to adopt the NQF-endorsed measure to capture the percentage 
of ASC admissions with appropriate surgical site hair removal. The NQF-
endorsed specifications for this ASC QC measure can be found at: http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pdf.
---------------------------------------------------------------------------

    \47\ ASC QC Quality measures: Implementation Guide version 1.4. 
ASC Quality Collaboration. December 2010.
    \48\ Seropian, R., Reynolds, B.M.: Wound infections after 
preoperative depilatory versus razor preparation. Am J Surg.1971 
Mar;121(3):251-4.
    \49\ http://www.cdc.gov/ncidod/dhqp/pdf/guidelines/SSI.pdf.
    \50\ Association of Operating Room Nurses. Recommended practices 
for skin preparation of patients. AORN J. 2002 Jan;75(1):184-7.
---------------------------------------------------------------------------

    Read together, section 1833(i)(7)(B) of the Act and section 
1833(t)(17)(C)(i) of the Act require the Secretary, except as the 
Secretary may otherwise provide, to develop measures appropriate for 
the measurement of the quality of care (including medication errors) 
furnished by ASCs, that reflect consensus among affected parties and, 
to the extent feasible and practicable, that include measures set forth 
by one or more national consensus building entities. We believe this 
measure is appropriate to measure quality in ASCs because it assesses 
quality of surgical care performed in ASCs, as measured by appropriate 
surgical site hair removal. Furthermore, we believe that this measure 
meets the consensus requirement and the requirement that it be set 
forth by a national consensus building entity because it was developed 
by the ASC QC and is endorsed by the NQF.
    We invite public comment on our proposal to adopt this measure for 
the CY 2014 payment determination using the claims-based QDC data 
collection mechanism for ASC services furnished for Medicare patients 
from January 1, 2012 through December 31, 2012. While the NQF-endorsed 
specification for this measure includes all ASC admissions, our 
proposal to use information submitted on claims to calculate these 
measures that we restrict the measure population to the population for 
which

[[Page 42342]]

CMS receives claims. Therefore, for this program, we would need to 
calculate the measures based on claims submitted for ASC services 
furnished to Medicare fee-for-service beneficiaries. NQF indicated in 
recent exchanges that our proposal to use Medicare Part B claims 
submitted by ASCs to calculate the measure consistently with the 
measure specification is an appropriate application of the NQF-endorsed 
measure to a subset of patients that are part of the broader population 
to which the measure applies. If finalized, ASCs would need to place 
QDCs relevant to this measure on Medicare Part B claims beginning 
January 1, 2012 in order to report this measure for purposes of CY 2014 
payment determination.
(7) Selection of Prophylactic Antibiotic: First OR Second Generation 
Cephalosporin (NQF 0268)
    Surgical outcomes are affected by the selection of appropriate 
antibiotics. Current guidelines indicate that first or second 
generation cephalosporins are effective for prevention of surgical site 
infections in most cases. The goal of this proposed measure is to 
ensure safe, cost-effective, broad spectrum antibiotics are used as a 
first line prophylaxis unless otherwise indicated. This measure was 
developed by the AMA's Physician Consortium for Performance 
Improvement, a national, diverse, physician-led group that identifies, 
develops, and promotes implementation of evidence-based clinical 
performance measures that reflect best practices. This measure received 
NQF-endorsement under a 2008 project entitled ``Hospital Care: 
Specialty Clinician Performance Measures,'' and it assesses the 
percentage of surgical patients aged 18 years and older undergoing 
procedures with the indications for a first OR second generation 
cephalosporin prophylactic antibiotic, who had an order for cefazolin 
or cefuroxime for antimicrobial prophylaxis. While we recognize that 
this measure is not specifically endorsed for the ASC setting, we 
believe that this measure is highly relevant for use in ASCs because it 
assesses adherence to best practices for use of prophylactic 
antibiotics for outpatient surgical patients. Accordingly, we propose 
to adopt an application of this NQF-endorsed measure for use in the ASC 
Quality Reporting Program. The measure specifications for this proposed 
measure can be found at: http://www.cms.gov/pqrs/downloads/2011_PhysQualRptg_MeasuresGroups_SpecificationsManual_033111.pdf?agree=yes&next=Accept.
    Read together, section 1833(i)(7)(B) of the Act and section 
1833(t)(17)(C)(i) of the Act require the Secretary, except as the 
Secretary may otherwise provide, to develop measures appropriate for 
the measurement of the quality of care (including medication errors) 
furnished by ASCs, that reflect consensus among affected parties and, 
to the extent feasible and practicable, that include measures set forth 
by one or more national consensus building entities. We believe this 
measure is appropriate for measurement of quality care in an ASC 
because it specifically assesses quality care, as measured by adherence 
to best practices for prophylactic antibiotics provided for outpatient 
surgical patients. It is not feasible or practicable to adopt an NQF-
endorsed measure of prophylactic antibiotic selection specifically for 
ASCs because there is no such NQF-endorsed measure. We note that 
section 1833(t)(17) of the Act does not require that each measure we 
adopt for the ASC Quality Reporting Program be endorsed by a national 
consensus building entity, or by the NQF specifically. Further, section 
1833(i)(7)(B) of the Act states that section 1833(t)(17) of the Act, 
which contains this requirement, applies to the ASC Quality Reporting 
Program, except as the Secretary may otherwise provide. Under this 
provision, the Secretary has further authority to adopt measures that 
are not NQF-endorsed or measures that have not been endorsed for the 
ASC setting.
    The proposed adoption of this measure in the ASC Quality Reporting 
Program also is consistent with our goal to align measures across 
settings, as it is also used in the Physician Quality Reporting System, 
and a similar measure (NQF 0528) has been implemented in the 
Hospital OQR Program and the Hospital IQR Program.
    We invite public comment on our proposal to adopt this measure for 
the CY 2014 payment determination using the claims-based QDC data 
collection mechanism for ASC services furnished for Medicare patients 
from January 1, 2012 through December 31, 2012. While the NQF-endorsed 
specification for this measure includes all surgical patients, our 
proposal to use information submitted on claims to calculate these 
measures requires that we restrict the measure population to the 
population for which CMS receives claims. Therefore, for this program, 
we would need to calculate the measures based on claims submitted for 
ASC services furnished to Medicare fee-for-service beneficiaries. NQF 
has indicated in recent exchanges that our proposal to use Medicare 
Part B claims submitted by ASCs to calculate the measure consistently 
with the measure specification is an appropriate application of the 
NQF-endorsed measure to a subset of patients that are part of the 
broader population to which the measure applies. If finalized, ASCs 
would need to place QDCs relevant to this measure on Medicare Part B 
claims beginning January 1, 2012 in order to report this measure for 
purposes of the CY 2014 payment determination.
b. Surgical Site Infection Rate (NQF 0299)
    HAIs are among the leading causes of death in the United States. 
CDC estimates that as many as 2 million infections are acquired each 
year in hospitals and result in approximately 90,000 deaths.\51\ It is 
estimated that more Americans die each year from HAIs than from auto 
accidents and homicides combined. HAIs not only put the patient at 
risk, but also increase the days of hospitalization required for 
patients and add considerable health care costs. HAIs are largely 
preventable for surgical patients through application of perioperative 
best practices such as those listed in the CDC's SSI prevention 
guidelines. Therefore, many health care consumers and organizations are 
calling for public disclosure of HAIs, arguing that public reporting of 
HAI rates provides the information health care consumers need to choose 
the safest hospitals, and gives hospitals an incentive to improve 
infection control efforts. This proposed measure is currently collected 
by the National Healthcare Safety Network (NHSN) as part of State-
mandated reporting and surveillance requirements for hospitals in some 
States. Additionally, data submission for this measure through EHRs may 
be possible in the near future.
---------------------------------------------------------------------------

    \51\ McKibben. L., Horan, T.: Guidance on public reporting of 
healthcare-associated infections: recommendations of the Healthcare 
Infection Control Practices Advisory Committee. AJIC 2005;33:217-26.
---------------------------------------------------------------------------

    This measure is NQF-endorsed and we are also proposing to adopt it 
for the CY 2014 Hospital OQR Program. It also has been adopted for the 
FY 2014 Hospital IQR Program. Because we are proposing the same measure 
for Hospital OQR program in this rule, we refer readers to the 
discussion of this measure in section XIV.C.2.a. of this proposed rule. 
The measure specifications can be found at http://www.cdc.gov/nhsn/psc.html. The NQF describes this measure as the ``percentage of 
surgical site infection events occurring within thirty days after the 
operative procedure if no implant is left in place, or [within] one 
year if an

[[Page 42343]]

implant is in place in patients who had an NHSN operative procedure 
performed during a specified time period and the infection appears to 
be related to the operative procedure.''
    Read together, section 1833(i)(7)(B) of the Act and section 
1833(t)(17)(C)(i) of the Act require the Secretary, except as the 
Secretary may otherwise provide, to develop measures appropriate for 
the measurement of the quality of care (including medication errors) 
furnished by ASCs, that reflect consensus among affected parties and, 
to the extent feasible and practicable, that include measures set forth 
by one or more national consensus building entities. Increasingly, 
surgical procedures are being performed in hospital outpatient 
department settings and ASCs. We believe this measure is appropriate 
for measuring quality of care in ASCs because it applies to outcomes 
for surgical patients undergoing procedures that are performed in ASCs. 
Furthermore, we believe that this measure meets the consensus 
requirement and the requirement that it be set forth by a national 
consensus building entity because it is endorsed by the NQF. The 
proposed adoption of this measure in the ASC Quality Reporting Program 
also is consistent with our goal to align measures across settings 
because we have proposed this measure for the Hospital OQR Program for 
CY 2014 payment determination and have previously adopted it for 
Hospital IQR Program for the FY 2014 payment determination. Therefore, 
we are proposing to adopt the Surgical Site Infection Rate measure that 
is collected by the CDC via the NHSN for the ASC Quality Reporting 
Program for the CY 2014 payment determination.
    Data submission for this measure for the CY 2014 payment 
determination would begin with infection events occurring on or after 
January 1, 2013 through June 30, 2013. The proposed reporting mechanism 
for this proposed HAI measure via the NHSN is discussed in greater 
detail in section XIV.C.2.a. of this proposed rule. We invite public 
comment on this proposed measure and the reporting mechanism.
    In summary, we are proposing to adopt 7 claims-based measures using 
the QDC data collection mechanism, and one NHSN HAI measure of Surgical 
Site Infection Rate for a total of eight measures for ASCs for the CY 
2014 payment determination. We believe the proposal falls within our 
stated framework for the ASC Quality Reporting Program. For the CY 2014 
payment determination, we are proposing that data submission for the 
claims-based measures begin on January 1, 2012 and end December 31, 
2012. For the CY 2014 payment determination, we are proposing that data 
submission for the NHSN-based SSI measure begin with infection events 
occurring between January 1, 2013 and June 30, 2013. This proposed 
measure is currently collected by the NHSN as part of State-mandated 
reporting and surveillance requirements for hospitals in some States.
    The NHSN is a secure, Internet-based surveillance system maintained 
and managed by the CDC, and can be utilized by all types of healthcare 
facilities in the United States, including acute care hospitals, long 
term acute care hospitals, psychiatric hospitals, rehabilitation 
hospitals, outpatient dialysis centers, ASCs, and long term care 
facilities. The NHSN reporting infrastructure is provided free of 
charge to healthcare providers/suppliers to access and use for 
reporting data regarding healthcare safety and infections. The NHSN 
enables healthcare facilities to collect and use data about HAIs, 
clinical practices known to prevent HAIs, the incidence or prevalence 
of multidrug-resistant organisms within their organizations, and other 
adverse events. Some States use the NHSN as a means for healthcare 
facilities to submit data on HAIs mandated through their specific State 
legislation. We invite public comments on our proposals. The proposed 
measures for ASCs for the CY 2014 payment determination are listed 
below with the ASC prefix:

      ASC Program Measurement Set Proposed for the CY 2014 Payment
                              Determination
               [Data submission to occur in 2012 and 2013]
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
ASC-1: Patient Burn.*
ASC-2: Patient Fall.*
ASC-3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong
 Implant.*
ASC-4: Hospital Transfer/Admission.*
ASC-5: Prophylactic Intravenous (IV) Antibiotic Timing.*
ASC-6: Ambulatory Surgery Patients with Appropriate Method of Hair
 Removal.*
ASC-7: Selection of Prophylactic Antibiotic First OR Second Generation
 Cephalosporin.*
ASC-8: Surgical Site Infection Rate.**
------------------------------------------------------------------------
* Data submission proposed to begin in CY 2012.
** Data submission proposed to begin in CY 2013.

4. Proposed ASC Quality Measures for CY 2015 Payment Determination
a. Retention of Measures Adopted for the CY 2014 Payment Determination 
in the CY 2015 Payment Determination
    In general, unless we otherwise specify in the retirement section 
of a rule, we propose to retain measures from one CY payment 
determination to another. We are proposing to retain the eight measures 
we are proposing to adopt for the CY 2014 payment determination, if 
they are finalized in the CY 2012 OPPS/ASC final rule with comment 
period, for the CY 2015 payment determination. We invite public 
comments on this proposal.
b. Proposed Structural Measures for the CY 2015 Payment Determination
    For the CY 2015 payment determination, we are proposing to adopt 
two structural measures: Safe Surgery Checklist Use, and ASC Facility 
Volume Data on Selected ASC Surgical Procedures. We discuss these 
proposals below.
(1) Safe Surgery Checklist Use
    A sound surgery safety checklist could minimize the most common and 
avoidable risks endangering the lives and well-being of surgical 
patients. The purpose of this proposed structural measure is to assess 
whether ASCs are using a safe surgery checklist that covers effective 
communication and helps ensure that safe practices are being performed 
at three critical perioperative periods: prior to administration of 
anesthesia, prior to incision, and prior to the patient leaving the 
operating room. The use of such checklists has been credited with 
dramatic decreases in preventable harm, complications and

[[Page 42344]]

post-surgical mortality.\52\ In November 2010, the New England Journal 
of Medicine published a study concluding that surgical complications 
were reduced by one-third, and mortality by nearly half, when a safe 
surgery checklist was used.\53\
---------------------------------------------------------------------------

    \52\ Haynes, A.B.; Weiser, T.G.; Berry, W.G. et. al (2009). ``A 
Surgical Safety Checklist to Reduce Morbidity and Mortality in a 
Global Population''. New England Journal of Medicine. 360: 491-499.
    \53\ de Vries EN, Prins HA, Crolla RMPH, et al. Effect of a 
comprehensive surgical safety system on patient outcomes. N Engl J 
Med 2010;363: 1928-37.
---------------------------------------------------------------------------

    We believe that effective communication and the use of safe 
surgical practices during surgical procedures will significantly reduce 
preventable surgical deaths and complications. Some examples of safe 
surgery practices that can be performed during each of these three 
perioperative periods are shown in the table below:

----------------------------------------------------------------------------------------------------------------
   First critical point (prior to     Second critical point (prior to skin     Third critical point (prior to
     administering  anesthesia)                     incision)                patient leaving the operating room)
----------------------------------------------------------------------------------------------------------------
 Verbal confirmation of        Confirm surgical team         Confirm the procedure.
 patient identity.                     members and roles.                    Complete count of surgical
 Mark surgical site.           Confirm patient identity,     instruments and accessories.
 Check anesthesia machine/     procedure, and surgical incision      Identify key patient
 medication.                           site.                                 concerns for recovery and
 Assessment of allergies,      Administration of             management of the patient.
 airway and aspiration risk.           antibiotic prophylaxis within 60
                                       minutes before incision.
                                       Communication among
                                       surgical team members of
                                       anticipated critical events.
                                       Display of essential
                                       imaging as appropriate.
----------------------------------------------------------------------------------------------------------------

    For example, mistakes in surgery can be prevented by ensuring that 
the correct surgery is performed on the correct patient and at the 
correct place on the patient's body.\54\ A safe surgery checklist would 
also reduce the potential for human error, which would increase the 
safety of the surgical environment. An example of a checklist that 
employs safe surgery practices at each of these three perioperative 
periods is the World Health Organization Surgical Safety Checklist, 
which was adopted by The World Federation of Societies of 
Anesthesiologists as an international standard of practice. This 
checklist can be found at: http://www.who.int/patientsafety/safesurgery/ss_checklist/en/index.html.
---------------------------------------------------------------------------

    \54\ Hospital National Patient Safety Goals. The Joint 
Commission Accreditation Hospital Manual, 2011. http://www.jointcommission.org/standards_information/npsgs.aspx.
---------------------------------------------------------------------------

    The adoption of a structural measure that assesses Safe Surgery 
Checklist Use would align our patient safety initiatives with those of 
several surgical specialty societies including: the American College of 
Surgeons' Nora Institute for Patient Safety, the American Society of 
Anesthesiologists, The Joint Commission, the National Association for 
Healthcare Quality and the AORN. The measure would assess whether the 
ASC uses a safe surgery checklist in general, and would not require an 
ASC to report whether it uses a checklist in connection with any 
individual procedures.
    Read together, section 1833(i)(7)(B) of the Act and section 
1833(t)(17)(C)(i) of the Act require the Secretary, except as the 
Secretary may otherwise provide, to develop measures appropriate for 
the measurement of the quality of care (including medication errors) 
furnished by ASCs, that reflect consensus among affected parties and, 
to the extent feasible and practicable, that include measures set forth 
by one or more national consensus building entities. This measure is 
appropriate for the measurement of quality of care furnished by ASCs 
because it pertains to best practices for surgeries, and ASCs perform 
ambulatory surgeries. It also reflects consensus among affected 
parties. As stated in section XIV.C.2.c.1 of this proposed rule, we 
believe that consensus among affected parties can be reflected through 
means other than NQF endorsement, including consensus achieved during 
the measure development process; consensus shown through broad 
acceptance and use of measures; and consensus through public comment. 
The proposed safe surgery checklist measure assesses the adoption of a 
best practice for surgical care that is broadly accepted and in 
widespread use among affected parties. In addition to being adopted by 
The World Federation of Societies of Anesthesiologists, the use of a 
safe surgery checklist is one of the safe surgery principles endorsed 
by the Council on Surgical and Perioperative Safety,\55\ which is 
comprised of the American Association of Nurse Anesthetists, the 
American College of Surgeons, the American Association of Surgical 
Physician Assistants, the American Society of Anesthesiologists, the 
American Society of PeriAnesthesia Nurses, AORN, and the Association of 
Surgical Technologists. Two State agencies (Oregon, South Carolina), 
the Veterans Health Administration,\56\ numerous hospital systems, 
State hospital associations (such as California and South Carolina), 
national accrediting organizations and large private insurers have 
endorsed the use of a safe surgery checklist as a best practice for 
reducing morbidity, mortality, and medical errors.57 58 
Because the use of a safe surgery checklist is a widely accepted best 
practice for surgical care, we believe that the proposed structural 
measure of Safe Surgery Checklist Use reflects consensus among affected 
parties. We also note that The Joint Commission has included safe 
surgery checklist practices among those to be used to achieve National 
Patient Safety Goals adopted for 2011 for surgeries performed in 
ambulatory settings and hospitals.\59\ The Safe Surgery Checklist Use 
structural measure is not NQF-endorsed, and there is no NQF-endorsed 
measure of safe surgery checklist use despite the broad acceptance and 
widespread endorsement of this practice. Therefore, it is not feasible 
or practicable to adopt an NQF-endorsed measure of safe surgery 
checklist use because there is no such NQF-endorsed measure. We note 
that section 1833(t)(17) of the Act does not require that each measure 
we adopt for the ASC Quality Reporting Program be endorsed by a 
national consensus building entity, or by the NQF specifically. 
Further, section 1833(i)(7)(B) of the Act states that section 
1833(t)(17) of the Act, which contains this requirement, applies to the

[[Page 42345]]

ASC Quality Reporting Program, except as the Secretary may otherwise 
provide. Under this provision, the Secretary has further authority to 
adopt non-endorsed measures. We note that the proposed adoption of this 
measure in the ASC Quality Reporting Program is consistent with our 
goal to align measures across settings because we are also proposing 
the same measure for the Hospital OQR Program for CY 2014 payment 
determination.
---------------------------------------------------------------------------

    \55\ http://www.cspsteam.org/safesurgerychecklist/safesurgerychecklist.html.
    \56\ Neily, J; Mills, PD, Young-Xu, Y. (2010). ``Association 
between implementation of a Medical Team Training Program and 
Surgical Mortality''. JAMA. 304 (15): 1693-1700.
    \57\ Haynes, AB; Weiser, TG; Berry, WR et al (2009) ``A Surgical 
Safety Checklist to Reduce Morbidity and Mortality in a Global 
Population''. NEJM. 360:491-499.
    \58\ Birkmeyer, JD (2010) ``Strategies for Improving Surgical 
Quality--Checklists and Beyond.'' NEJM. 363: 1963-1965.
    \59\ http://www.jointcommission.org/standards_information/npsgs.aspx.
---------------------------------------------------------------------------

    For the CY 2015 payment determination, we are proposing that data 
collection for this structural measure for ASCs would begin on July 1, 
2013 and end on August 15, 2013 for the entire time period from January 
1, 2012 through December 31, 2012. In other words, an ASC would report 
whether their facility employed a safe surgery checklist that covered 
each of the three critical perioperative periods for the entire 
calendar year of 2012 during the 45-day window from July 1 through 
August 15, 2013. The information for this structural measure would be 
collected via an online Web-based tool that will be made available to 
ASCs via the QualityNet Web site. This collection mechanism is also 
used to collect structural measures and other information for other 
programs, specifically for the Hospital IQR and Hospital OQR programs.
    We invite public comments on our proposal to add this new 
structural measure to the ASC quality measurement set and the 
submission process for the CY 2015 payment determination.

(2) ASC Facility Volume Data on Selected ASC Surgical Procedures

    There is substantial evidence in recent peer-reviewed clinical 
literature that volume of surgical procedures, particularly of high 
risk surgical procedures, is related to better patient outcomes, 
including decreased surgical errors and mortality.60 61 62 
This may be attributable to greater experience and/or surgical skill, 
greater comfort with and hence likelihood of application of 
standardized best practices, and increased experience in monitoring and 
management of surgical patients for the particular procedure. For this 
reason, the National Quality Forum has endorsed measures of total all-
patient surgical volume for Isolated CABG and Valve Surgeries (NQF 
0124), Percutaneous Coronary Intervention (PCI) (NQF 
0165), Pediatric Heart Surgery (NQF 0340), Abdominal 
Aortic Aneurism Repair (NQF 357), Esophageal Resection 
(0361), and Pancreatic Resection (NQF 0366). 
Additionally, many consumer-oriented Web sites reporting health care 
quality information sponsored by States (California, New York, Texas, 
Washington, Florida, Illinois, Michigan, Oregon) and private 
organizations (Leapfrog Group, U.S. News & World Report) are reporting 
procedure volume, in addition to provider performance on surgical 
process (SCIP measures) and outcome measures (SSI, Patient Safety 
Indicators, and Mortality), because it provides beneficial performance 
information to consumers choosing a health care provider. The currently 
NQF-endorsed measures of procedure volume (noted above) relate to 
surgeries only performed in inpatient settings, and would not be 
applicable to the types of procedures approved to be performed in HOPDs 
and ASCs.
---------------------------------------------------------------------------

    \60\ Livingston, E.H.; Cao, J ``Procedure Volume as a Predictor 
of Surgical Outcomes''. JAMA. 2010;304(1):95-97.
    \61\ David R. Flum, D.R.; Salem, L.; Elrod, J.B.; Dellinger, 
E.P.; Cheadle, A. Chan, L. ``Early Mortality Among Medicare 
Beneficiaries Undergoing Bariatric Surgical Procedures''. JAMA. 
2005;294(15):1903-1908.
    \62\ Schrag, D; Cramer, L.D.; Bach, P.B.; Cohen, A.M.; Warren, 
J.L.; Begg, C.B '' Influence of Hospital Procedure Volume on 
Outcomes Following Surgery for Colon Cancer'' JAMA. 2000; 284 (23): 
3028-3035.
---------------------------------------------------------------------------

    The recently issued Report to Congress entitled ``Medicare 
Ambulatory Surgical Center Value-Based Purchasing Implementation Plan'' 
included an analysis of CY 2009 ASC claims for Medicare beneficiaries. 
When stratified by specialty category, CMS identified six procedure 
categories that historically constitute 98.5 percent of the total 
volume of procedures performed in ASCs: Gastrointestinal, Eye, Nervous 
System, Musculoskeletal, Skin, and Genitourinary. We are proposing that 
ASCs submit all patient volume data on these six broad categories of 
surgical procedures as a structural measure to be used for the ASC 
Quality Reporting Program CY 2015 payment determination. In section 
XIV.C.2.c.(2) of this proposed rule, we are also proposing that HOPDs 
submit similar all patient volume data for eight broad procedure 
categories.
    Structural measures assess whether a provider/facility possesses 
conditions for the care of patients that are associated with better 
quality. Read together, section 1833(i)(7)(B) of the Act and section 
1833(t)(17)(C)(i) of the Act require the Secretary, except as the 
Secretary may otherwise provide, to develop measures appropriate for 
the measurement of the quality of care (including medication errors) 
furnished by ASCs, that reflect consensus among affected parties and, 
to the extent feasible and practicable, that include measures set forth 
by one or more national consensus building entities. Because surgical 
volume is associated with better quality, and surgical procedures are 
performed in ASCs, we believe that surgical volume is appropriate for 
measuring the quality of these six categories of surgical procedures 
performed in ASCs. We have previously established for other programs 
that we believe consensus among affected parties can be reflected 
through various means including widespread use among industry 
stakeholders. We believe that the ASC Facility Volume Data on Selected 
ASC Surgical Procedures structural measure reflects consensus among 
affected parties as being associated with quality of surgical care 
because of recent evidence published in well-respected and widely 
circulated peer-reviewed clinical literature, and because of its 
widespread reporting among States and private stakeholders on Web sites 
featuring quality information. Because the current volume measures are 
endorsed for inpatient procedures, many of which are not performed in 
outpatient settings such as ASCs, it is not feasible or practicable to 
utilize NQF endorsed measures of volume for ASCs. Further, section 
1833(i)(7)(B) of the Act states that section 1833(t)(17) of the Act, 
which contains this requirement, applies to the ASC Quality Reporting 
Program, except as the Secretary may otherwise provide. Under this 
provision, the Secretary has further authority to adopt non-endorsed 
measures. For the CY 2015 payment determination, we are proposing that 
ASCs would report these data with respect to these six categories 
between the dates July 1, 2013 and August 15, 2013 with respect to the 
time period January 1, 2012 through December 31, 2012. In other words, 
under this proposal, an ASC would report its CY 2012 all-patient volume 
data for these six categories of procedures during the 45-day window of 
July 1 to August 15, 2013. The table below lists the HCPCS codes for 
which hospitals would be required to report all-patient volume data. 
Like the structural measures in the Hospital OQR program, data on this 
proposed measure would be collected via an online Web-based tool that 
will be made available to ASCs via the QualityNet Web site. This 
collection mechanism is also used to collect structural measures and 
other information for other programs (Hospital IQR and Hospital OQR). 
We invite public comment on this proposal.
    In summary, for the CY 2015 payment determination, we are proposing 
to

[[Page 42346]]

retain the eight measures proposed for the CY 2014 payment 
determination, if they are adopted in the final rule with comment 
period, and to add two structural measures. We invite public comments 
on these proposals for the CY 2015 payment determination. The proposed 
measures for ASCs for CY 2015 payment determination are listed below:

      Proposed ASC Program Measurement Set for the CY 2015 Payment
                              Determination
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
ASC-1: Patient Burn.
ASC-2: Patient Fall.
ASC-3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong
 Implant.
ASC-4: Hospital Transfer/Admission.
ASC-5: Prophylactic Intravenous (IV) Antibiotic Timing.
ASC-6: Ambulatory Surgery Patients with Appropriate Method of Hair
 Removal.
ASC-7: Selection of Prophylactic Antibiotic: First OR Second Generation
 Cephalosporin.
ASC-8: Surgical Site Infection Rate.
------------------------------------------------------------------------

      Proposed ASC Program Measurement Set for the CY 2015 Payment
                              Determination
------------------------------------------------------------------------
 
------------------------------------------------------------------------
ASC-9: Safe Surgery Checklist Use*
ASC-10: ASC Facility Volume Data on Selected ASC Surgical Procedures*
------------------------------------------------------------------------
            Procedure category                Corresponding HCPCS codes
------------------------------------------------------------------------
Gastrointestinal..........................  40000 through 49999, G0104,
                                             G0105, G0121, C9716, C9724,
                                             C9725, 0170T.
Eye.......................................  65000 through 68999, 0186,
                                             0124T, 0099T, 0017T, 0016T,
                                             0123T, 0100T, 0176T, 0177T,
                                             0186T, 0190T, 0191T, 0192T,
                                             76510, 0099T.
Nervous System............................  61000 through 64999, G0260,
                                             0027T, 0213T, 0214T, 0215T,
                                             0216T, 0217T, 0218T, 0062T.
Musculoskeletal...........................  20000 through 29999, 0101T,
                                             0102T, 0062T, 0200T, 0201T.
Skin......................................  10000 through 19999, G0247,
                                             0046T, 0268T, G0127, C9726,
                                             C9727.
Genitourinary.............................  50000 through 58999, 0193T,
                                             58805.
------------------------------------------------------------------------
*New proposed measures for CY 2015 payment determination.

5. Proposed ASC Quality Measures for the CY 2016 Payment Determination
a. Retention of Measures Adopted for the CY 2015 Payment Determination 
in the CY 2016 Payment Determination
    In general, unless otherwise specified in the retirement section of 
a rule, we propose to retain measures from one CY payment determination 
to the next. We are proposing to retain the ten measures we are 
proposing to adopt for the CY 2015 payment determination, if they are 
finalized in an OPPS/ASC final rule with comment period, for the CY 
2016 payment determination. We invite public comment on this proposal.
b. Proposed HAI Measure: Influenza Vaccination Coverage Among 
Healthcare Personnel (HCP) (NQF 0431)
    The Influenza Vaccination among Healthcare Personnel measure 
assesses the percentage of healthcare personnel who have been immunized 
for influenza during the flu season. The specifications for this 
measure are available at http://www.cdc.gov/nhsn/PDFs/HSPmanual/HPS_Manual.pdf.
    For the ASC CY 2016 payment determination, we are proposing to 
adopt this NQF-endorsed HAI measure. We also are proposing to adopt 
this measure for the Hospital OQR Program for the CY 2015 payment 
determination. We refer readers to the discussion in section XIV.C.3.b. 
of this proposed rule for a detailed description of this measure.
    Read together, section 1833(i)(7)(B) of the Act and section 
1833(t)(17)(C)(i) of the Act require the Secretary, except as the 
Secretary may otherwise provide, to develop measures appropriate for 
the measurement of the quality of care (including medication errors) 
furnished by ASCs, that reflect consensus among affected parties and, 
to the extent feasible and practicable, that include measures set forth 
by one or more national consensus building entities. We believe this 
measure is appropriate for measuring quality of care in ASCs due to the 
significant impact of HCP influenza vaccination on the spread of 
influenza among patients. Furthermore, we believe that this measure 
meets the consensus requirement and the requirement that it be set 
forth by a national consensus building entity because it is endorsed by 
the NQF.
    We are proposing that ASCs use the NHSN infrastructure and protocol 
to report the measure for ASC Quality Reporting Program purposes. 
Collection of data via the NHSN for this measure will begin with 
immunizations from October 1, 2013 to March 31, 2014 for the CY 2016 
payment determination. We invite public comment on our proposal to 
adopt this HAI measure into the ASC Quality Reporting Program for the 
CY 2016 payment determination.
    In summary, for the CY 2016 payment determination, we are proposing 
to retain the ten measures that we adopt for the CY 2015 payment 
determination (if these proposals are finalized in a final rule) and to 
add one NHSN HAI measure. The proposed measures for ASCs for the CY 
2016 payment determination are listed below:

      Proposed ASC Program Measurement Set for the CY 2016 Payment
                              Determination
------------------------------------------------------------------------
 
------------------------------------------------------------------------
ASC-1: Patient Burn.
ASC-2: Patient Fall.
ASC-3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong
 Implant.
ASC-4: Hospital Transfer/Admission.
ASC-5: Prophylactic Intravenous (IV) Antibiotic Timing.
ASC-6: Ambulatory Surgery Patients with Appropriate Method of Hair
 Removal.

[[Page 42347]]

 
ASC-7: Selection of Prophylactic Antibiotic: First OR Second Generation
 Cephalosporin.
ASC-8: Surgical Site Infection Rate.
ASC-9: Safe Surgery Checklist Use.
ASC-10: ASC Facility Volume Data on Selected ASC Surgical Procedures.
------------------------------------------------------------------------
            Procedure category                Corresponding HCPCS codes
------------------------------------------------------------------------
Gastrointestinal..........................  40000 through 49999, G0104,
                                             G0105, G0121, C9716, C9724,
                                             C9725, 0170T.
Eye.......................................  65000 through 68999, 0186,
                                             0124T, 0099T, 0017T, 0016T,
                                             0123T, 0100T, 0176T, 0177T,
                                             0186T, 0190T, 0191T, 0192T,
                                             76510, 0099T.
Nervous System............................  61000 through 64999, G0260,
                                             0027T, 0213T, 0214T, 0215T,
                                             0216T, 0217T, 0218T, 0062T.
Musculoskeletal...........................  20000 through 29999, 0101T,
                                             0102T, 0062T, 0200T, 0201T.
Skin......................................  10000 through 19999, G0247,
                                             0046T, 0268T, G0127, C9726,
                                             C9727.
Genitourinary.............................  50000 through 58999, 0193T,
                                             58805.
------------------------------------------------------------------------
ASC-11: Influenza Vaccination Coverage among Healthcare Personnel.*
------------------------------------------------------------------------
*New proposed measure for CY 2016 payment determination.

6. ASC Measure Topics for Future Consideration
    Below is a list of future measurement areas that we are considering 
for future ASC Quality Reporting Program payment determinations for 
which we seek comment.
    In particular, we seek comment on the inclusion of Patient 
Experience of Care Measures in the ASC Quality Reporting Program 
measure set for a future payment determination, such as existing 
Consumer Assessment of Healthcare Providers and Systems (CAHPS) surveys 
for clinicians/groups and the CAHPS Surgical Care Survey, sponsored and 
submitted by the American College of Surgeons (ACS) and the Surgical 
Quality Alliance (SQA). We also, in particular, seek comment on the 
inclusion of procedure-specific measures for cataract surgery, 
colonoscopy and endoscopy, and for measures of Anesthesia Related 
Complications in the ASC Quality Reporting Program measure set.

 Measures and Measurement Topics Under Consideration for Future Payment
                             Determinations
------------------------------------------------------------------------
 
---------------------------------------------------------------------------
Patient Experience of Care:
    Consumer Assessment of Healthcare Providers and Systems (CAHPS)
     surveys for clinicians/groups.
    CAHPS Surgical Care Survey.
Procedure Specific Measures:
    Colonoscopy and other Endoscopy measures.
    Cataract Surgery measures.
Anesthesia Related Complications:
    Death.
    Cardiac Arrest.
    Perioperative Myocardial Infarction.
    Anaphylaxis.
    Hyperthermia.
    Transfusion Reaction.
    Stroke, Cerebral Vascular Accident, or Coma following anesthesia.
    Visual Loss.
    Medication Error.
    Unplanned ICU admission.
    Patient intraoperative awareness.
    Unrecognized difficult airway.
    Reintubation.
    Dental Trauma.
    Perioperative aspiration.
    Vascular access complication, including vascular injury or
     pneumothorax.
    Pneumothorax following attempted vascular access or regional
     anesthesia.
    Infection following epidural or spinal anesthesia.
    Epidural hematoma following spinal or epidural anesthesia.
    High Spinal.
    Postdural puncture headache.
    Major systemic local anesthetic toxicity.
    Peripheral neurologic deficit following regional anesthesia.
    Infection following peripheral nerve block.
  Additional Future Measurement Topics:
    NQF Serious Reportable Events in Healthcare.
    Medication administration variance.
    Medication reconciliation.
    Venous thromboembolism measures: outcome/assessment/prophylaxis.
    Presence of Physician during Entire Recovery Period.
    Post-discharge follow up.
    Post-discharge ED visit within 72 hours.
------------------------------------------------------------------------

[[Page 42348]]

    We invite public comment on these quality measures and measurement 
topics so that we may consider proposing to adopt them for future ASC 
Quality Reporting Program payment determinations beginning with the CY 
2015 payment determination. We also are seeking suggestions for 
additional measures and rationales for the ASC Quality Reporting 
Program that are not listed in the table above.
7. Technical Specification Updates and Data Publication
a. Maintenance of Technical Specifications for Quality Measures
    We are proposing to provide technical specifications, and in some 
cases, links to technical specifications hosted on external third party 
Web sites, for the ASC Quality Reporting Program measure in a 
Specifications Manual, to be posted after publication of the CY 2012 
OPPS/ASC final rule with comment period, on the CMS QualityNet Web site 
at http://www.QualityNet.org. Currently, the specifications for the 
proposed ASC measures for the CY 2014, CY 2015 and CY 2016 payment 
determinations, with the exception of the two structural measures, can 
be found at: http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pdf; http://www.cms.gov/apps/ama/license.asp?file=/pqrs/downloads/2011_PhysQualRptg_MeasureSpecificationsManual_033111.pdf; http://www.cdc.gov/nhsn/psc.html; and http://www.cdc.gov/nhsn/PDFs/HSPmanual/HPS_Manual.pdf. 
The specifications for the two structural measures are included in the 
discussion above and in the table of measures proposed for the CY 2015 
payment determination.
    We are proposing to maintain the technical specifications for the 
measures adopted for the ASC quality reporting program by updating this 
Specifications Manual and including detailed instructions and 
calculation algorithms as appropriate. In some cases where the 
specifications are available elsewhere, we may include links to Web 
sites hosting technical specifications. We currently use this same 
process for Hospital OQR Program measures, as discussed above in 
section XIV.A.3.a. of this proposed rule. We are proposing to follow 
the same technical specification maintenance process for the ASC 
Quality Reporting Program measures and we invite public comments on 
this proposal.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68766 
through 68767), we established a subregulatory process for updates to 
the technical specifications that we use to calculate Hospital OQR 
Program measures. This process is used when changes to the measure 
specifications are necessary due to changes in scientific evidence or 
other substantive changes, thereby giving CMS the option to seek re-
endorsement of that measure. We note that NQF endorsement of an OQR 
measure is not required under sections 1833(i)(2)(D)(iv), (i)(7) or 
(t)(17) of the Act. The legal standard for adopting Hospital OQR 
measures is consensus among affected parties, and to the extent 
feasible and practicable, measures that are set forth by a consensus 
building entity. The legal standard for adopting ASC measures is this 
same standard, except as the Secretary may otherwise provide. Changes 
of this nature to measures adopted for the ASC Quality Reporting 
Program may not coincide with the timing of our regulatory actions, but 
nevertheless require inclusion in the measure specifications so that 
measures are calculated based on the most up-to-date scientific 
standards and, in some instances, consensus standards.
    For the Hospital OQR Program, we indicated that notification of 
changes to the measure specifications is available on the QualityNet 
Web site, http://www.QualityNet.org, and in the Hospital OQR Program 
Specifications Manual and would occur no less than 3 months before any 
changes become effective for purposes of reporting under the Hospital 
OQR Program. The Hospital OQR Program Specifications Manual is released 
every 6 months and addenda are released as necessary providing at least 
3 months of advance notice for substantial changes such as changes to 
ICD-9, CPT, NUBC, and HCPCS codes, and at least 6 months notice for 
substantive changes to data elements that would require significant 
systems changes. We are proposing to follow the same subregulatory 
process for the ASC Quality Reporting Program for updates to the 
technical specifications. We invite public comments on this proposal.
b. Publication of ASC Quality Reporting Program Data
    Section 1833(t)(17)(E) of the Act requires that the Secretary 
establish procedures to make data collected under the Hospital OQR 
Program available to the public. It also states that such procedures 
must ensure that a hospital has the opportunity to review the data that 
are to be made public with respect to the hospital prior to such data 
being made public. These requirements under section 1833(t)(17)(E) of 
the Act also apply to the ASC Quality Reporting Program except as the 
Secretary may otherwise provide. We are proposing to make data that an 
ASC has submitted for the ASC Quality Reporting Program available on a 
CMS Web site after providing ASCs an opportunity to preview the data to 
be made public. We are proposing that these data would be displayed at 
the CMS Certification Number (CCN) level. Publishing this information 
encourages beneficiaries to work with their doctors and ASCs to discuss 
the quality of care ASCs provide to patients, thereby providing an 
additional incentive to ASCs to improve the quality of care that they 
furnish. We intend to propose more detail on the publication of data in 
a later rulemaking. We solicit public comment on these proposed 
processes of making ASC quality data available to the public.
8. Proposed Requirements for Reporting of ASC Quality Data for the CY 
2014 Payment Determination
    To participate in the ASC Quality Reporting Program for the CY 2014 
payment determination, we are proposing that ASCs must meet data 
collection and data submission requirements. We intend to propose 
administrative requirements, data validation and data completeness 
requirements, reconsideration and appeals processes, and CY 2015 
payment determination reporting requirements in the CY 2013 OPPS/ASC 
proposed rule with comment period.
a. Proposed Data Collection and Submission Requirements for the 
Proposed Claims-Based Measures
    We are proposing that, to be eligible for the full CY 2014 ASC 
annual payment update, ASCs would be required to submit complete data 
on individual quality measures through a claims-based reporting 
mechanism by submitting the appropriate QDCs on the ASC's Medicare 
claims. For the CY 2014 payment determination, we are proposing to 
utilize Medicare fee-for-service ASC claims for services furnished 
between January 1, 2012 and December 31, 2012.
    We are proposing to consider an ASC as participating in the ASC 
Quality Reporting Program for CY 2014 payment determination if the ASC 
includes QDCs specified for the program on their CY 2012 claims 
relating to the proposed measures if finalized. As no determinations 
will be made affecting payment until the CY 2014 annual payment update, 
we are proposing this approach as to reduce ASC burden. We intend to 
provide additional details regarding participation notification and

[[Page 42349]]

other administrative requirements in CY 2013 rulemaking.
    We are proposing that data completeness for claims-based measures 
would be determined by comparing the number of claims meeting measure 
specifications that contain the appropriate QDCs with the number of 
claims that would meet measure specifications, but did not have the 
appropriate QDCs on the submitted claim. We intend to propose how we 
will assess data completeness for claims-based measures in the CY 2013 
OPPS/ASC proposed rule. We request public comment on these proposals 
and are specifically interested in receiving public comment on what 
constitutes complete data in regard to our proposed ASC claims-based 
measures utilizing QDCs and methods to assess completeness.
b. Proposed Data Submission Deadlines for the Proposed Surgical Site 
Infection Rate Measure
    As discussed above, we are proposing to adopt a HAI measure, 
Surgical Site Infection Rate, for the CY 2014 payment determination. We 
are proposing to use the data submission and reporting standard 
procedures that have been set forth by the CDC for NHSN participation 
in general and for submission of this measure to NHSN. We refer readers 
to the CDC's NHSN Web site (http://www.cdc.gov/nhsn) for detailed data 
submission and reporting procedures. Our proposal seeks to reduce ASC 
burden by aligning CMS data submission and reporting procedures with 
NHSN procedures currently utilized by healthcare providers and 
suppliers. The submission timeframes for the CY 2014 payment 
determination that we are proposing to use for the proposed Surgical 
Site Infection Rate measure are shown below. ASCs must submit their 
quarterly data to NHSN for ASC Quality Data Reporting purposes within 
the date intervals shown in the table below (any updates to this 
schedule will be posted on the QualityNet Web site).

 Proposed Submission Timeframe for the Proposed Surgical Site Infection
           Rate Measure for the CY 2014 Payment Determination
------------------------------------------------------------------------
                                                      Final submission
                                                      deadline for ASC
  CY 2013 infection events     CDC-NHSN collection   quality  reporting
                              and quarterly report     CY 2014 payment
                                                        determination
------------------------------------------------------------------------
Q1 (Jan 1 to Mar 31, 2013)..  January 31st to       August 1, 2013
                               August 1st.
Q2 (Apr 1 to Jun 30, 2013)..  April 30th to         November 1, 2013
                               November 1st.
------------------------------------------------------------------------

    We request public comments on these proposals.

XV. Proposed Changes to Whole Hospital and Rural Provider Exceptions to 
the Physician Self-Referral Prohibition: Exception for Expansion of 
Facility Capacity; and Proposed Changes to Provider Agreement 
Regulations Relating to Patient Notification Requirements

A. Background

    Section 1877 of the Act, also known as the physician self-referral 
law: (1) prohibits a physician from making referrals for certain 
``designated health services'' (DHS) payable by Medicare to an entity 
with which the physician (or an immediate family member) has a 
financial relationship (ownership or compensation), unless an exception 
applies; and (2) prohibits the entity from filing claims with Medicare 
(or billing another individual, entity, or third party payer) for those 
DHS furnished as a result of a prohibited referral. The Act establishes 
a number of specific exceptions and grants the Secretary the authority 
to create regulatory exceptions that pose no risk of program or patient 
abuse.
    Section 1877(d) of the Act sets forth additional exceptions related 
to ownership or investment interests held by a physician (or an 
immediate family member of a physician) in an entity that furnishes 
DHS. Section 1877(d)(2) of the Act provides an exception for ownership 
or investment interests in rural providers. In order for an entity to 
qualify for the exception, the DHS must be furnished in a rural area 
(as defined in section 1886(d)(2) of the Act) and substantially all of 
the DHS furnished by the entity must be furnished to individuals 
residing in a rural area. Section 1877(d)(3) of the Act provides an 
exception, known as the ``whole hospital'' exception, for ownership or 
investment interests in a hospital located outside of Puerto Rico, 
provided that the referring physician is authorized to perform services 
at the hospital and the ownership or investment interest is in the 
hospital itself (and not merely in a subdivision of the hospital).

B. Changes Made by the Affordable Care Act

1. Provisions Relating to Exceptions to Ownership and Investment 
Prohibition (Section 6001(a) of the Affordable Care Act)
    Section 6001(a) of the Affordable Care Act amended the whole 
hospital and rural provider exceptions to impose additional 
restrictions on physician ownership or investment in hospitals. The 
statute defines a ``physician owner or investor'' in a hospital as a 
physician or immediate family member of a physician who has a direct or 
indirect ownership or investment interest in a hospital. We will refer 
to hospitals with such ``physician owners or investors'' as 
``physician-owned hospitals.''
    We addressed section 6001(a) of the Affordable Care Act in the CY 
2011 OPPS/ASC final rule with comment period (75 FR 71800). In Sec.  
411.362, we implemented most of the requirements of section 6001(a) of 
the ACA, including patient safety requirements. In sections XV.B.2. and 
C. of this proposed rule, we address the process for a hospital to 
request an exception to the prohibition on expansion of facility 
capacity under section 6001(a)(3) of the Affordable Care Act. In 
section D. of this proposed rule, we address related patient 
notification requirements in the provider agreement regulations.
2. Provisions of Section 6001(a)(3) of the Affordable Care Act
    The amended whole hospital and rural provider exceptions provide 
that a hospital may not increase the number of operating rooms, 
procedure rooms, and beds beyond that for which the hospital was 
licensed on March 23, 2010 (or, in the case of a hospital that did not 
have a provider agreement in effect as of this date, but did have a 
provider agreement in effect on December 31, 2010, the date of effect 
of such agreement). Section 6001(a)(3) of the Affordable Care Act added 
new section 1877(i)(3)(A)(i) of the Act to set forth that the Secretary 
shall establish and implement an exception process to the prohibition 
on expansion of facility capacity. Referrals are prohibited if made by 
physician owners or investors after facility expansion and prior to the 
Secretary granting an exception. Exceptions for expanding

[[Page 42350]]

facility capacity will protect only those referrals made after the 
exception is granted. In this proposed rule, we set forth proposed 
regulations for this process at Sec.  411.362(c) and related 
definitions at Sec.  411.362(a).
    The proposed regulations at Sec.  411.362(c) set forth the process 
for a hospital to request an exception. Proposed new Sec.  
411.362(c)(2) outlines the requirements for an applicable hospital 
request and Sec.  411.362(c)(3) outlines the requirements for a high 
Medicaid facility request. These terms are defined at sections 
1877(i)(3)(E) and 1877(i)(3)(F) of the Act. The statute is clear that 
an applicable hospital may apply for an exception up to once every 2 
years. Using our rulemaking authority under sections 1871 and 
1877(i)(3)(A)(i) of the Act, we are proposing to interpret the statute 
to impose the same 2-year frequency limit to apply also to high 
Medicaid facilities as discussed in section XV.C.2. of this proposed 
rule.
    We are proposing to set forth the elements required for a complete 
request for an exception under proposed new Sec.  411.362(c)(4). The 
opportunity for community input (required by section 1877(i)(3)(A)(ii) 
of the Act) and timing of a complete request are described in proposed 
Sec.  411.362(c)(5). Under proposed Sec.  411.362(c)(5), we are 
proposing to provide an opportunity for individuals and entities in the 
community in which the hospital is located to provide input with 
respect to the hospital's request for an exception. For purposes of 
this proposed rule, when the statute refers to an ``application,'' we 
use the term ``request.''
    Because section 1877(i)(3)(D) of the Act provides that any increase 
in the number of operating rooms, procedure rooms, and beds for which a 
hospital is licensed pursuant to being granted an exception may occur 
only in facilities on the hospital's main campus, we are proposing a 
definition of the ``main campus of the hospital'' at Sec.  411.362(a), 
as discussed below. Additionally, we are proposing a definition of the 
``baseline number of operating rooms, procedure rooms, and beds'' for 
purposes of section 1877(i)(3)(C)(ii) of the Act.
    Section 1877(i)(3)(H) of the Act provides that the Secretary shall 
publish the final decision with respect to an application in the 
Federal Register no later than 60 days after receiving a complete 
application. Under section XV.C.4. of this proposed rule, below, we 
discuss our proposal for publishing decisions in the Federal Register 
as well as on the CMS Web site.
    Under section 1877(i)(3)(A) of the Act, the Secretary must 
promulgate regulations concerning the process for a hospital to apply 
for an exception by January 1, 2012, and implement this process on 
February 1, 2012. We anticipate an effective date of January 1, 2012, 
for these proposed regulations. Below, we set out our proposals related 
to the exception process in greater detail.

C. Proposed Changes Relating to the Process for an Exception to the 
Prohibition on Expansion of Facility Capacity

    In order to conform our regulations to the amendments made to the 
rural provider and whole hospital exceptions by section 6001(a)(3) of 
the Affordable Care Act, we are proposing to add two definitions in 
Sec.  411.362(a) and a new Sec.  411.362(c) to establish the process by 
which an applicable hospital or high Medicaid facility may request an 
exception to the prohibition on expansion of facility capacity. We are 
proposing to define the terms ``baseline number of operating rooms, 
procedure rooms, and beds'' and ``main campus of the hospital''. The 
process we are proposing sets forth the relevant data sources and the 
elements of a complete request for an exception.
1. Applicable Hospital
    Below we separately discuss each of the statutory criteria that a 
hospital must satisfy to qualify as an ``applicable hospital''. We are 
proposing the processes by which a hospital can determine whether it 
satisfies each criterion. The proposed data requirements for each 
criterion are further discussed in each section below.
    We are proposing that data from the CMS Healthcare Cost Report 
Information System (HCRIS) be used to determine whether a hospital 
satisfies the inpatient admission, bed capacity, and bed occupancy 
criteria. We currently consider HCRIS to contain a sufficient amount of 
data for a particular fiscal year if HCRIS contains data from at least 
6,100 hospitals for that fiscal year. Therefore, we are proposing that 
HCRIS must contain data from at least 6,100 hospitals for a particular 
year in order for that year's data to be used under the exception 
process. If HCRIS does not contain sufficient data for that year, data 
from the most recent year(s) that satisfy the threshold should be used.
    CMS will post the average percent of total inpatient Medicaid 
admissions per county, the average bed capacity per State, the national 
average bed capacity, and the average bed occupancy per State on the 
CMS Web site at: http://www.cms.gov/physicianselfreferral/85_physician_owned_hospitals.asp. Hospitals can access these data to 
assess whether they satisfy the respective criteria to qualify as an 
applicable hospital. CMS will make a reasonable effort to ensure that 
the data contained in HCRIS are correct and complete at the time of 
disclosure. We are soliciting public comment on proposing and 
justifying alternative data sources other than HCRIS that could result 
in more accurate determinations as to whether a hospital satisfies the 
relevant criteria.
a. Percentage Increase in Population
    Section 1877(i)(3)(E)(i) of the Act provides that an applicable 
hospital means a hospital that is located in a county in which the 
percentage increase in the population during the most recent 5-year 
period (as of the application date) is at least 150 percent of the 
percentage increase in the population growth of the State in which the 
hospital is located during that period, as estimated by the Bureau of 
the Census.
    To determine the percentage increase in population in the county 
and State in which the hospital is located, we are proposing at Sec.  
411.362(c)(2)(i) that the hospital use population estimates provided by 
the Bureau of the Census. If the hospital is located in an area 
referred to by the Bureau of the Census as a county equivalent area, 
such as an independent city, borough, or census area, the hospital 
should use the Bureau of the Census estimates for the county equivalent 
area in which it is located. For the remainder of this subsection, 
``county'' refers to both a county and a county equivalent area.
    We recognize that the Bureau of the Census may not provide county 
and State population size estimates that are current as of the date 
that a hospital submits its request for an exception. We are proposing 
that a hospital should use only the most recent estimates available to 
perform the necessary calculations. For example, if a hospital submits 
a request for an exception in 2012, but the most recent year for which 
the Bureau of the Census has estimates is 2010, the hospital should 
perform the necessary calculations using estimates for years 2010 and 5 
years prior.
    We are proposing also that the hospital use county and State 
population estimates for the same years. For example, if a hospital 
submits a request for an exception in 2012 and the most recent year for 
which the Bureau of the Census has State and county population 
estimates is 2011 and 2010, respectively, the hospital should perform 
the necessary calculations

[[Page 42351]]

using estimates for years 2010 and 5 years prior. We are proposing to 
review a request based on the population estimates available as of the 
date that a hospital submits its request even if the Bureau of the 
Census updates its estimates after the hospital submits its request and 
prior to our decision.
b. Inpatient Admissions
    Section 1877(i)(3)(E)(ii) of the Act provides that an applicable 
hospital means a hospital that has an annual percent of total inpatient 
admissions under Medicaid that is equal to or greater than the average 
percent with respect to such admissions for all hospitals located in 
the county in which the hospital is located. We are proposing at Sec.  
411.362(c)(2)(ii) to require hospitals to calculate inpatient 
admissions using filed hospital cost report discharge data. We are 
proposing that, in calculating the hospital's annual percent of total 
Medicaid inpatient admissions, the hospital should divide the number of 
discharges for the year that are paid for under Medicaid by the total 
number of discharges for the year paid for by any governmental or 
private payor. We are soliciting public comment on other data sources 
that could be used to provide an accurate estimate of the annual 
percent of total Medicaid inpatient admissions for the applicable 
hospital and for all hospitals in the same county.
    The statute does not specify the number of years for which the 
hospital's annual percent of total inpatient admissions under Medicaid 
must be equal to or greater than the average percent with respect to 
such admissions for all hospitals located in the county in which the 
hospital is located. We are proposing at Sec.  411.362(c)(2)(ii) that a 
hospital must satisfy this criterion for each of the 3 most recent 
fiscal years for which data are available as of the date the hospital 
submits a request. We invite public comment on whether 3 years of data 
are sufficient to indicate a legitimate need by the hospital to 
increase its number of operating rooms, procedure rooms, and beds and, 
if not, how many years of data we should consider in evaluating a 
request for an exception.
    We are proposing at Sec.  411.362(c)(2)(ii) that the hospital would 
estimate its annual percentage of total inpatient admissions under 
Medicaid. The hospital would reference its own filed cost reports for 
the 3 most recent fiscal years for which data are available. We are 
proposing that we would review a request based on the data available as 
of the date the hospital submits its request. We plan to issue guidance 
to further address the process for a hospital to estimate its annual 
percentage of total inpatient admissions under Medicaid. The guidance 
will also explain how CMS will determine and provide the average 
percentages of inpatient admissions under Medicaid for each county.
c. Nondiscrimination
    Section 1877(i)(3)(E)(iii) of the Act provides that an applicable 
hospital does not discriminate against beneficiaries of Federal health 
care programs and does not permit physicians practicing at the hospital 
to discriminate against such beneficiaries. We are proposing to 
incorporate this requirement at Sec.  411.362(c)(2)(iii) of the 
regulations.
d. Bed Capacity
    Section 1877(i)(3)(E)(iv) of the Act provides that an applicable 
hospital means a hospital that is located in a State in which the 
average bed capacity in the State is less than the national average bed 
capacity. The statute does not specify a time period over which a 
State's average bed capacity must be less than the national average bed 
capacity. We are proposing at Sec.  411.362(c)(2)(iv) that the State 
average bed capacity must be less than the national average bed 
capacity for each of the 3 most recent fiscal years for which data are 
available as of the date that a hospital submits its request. We invite 
public comment on whether 3 years of data are sufficient to indicate a 
legitimate need by the hospital to increase its number of operating 
rooms, procedure rooms, and beds and, if not, how many years of data we 
should consider in evaluating any request for an exception.
    Under our proposed process, CMS would use filed hospital cost 
reporting data to determine State and national average bed capacities. 
We plan to issue guidance explaining how CMS will determine and provide 
the average bed capacities. We are proposing that we would review a 
request based on the data available as of the date a hospital submits 
its request.
e. Bed Occupancy
    Section 1877(i)(3)(E)(v) of the Act provides that an applicable 
hospital means a hospital that has an average bed occupancy rate that 
is greater than the average bed occupancy rate in the State in which 
the hospital is located. The statute does not specify the time period 
over which the hospital's average bed occupancy rate must be greater 
than the State average bed occupancy rate. We are proposing at Sec.  
411.362(c)(2)(v) that the hospital's bed occupancy rate must be greater 
than the State average bed occupancy rate for each of the 3 most recent 
fiscal years for which data are available as of the date that a 
hospital submits its request. We invite public comment on whether 3 
years of data are sufficient to indicate a legitimate need by the 
hospital to increase the number of its operating rooms, procedure 
rooms, and beds and, if not, how many years of data we should consider 
in evaluating any request for an exception.
    We are proposing at Sec.  411.362(c)(2)(v) that the hospital use 
filed hospital cost reporting data to calculate its own average bed 
occupancy rate. We plan to issue guidance explaining how the hospital 
can calculate its bed occupancy rate. The guidance would also explain 
how CMS will determine and provide the State bed occupancy rates. We 
are proposing that we would review a request based on the data 
available as of the date that the hospital submits its request.
2. High Medicaid Facility
    Below we separately discuss each of the statutory criteria that a 
hospital must satisfy to qualify as a ``high Medicaid facility.'' We 
are proposing the processes by which a hospital can determine whether 
it satisfies each criterion. The proposed data requirements for each 
criterion are further discussed in the sections below.
    As discussed in section XV.C.1. of this proposed rule, we currently 
consider HCRIS to contain a sufficient amount of data for a particular 
fiscal year once HCRIS contains data from at least 6,100 hospitals for 
that year. Therefore, we are proposing that HCRIS must contain data 
from at least 6,100 hospitals for a particular year in order for that 
year's data to be used under the exception process. If HCRIS does not 
contain sufficient data for that year, data from the most recent 
year(s) that satisfies the threshold should be used.
a. Number of Hospitals in County
    Section 1877(i)(3)(F)(i) of the Act provides that a high Medicaid 
facility means a hospital that is not the sole hospital in a county. We 
are proposing to incorporate this requirement into the regulations at 
Sec.  411.362(c)(3)(i).
b. Inpatient Admissions
    Section 1877(i)(3)(F)(ii) of the Act provides that a high Medicaid 
facility means a hospital that, with respect to each of the 3 most 
recent years for which data are available, has an annual percent of 
total inpatient admissions under Medicaid that is estimated to be 
greater than such percent with respect to such admissions for any other

[[Page 42352]]

hospital located in the county in which the hospital is located. We are 
proposing to incorporate this requirement at Sec.  411.362(c)(3)(ii) of 
the regulations.
    We are proposing at Sec.  411.362(c)(3)(ii) that the hospital 
estimate its annual percentages of total inpatient admissions under 
Medicaid for each of the 3 most recent fiscal years for which data are 
available. We also are proposing that the hospital estimate the annual 
percentage of such admissions for all other hospitals located in the 
county in which the hospital is located for each of the 3 most recent 
fiscal years for which data are available. We are proposing that we 
would review a request based on the data available as of the date that 
the hospital submits its request.
    We are proposing to require the applicant hospital to use filed 
hospital cost reporting discharge data as a proxy for inpatient 
admissions under Medicaid. CMS will post the data necessary for a 
hospital to calculate the annual percentage of total inpatient 
admissions under Medicaid for all other hospitals located in the county 
in which the hospital is located on the CMS Web site at: http://www.cms.gov/physicianselfreferral/85_physician_owned_hospitals.asp. 
We plan to issue guidance that further describes the process for 
hospitals to estimate inpatient admissions under Medicaid.
c. Nondiscrimination
    Section 1877(i)(3)(F)(iii) of the Act provides that a high Medicaid 
facility does not discriminate against beneficiaries of Federal health 
care programs and does not permit physicians practicing at the hospital 
to discriminate against such beneficiaries. We are proposing to 
incorporate this requirement at Sec.  411.362(c)(3)(iii) of the 
regulations.
3. Procedure for Submitting a Request
    We are not creating an application form that a hospital must 
complete to apply for an exception to the prohibition on expansion of 
facility capacity. Rather, we are proposing that a hospital submit to 
CMS a request that includes the information and documentation set forth 
in proposed Sec.  411.362(c)(4)(ii).
    We are proposing that each request must include: (i) the name and 
address, National Provider Identification number(s) (NPI), Tax 
Identification Number(s) (TIN), and CMS Certification Number(s) (CCN) 
of the hospital; (ii) the county in which the hospital is located; and 
(iii) the name, title, address, and daytime telephone number of a 
contact person who will be available to discuss the request with CMS on 
behalf of the hospital. Each request must include a clear statement as 
to whether the hospital is requesting an exception as an applicable 
hospital or a high Medicaid facility. We are proposing that each 
request submitted by a hospital must include a clear explanation of how 
it satisfies the criteria using the information discussed in sections 
XV.C.1. or 2. of this proposed rule. This includes performing, 
recording, and submitting all calculations necessary to submit a 
complete request. The hospital's request must state that it does not 
discriminate against beneficiaries of Federal health care programs and 
does not permit physicians practicing at the hospital to discriminate 
against such beneficiaries. Finally, we encourage hospitals to clearly 
label all documentation submitted with a request and indicate the 
criteria for which the documentation provides supporting information.
    We are proposing at Sec.  411.362(c)(4)(ii)(E) that each request 
must include documentation supporting the hospital's calculation of the 
hospital's baseline number of operating rooms, procedure rooms, and 
beds as defined at section 1877(i)(3)(C)(iii) of the Act; the 
hospital's number of operating rooms, procedure rooms, and beds for 
which the hospital is licensed as of the date that the hospital submits 
its request; and the additional number of operating rooms, procedure 
rooms, and beds by which the hospital requests to expand.
    Finally, we are proposing at Sec.  411.362(c)(4)(iii) that each 
request must include a certification signed by an authorized 
representative of the hospital attesting that all of the information 
provided is true and correct to the best of his or her knowledge and 
belief.
    We are proposing at Sec.  411.362(c)(4)(i) that a hospital must 
either mail an original and one copy of its request to CMS or submit 
its request electronically. If a hospital submits its request 
electronically, the hospital must also submit an original, hard copy of 
the required certification.
4. Community Input
    Section 1877(i)(3)(A)(ii) of the Act provides that individuals and 
entities in the community in which the applicable hospital is located 
shall have an opportunity to provide input on the applicable hospital's 
request for an exception to the prohibition against facility expansion. 
We are proposing to incorporate this provision in proposed Sec.  
411.362(c)(5) of the regulations. We are proposing that the community 
input must take the form of written comments. In addition, using our 
rulemaking authority under sections 1871 and 1877(i)(3)(A)(i) of the 
Act, we are proposing that individuals and entities in the community in 
which a high Medicaid facility is located may have the same opportunity 
to submit written comments.
    We are proposing at Sec.  411.362(c)(5) that a hospital must 
disclose on any public Web site for the hospital that it is requesting 
an exception. The notice should be accessible to the public and should 
remain posted from the time a request is submitted to CMS until a 
decision is finalized by CMS. Once CMS has received the statements, 
certifications, and documentation required for a hospital's request, 
CMS will report that the hospital is requesting an exception on the CMS 
Hospital Listserv and will post the hospital's request for an exception 
on the CMS Web site. For specific information on how to subscribe to 
the CMS Hospital Listserv, please access the CMS Web site at http://www.cms.gov/MLNProducts/downloads/MailingLists_FactSheet.pdf. In 
addition, we are proposing that a notice of the hospital's request will 
be published in the Federal Register. We are proposing at Sec.  
411.362(c)(5) to allow individuals and entities in the community 30 
days from the date of the notice's publication in the Federal Register 
to submit written comments.
    Examples of community input include documentation demonstrating 
that the hospital does not satisfy one or more of the data criteria or 
that the hospital discriminates against beneficiaries. These are 
examples only; we are not restricting the types of community input that 
may be submitted. We are proposing at Sec.  411.362(c)(5) that written 
comments must be submitted by mail or electronically to CMS.
    We are proposing at Sec.  411.362(c)(5)(i) that we will consider a 
request complete if CMS does not receive any written comments during 
the 30-day period after notice of the hospital's request is published 
in the Federal Register.
    If CMS receives written comments, CMS will notify the hospital in 
writing. We are proposing at Sec.  411.362(c)(5)(ii) to allow the 
hospital 30 days after CMS notifies the hospital of the written 
comments to submit information and documentation that rebut the written 
comments. We will consider the request complete at the end of the 30-
day period provided for the hospital's rebuttal, regardless of whether 
the hospital

[[Page 42353]]

submits additional information or documentation. We reserve the right 
to perform our own calculations based on a review of the material 
submitted and of information generally available to CMS.
5. Permitted Increase
    Section 1877(i)(3)(C)(i) of the Act provides that a hospital 
granted an exception from the Secretary may increase the number of 
operating rooms, procedure rooms, and beds for which the hospital is 
licensed above its baseline number of operating rooms, procedure rooms, 
and beds. If the hospital has been granted a previous exception from 
the Secretary, the hospital may increase above the number of operating 
rooms, procedure rooms, and beds for which the hospital is licensed 
after application of the most recent increase under such an exception.
a. Amount of Permitted Increase
    Section 1877(i)(3)(C)(ii) of the Act provides that the Secretary 
shall not permit an increase in the number of operating rooms, 
procedure rooms, and beds for which an applicable hospital is licensed 
to the extent such increase would result in the number of operating 
rooms, procedure rooms, and beds for which the applicable hospital is 
licensed exceeding 200 percent of the baseline number of operating 
rooms, procedure rooms, and beds of the applicable hospital. We are 
proposing to incorporate this provision at Sec.  411.362(c)(6)(i) of 
the regulations.
    Using our rulemaking authority under sections 1871 and 
1877(i)(3)(A)(i) of the Act, we are proposing to similarly limit the 
increase in the number of operating rooms, procedure rooms, and beds 
for which a high Medicaid facility may request an exception. We are 
soliciting public comment on whether the proposed limit would be 
sufficient to balance the intent of the general prohibition on 
expansion with the purpose of the exception process to provide the 
opportunity to expand in areas where a sufficient need for access to 
high Medicaid facilities is demonstrated.
    A hospital must determine its baseline facility capacity to ensure 
that an expansion is within the limits set forth at section 
1877(i)(3)(C)(ii) of the Act and to submit a complete request. Section 
1877(i)(3)(C)(iii) of the Act defines the ``baseline number of 
operating rooms, procedure rooms, and beds'' as the number of operating 
rooms, procedure rooms, and beds for which the applicable hospital is 
licensed as of [March 23, 2010] (or, in the case of a hospital that did 
not have a provider agreement in effect as of such date but does have 
such an agreement in effect on December 31, 2010, the effective date of 
such provider agreement). We are proposing to incorporate this 
definition, with the clarification that it also applies to high 
Medicaid facilities, at Sec.  411.362(a) of the regulations.
b. Location of Permitted Increase
    Section 1877(i)(3)(D) of the Act provides that any increase in the 
number of operating rooms, procedure rooms, and beds for which an 
applicable hospital is licensed may occur only in facilities on the 
main campus of the applicable hospital. We are proposing to incorporate 
this provision at proposed Sec.  411.362(c)(6)(ii) of the regulations. 
We are proposing to define the term ``main campus'' as the term 
``campus'' is defined at Sec.  413.65(a)(2). Using our rulemaking 
authority under sections 1871 and 1877(i)(3)(A)(i) of the Act, we are 
proposing that, with respect to high Medicaid facilities, the 
limitation on expansion of hospital capacity, as set forth at section 
1877(i)(1)(B) of the Act, similarly applies to the number of operating 
rooms, procedure rooms, and licensed beds on the ``campus'' of the high 
Medicaid facility.
6. Decisions
    Section 1877(i)(3)(H) of the Act states that the Secretary shall 
publish in the Federal Register the final decision with respect to an 
application for an exception to the prohibition against facility 
expansion not later than 60 days after receiving a complete 
application. We are proposing to codify this provision at Sec.  
411.362(c)(7). To facilitate access to decisions, we are proposing to 
post our decisions on the CMS Web site as well. The posted information 
will include the hospital's name, address, county, and our final 
decision. If an exception is granted under this section, we will also 
post the number of operating rooms, procedure rooms, and beds by which 
the hospital may expand under the granted exception. We believe that 
posting decisions on the CMS Web site will enable us to inform the 
public and the affected community of our decisions in a timely manner 
and in a centralized location.
7. Limitation on Review
    Section 1877(i)(3)(I) of the Act provides that there shall be no 
administrative or judicial review of the process, either under section 
1869, section 1878, or otherwise. We incorporated this limitation on 
review at proposed Sec.  411.362(c)(8) of the regulations. We interpret 
this limitation on review to mean that CMS' decision with respect to 
whether a hospital qualifies for an exception is not reviewable.
8. Frequency of Request
    Section 1877(i)(3)(B) of the Act provides that the exception 
process shall permit an applicable hospital to apply for an exception 
up to once every 2 years. We are incorporating this provision at Sec.  
411.362(c)(1). Using our authority under sections 1871 and 1877 of the 
Act, we similarly are proposing to permit a high Medicaid facility to 
submit a request for an exception up to once every 2 years from the 
date of a CMS decision on the hospital's most recent request. We are 
proposing to consider the date of a CMS decision to be the date of the 
letter sent to the requesting party.

D. Proposed Changes Related to Provider Agreement Regulations on 
Patient Notification Requirements

    Section 1866 of the Act states that a provider of services shall be 
qualified to participate in the Medicare program and shall be eligible 
for Medicare payments if it files a Medicare provider agreement and 
abides by the requirements applicable to Medicare provider agreements. 
These requirements are incorporated in our existing regulations at 42 
CFR Part 489, Subparts A and B (Provider Agreements and Supplier 
Approval). Section 5006 of the Deficit Reduction Act of 2005 mandated 
the Secretary to develop a strategic and implementing plan to address 
certain issues with respect to physician ownership of specialty 
hospitals. As part of that plan, we used our authority under sections 
1866, 1820(e)(3), and 1861(e)(9) of the Act (as well as our general 
rulemaking authority under sections 1102 and 1871 of the Act) to impose 
certain additional requirements on physician-owned hospitals as part of 
their provider agreements. These new requirements were established in 
the FY 2008 IPPS final rule with comment period (72 FR 47385 through 
47391) and the FY 2009 IPPS final rule (73 FR 48686 through 48688).
    Specifically, we added a new provision to require that all 
hospitals and CAHs: (1) furnish all patients written notice at the 
beginning of their inpatient hospital stay or outpatient service if a 
doctor of medicine or a doctor of osteopathy is not present in the 
hospital 24 hours per day, 7 days per week; and (2) describe how the 
hospital or CAH will meet the medical needs of any patient who develops 
an emergency medical condition at a time when no physician is present 
in the

[[Page 42354]]

hospital or CAH. These requirements are codified at Sec.  489.20(w). 
The requirements of Sec. Sec.  489.20(u) and (w) were made applicable 
to both inpatient hospital stays and outpatient services because, as we 
stated in the FY 2008 IPPS final rule with comment period, these 
provisions are in the interest of the health and safety of all 
individuals who receive services in these institutions. The notice 
requirements are intended to permit individuals to make more informed 
decisions regarding their treatment.
    In the CY 2011 OPPS/ASC final rule with comment period (75 FR 
72251), we stated that we saw no reason to treat the safety of hospital 
inpatients differently than hospital outpatients, and, thus, applied 
these patient safety requirements to hospital inpatients and 
outpatients. We continue to believe that both hospital inpatients and 
outpatients should receive these disclosures prior to admission. 
However, after hospitals in general informed us that it would be unduly 
burdensome to provide disclosures to all outpatients, and hospitals 
with emergency departments reported the individual notice requirement 
makes the registration process more cumbersome and time-consuming than 
is desirable in the emergency department setting, we revisited this 
issue. We have reconsidered the patient safety requirements related to 
patient notification of physician presence, and in this proposed rule, 
we are proposing that hospital outpatients would need to receive such 
disclosures only where the risk of an emergency or the length of the 
outpatient visit make their situations more like that of hospital 
inpatients. Under this proposal, disclosures would be required only for 
those outpatients receiving observation services, surgery, or any other 
procedure requiring anesthesia. Signage would be required for hospital 
outpatients in the emergency department, as we recognize the merit of 
finding a less cumbersome manner to provide the required notice in this 
setting. Other hospital outpatient encounters are relatively short and, 
in many cases, scheduled in advance. The risk of emergency is 
relatively low in most of these scheduled encounters. As a result, we 
believe the safety of these particular hospital outpatients would not 
be compromised in any way if hospitals were not required to provide 
disclosures in these circumstances.
    In this proposed rule, we are proposing to revise paragraph (w)(1) 
of Sec.  489.20 to reduce the categories of outpatients who must be 
notified if a hospital does not have a physician on site 24 hours per 
day/7 days per week. We are proposing that only those outpatients who 
receive observation services, surgery, or services involving 
anesthesia, must receive such written notice. We believe this change 
would reduce burden, but ensure that notice goes to those categories of 
patients who are more likely to find themselves in a situation where a 
physician is not present when an emergency develops. (We note that we 
are not making any changes to similar patient safety requirements for 
physician-owned hospitals at Sec.  411.362(b)(5)(i).) We are proposing 
to add a provision that notice would be required at the beginning of a 
planned or unplanned inpatient stay or outpatient visit, and we provide 
explanation of when a planned or unplanned stay or visit begins. We are 
proposing to add a provision to state that an unplanned stay or visit 
begins at the earliest point at which the patient presents to the 
hospital. The current regulation describes when a stay or visit begins 
by referring to the time when a package of information is provided 
regarding scheduled preadmission testing and registration for a planned 
hospital admission or outpatient service. However, many admissions to 
the hospital are unplanned admissions of patients who present on an 
unscheduled visit to the emergency department. Therefore, it was 
necessary to clarify when we considered such unplanned stays or visits 
begin.
    We are proposing to add a new paragraph (w)(2) to Sec.  489.20 
(existing paragraph (w)(2) would be redesignated as discussed below) 
that would require a hospital that is a main provider that has one or 
more remote locations of a hospital or satellites to make the 
determination of whether notice is required separately at each location 
providing inpatient services. We are proposing to use the terms ``main 
provider,'' ``remote location of a hospital,'' and ``satellite'' as 
these terms are defined at Sec.  413.65(a)(2), Sec.  412.22(h), or 
Sec.  412.25(e), as applicable. We are proposing that notice would be 
required for all applicable patients, that is, all inpatients and 
applicable outpatients, at each location at which inpatient services 
are furnished and at which a doctor of medicine or doctor of osteopathy 
is not present 24 hours per day/7 days per week. We are proposing to 
move language that is currently in paragraph (w)(1) to a new paragraph 
(w)(3), governing the content of the written notice. We are proposing 
to redesignate existing paragraph (w)(2), which requires the hospital 
to receive a signed acknowledgment from the patient who has received a 
notice that the patient understands that a physician may not be present 
during all hours in which services are furnished to the patient, as 
paragraph (w)(4) and to revise the redesignated paragraph. We are 
proposing to add a provision to state that, before providing an 
outpatient service to an outpatient for whom a notice is required, the 
hospital must receive the signed acknowledgment. This revision would 
make this requirement consistent with our proposed revisions to 
paragraph (w)(1) limiting the notice requirement to certain categories 
of outpatients.
    We are proposing to add a new paragraph (w)(5) which would require 
every hospital that has a dedicated emergency department in which a 
doctor of medicine or doctor of osteopathy is not present 24 hours per 
day/7 days per week to post a notice conspicuously in a place or places 
likely to be noticed by all individuals entering the dedicated 
emergency department. ``Dedicated emergency department'' would have the 
meaning found in existing Sec.  489.24(b) of the regulations. We would 
require the notice to state that the hospital does not have a doctor of 
medicine or doctor of osteopathy present in the hospital 24 hours per 
day/7 days per week, and to indicate how the hospital will meet the 
needs of any patient with an emergency medical condition, as that term 
is defined in Sec.  489.24(b), at a time when no doctor of medicine or 
doctor of osteopathy is present within the hospital. In the event that 
there is a decision to admit a patient from the emergency department as 
an inpatient, the individualized written disclosure and acknowledgment 
would have to be made at the time the patient is admitted.

XVI. Additional Proposals for the Hospital Value-Based Purchasing 
(Hospital VBP) Program

A. Hospital VBP Program

1. Legislative Background
    Section 3001(a) of the Affordable Care Act added section 1886(o) to 
the Act. This section requires the Secretary to establish a hospital 
inpatient value-based purchasing program under which value-based 
incentive payments are made in a fiscal year to hospitals meeting 
performance standards established for a performance period for such 
fiscal year. Both the performance standards and the performance period 
for a fiscal year are to be established by the Secretary.
    Section 1886(o)(1)(B) of the Act directs the Secretary to begin 
making value-based incentive payments under the Hospital Inpatient 
Value-Based

[[Page 42355]]

Purchasing Program (Hospital VBP Program) to hospitals for discharges 
occurring on or after October 1, 2012. These incentive payments will be 
funded for FY 2013 through a reduction of 1.0 percent to the FY 2013 
base operating DRG payment amount for each discharge, as required by 
section 1886(o)(7)(B)(i) of the Act.
    Section 1886(o)(1)(C) of the Act provides that the Hospital VBP 
Program applies to subsection (d) hospitals (as defined in section 
1886(d)(1)(B) of the Act), but excludes from the definition of the term 
``hospital,'' with respect to a fiscal year: (1) a hospital that is 
subject to the payment reduction under section 1886(b)(3)(B)(viii)(I) 
of the Act (the Hospital IQR Program) for such fiscal year; (2) a 
hospital for which, during the performance period for the fiscal year, 
the Secretary cited deficiencies that pose ``immediate jeopardy'' to 
the health or safety of patients; and (3) a hospital for which there 
are not a minimum number (as determined by the Secretary) of measures 
for the performance period for the fiscal year involved, or for which 
there are not a minimum number (as determined by the Secretary) of 
cases for the measures that apply to the hospital for the performance 
period for such fiscal year.
2. Overview of the Hospital Inpatient VBP Program Final Rule
    We recently issued the Hospital Inpatient VBP Program Final Rule, 
which implemented the Hospital VBP Program gram under section 1886(o) 
of the Act (76 FR 26490 through 26547). The Hospital Inpatient VBP 
Program Final Rule was developed based on extensive research we 
conducted on hospital value-based purchasing, including research that 
formed the basis of a 2007 report we submitted to Congress, entitled 
``Report to Congress: Plan to Implement a Medicare Hospital Value-Based 
Purchasing Program.'' This report is available on our Web site (https://www.cms.gov/AcuteInpatientPPS/downloads/HospitalVBPPlanRTCFINALSUBMITTED2007.pdf) and takes into account input 
from stakeholders and other interested parties.
    As described more fully in the Hospital Inpatient VBP Program Final 
Rule, we adopted for the FY 2013 Hospital VBP Program 13 measures that 
we have already adopted for the Hospital IQR Program, categorized into 
two domains (76 FR 26495 through 26511). We grouped 12 clinical process 
of care measures into a clinical process of care domain, and placed the 
HCAHPS survey measure into a patient experience of care domain. We 
adopted a 3-quarter performance period from July 1, 2011 through March 
31, 2012 for these measures (76 FR 26494 through 26495). To determine 
whether a hospital meets the proposed performance standards for these 
measures, we will compare each hospital's performance during this 
performance period to its performance during a 3-quarter baseline 
period from July 1, 2009 through March 31, 2010 (76 FR 26493 through 
26495).
    We also finalized a methodology for assessing the total performance 
of each hospital based on performance standards under which we will 
score each hospital based on achievement and improvement ranges for 
each applicable measure. We will calculate a Total Performance Score 
for each hospital by combining the greater of the hospital's 
achievement or improvement points for each measure to determine a score 
for each domain, weighting each domain score (for the FY 2013 Hospital 
VBP Program, the weights will be clinical process of care = 70 percent, 
patient experience of care = 30 percent), and adding together the 
weighted domain scores. We will convert each hospital's Total 
Performance Score into a value-based incentive payment using a linear 
exchange function. We refer readers to the Hospital Inpatient VBP 
Program Final Rule for further explanation of the details of the FY 
2013 Hospital VBP Program (76 FR 26490 through 26547).
    For FY 2014, we adopted 13 outcome measures comprised of 3 
mortality measures, 2 AHRQ composite measures, and 8 hospital-acquired 
condition (HAC) measures (76 FR 26511). These measures are discussed 
fully in the Hospital Inpatient VBP Program Final Rule (76 FR 26510 
through 26511). These finalized outcome measures for FY 2014 are set 
forth below.

     Finalized Outcome Measures for the FY 2014 Hospital VBP Program
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Mortality Measures (Medicare Patients):
     Acute Myocardial Infarction (AMI) 30-day mortality rate.
     Heart Failure (HF) 30-day mortality rate.
     Pneumonia (PN) 30-day mortality rate.
AHRQ Patient Safety Indicators (PSIs), Inpatient Quality Indicators
 (IQIs) Composite Measures:
     Complication/patient safety for selected indicators
     (composite).
     Mortality for selected medical conditions (composite).
Hospital Acquired Condition Measures:
     Foreign Object Retained After Surgery.
     Air Embolism.
     Blood Incompatibility.
     Pressure Ulcer Stages III & IV.
     Falls and Trauma: (Includes: Fracture, Dislocation,
     Intracranial Injury, Crushing Injury, Burn, Electric Shock).
     Vascular Catheter-Associated Infection.
     Catheter-Associated Urinary Tract Infection (UTI).
     Manifestations of Poor Glycemic Control.
------------------------------------------------------------------------

3. Proposed Additional FY 2014 Hospital VBP Program Measures
    For the FY 2014 Hospital VBP Program, we are proposing to retain 
all 13 of the clinical process of care and patient experience of care 
measures that we adopted for the FY 2013 Hospital VBP Program. We also 
are proposing to add one measure to the clinical process of care 
domain: SCIP-Inf-9: Postoperative Urinary Catheter Removal on 
Postoperative Day 1 or 2. This measure was specified for the Hospital 
IQR Program beginning with FY 2011 and subsequent payment determination 
years (74 FR 43869 through 43870), and information about the measure 
first appeared on Hospital Compare in December 2010. Thus, we believe 
that this measure meets the requirement in section 1886(o)(2)(C)(i) of 
the Act to be included in the Hospital VBP Program because it has been 
specified for the Hospital IQR Program and will have been displayed on 
Hospital Compare for at least one year before the applicable 
performance period begins. In addition, SCIP-Inf-9 is NQF-endorsed 
(453).
    The measure is relevant for the Hospital VBP Program because it 
assesses a practice that reduces Catheter Associated Urinary Tract 
Infection (CAUTI), and improves patient safety, which is highlighted as 
one of the Institute of Medicine's six quality aims

[[Page 42356]]

along with effectiveness, patient-centeredness, timeliness, efficiency, 
and equity. SCIP-Inf-9 is one of the NQF-endorsed SCIP infection 
prevention measures; these measures are referenced as a whole among the 
metrics listed in the HHS Action Plan to Prevent HAIs. This Action Plan 
can be found at the following Web site: http://www.hhs.gov/ash/initiatives/hai/actionplan/. Furthermore, this measure meets other 
criteria considered for measure selection for the Hospital VBP Program, 
such as not being ``topped-out'' and displaying meaningful variability 
among hospitals. Therefore, we believe it would be a meaningful measure 
to include in the Hospital VBP Program.
    The table below lists the clinical process of care and patient 
experience of care measures we are proposing to adopt for the FY 2014 
Hospital VBP Program. We note that these measures are currently NQF-
endorsed and we will continue to monitor these measures to ensure that 
they reliably measure hospital quality, for example, ensuring that, 
among other things, these measures are not ``topped-out,'' and their 
measurement criteria remain endorsed by NQF and/or are otherwise 
appropriate. To the extent we determine that these measures are topped-
out, we may choose not to finalize them.

    Proposed Clinical Process of Care and Patient Experience of Care
              Measures for the FY 2014 Hospital VBP Program
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                    Clinical Process of Care Measures
------------------------------------------------------------------------
              Measure ID                       Measure description
------------------------------------------------------------------------
Acute myocardial infarction:
    AMI-7a............................  Fibrinolytic Therapy Received
                                         Within 30 Minutes of Hospital
                                         Arrival.
    AMI-8a............................  Primary PCI Received Within 90
                                         Minutes of Hospital Arrival.
Heart Failure:
    HF-1..............................  Discharge Instructions.
Pneumonia:
    PN-3b.............................  Blood Cultures Performed in the
                                         Emergency Department Prior to
                                         Initial Antibiotic Received in
                                         Hospital.
    PN-6..............................  Initial Antibiotic Selection for
                                         CAP in Immunocompetent Patient.
Healthcare-associated infections:
    SCIP-Inf-1........................  Prophylactic Antibiotic Received
                                         Within One Hour Prior to
                                         Surgical Incision.
    SCIP-Inf-2........................  Prophylactic Antibiotic
                                         Selection for Surgical
                                         Patients.
    SCIP-Inf-3........................  Prophylactic Antibiotics
                                         Discontinued Within 24 Hours
                                         After Surgery End Time.
    SCIP-Inf-4........................  Cardiac Surgery Patients with
                                         Controlled 6AM Postoperative
                                         Serum Glucose.
    SCIP-Inf-9........................  Postoperative Urinary Catheter
                                         Removal on Post Operative Day 1
                                         or 2.
Surgeries:
    SCIP-Card-2.......................  Surgery Patients on a Beta
                                         Blocker Prior to Arrival That
                                         Received a Beta Blocker During
                                         the Perioperative Period.
    SCIP-VTE-1........................  Surgery Patients with
                                         Recommended Venous
                                         Thromboembolism Prophylaxis
                                         Ordered.
    SCIP-VTE-2........................  Surgery Patients Who Received
                                         Appropriate Venous
                                         Thromboembolism Prophylaxis
                                         Within 24 Hours Prior to
                                         Surgery to 24 Hours After
                                         Surgery.
------------------------------------------------------------------------
                   Patient Experience of Care Measures
------------------------------------------------------------------------
HCAHPS................................  Hospital Consumer Assessment of
                                         Healthcare Providers and
                                         Systems Survey.*
------------------------------------------------------------------------
* Proposed dimensions of the HCAHPS survey for use in the FY 2014
  Hospital VBP Program are: Communication with Nurses, Communication
  with Doctors, Responsiveness of Hospital Staff, Pain Management,
  Communication about Medicines, Cleanliness and Quietness of Hospital
  Environment, Discharge Information and Overall Rating of Hospital.

    We invite public comment on these proposals.
4. Proposed Minimum Numbers of Cases and Measures for the Outcome 
Domain for the FY 2014 Hospital VBP Program
a. Background
    Section 1886(o)(1)(C)(ii)(III) of the Act requires the Secretary to 
exclude for the fiscal year hospitals that do not report a minimum 
number (as determined by the Secretary) of measures that apply to the 
hospital for the performance period for the fiscal year. Section 
1886(o)(1)(C)(ii)(IV) of the Act requires the Secretary to exclude for 
the fiscal year hospitals that do not report a minimum number (as 
determined by the Secretary) of cases for the measures that apply to 
the hospital for the performance period for the fiscal year. In the 
Hospital Inpatient VBP Program Final Rule, we adopted 13 outcome 
measures for the FY 2014 Hospital VBP Program (76 FR 26511), but we did 
not adopt a minimum number of cases for such measures to apply to 
hospitals, nor did we adopt a minimum number of measures necessary for 
the outcome domain to be included in the Total Performance Score.
    Under section 1886(o)(1)(C)(iii) of the Act, in determining the 
minimum number of reported measures and cases under sections 
1886(o)(1)(C)(ii)(III) and (IV), the Secretary must conduct an 
independent analysis of what minimum numbers would be appropriate. As 
described in the Hospital Inpatient VBP Final Rule (76 FR 26528 through 
26529), to fulfill this requirement, we commissioned Brandeis 
University to perform an independent analysis that examined technical 
issues concerning the minimum number of cases per measure and the 
minimum number of measures per hospital for clinical process of care 
measures needed to derive reliable domain scores. Based on that 
analysis, we finalized our policy to exclude any clinical process of 
care measures for which a hospital reported fewer than 10 cases, and to 
exclude from the Hospital VBP Program any hospital to which fewer than 
4 of the clinical process of care measures applied. We also finalized 
our proposal to exclude any hospital reporting fewer than 100 HCAHPS 
surveys during the performance period (76 FR 26529 through 26531).
    To determine the minimum numbers of measures and cases that should 
be required for the outcome domain, we again commissioned Brandeis 
University to perform an independent analysis. This analysis examined 
hospital performance on the 13 finalized outcome measures using data 
from the proposed baseline periods (discussed below) for the FY 2014 
Hospital VBP Program. As we did to analyze the reliability of scores in 
the clinical process of care domain, different minimum numbers of cases 
and measures were tested to determine the combination of minimum 
numbers of

[[Page 42357]]

cases and measures that would lead to reliable scores in the outcome 
domain while allowing the maximum number of hospitals to be scored for 
the Hospital VBP Program. Concurrent with the Brandeis analysis, we 
contracted with researchers at Mathematica Policy Research 
(Mathematica) to explore the minimum number of cases a hospital would 
need to report for each individual outcome measure.
b. Proposed Minimum Number of Cases for Mortality Measures, AHRQ 
Composite Measures, and HAC Measures
    The analyses by Brandeis and Mathematica determined that in order 
to receive a score on a mortality measure, the hospital would need to 
report a minimum of 10 cases, and in order to receive a score on an 
AHRQ composite measure, a hospital would need to report a minimum of 3 
cases. Consistent with these analyses, we are proposing that these case 
minimums would apply for the FY 2014 Hospital VBP Program.
    Mathematica also examined the minimum number of cases a hospital 
would need to report in order to receive a reliable score on each HAC 
measure. Along with reliability concerns, when conducting this 
analysis, Mathematica also took into consideration our view, more fully 
explained in section XVI.A.6.d. of this proposed rule, that the 
incidence of HACs raises significant safety and quality concerns for 
patients and for the Medicare program. Therefore, we believe that a 
hospital should be held accountable when HACs occur in all instances in 
order to protect and promote patient safety. Mathematica concluded that 
a minimum of one Medicare claim would be sufficient to compute an 
accurate score on each HAC measure, and in accordance with this 
conclusion, we are proposing that hospitals be evaluated based on the 
presence or absence of HAC occurrences, regardless of the number of 
Medicare cases a hospital treats, as long as the hospital submits at 
least one Medicare claim during the performance period. As we discuss 
further below, we anticipate that all participating hospitals will 
submit at least one Medicare claim during the performance period, which 
would be sufficient for the hospitals to receive a score on seven of 
the eight HAC measures.
c. Proposed Minimum Numbers of Measures for Outcome Domain
    Brandeis researchers also analyzed the reliability of the outcome 
domain scores for hospitals depending upon the total number of outcome 
measures on which they reported. The analysis showed that the data 
provide a meaningful and sufficiently reliable indication of outcomes 
for hospitals in the outcome domain as long as the hospitals submit the 
minimum number of cases (discussed above) on each of 11 outcome 
measures for FY 2014. Specifically, the analysis found that using at 
least 11 outcome measures per hospital provided sufficiently comparable 
reliability of hospitals' scores in the outcome domain (particularly in 
terms of rank ordering relative to other hospitals) as compared with 
what hospitals' scores would have been if they had reported on more 
outcome measures. Brandeis concluded that this 11 measure minimum could 
be comprised of the 8 HAC measures, together with 3 measures comprised 
of any combination of the 3 mortality measures and the 2 AHRQ composite 
measures.
    We note that, in conducting its analysis, Brandeis evaluated how 
the outcome domain score would be affected if a hospital reported all 
eight finalized HAC measures. However, one of these HAC measures, 
Foreign Object Retained After Surgery, will not apply to a very small 
subset of hospitals that do not perform surgeries. Taking this into 
account, as well as our own further analysis which shows that the 
reliability of the outcome domain score would not be significantly 
different as a statistical matter, we are proposing that the minimum 
number of measures a hospital would need to report in order to receive 
a score on the outcome domain is 10, comprised of 7 of the 8 HAC 
measures (all but the Foreign Object Retained After Surgery measure), 
along with 3 other measures comprised of any 3 of the other outcome 
measures (for example, 2 AHRQ composite measures and 1 mortality 
measure, or 3 mortality measures). We believe that this proposal is 
consistent with the conclusions reached by Brandeis. In addition, from 
an inclusiveness standpoint, we believe that a 10 measure minimum will 
maximize hospital participation in the FY 2014 Hospital VBP Program.
    Furthermore, because we believe that every domain is an important 
component of an accurate Total Performance Score, we are proposing 
that, in order for a hospital to receive a Total Performance Score and 
be included in the FY 2014 Hospital VBP Program, the hospital must have 
enough cases and measures to report on all finalized domains. This 
proposed requirement should not impose any new barrier to hospitals or 
greatly reduce the number of hospitals in the FY 2014 Hospital VBP 
Program as compared to the FY 2013 Hospital VBP Program, when hospitals 
will only be scored on clinical process of care and patient experience 
of care measures. This is because, as stated above, an analysis of the 
existing data shows that virtually all hospitals participating in the 
FY 2014 Hospital VBP Program will report on a sufficient number of 
cases and measures to receive outcome domain scores in addition to the 
clinical process and patient experience domain scores for FY 2014.
    We invite public comment on the proposed minimum numbers of cases 
and measures required for the FY 2014 Hospital VBP Program. We also 
invite public comment on the proposed requirement that hospitals must 
report on all four domains (if finalized) to receive a Total 
Performance Score for the FY 2014 Hospital VBP Program.
5. Proposed Performance Periods and Baseline Periods for FY 2014 
Measures
    Section 1886(o)(4) of the Act requires the Secretary to establish a 
performance period for the Hospital VBP Program for a fiscal year that 
begins and ends prior to the beginning of such fiscal year.
a. Proposed Clinical Process of Care Domain and Patient Experience of 
Care Domain Performance Period and Baseline Period
    For the FY 2014 Hospital VBP Program, we are proposing a 9-month 
(3-quarter) performance period from April 1, 2012 to December 31, 2012 
for the clinical process of care and patient experience of care domain 
measures. As described in the Hospital Inpatient VBP Final Rule (76 FR 
26494 through 26495), due to various statutory deadlines and other 
challenges we faced in implementing the FY 2013 Hospital VBP Program in 
a timely fashion, we adopted a 3-quarter performance period for the 
clinical process of care and patient experience of care domains for the 
FY 2013 payment determination. We have stated our intent to move to a 
12-month performance period when feasible. While a 12-month performance 
period is not yet feasible for FY 2014, we believe that this proposed 
3-quarter performance period will allow us to notify hospitals of the 
amount of their value-based incentive payment at least 60 days before 
the start of FY 2014. It would also allow us to consider selecting CY 
2013, a 12-month performance period, as the performance period for the 
FY 2015 Hospital VBP Program. In addition, this proposed performance 
period for FY 2014 would begin immediately after the end of the FY 2013 
performance period, provide

[[Page 42358]]

reliable performance information, and ensure that incentive payments 
can be made beginning with October 1, 2013 discharges.
    As we explained in the Hospital Inpatient VBP Program Final Rule 
(76 FR 26485), we believe that baseline data should be used from a 
comparable 9-month (3-quarter) period. Therefore, we are proposing 
April 1, 2010 to December 31, 2010 as the baseline period for these 
proposed measures for FY 2014. We invite public comment on these 
proposals.
b. Proposed Outcome Domain Performance Periods and Baseline Periods
    In the Hospital Inpatient VBP Program proposed rule, we proposed an 
18-month performance period of July 1, 2011 to December 31, 2012 and an 
18-month baseline period of July 1, 2008 to December 31, 2009 for the 
three mortality outcome measures currently specified under the Hospital 
IQR Program (MORT-30-AMI, MORT-30-HF, MORT-30-PN). In response to 
public comment and for reasons discussed in the Hospital Inpatient VBP 
Program Final Rule (76 FR 26494), we adopted a 12-month performance 
period of July 1, 2011 to June 30, 2012 and a 12-month baseline period 
of July 1, 2009 to June 30, 2010 for these measures.
    In the Hospital Inpatient VBP Program Final Rule, we stated that we 
would begin the performance period for the proposed HAC and AHRQ 
measures 1 year after such measures were included on Hospital Compare. 
Because all the finalized HAC and AHRQ measures were included on 
Hospital Compare on March 3, 2011, we finalized March 3, 2012 as the 
start of the performance period for these measures in the Hospital 
Inpatient VBP Program Final Rule (76 FR 26494 through 26495). We stated 
in the Hospital Inpatient VBP Program Final Rule (76 FR 26495) that we 
would propose the end performance period date for these measures in 
this proposed rule.
    In order for the HAC and AHRQ measures to be scored for the FY 2014 
Hospital VBP Program, the performance period for these measures would 
need to end by the fourth quarter of FY 2012 to allow us sufficient 
time to collect and process the necessary claims data. We note that 
this time period needs to be longer for HAC and AHRQ measures than for 
clinical process and patient experience measures, which are based on 
chart-abstracted data and surveys rather than claims. Claims data 
require at least three months following a given calendar quarter to 
process and necessitate two additional months to complete measure 
calculation, including risk adjustment, statistical modeling, quality 
assurance, programming, and generating reports on patient-level data, 
which is provided to hospitals.
    Therefore, we are proposing to adopt a nearly 7-month performance 
period for the HAC and AHRQ measures for FY 2014 by selecting September 
30, 2012 as the end of the performance period. While we would prefer to 
use a 12-month performance period, analysis of existing data indicates 
that a 7-month performance period would provide sufficiently robust 
values on these critical measures.
    As stated above, because we believe that a comparable period should 
be selected for the baseline data, we are proposing to set March 3, 
2010 to September 30, 2010 as the baseline period for the proposed HAC 
and AHRQ measures for the FY 2014 Hospital VBP Program. We invite 
public comment on these proposals.
    The following tables include all proposed and finalized baseline 
and performance periods for the FY 2013 and FY 2014 program years.

      FY 2013 Hospital VBP Program Baseline and Performance Periods
------------------------------------------------------------------------
             Domain                 Baseline period   Performance period
------------------------------------------------------------------------
Clinical Process................  July 1, 2009-March  July 1, 2011-March
                                   31, 2010.           31, 2012.
Patient Experience..............  July 1, 2009-March  July 1, 2011-March
                                   31, 2010.           31, 2012.
------------------------------------------------------------------------

      FY 2014 Hospital VBP Program Baseline and Performance Periods
------------------------------------------------------------------------
             Domain                 Baseline period   Performance period
------------------------------------------------------------------------
Clinical Process *..............  April 1, 2010-      April 1, 2012-
                                   December 31, 2010.  December 31,
                                                       2012.
Patient Experience *............  April 1, 2010-      April 1, 2012-
                                   December 31, 2010.  December 31,
                                                       2012.
Efficiency *....................  May 15, 2010-90     May 15, 2012-
                                   days prior to       February 14,
                                   February 14, 2011.  2013.
Outcomes
     Mortality..........   July 1,     July 1,
                                   2009-June 30,       2011-June 30,
                                   2010.               2012.
     HAC *..............   March 3,    March 3,
                                   2010-September      2012-September
                                   30, 2010.           30, 2012.
     AHRQ *.............   March 3,    March 3,
                                   2010-September      2012-September
                                   30, 2010.           30, 2012.
------------------------------------------------------------------------
* Proposed

6. Proposed Performance Standards for the FY 2014 Hospital VBP Program
a. Background
    Section 1886(o)(3)(A) of the Act requires the Secretary to 
establish performance standards for the measures selected under the 
Hospital VBP Program for a performance period for the applicable fiscal 
year. The performance standards must include levels of achievement and 
improvement, as required by section 1886(o)(3)(B) of the Act, and must 
be established and announced not later than 60 days before the 
beginning of the performance period for the fiscal year involved, as 
required by section 1886(o)(3)(C) of the Act. Achievement and 
improvement standards are discussed more fully in the Hospital 
Inpatient VBP Program Final Rule (76 FR 26511 through 26513). In 
addition, when establishing the performance standards, section 
1886(o)(3)(D) of the Act requires the Secretary to consider appropriate 
factors, such as: (1) Practical experience with the measures, including 
whether a significant proportion of hospitals failed to meet the 
performance standard during previous performance periods; (2) 
historical performance standards; (3) improvement rates; and (4) the 
opportunity for continued improvement.
(1) Mortality Measures
    In the Hospital Inpatient VBP Program Final Rule, we finalized the 
achievement performance standard (achievement threshold) for each of 
the proposed FY 2014 Hospital VBP

[[Page 42359]]

Program mortality measures at the median of hospital performance (50th 
percentile) during the applicable baseline period. We also finalized 
the improvement performance standard (improvement threshold) for each 
mortality measure at each specific hospital's performance on each 
measure during the baseline period of July 1, 2009 to June 30, 2010 (76 
FR 26511 through 76 FR 26512). In addition, we finalized the precise 
achievement thresholds for these mortality measures (76 FR 26513), as 
shown below:

             Achievement Thresholds for the FY 2014 Hospital VBP Program Mortality Outcome Measures
                                          [Displayed as survival rates]
----------------------------------------------------------------------------------------------------------------
                                                                               Performance
                                                                                 standard
               Measure ID                       Measure description            (achievement        Benchmark
                                                                                threshold)
----------------------------------------------------------------------------------------------------------------
                                           Mortality Outcome Measures
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI............................  Acute Myocardial Infarction (AMI)             0.8477             0.8673
                                          30-Day Mortality Rate.
MORT-30-HF.............................  Heart Failure (HF) 30-Day                     0.8861             0.9042
                                          Mortality Rate.
MORT-30 PN.............................  Pneumonia (PN) 30-Day Mortality               0.8818             0.9021
                                          Rate.
----------------------------------------------------------------------------------------------------------------

(2) Proposed Medicare Spending per Beneficiary Measure
    In section IV.B.3.b.(2)(A) of the FY 2012 IPPS/LTCH PPS proposed 
rule (76 FR 25927), we proposed to calculate a ratio of the Medicare 
spending per beneficiary amount for each hospital to the median 
Medicare spending per beneficiary amount across all hospitals during 
the performance period. We proposed to set the achievement threshold at 
the median Medicare spending per beneficiary ratio across all hospitals 
during the performance period. The proposed value of the achievement 
performance standard (achievement threshold) for the Medicare Spending 
per Beneficiary measure would be 1.0. This would be the middle ratio, 
or the Medicare spending per beneficiary for the median hospital 
divided by the median Medicare spending per beneficiary for all 
hospitals.
    Likewise, in section IV.B.3.b.(2)(B) of the FY 2012 IPPS/LTCH PPS 
proposed rule (76 FR 25927 through 25928), we proposed to set the 
improvement performance standard (improvement threshold) for the 
proposed Medicare spending per beneficiary measure at the hospital's 
own Medicare spending per beneficiary ratio, as calculated during the 
proposed baseline period. We also proposed to set the achievement 
performance benchmark at the mean of the lowest decile of Medicare 
spending per beneficiary ratios during the performance period, and that 
the improvement benchmark would be equal to the achievement performance 
benchmark for the performance period, which is the mean of the lowest 
decile of Medicare spending per beneficiary ratios. We refer readers to 
the FY 2012 IPPS/LTCH proposed rule for a complete discussion of these 
proposals.
b. Proposed Clinical Process of Care and Patient Experience of Care FY 
2014 Performance Standards
    As discussed in section XVI.B.5.a. of this proposed rule, we are 
proposing to adopt a 9-month (3-quarter) performance period of April 1, 
2012 to December 31, 2012 for the clinical process of care and patient 
experience of care measures for the FY 2014 Hospital VBP Program. To 
set achievement and improvement performance standards for these 
proposed measures for the FY 2014 Hospital VBP Program, we are 
proposing to use the same approach adopted in the Hospital Inpatient 
VBP Program Final Rule. That approach, as well as our rationale for 
adopting it, is explained in detail at 76 FR 26511 through 76 FR 26513. 
We are proposing to set the achievement performance standard 
(achievement threshold) for each proposed measure at the median of 
hospital performance (50th percentile) during the proposed baseline 
period of April 1, 2010 through December 31, 2010. We also are 
proposing to set the improvement performance standard (improvement 
threshold) for each of the proposed measures at each specific 
hospital's performance on the applicable measure during the proposed 
baseline period of April 1, 2010 through December 31, 2010. We are 
proposing to set each benchmark for each measure as the mean of the top 
decile performance of applicable hospitals during the proposed baseline 
period. We invite public comment on these proposals.
    We set out proposed achievement performance standards for the 
proposed clinical process of care and patient experience of care 
measures using the applicable baseline period data in the table below.

 Proposed Achievement Performance Standards for Proposed FY 2014 Clinical Process of Care and Patient Experience
                                                of Care Measures
----------------------------------------------------------------------------------------------------------------
                                                                               Performance
                                                                                 standard
               Measure ID                       Measure description            (achievement        Benchmark
                                                                                threshold)
----------------------------------------------------------------------------------------------------------------
                                            Process of Care Measures
----------------------------------------------------------------------------------------------------------------
AMI-7a.................................  Fibrinolytic Therapy Received                 0.8066             0.9630
                                          Within 30 Minutes of Hospital
                                          Arrival.
AMI-8a.................................  Primary PCI Received Within 90                0.9344             1.0000
                                          Minutes of Hospital Arrival.
HF-1...................................  Discharge Instructions...........             0.9266             1.0000
PN-3b..................................  Blood Cultures Performed in the               0.9730             1.0000
                                          Emergency Department Prior to
                                          Initial Antibiotic Received in
                                          Hospital.
PN-6...................................  Initial Antibiotic Selection for              0.9446             1.0000
                                          CAP in Immunocompetent Patient.
SCIP-Inf-1.............................  Prophylactic Antibiotic Received              0.9807             1.0000
                                          Within One Hour Prior to
                                          Surgical Incision.
SCIP-Inf-2.............................  Prophylactic Antibiotic Selection             0.9813             1.0000
                                          for Surgical Patients.
SCIP-Inf-3.............................  Prophylactic Antibiotics                      0.9663             0.9996
                                          Discontinued Within 24 Hours
                                          After Surgery End Time.

[[Page 42360]]

 
SCIP-Inf-4.............................  Cardiac Surgery Patients with                 0.9634             1.0000
                                          Controlled 6AM Postoperative
                                          Serum Glucose.
SCIP-Inf-9.............................  Postoperative Urinary Catheter                0.9286             0.9989
                                          Removal on Post Operative Day 1
                                          or 2.
SCIP-Card-2............................  Surgery Patients on a Beta                    0.9565             1.0000
                                          Blocker Prior to Arrival That
                                          Received a Beta Blocker During
                                          the Perioperative Period.
SCIP-VTE-1.............................  Surgery Patients with Recommended             0.9462             1.0000
                                          Venous Thromboembolism
                                          Prophylaxis Ordered.
SCIP-VTE-2.............................  Surgery Patients Who Received                 0.9492             0.9983
                                          Appropriate Venous
                                          Thromboembolism Prophylaxis
                                          Within 24 Hours Prior to Surgery
                                          to 24 Hours After Surgery.
----------------------------------------------------------------------------------------------------------------
                                       Patient Experience of Care Measure
----------------------------------------------------------------------------------------------------------------
HCAHPS
                                         Communication with Nurses........             75.79%             84.99%
                                         Communication with Doctors.......             79.57%             88.45%
                                         Responsiveness of Hospital Staff.             62.21%             78.08%
                                         Pain Management..................             68.99%             77.92%
                                         Communication about Medicines....             59.85%             71.54%
                                         Hospital Cleanliness & Quietness.             63.54%             78.10%
                                         Discharge Information............             82.72%             89.24%
                                         Overall Rating of Hospital.......             67.33%             82.55%
----------------------------------------------------------------------------------------------------------------

c. AHRQ Measures
    For the reasons we have discussed in the Hospital Inpatient VBP 
Program Final rule (76 FR 26514), we are proposing to set the 
achievement performance standard (achievement threshold) for each AHRQ 
composite measure at the median of hospital performance (50th 
percentile) during the proposed baseline period of March 3, 2010 to 
September 30, 2010. We are proposing to set the benchmark for each AHRQ 
composite measure at the mean of the top decile of hospital performance 
during the proposed baseline period of March 3, 2010 to September 30, 
2010. We also are proposing to set the improvement performance standard 
(improvement threshold) for each of the proposed measures at each 
specific hospital's performance on the applicable measure during the 
proposed baseline period of March 3, 2010 to September 30, 2010.
d. HAC Measures
    We adopted eight HAC measures in the Hospital Inpatient VBP Final 
Rule. For each of these eight HAC measures, at least one quarter of 
hospitals achieved a 100 percent rating based on administrative data 
for all IPPS hospitals participating in the Hospital IQR Program for 
Medicare discharges from October 1, 2008 through June 30, 2010 (that 
is, they do not have any reportable HAC occurrences). In addition, 
based on the administrative data from October 1, 2008 through June 30, 
2010, at least one half of all hospitals achieved a measure rate of 100 
percent on six of the eight HAC measures (Foreign Object Retained After 
Surgery; Air Embolism; Blood Incompatibility; Pressure Ulcer Stages III 
and IV; Catheter-Associated UTI; Manifestations of Poor Glycemic 
Control). Accordingly, the achievement threshold for these measures 
would be zero if we proposed to set performance standards for each 
individual measure using the same methodology that we finalized with 
respect to the mortality measures.
    We believe that the HAC measures are extremely important in 
promoting patient safety, improving quality of care, and reducing 
costs. According to a 2010 HHS Office of the Inspector General report, 
entitled ``Adverse Events in Hospitals: National Incidence Among 
Medicare Beneficiaries'' (http://oig.hhs.gov/oei/reports/oei-06-09-00090.pdf), an estimated 13.5 percent of hospitalized Medicare 
beneficiaries experienced adverse events during their hospital stays. 
We believe that all the finalized HAC measures assess the presence of 
conditions and outcomes that are reasonably preventable if high quality 
care is furnished to the Medicare beneficiary. We also believe that the 
incidence of HACs in general raises major patient safety issues for 
Medicare beneficiaries. Outcome measures, including HAC outcome 
measures, are widely regarded by the provider community as strongly 
indicative of the quality of medical care and as integral to reporting 
and improving quality and patient safety. Therefore, we believe it is 
important to include HAC outcome measures in the Hospital VBP Program.
    For these reasons, we are proposing that our topped-out policy 
would not apply to the HAC measures. We also are proposing to treat the 
eight individual HAC measures as a single aggregate HAC score for 
purposes of scoring, and believe that this approach will enable us to 
calculate meaningful distinction among hospitals and variation in 
hospital performance. In addition, this aggregation of the scores for 
the HAC measures ensures that the HAC measures do not unduly outweigh 
the remainder of the measures in the outcome domain. Accordingly, in 
taking into account our HAC policy and reliability concerns, we are 
proposing to set achievement performance standards, benchmarks, and 
improvement performance standards based on hospital combined 
performance on seven or eight HAC measures, as applicable, during the 
proposed performance or baseline period. Because certain hospitals will 
report on only seven of the eight HAC measures, we are proposing 
separate standards for hospital performance depending on whether the 
hospitals report on seven or eight HAC measures. As discussed more 
fully below, we are also proposing to score hospital performance on the 
HAC measures by combining hospital performance scores on each of the 
HAC measures to calculate a single, aggregate HAC score for this 
purpose.
    As finalized in the Hospital Inpatient VBP Program Final Rule (76 
FR 26514), we are proposing to set the achievement performance standard 
(achievement

[[Page 42361]]

threshold) for the HAC aggregate score for those hospitals that report 
on all eight of the HAC measures at the median of hospital performance 
(50th percentile) of those hospitals reporting on all eight of the HAC 
measures during the proposed baseline period of March 3, 2010 to 
September 30, 2010. We are proposing to set the achievement performance 
standard (achievement threshold) for the HAC aggregate score for those 
hospitals that report on seven of the HAC measures at the median of 
hospital performance (50th percentile) on only those seven measures for 
those hospitals reporting on either seven or eight of the HAC measures 
during the proposed baseline period of March 3, 2010 to September 30, 
2010.
    We are proposing to set the benchmark for the HAC aggregate score 
for those hospitals that report on all eight of the HAC measures at the 
mean of the top decile of hospital performance for those hospitals 
reporting on all eight HAC measures during the proposed baseline period 
of March 3, 2010 to September 30, 2010. We are proposing to set the 
benchmark for the HAC aggregate score for those hospitals that report 
on seven of the HAC measures at the mean of the top decile of hospital 
performance on only those seven measures for hospitals reporting on 
either seven or eight of the HAC measures during the proposed baseline 
period of March 3, 2010 to September 30, 2010.
    We also are proposing to set the improvement performance standard 
(improvement threshold) for the HAC aggregate score at each specific 
hospital's performance during the proposed baseline period of March 3, 
2010 to September 30, 2010, whether the hospitals report on seven or 
eight HAC measures. Please see below for further discussion of the 
aggregate HAC scoring methodology.
    We note that the performance standards for the HAC aggregate score 
are displayed in the table below as a score composed of all eight 
individual HAC measures. We recognize that all hospitals report on 
seven of these individual measures, and nearly all (about 95 percent) 
of hospitals report all eight. However, a small number of hospitals do 
not report on the Foreign Object Removal after Surgery HAC measure. We 
believe that any numerical differences between the HAC performance 
standards for hospitals reporting on seven of eight HAC measures 
compared to the standards for hospitals reporting on all eight HAC 
measures will be statistically insignificant. However, we intend to 
provide updated performance standards in the CY 2012 OPPS/ASC final 
rule with comment period for those hospitals only reporting on seven of 
the eight HAC measures.
    We invite public comment on the proposed methodology for setting 
performance standards for the aggregate HAC score for HAC measures 
finalized for the FY 2014 Hospital VBP Program. We specify the proposed 
performance standards for the aggregate HAC score (all eight measures) 
and AHRQ measures using the proposed baseline period data in the table 
below. We note that, for both AHRQ and HAC measures, a lower value 
represents better performance on the measures. Thus, a ``perfect'' 
score on each measure would be a 0.00.

                 Proposed Achievement Performance Standards for FY 2014 HAC * and AHRQ Measures
----------------------------------------------------------------------------------------------------------------
                                                                                 Performance
                                                                                  standard
                Measure ID                        Measure description           (achievement        Benchmark
                                                                                 threshold)
----------------------------------------------------------------------------------------------------------------
                                                Outcome Measures
----------------------------------------------------------------------------------------------------------------
HACs **..................................  Hospital Acquired Conditions per            0.00109            0.0000
                                            1,000 (aggregated).
AHRQ Composite...........................  Complication/patient safety for             0.4006             0.2754
                                            selected indicators (composite).
AHRQ Composite...........................  Mortality for selected medical              0.7542             0.6130
                                            conditions (composite).
----------------------------------------------------------------------------------------------------------------
* Finalized HACs for use in the FY 2014 Hospital VBP Program include: Foreign Object Retained After Surgery, Air
  Embolism, Blood Incompatibility, Pressure Ulcer Stages III & IV, Falls and Trauma, Vascular Catheter
  Associated Infections, Catheter Associated Urinary Tract Infection, and Manifestations of Poor Glycemic
  Control.
** HAC performance standards were calculated using data from hospitals reporting on 8 HAC measures. The final
  rule will include the performance standards for hospitals reporting on seven HAC measures.

7. Proposed FY 2014 Hospital VBP Program Scoring Methodology
a. Proposed FY 2014 Domain Scoring Methodology
    In the Hospital Inpatient VBP Program Final Rule, we adopted a 
methodology for scoring all clinical process of care, patient 
experience of care, and outcome measures. As noted in the Hospital 
Inpatient VBP Program Final Rule, this methodology outlines an approach 
that we believe is well-understood by patient advocates, hospitals and 
other stakeholders because it was developed during a year-long process 
that involved extensive stakeholder input, and was presented by us in a 
report to Congress. Further, we have conducted extensive research on a 
number of other scoring models for the Hospital VBP Program to ensure a 
high level of confidence in the scoring methodology (76 FR 26514). In 
addition, we believe that, for simplicity and consistency of the 
Hospital VBP Program, it is important to score hospitals under the same 
methodology for subsequent fiscal years, with appropriate modifications 
to accommodate new domains and measures. Therefore, we are proposing to 
use the same scoring methodology for these measures in the FY 2014 
Hospital VBP Program, with the changes discussed below for HAC 
measures. We also refer readers to discussion of the proposed Medicare 
Spending per Beneficiary measure in the FY 2012 IPPS/LTCH PPS proposed 
rule (76 FR 25927 through 25928). We invite public comment on this 
proposal.
b. Proposed HAC Measures Scoring Methodology
    We are proposing to score the HAC measures using an aggregated HAC 
rate based on the unweighted average of the rates of the individual HAC 
measures. However, as explained above, we are aware that hospitals may 
only report on seven of the eight finalized HAC measures. This is 
because some hospitals do not perform surgeries, and therefore would 
not submit eligible claims that would be the basis for the Foreign 
Object Retained After Surgery HAC measure. The remaining seven HAC 
measures would apply to all hospitals, however, because all hospitals 
that participate in the Hospital VBP Program will submit eligible 
claims for these measures. We also anticipate that most hospitals will 
report on all

[[Page 42362]]

eight of the individual HAC measures because most hospitals that 
participate in the Hospital VBP Program perform surgeries and would 
submit eligible surgical claims that would be the basis for the Foreign 
Object Retained After Surgery HAC measure. Accordingly, we are 
proposing that the aggregate HAC score for each hospital be calculated 
as the equally weighted average of the rates on all HAC measures for 
which the hospital reports Medicare claims, which will most often be an 
equally weighted average of the rates on all eight measures, but may be 
scores on seven of the HAC measures. As stated above, the HAC aggregate 
score will be calculated if a hospital submits at least one Medicare 
claim during the performance period. For example, if a hospital submits 
one or more Medicare claims during the performance period, and those 
claims do not indicate any HAC occurrences, the hospital will receive a 
perfect score on all applicable HAC measures. The aggregate HAC rate 
would then be used to assign points in accordance with the proposed 
performance standards discussed above to calculate an individual 
hospital's aggregate HAC achievement and improvement scores. The single 
aggregate HAC score would be the greater of the hospital's achievement 
or improvement score. The hospital's aggregate HAC score would be 
combined with the hospital's score on other outcome measures to derive 
an outcome domain score, with the aggregate HAC score weighted equally 
with the other outcome measures in the domain. We note that in 
assigning points for this aggregate HAC score, lower aggregate HAC 
scores represent better performance. We believe our proposed aggregate 
scoring methodology for HAC measures allows us to meaningfully score 
hospitals on these critical patient safety measures.
    We welcome public comment on this proposal.
8. Ensuring HAC Reporting Accuracy
    For the FY 2013 Hospital VBP Program, the validation process we 
adopted for the Hospital IQR Program will ensure that the Hospital VBP 
data are accurate (76 FR 26537 through 26538). In addition, Medicare 
Administrative Contractors (MACs) review claims to ensure that accurate 
Medicare payments are made. This claims review ensures that HAC data 
included on the claims are accurately reported both for the Hospital 
IQR Program and the Hospital VBP Program. In addition, we are 
considering proposing to adopt additional targeting to assess the 
accuracy of HAC data reported on claims. Specifically, we are 
considering targeting a subset of hospitals that report zero or an 
aberrantly low percentage of HACs on Medicare fee-for-service IPPS 
claims relative to the overall national average of HACs.
    This consideration is supported by our analysis of HAC rates 
calculated using data from Medicare fee-for-service claims from October 
1, 2008 through June 30, 2010. We publicly released these rates in 
March 2011, and they can be found on our Web site at: http://www.cms.gov/HospitalQualityInits/06_HACPost.asp#TopOfPage. This 
analysis revealed a range in hospital-reporting of the eight HACs from 
a low of 0.0001 percent (that is, 1 discharge out of every 100,000 
applicable discharges) of hospital inpatient discharges (23 discharges) 
reporting a blood incompatibility, to a high of 0.0564 percent (that 
is, 56.4 discharges out of every 100,000 applicable discharges) 
reporting Falls and Trauma. According to this analysis, however, these 
HAC rates appear to be underreported occurrences when compared to 
similar HAI measures. For example, the Catheter Associated Urinary 
Tract Infection (CAUTI) measure rate was 5.4 percent, or 54 out of 
every 1,000 eligible discharges, as reported in the AHRQ 2008 National 
Healthcare Quality Report. This rate is more than 125 times greater 
than the national HAC reported CAUTI rate of 0.317 out of every 1,000 
eligible discharges. While we recognize that definitional differences 
in the measures might contribute to this rate difference, we also 
believe that underreporting of HAC claims data contributed to this 
difference. It is important to note that the 5.4 percent CAUTI rate was 
calculated using medical record documentation as a data source and a 
random sample of Medicare beneficiaries for acute care hospital stays, 
as discussed in a separate Federal report about healthcare quality 
(AHRQ 2008 National Healthcare Quality Report). We note that this 
analysis is exploratory in nature, and we cannot definitively conclude 
any systematic underreporting by any particular hospitals. Nonetheless, 
we believe that this analysis provides sufficient information for CMS 
to consider development of a HAC validation process to assess potential 
underreporting by hospitals and ensure accurate reporting among all 
hospitals reporting HACs on Medicare claims. Our goal is to improve 
quality and patient safety through accurate reporting of hospital 
quality data and accurately linking quality to payment in the Hospital 
VBP Program. We strive to ensure accurate reporting, and we believe 
that validating a random subset of hospitals that report an aberrantly 
low number of HACs would strengthen our overall effort to link value to 
quality. We welcome public comments regarding our consideration of a 
HAC validation process. We also note that we intend to take appropriate 
action if we discover systematic underreporting of HAC and other 
adverse event information, including, where appropriate, reporting such 
instances to the HHS Office of the Inspector General for its review.
9. Proposed Domain Weighting for FY 2014 Hospital VBP Program
    For the FY 2013 Hospital VBP Program, we adopted a weighting scheme 
that weights the clinical process of care domain at 70 percent of the 
Total Performance Score, and weights the patient experience of care 
domain at 30 percent. However, the addition of the outcome domain and 
the proposed addition of an efficiency domain necessitate the adoption 
of a different domain weighting scheme than we adopted for the FY 2013 
Hospital VBP Program. We discuss below the factors we considered in 
determining the appropriate weight to propose for each domain in the FY 
2014 Hospital VBP Program.
    As we have previously stated, we believe that the patient's 
experience associated with receiving inpatient services in a hospital 
is important in determining the hospital's overall quality of care for 
purposes of the Hospital VBP Program. However, we also believe that a 
majority of the Total Performance Score should be based on the 
objective data submitted by hospitals on the measures selected for the 
Hospital VBP Program. Thus, as we finalized for the FY 2013 Hospital 
VBP Program, we are proposing to weight the patient experience of care 
domain at 30 percent for the FY 2014 Hospital VBP Program. We believe 
that this weighting proposal appropriately incentivizes hospitals to 
provide patient-centered care across the full spectrum of their 
services. As we stated in the Hospital Inpatient VBP Program Final Rule 
(76 FR 26491), we believe that domains need not be given equal weight, 
and that over time, scoring methodologies should be weighted more 
towards outcomes, patient experience of care and functional status 
measures (measures assessing physical and mental capacity, capability, 
well-being and improvement). Consistent with this policy and our 
analysis showing that many of the clinical process of care

[[Page 42363]]

measures are nearly topped-out, we are proposing to reduce the 
weighting for the clinical process of care domain to 20 percent. We 
also are proposing to weight the outcome domain at 30 percent of the 
Total Performance Score for the FY 2014 Hospital VBP Program. Because 
we believe that scoring hospitals on outcome measures will improve 
treatment outcomes and patient safety, we intend to propose increasing 
the weighting for the outcome domain in subsequent fiscal years as more 
outcome measures become available.
    As we indicated in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 
25927 through 25928), we believe that efficiency is an important 
component of improving outcomes, the patient experience of care and the 
overall quality of care provided to Medicare beneficiaries in the 
inpatient hospital setting. However, we also recognize the importance 
of clinical quality based upon industry standards of care and the 
patients' experience of care. Accordingly, we are proposing to weight 
the efficiency domain at 20 percent of the Total Performance Score for 
the FY 2014 Hospital VBP Program.
    Therefore, we are proposing the following domain weights for the FY 
2014 Total Performance Score: outcome domain = 30 percent; clinical 
process of care domain = 20 percent; patient experience of care domain 
= 30 percent; and efficiency domain = 20 percent. Under this proposed 
weighting scheme, the clinical care-related domains (process of care 
and outcome domains) would, together, constitute 50 percent of the 
total performance score (20 percent for clinical process of care and 30 
percent for outcome), the patient experience of care domain would 
constitute 30 percent, and the efficiency domain would constitute 20 
percent. We believe that this proposed weighting scheme will hold 
hospitals accountable for all aspects of patient care, including 
clinical outcomes and efficiency.
    We invite public comment on the proposed weighting of the four 
proposed domains to be used in the calculation of the Total Performance 
Score for the FY 2014 Hospital VBP Program.

B. Proposed Review and Correction Process Under the Hospital VBP 
Program

1. Background
    Section 1886(o)(10)(A)(i) of the Act requires the Secretary to make 
information available to the public regarding individual hospital 
performance in the Hospital VBP Program, including: (1) Performance of 
the hospital on each measure that applies to the hospital; (2) the 
performance of the hospital with respect to each condition or 
procedure; and (3) the hospital's Total Performance Score. To meet this 
requirement, we stated our intention in the Hospital Inpatient VBP 
Program Final Rule to publish hospital scores with respect to each 
measure, each hospital's condition-specific score (that is, the 
performance score with respect to each condition or procedure, for 
example, AMI, HF, PN, and SCIP), each hospital's domain-specific score, 
and each hospital's Total Performance Score on Hospital Compare (76 FR 
26534 through 26536). We intend to make proposals related to making 
this information publicly available in future rulemaking.
    Section 1886(o)(10)(A)(ii) of the Act requires the Secretary to 
ensure that each hospital has the opportunity to review, and submit 
corrections for, the information to be made public with respect to each 
hospital under section 1886(o)(10)(A)(i) of the Act prior to such 
information being made public.
    For the FY 2013 Hospital VBP Program, the finalized measures 
consist of chart-abstracted clinical process of care measures and a 
patient experience of care measure. We are proposing that hospitals 
will have an opportunity to review and correct chart-abstracted data 
and patient experience data through the processes discussed below. We 
intend to make additional proposals regarding the review and correction 
of outcome measures, efficiency measures, and domain, condition, and 
Total Performance Scores in future rulemaking.
2. Proposed Review and Corrections of Data Submitted to the QIO 
Clinical Warehouse on Chart-Abstracted Process of Care Measures and 
Measure Rates
    We are proposing that the process utilized to give hospitals an 
opportunity to review and correct data submitted on the Hospital IQR 
Program chart-abstracted measures also be used to allow hospitals to 
correct data and measure rates on chart-abstracted measures for the 
Hospital VBP Program. Under this proposed process, hospitals would 
continue to have the opportunity to review and correct data they submit 
on all Hospital IQR Program chart-abstracted measures, whether or not 
the measure is adopted as a measure for the Hospital VBP Program. We 
are proposing to use the Hospital IQR Program's data submission, 
review, and correction processes, which will allow for review and 
correction of data on a continuous basis as it is being submitted for 
the Hospital IQR Program, which in turn would allow hospitals to 
correct data and measure rates used to calculate the Hospital VBP 
Program Total Performance Score for those hospitals that participate in 
both programs. We believe this process would satisfy the requirement in 
section 1886(o)(10)(A)(ii) of the Act to allow hospitals to review and 
submit corrections for one of the pieces of information that will be 
made public with respect to each hospital--the measure rates for chart-
abstracted measures. For hospitals that do not participate in the 
Hospital IQR Program but do participate in the Hospital VBP Program, 
such as Maryland hospitals, we intend to make proposals regarding how 
those hospitals will be able to review and correct their Hospital VBP 
data in future rulemaking.
    Under the Hospital IQR Program, hospitals currently have an 
opportunity to submit, review, and correct any of the chart-abstracted 
information submitted to the QIO Clinical Warehouse for the full 4\1/2\ 
months following the last discharge date in a calendar quarter. (We 
note that in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25915), we 
proposed to reduce the submission period from 4\1/2\ months to 104 
days.) Hospitals can begin submitting data on the first discharge day 
of any reporting quarter. Hospitals are encouraged to submit data early 
in the submission schedule so that they can identify errors and 
resubmit data before the quarterly submission deadline. Users are able 
to view and make corrections to the data that they submit within 24 
hours of submission. The data are populated into reports that are 
updated nightly with all data that have been submitted and successfully 
processed for the previous day. Hospitals are able to view a report 
each quarter which shows the numerator, denominator and percentage of 
total for each Clinical Measure Set and Strata. That report contains 
the hospital's performance on each measure set/strata submitted to the 
QIO Clinical Warehouse. The numerator is the number of cases that 
satisfies the conditions of the performance measure, and a denominator 
is the number of successfully accepted cases in the measure population 
evaluated by the performance measure. The percentage of total is 
calculated by using the numerator divided by the denominator multiplied 
by 100. This measure rate is the same as the Hospital VBP measure rate.
    We believe that 4\1/2\ months is sufficient time for hospitals to 
be able to submit, review data, make corrections to the data, and view 
their percentage of total, or measure rate, on each Clinical Measure 
Set/Strata for use in both the

[[Page 42364]]

Hospital IQR and Hospital VBP Programs. Additionally, because this 
process is familiar to most hospitals, use of this existing framework 
reduces the burden that could have been placed on hospitals that 
participate in the Hospital IQR Program if they had to learn a new 
process for submitting data for the Hospital VBP Program. Following the 
period in which hospitals can review and correct data and measure rates 
for chart-abstracted measures as specified above, we propose that 
hospitals will have no further opportunity to correct such data or 
measure rates.
    We are proposing that once the hospital has an opportunity to 
review and correct data related to chart-abstracted measures submitted 
in the Hospital IQR Program, we will consider that the hospital has 
been given the opportunity to review and correct this data and measure 
rates for purposes of the Hospital VBP Program, and these measure rates 
will be used to calculate domain, condition, and Total Performance 
Scores for the Hospital VBP Program without further review and 
correction. We invite public comment on this proposal.
3. Proposed Review and Correction Process for Hospital Consumer 
Assessment of Healthcare Providers and Systems (HCAHPS) Data
    We are proposing a ``two-phase'' process for the review and 
correction of HCAHPS data. Under this proposed process, hospitals would 
have the opportunity to review and correct data they submitted on all 
HCAHPS Hospital IQR Program items in the first phase, whether or not 
such items or combination of items are adopted as HCAHPS dimensions for 
the Hospital VBP Program. In the second phase, hospitals would have the 
opportunity to review the patient-mix and mode adjusted HCAHPS scores 
(details on the HCAHPS adjustment process may be found at: http://www.hcahpsonline.org/files/Final%20Draft%20Description%20of%20HCAHPS%20Mode%20and%20PMA%20with%20bottom%20box%20modedoc%20April%2030,%202008.pdf) on dimensions that we 
will use to score hospitals under the Hospital VBP Program to determine 
whether they believe CMS calculated their scores on these dimensions 
correctly. We believe that this proposal for a two-phase review process 
will expedite hospital review and correction of data. We also believe 
that this proposal will improve quality of care because hospitals will 
be able to timely review their HCAHPS scores and respond efficiently in 
improving patient care to address areas of weakness reflected in their 
scores. We are not proposing to release any patient level data to the 
public. This proposed review process would only grant each hospital the 
authority to review and correct the hospital's patient-level data.
a. Phase One: Review and Correction of HCAHPS Data Submitted to the QIO 
Clinical Warehouse
    For the first phase of the HCAHPS review and correction process, we 
proposed to reduce the HCAHPS submission deadline under the Hospital 
IQR Program by one week in order to create a 1-week period for 
hospitals to review and correct their HCAHPS data. We included this 
proposal to reduce the submission deadline in the FY 2012 IPPS/LTCH PPS 
proposed rule (76 FR 25916). Currently, hospitals have approximately 14 
weeks after the end of a calendar quarter to submit HCAHPS data for 
that quarter to the QIO Clinical Warehouse. Under this proposal, 
hospitals would have approximately 13 weeks after the end of a calendar 
quarter to submit HCAHPS data for that quarter to the QIO Clinical 
Warehouse and a 1-week period to review and correct that data. During 
the 13-week submission period, hospitals would be able to resubmit 
their data to make corrections to the patient-level records. The 1-week 
review and correction period would occur immediately after the 13-week 
data submission deadline.
    The proposed 1-week review and correction period would allow 
hospitals to provide missing data or replace incorrect data in the data 
files they have submitted to the QIO Clinical Warehouse. The 1-week 
review and correction period will allow hospitals to identify any 
issues with the data they had submitted in the 13-week submission 
period. Hospitals will have the opportunity to review frequency 
distributions of all of their submitted data items, which include 
hospital summary information, patient administrative data, and patient 
survey responses, and resubmit their HCAHPS data files to correct 
identified issues during the 1-week review and correction period. We 
define the term ``review and correct'' to mean that hospitals can 
correct their existing data records, but not add new data records. 
Accordingly, hospitals would not be allowed to add new patient-level 
records or remove existing patient-level records during the review and 
correction period. Following the conclusion of the 1-week review and 
correction period, hospitals would not be allowed to review, correct, 
or submit additional HCAHPS data for the applicable calendar quarter.
b. Phase Two: Review and Correction of HCAHPS Scores for the Hospital 
VBP Program
    In the second phase of the proposed HCAHPS review and correction 
process, hospitals would be given the opportunity to review their 
scores on the HCAHPS items that will be used in the Hospital VBP 
Program. These HCAHPS scores are constructed after the data that 
hospitals had submitted have been analyzed to identify and remove 
incomplete surveys and after adjustments for the effects of patient-mix 
and survey mode have been applied. (Details on the HCAHPS adjustment 
process may be found at: http://www.hcahpsonline.org/files/Final%20Draft%20Description%20of%20HCAHPS%20Mode%20and%20PMA%20with%20bottom%20box%20modedoc%20April%2030,%202008.pdf.) Hospitals would have 
approximately 1 week to examine their HCAHPS dimension scores for the 
applicable Hospital VBP Program performance period. A participating 
hospital would have the opportunity to question CMS if the hospital 
believes its scores were miscalculated. We would respond to a 
hospital's inquiries by checking the calculation and, if necessary, 
recalculating the hospital's HCAHPS scores. In this proposed second 
phase of the HCAHPS review and correction process, hospitals would not 
be allowed to change or submit new HCAHPS data or delete existing data. 
Their right to correct information during this period would be limited 
to reviewing their HCAHPS dimension scores and notifying CMS of any 
errors in its calculation of those scores. We intend to propose the 
procedural aspects of the second phase of the proposed HCAHPS review 
and correction process in the FY 2013 IPPS/LTCH PPS proposed rule. In 
summary, for the chart-abstracted and patient experience of care 
measures, we are proposing that existing procedures for submission, 
review, and correction related to chart-abstracted measures under the 
Hospital IQR Program, coupled with the proposed two phase review of 
HCAHPS scores discussed above, would constitute an opportunity for 
review and correction of measure data and measure rates under the 
Hospital VBP Program. Because these procedures give hospitals the 
opportunity to review and correct the data and/or measure rates, such 
data and measure rates may be used to calculate domain, condition, and 
Total Performance Scores for the Hospital VBP Program. We intend to 
make proposals related to making this

[[Page 42365]]

information publicly available, and to make additional proposals 
regarding the review and correction of outcome measures, efficiency 
measures, and domain, condition, and Total Performance Scores in future 
rulemaking. We invite public comment on these proposals.

XVII. Files Available to the Public via the Internet

    In the past, a majority of the Addenda to which we referred 
throughout the preamble of the OPPS/ASC proposed and final rules 
appeared in the printed version of the Federal Register as part of the 
annual rulemakings. However, beginning with this CY 2012 proposed rule, 
the Addenda of the proposed and final rules will be published and 
available only via the Internet on the CMS Web site. We note that our 
existing regulations at Sec. Sec.  416.166(b), 416.171(b), and 416.173 
provide for the annual publication of the covered surgical procedures 
and the payment rates under the ASC payment system in the Federal 
Register. In this proposed rule, we are proposing to revise these three 
regulations to reflect the option of annually publishing the Addenda 
containing the covered surgical procedures and payment rates under the 
ASC payment system via the Internet on the CMS Web site.
    To view the Addenda of the CY 2012 OPPS/ASC proposed rule 
pertaining to the CY 2012 proposed payments under the OPPS, go to the 
CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD and 
select ``1525-P'' from the list of regulations. All Addenda for this 
proposed rule are contained in the zipped folder entitled ``2012 OPPS 
NPRM Addenda'' at the bottom of the page.
    To view the Addenda of the CY 2012 OPPS/ASC proposed rule 
pertaining to the CY 2012 proposed payments under the ASC payment 
system, go to the CMS Web site at: http://www.cms.gov/ASCPayment/ASCRN/ 
and select ``1525-P'' from the list of regulations. All Addenda for 
this proposed rule are contained in the zipped folder entitled 
``Addendum AA, BB, DD1, and DD2'' at the bottom of the page.

A. Information in Addenda Related to the Proposed CY 2012 Hospital OPPS

    Addenda A and B provide various data pertaining to the proposed CY 
2012 payment for items and services under the OPPS. Specifically, 
Addendum A includes a list of all proposed APCs to be payable under the 
OPPS, including the proposed scaled relative weights, the proposed 
national unadjusted payment rates, the proposed national unadjusted 
copayments, and the proposed minimum unadjusted copayments for each APC 
that we are proposing for CY 2012. Addendum B includes a list of all 
active HCPCS codes, including the proposed APC assignments, the 
proposed scaled relative weights, the proposed national unadjusted 
payment rates, the proposed national unadjusted copayments, the 
proposed minimum unadjusted copayments, and the proposed payment status 
indicators and proposed comment indicators for CY 2012 OPPS.
    For the convenience of the public, we also are including on the CMS 
Web site a table that displays the HCPCS code data in Addendum B sorted 
by APC assignment, identified as Addendum C.
    Addendum D1 defines the proposed payment status indicators that we 
are proposing to use in Addenda A and B. Addendum D2 defines the 
proposed comment indicators that are used in Addendum B. Addendum E 
lists the HCPCS codes that are proposed to be only payable to hospitals 
as inpatient procedures and that are not payable under the OPPS for CY 
2012. Addendum L contains the proposed out-migration wage adjustment 
for CY 2012. Addendum M lists the HCPCS codes that are proposed to be 
members of a composite APC and identifies the proposed composite APC to 
which each is assigned. This addendum also identifies the proposed 
status indicator for each HCPCS code and a proposed comment indicator 
if there is a proposed change in the code's status with regard to its 
membership in the composite APC. Each of the HCPCS codes included in 
Addendum M has a single procedure payment APC, listed in Addendum B, to 
which it is assigned when the criteria for assignment to the composite 
APC are not met. When the criteria for payment of the code through the 
composite APC are met, one unit of the composite APC payment is paid, 
thereby providing packaged payment for all services that are assigned 
to the composite APC according to the specific I/OCE logic that applies 
to the APC. We refer readers to the discussion of composite APCs in 
section II.A.2.e. of this proposed rule for a complete description of 
the proposed composite APCs.
    Addendum N, ``Proposed Bypass Codes for Creating `Pseudo' Single 
Procedure Claims for CY 2012 OPPS,'' contains a list of the HCPCS codes 
that we are proposing to use to create ``pseudo'' single claims from 
multiple procedure claims so that the most claims data can be used to 
set median costs for the CY 2012 OPPS. We refer readers to section 
II.A.1.b. of this proposed rule for a full discussion of the use of 
this file in the proposed 2012 OPPS ratesetting process. Addendum N 
contains the following elements for the proposed CY 2012 bypass codes: 
(1) HCPCS code; (2) short descriptor; (3) overall bypass indicator; and 
(4) an indicator if the code was not used as a bypass code in 
ratesetting activities prior to this CY 2012 proposed rule. The 
addendum was previously issued as a table (usually Table 1) in the 
preamble of the applicable proposed or final rule. We are issuing it as 
an addendum in this proposed rule because it is lengthy and users can 
better analyze the file if it is furnished in Excel format on the CMS 
Web site.

B. Information in Addenda Related to the Proposed CY 2012 ASC Payment 
System

    Addenda AA and BB provide various data pertaining to the proposed 
CY 2012 payment for the covered surgical procedures and covered 
ancillary services for which ASCs may receive separate payment. 
Addendum AA lists, for CY 2012, the proposed ASC covered surgical 
procedures, whether the procedure is proposed to be subject to multiple 
procedure discounting, the proposed comment and payment indicators for 
each procedure, and the proposed payment weights and rates for each 
procedure. Addendum BB displays, for CY 2012, the proposed ASC covered 
ancillary services, the proposed comment and payment indicators for 
each service, and the proposed payment weights and rates for each 
service.
    Addendum DD1 defines the proposed payment indicators that are used 
in Addenda AA and BB. Addendum DD2 defines the proposed comment 
indicators that are used in Addenda AA and BB.
    To view the Addenda that pertain to the list of proposed surgical 
procedures to be excluded from Medicare payment if furnished in ASCs, 
go to the CMS Web site at: http://www.cms.gov/ASCPayment/ASCRN/ and 
select ``1525-P'' from the list of regulations. The proposed excluded 
ASC procedures are contained in the zipped folder titled ``Addendum 
EE'' at the bottom of the page. The proposed excluded procedures listed 
in Addendum EE are surgical procedures that are assigned to the OPPS 
inpatient list, are not covered by Medicare, are reported using a CPT 
unlisted code, or have been determined to pose a significant safety 
risk to a Medicare beneficiary when performed in an ASC or for which 
standard medical practice dictates that the beneficiary typically 
requires active

[[Page 42366]]

medical monitoring and care at midnight following the procedure.
    The Medicare Physician Fee Schedule (MPFS) data files are located 
at the CMS Web site at: http://www.cms.gov/PhysicianFeeSched/.
    The links to all of the FY 2012 IPPS proposed wage index-related 
tables (that are used for the CY 2012 OPPS) are accessible on the CMS 
Web site at: http://www.cms.gov/AcuteInpatientPPS/WIFN.

XVIII. Collection of Information Requirements

A. Legislative Requirements for Solicitation of Comments

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and to solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    In this proposed rule, we are soliciting public comments on each of 
the issues outlined above as discussed below that contained information 
collection requirements.

B. Requirements in Regulation Text

    This proposed rule contains the following proposed information 
collection requirements specified in the regulatory text:
1. ICRs Regarding Basic Commitments of Providers (Sec.  489.20)
    Section 489.20(w) contains a physician presence disclosure 
requirement that requires disclosure when a doctor of medicine or a 
doctor of osteopathy is not onsite 24 hours per day, 7 days per week. 
The burden associated with the physician presence disclosure 
requirement is the time and effort necessary for each hospital and CAH 
to develop a standard notice to furnish to its patient, obtain the 
required patients signatures, and maintain a copy in the patient's 
medical record. Although this requirement is subject to the PRA, the 
associated burden is approved under OMB control number 0938-1034.
    Our proposed amendment to Sec.  489.20(w) would require that, for 
hospitals and CAHs that are not physician owned, the existing physician 
presence disclosure requirement regarding outpatient services would 
apply only to outpatients receiving observation services, surgery, and 
procedures requiring anesthesia. The burden associated with this 
requirement would be greatly reduced and includes revisions to the time 
and effort necessary for each hospital and CAH to revise and 
disseminate the existing standard notice to its patients. The 
requirements in Sec.  489.20(w) apply to all hospitals as defined in 
Sec.  489.24(b). We estimate that there are approximately 2,597 
hospitals and CAHs that may not have a doctor or medicine or a doctor 
of osteopathy onsite at all times. We estimate that it will take each 
hospital or CAH 4 hours to develop or amend and review a disclosure 
form on a one-time basis, 30 seconds to make each disclosure, another 
30 seconds to obtain the patient's signature, and an additional 30 
seconds to include a copy of the notice in the patient's medical 
record. We estimate that on average each hospital or CAH that is 
subject to the disclosure requirement will make 1966 disclosures per 
year. The estimated annual burden associated with developing an amended 
form, obtaining patient signatures, and copying and recording the form 
is 137,872 hours at a cost of approximately $2,551,148.
2. ICRs Regarding Exceptions Process Related to the Prohibition of 
Expansion of Facility Capacity (Sec.  411.362)
    As discussed in section XV. of this proposed rule, our proposed new 
Sec.  411.362(c) would establish and implement a process under which an 
applicable hospital or high Medicaid facility may apply for an 
exception to the prohibition on expansion of facility capacity. A 
physician-owned hospital would be allowed to request an exception under 
proposed Sec.  411.362(c) by providing information to CMS regarding the 
hospital's baseline number of operating rooms, procedure rooms, and 
beds for which the hospital is licensed as of March 23, 2010, and 
specifying the increase in the number of operating rooms, procedure 
rooms and beds it is requesting under the exceptions process. In 
addition, the hospital would have to provide supporting documentation 
to CMS regarding the criteria it must satisfy. We estimate that 265 
physician-owned hospitals would request an exception. We estimate that 
it would take each hospital 8 hours and 17.5 minutes to complete the 
request process at the cost of $417.74 for each hospital. Overall, the 
annual burden for this process is estimated at approximately 2,153 
hours at the cost of approximately $110,707. These estimates do not 
include time or cost burden estimates for hospitals to read and provide 
rebuttal statements in response to community input comments, which is 
included in the proposed regulation, and the associated time and costs 
for the hospital to send them to CMS. Due to the voluntary nature of 
this criterion, time and cost burden estimates would be difficult to 
anticipate as this is an unknown variable.

                                            Proposed Revised Annual Recordkeeping and Reporting Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                           Total     Hourly labor  Total labor     Total
                                                 Number of    Number of    Burden per      annual       cost of      cost of      capital/    Total cost
    Regulation  section(s)     OMB Control No.  respondents   responses     response       burden      reporting    reporting   maintenance      ($)
                                                                             (hours)      (hours)         ($)          ($)       costs  ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.   489.20................  0938-1034......        2,597        1,966         0.019    * 137,872         18.50    2,551,148            0    2,551,148
Sec.   411.362...............  0938-New.......          265          265         8.29         2,153         51.42      110,707            0      110,707
                                               ---------------------------------------------------------------------------------------------------------
    Total....................  ...............        2,862        2,231  ............      140,025  ............  ...........  ...........    2,661,855
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Represents the revised burden estimate associated with the requirement. It does not reflect the burden currently approved under OCN 0938-1034.

[[Page 42367]]

C. Proposed Associated Information Collections Not Specified in 
Regulatory Text

    In this proposed rule, we make reference to proposed associated 
information collection requirements that are not discussed in the 
regulation text contained in this document. The following is a 
discussion of those requirements.
1. Hospital Outpatient Quality Reporting (Hospital OQR) Program
    As previously stated in section XIV. of this proposed rule, the 
Hospital OQR Program has been generally modeled after the quality data 
reporting program for the Hospital IQR Program. We refer readers to the 
CY 2011 OPPS/ASC final rule with comment period (75 FR 72064 through 
72110 and 72111 through 72114) for a detailed discussion of Hospital 
OQR Program information collection requirements we have previously 
finalized.
2. Hospital OQR Program Measures for the CY 2012, CY 2013, CY 2014, and 
CY 2015 Payment Determinations
a. Previously Adopted Hospital OQR Program Measures for the CY 2012, CY 
2013, and CY 2014 Payment Determinations
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68766), we retained the 7 chart-abstracted measures we used in CY 2009 
and adopted 4 new claims-based imaging measures for the CY 2010 payment 
determination, bringing the total number of quality measures for which 
hospitals must submit data to 11 measures. In the CY 2010 OPPS/ASC 
final rule with comment period (74 FR 60637), we required hospitals to 
continue to submit data on the same 11 measures for the CY 2011 payment 
determination. The burden associated with the aforementioned data 
submission requirements is currently approved under OCN: 0938-1109 and 
expires October 31, 2013.
    In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72071 
through 72094), we adopted measures for the CY 2012, CY 2013, and CY 
2014 payment determinations.
    For the CY 2012 payment determination, we retained the 7 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 lab 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 care transitions 
and ED efficiency, as well as 1 chart-abstracted ED-AMI measure that we 
proposed for the CY 2012 payment determination but which we decided to 
finalize for the CY 2013 payment determination. These actions bring the 
total number of quality measures for the CY 2013 payment determination 
for which hospitals must submit data to 23 measures.
    In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72071 
through 72094), for the CY 2014 payment determination, we retained the 
CY 2013 payment determination measures, but did not adopt any 
additional measures. In the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 72112 through 72113), we discussed the burden associated 
with these information collection requirements.
    The 23 measures that we adopted in the CY 2011 OPPS/ASC final rule 
with comment period to be used for the CY 2012 through CY 2014 payment 
determinations are listed in the table below.

  Hospital OQR Program Measurement Set Adopted in the CY 2011 OPPS/ASC
 Final Rule With Comment Period To Be Used for the CY 2012, CY 2013, and
                     CY 2014 Payment Determinations
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
OP-1: Median Time to Fibrinolysis.
OP-2: Fibrinolytic Therapy Received Within 30 Minutes.
OP-3: Median Time to Transfer to Another Facility for Acute Coronary
 Intervention.
OP-4: Aspirin at Arrival.
OP-5: Median Time to ECG.
OP-6: Timing of Antibiotic Prophylaxis.
OP-7: Prophylactic Antibiotic Selection for Surgical Patients.
OP-8: MRI Lumbar Spine for Low Back Pain.
OP-9: Mammography Follow-up Rates.
OP-10: Abdomen CT--Use of Contrast Material.
OP-11: Thorax CT--Use of Contrast Material.
OP-12: The Ability for Providers with HIT to Receive. Laboratory Data
 Electronically Directly into their Qualified/Certified EHR System as
 Discrete Searchable Data.
OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac
 Low Risk Surgery.
OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus
 Computed Tomography (CT).
OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department
 for Atraumatic Headache.
OP-16: Troponin Results for Emergency Department acute myocardial
 infarction (AMI) patients or chest pain patients (with Probable Cardiac
 Chest Pain) Received Within 60 minutes of Arrival.
OP-17: Tracking Clinical Results between Visits.
OP-18: Median Time from ED Arrival to ED Departure for Discharged ED
 Patients.
OP-19: Transition Record with Specified Elements Received by Discharged
 Patients.
OP-20: Door to Diagnostic Evaluation by a Qualified Medical
 Professional.
OP-21: ED-Median Time to Pain Management for Long Bone Fracture.
OP-22: ED-Patient Without Being Seen.
OP-23: ED-Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic
 Stroke who Received Head CT Scan Interpretation Within 45 minutes of
 Arrival.
------------------------------------------------------------------------

[[Page 42368]]

    b. Additional Proposed Hospital OQR Program Measures for CY 2014
    In the CY 2011 OPPS/ASC final rule with comment period, we did not 
adopt any new measures for the CY 2014 payment determination. In this 
CY 2012 OPPS/ASC proposed rule, we are proposing to add, for the CY 
2014 payment determination, 6 chart-abstracted measures, 2 structural 
measures (including hospital outpatient volume data for selected 
outpatient surgical procedures), and 1 HAI surgical site infection 
measure. Thus, for the CY 2014 payment determination, we are proposing 
that there would be a total of 32 measures. The complete proposed 
measure set we are proposing for the CY 2014 payment determination, 
including measures we have previously adopted, is shown below.

  Proposed CY 2014 Hospital OQR Program Measure Set Reflecting Measures
              Previously Adopted and the Proposed Additions
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
OP-1: Median Time to Fibrinolysis.
OP-2: Fibrinolytic Therapy Received Within 30 Minutes.
OP-3: Median Time to Transfer to Another Facility for Acute Coronary
 Intervention.
OP-4: Aspirin at Arrival.
OP-5: Median Time to ECG.
OP-6: Timing of Antibiotic Prophylaxis.
OP-7: Prophylactic Antibiotic Selection for Surgical Patients.
OP-8: MRI Lumbar Spine for Low Back Pain.
OP-9: Mammography Follow-up Rates.
OP-10: Abdomen CT--Use of Contrast Material.
OP-11: Thorax CT--Use of Contrast Material.
OP-12: The Ability for Providers with HIT to Receive Laboratory Data
 Electronically Directly into their Qualified/Certified EHR System as
 Discrete Searchable Data.*
OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non-Cardiac
 Low Risk Surgery.*
OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus
 Computed Tomography (CT).*
OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department
 for Atraumatic Headache.*
OP-16: Troponin Results for Emergency Department acute myocardial
 infarction (AMI) patients or chest pain patients (with Probable Cardiac
 Chest Pain) Received Within 60 minutes of Arrival.**
OP-17: Tracking Clinical Results between Visits.**
OP-18: Median Time from ED Arrival to ED Departure for Discharged ED
 Patients.**
OP-19: Transition Record with Specified Elements Received by Discharged
 Patients.**
OP-20: Door to Diagnostic Evaluation by a Qualified Medical
 Professional.**
OP-21: ED-Median Time to Pain Management for Long Bone Fracture.**
OP-22: ED-Patient Left Before Being Seen.**
OP-23: ED-Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic
 Stroke who Received Head CT Scan Interpretation Within 45 minutes of
 Arrival.**
OP-24: Surgical Site Infection.***
OP-25: Hemoglobin A1c Poor Control in Diabetic Patients.***
OP-26: Low Density Lipoprotein (LDL-C) Control in Diabetic Patients.***
OP-27: High Blood Pressure Control in Diabetic Patients.***
OP-28: Dilated Eye Exam in Diabetic Patients.***
OP-29: Urine Screening for Microalbumin or Medical Attention for
 Nephropathy in Diabetic Patients.***
OP-30: Cardiac Surgery Referral.***
OP-31: Safety Surgery Checklist.***
OP-32: Hospital Outpatient Department Volume for Selected Outpatient
 Surgical Procedures.***
------------------------------------------------------------------------
* New measure for the CY 2012 payment determination.
** New measure for the CY 2013 payment determination.
*** Proposed new measure for the CY 2014 payment determination.

    We will calculate the claims-based measures using Medicare FFS 
claims data and do not require additional hospital data submissions, 
and we are using the same data submission requirements related to the 
chart-abstracted quality measures that are submitted directly to CMS 
that we used for the CY 2011 and CY 2012 payment determinations. For 
the structural measures, including the collection of all-patient volume 
for selected outpatient procedures; hospitals will enter data into a 
Web-based collection tool during a specified collection period once 
annually. For the collection of HAI data, we are proposing that 
hospitals would use the NHSN infrastructure and protocol to report the 
measure for Hospital OQR Program purposes. The NHSN is a Web-based 
reporting tool hosted by CDC and is provided free of charge to 
hospitals. Under the Hospital OQR Program requirements, hospitals must 
complete and submit a notice of participation form for the Hospital OQR 
Program if they have not already done so or have withdrawn from 
participation. By submitting this document, hospitals agree that they 
will allow CMS to publicly report the measures for which they have 
submitted data under the Hospital OQR Program.
    For the CY 2014 payment determination, the burden associated with 
these requirements (including those previously adopted and those 
currently proposed) is the time and effort associated with completing 
the notice of participation form, collecting and submitting the data on 
the 32 measures. For the chart-abstracted measures where data is 
submitted directly to CMS, we estimate that there will be approximately 
3,200 respondents per year. For hospitals to collect and submit the 
information on the chart-abstracted measures (including the OP-22 
measure for which we are proposing that data be submitted via a Web-
based tool rather than via an electronic file) we estimate it will take 
35 minutes per sampled case. Based upon the data submitted for the CY 
2011 payment determination and our estimates for the additional 
proposed measures, we estimate there will be a total of 1,307,510 cases 
per year, approximately 409 cases per year per respondent. The 
estimated annual burden associated with the submission requirements for 
these chart-abstracted

[[Page 42369]]

measures is 762,278 hours (1,307,510 cases per year x 0.583 hours per 
case).
    For the structural measures, excluding the proposed all-patient 
volume for selected surgical procedures measure, we estimate that each 
participating hospital will spend 10 minutes per year to collect and 
submit the required data, making the estimated annual burden associated 
with this measure 1,603 hours (3,200 hospitals x 0.167 hours per 
hospital x 3 structural measures per hospital).
    For the collection of data for the proposed HAI Surgical Site 
Infection measure, we estimate that approximately 1,200 hospitals are 
participating in the Hospital OQR Program, but are not currently 
submitting HAI data to the NHSN. Based upon burden estimates associated 
with the collection of NHSN data currently approved under OCN: 0920-
0666, we estimate that additional annual burden associated with this 
proposed measure will be 17,269 hours (0.533 hr per response x 
estimated 27 responses per hospital x 1,200 hospitals).
    For the proposed collection of all-patient volume for selected 
outpatient surgical procedures, because hospitals must determine their 
populations for data reporting purposes and most hospitals are 
voluntarily reporting population and sampling data for Hospital OQR 
Program purposes, we believe the only additional burden associated with 
this proposed requirement would be the reporting of the data using the 
Web-based tool. We estimate that each participating hospital will spend 
10 minutes per year to collect and submit the data, making the 
estimated annual burden associated with this measure 534 hours (3,200 
hospitals x 0.167 hours per hospital).
c. Proposed Hospital OQR Program Measures for CY 2015
    For the CY 2015 payment determination, we are proposing to retain 
the requirement that hospitals must complete and submit a notice of 
participation form for the Hospital OQR Program. For the CY 2015 
payment determination, we also are proposing to retain the measures 
used for CY 2014 payment determination (including, if adopted, the 
measures proposed in this proposed rule) and to add one additional HAI 
measure, Healthcare Personnel (HCP) Influenza Vaccination. Achieving 
and sustaining high influenza vaccination coverage among HCP is 
intended to help protect HCP and their patients and reduce disease 
burden and healthcare costs.
    For the CY 2015 payment determination, the burden associated with 
these proposed requirements is the time and effort associated with 
completing the notice of participation form, collecting and submitting 
the data on the proposed measures, and collecting and submitting 
proposed all-patient volume data for selected outpatient surgical 
procedures. For the proposed chart-abstracted measures, we estimate 
that there will be approximately 3,200 respondents per year. For 
hospitals to collect and submit the information on the proposed chart-
abstracted measures where data is submitted directly to CMS, we 
estimate it will take 35 minutes per sampled case. Based upon the data 
submitted for the CY 2011 payment determination and our estimates for 
the additional proposed measures, we estimate there will be a total of 
1,307,510 cases per year, approximately 409 cases per year per 
respondent. The estimated annual burden associated with the 
aforementioned proposed submission requirements for the proposed chart-
abstracted data is 762,278 hours (1,307,510 cases per year x 0.583 
hours per case). For the proposed structural measures, we estimate that 
each participating hospital will spend 10 minutes per year to collect 
and submit the data, making the estimated annual burden associated with 
this proposed measure 1,603 hours (3,200 hospitals x 0.167 hours per 
hospital x 3 structural measures per hospital).
    For the proposed collection of HAI data, we estimate that 
approximately 1,200 hospitals are participating in the Hospital OQR 
Program, but are not currently submitting HAI data to the NHSN. We base 
our burden estimates upon burden estimates associated with the 
collection of NHSN data currently approved under OCN: 0920-0666. For 
the proposed Surgical Site Infection HAI measure, we estimate that 
hospitals will incur an additional burden of 17,269 hours (0.533 hours 
per response x an estimated 27 responses per hospital x 1,200 
hospitals).
    For the proposed collection of HCP Influenza Vaccination HAI 
measure data, we estimate that hospitals will incur an additional 
burden of 14,400 hours (2.0 hours per response x an estimated 6 
responses per hospital x 1,200 hospitals).
    For the proposed 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 
proposed requirement will be the reporting of the data using the Web-
based tool. We estimate that each participating hospital will spend 10 
minutes per year to collect and submit the data, making the estimated 
annual burden associated with this proposed measure 534 hours (3,200 
hospitals x 0.167 hours per hospital).
    We invite public comment on the burden associated with these 
proposed information collection requirements.
3. Proposed Hospital OQR Program Validation Requirements for CY 2013
    In this proposed rule, we are proposing to retain most of the 
requirements related to data validation for CY 2013 that we adopted in 
the CY 2011 OPPS/ASC final rule with comment period (75 FR 72103 
through 72106) for CY 2012, with some revisions. While these 
requirements are subject to the PRA, they are currently approved under 
OCN: 0938-1109 and expire October 31, 2013.
    Similar to our approach for the CY 2012 Hospital IQR Program 
payment determination (75 FR 72103 through 72106), we are proposing to 
validate data from randomly selected hospitals for the CY 2013 payment 
determination, but we are proposing to reduce the number of hospitals 
from 800 to 450. We note that, because hospitals would be selected 
randomly, every hospital participating in the Hospital OQR Program 
would be eligible each year for validation selection.
    In the CY 2011 OPPS/ASC proposed rule and final rule with comment 
period (75 FR 46381 and 72106, respectively), we discussed additional 
data validation conditions under consideration for CY 2013 and 
subsequent years. In this proposed rule, we are proposing to select for 
validation, up to 50 additional hospitals based upon targeting 
criteria.
    For each selected hospital, we would randomly select up to 48 
patient episodes of care per year (12 per quarter) for validation 
purposes from the total number of cases that the hospital successfully 
submitted to the OPPS Clinical Warehouse during the applicable time 
period. However, if a selected hospital submitted less than 12 cases in 
one or more quarters, only those cases available would be validated.
    The burden associated with the proposed CY 2013 requirement is the 
time and effort necessary to submit validation data to a CMS 
contractor. We estimate that it would take each of the sampled 
hospitals approximately 12 hours to comply with these proposed data 
submission requirements. To

[[Page 42370]]

comply with the proposed requirements, we estimate each hospital must 
submit up to 48 cases for the affected year for review. We are 
proposing that selected hospitals comply with these requirements per 
year, which would result in a total of up to 24,000 charts being 
submitted by the sampled hospitals. The estimated annual burden 
associated with the proposed data validation process for CY 2013 is 
approximately 6,000 hours.
    We also are proposing to reduce the deadline from 45 days to 30 
days for hospitals to submit requested medical record documentation to 
a CMS contractor to support our validation process. This proposal may 
create an additional administrative burden for hospitals selected for 
validation. However, this proposed deadline is in line with our QIO 
regulations at Sec.  476.78 and the total burden would be the time 
required to comply with the requirements for copying and mailing in a 
30-day period 12 charts for each of four quarters for CY 2013.
    We invite public comment on the burden associated with these 
proposed information collection requirements.
4. Proposed Hospital OQR Program Reconsideration and Appeals Procedures
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68779), we adopted a mandatory reconsideration process that applied to 
the CY 2010 payment decisions. In the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60654 through 60655), we continued this process 
for the CY 2011 payment update. In the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 72106 through 72108), we continued this process 
for the CY 2012 payment update with some modifications. We eliminated 
the requirement that the reconsideration request form be signed by the 
hospital CEO to facilitate electronic submission of the form and reduce 
hospital burden. We are proposing to continue this process for the CY 
2013 payment determination. While there is burden associated with 
filing a reconsideration request, 5 CFR 1320.4 of the Paperwork 
Reduction Act of 1995 regulations excludes collection activities during 
the conduct of administrative actions such as redeterminations, 
reconsiderations, and/or appeals.
5. ASC Quality Reporting Program
    In this proposed rule, we are proposing to adopt seven claims-based 
measures for collection beginning in CY 2012 and one NHSN HAI measure 
of Surgical Site Infection for collection beginning in CY 2013. These 
measures would be used for the CY 2014 payment determination. We are 
proposing to collect quality measure data for the seven claims-based 
measures by using Quality Data Codes (QDCs) placed on submitted claims 
beginning with services furnished from January 1, 2012 through December 
31, 2012. Data collection for the HAI measure would begin with 
infection events occurring on or after January 1, 2013 through June 30, 
2013. The eight proposed measures are:
     Patient Burns (NQF 0263)
     Patient Falls (NQF 0266)
     Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, 
Wrong Implant (NQF 0267)
     Hospital Transfer/Admission (NQF 0265)
     Prophylactic Intravenous (IV) Antibiotic Timing (NQF 
0264)
     Ambulatory Surgery Patients with Appropriate Method of 
Hair Removal (NQF 0515)
     Selection of Prophylactic Antibiotic: First OR Second 
Generation Cephalosporin (NQF 0268)
     Surgical Site Infection Rate (NQF 0299)
    Approximately 71 percent of ASCs participate in Medical Event 
Reporting, which includes reporting on the first four proposed claims-
based measures listed above. Between January 1995 and December 2007, 
ASCs reported 126 events, an average of 8.4 events per year (Florida 
Medical Quality Assurance, Inc. and Health Services Advisory Group. 
Ambulatory Surgery Center Environmental Scan (July 2008) (Contract No. 
GS-10F-0096T).). Thus, we estimate the burden to report QDCs on this 
number of claims per year for the first four claims-based measures to 
be nominal due to the small number of cases (less than 1 case per month 
per ASC).
    The remaining proposed claims-based measures concern surgical 
procedures. We estimate the burden associated with submitting QDCs for 
these measures to be 465,703 hours (5,577,280 claims per year x 50 
percent of claims requiring quality data code information x 0.167 hours 
per claim). We refer readers to the HHS Report to Congress: Medicare 
Ambulatory Surgical Center Value-Based Purchasing Implementation Plan, 
available at the Web site: https://www.cms.gov/ASCPayment/downloads/C_ASC_RTC%202011.pdf as the source for the number of ASCs and number of 
claims per year to calculate ASC burden estimates.
    For the collection of the Surgical Site Infection HAI data, we are 
proposing that ASCs would use the NHSN infrastructure and protocol to 
report the measure for ASC Quality Reporting Program purposes discussed 
above.
    For the Surgical Site Infection HAI measure, we estimate that it 
will require ASCs an additional 8,275 hours (0.533 hours per response x 
an estimated 3 responses per ASC x 5,175 ASCs). We base the time per 
response for our burden estimate on burden estimates associated with 
the collection of NHSN data currently approved under OCN: 0920-0666, 
and the number of ASCs from the HHS Report to Congress: Medicare 
Ambulatory Surgical Center Value-Based Purchasing Implementation Plan, 
available at the Web site: https://www.cms.gov/ASCPayment/downloads/C_ASC_RTC%202011.pdf.
    For CY 2015 payment determination, we are proposing to retain the 
eight measures we are proposing to adopt for CY 2014 payment 
determination (if they are adopted) and we are proposing to add two 
structural measures.
    For the structural measures, we are proposing that ASCs would enter 
required information using a Web-based collection tool between July 1, 
2013 and August 15, 2013. For the Safe Surgery Checklist Use structural 
measure, we estimate that each participating ASC will spend 10 minutes 
per year to collect and submit the required data, making the estimated 
annual burden associated with this measure 864 hours (5,175 ASCs x 
0.167 hours per ASC).
    For the ASC Facility Volume Data on Selected ASC Surgical 
Procedures structural measure, we estimate that each participating ASC 
will spend 10 minutes per year to collect and submit the required data, 
making the estimated annual burden associated with this measure, 864 
hours (5,175 ASCs x 0.167 hours per ASC).
    For the CY 2016 payment determination, we are proposing to retain 
the ten measures we are proposing to adopt for the CY 2015 payment 
determination (if they are adopted), and are proposing to add one 
structural measure, Influenza Vaccination Coverage Among Healthcare 
Personnel (NQF 0431).
    We estimate that each participating ASC will spend 10 minutes per 
year to collect and submit the data via a Web-based tool, making the 
estimated annual burden associated with this proposed measure 864 hours 
(5,175 ASCs x 0.167 hours per ASC).
6. Proposed 2012 Medicare EHR Incentive Program Electronic Reporting 
Pilot for Hospitals and CAHs
    Under 42 CFR 495.6(f)(9), we require eligible hospitals and CAHs 
participating in the Medicare EHR

[[Page 42371]]

Incentive Program (which would include those participating in the 
proposed 2012 Medicare EHR Incentive Program Electronic Reporting 
Pilot) to successfully report hospital clinical quality measures (CQMs) 
to CMS in the manner specified by CMS. Although we are proposing that 
eligible hospitals and CAHs may continue to attest CQMs in 2012, they 
may also choose to participate in the proposed 2012 Medicare EHR 
Incentive Program Electronic Reporting Pilot for Hospitals and CAHs. We 
are proposing that eligible hospitals and CAHs participating in the 
2012 Medicare EHR Incentive Program Electronic Reporting Pilot must 
submit CQM data on all 15 CQMs (listed in Table 10 of the final rule 
(75 FR 44418 through 44420) for the Medicare and Medicaid EHR Incentive 
Program) to CMS, via a secure portal based on data obtained from the 
eligible hospital's or CAH's certified EHR technology.
    Eligible hospitals and CAHs are required to report on core and menu 
set criteria for Stage 1 meaningful use. The reporting of clinical 
quality measures is part of the core set. We estimate that it would 
take an eligible hospital or CAH 0.5 hour to submit the required CQM 
information via the proposed 2012 Medicare EHR Incentive Program 
Electronic Reporting Pilot. Therefore, the estimated total burden for 
all 4,922 Medicare eligible hospitals and CAHs participating in the 
reporting Pilot (3,620 acute care hospitals and 1,302 CAHs) is 2,461 
hours.
    We believe that an eligible hospital or CAH might assign a Computer 
and Information Systems Managers to submit the CQM information on their 
behalf. We estimate the cost burden for an eligible hospital or CAH to 
submit the CQMs and hospital quality requirements is $29.64 (0.5 hour x 
$59.27 (mean hourly rate for computer and information systems managers 
based on the 2010 Bureau of Labor Statistics)) and the total estimated 
annual cost burden for all eligible hospitals and CAHs to submit the 
required CQMs is $145,889 ($29.64 x 4,922 hospitals and CAHs). We are 
soliciting public comments on the estimated numbers of eligible 
hospitals and CAHs that may registered for the Medicare EHR Incentive 
Program Electronic Reporting Pilot that would submit the CQM 
information via the proposed Electronic Reporting Pilot in FY 2012. We 
also invite public comments on the type of personnel or staff that 
would mostly likely submit on behalf of eligible hospitals and CAHs.
7. Additional Topics
    In addition to seeking OMB approval for the proposed information 
collection requirements associated with the Hospital OQR Program, we 
are seeking public comment on several issues that may ultimately affect 
the burden associated with the Hospital OQR Program. Specifically, in 
this proposed rule, we are proposing to retain measures for the CY 2015 
payment determinations, adopt new measures for the CY 2014 and CY 2015 
payment determinations, and we are seeking comments on other possible 
measures under consideration for adoption into the Hospital OQR 
Program. We also are soliciting public comments on collecting chart-
abstracted data for one measure for the CY 2013 payment determination 
via a Web-based tool, and on the continued use of an extraordinary 
circumstance extension or waiver for reporting quality data, and 
additional data validation conditions that we are considering adopting 
beginning with the CY 2014 payment determination.
    We also are seeking public comment on our proposals for an ASC 
Quality Reporting Program for the ASC payment determinations for CYs 
2014, 2015 and 2016.
    To obtain copies of the supporting statement and any related forms 
for the proposed paperwork collections referenced above, access CMS' 
Web site at http://www.cms.hhs.gov/Paperwork@cms.hhs.gov, or call the 
Reports Clearance Office at 410-786-1326.
    We invite public comments on these potential information collection 
requirements.
    If you comment on these information collection and recordkeeping 
requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget,
    Attention: CMS Desk Officer, (CMS-1525-P)
    Fax: (202) 395-6974; or
    E-mail: OIRA_submission@omb.eop.gov.

XIX. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this proposed 
rule, and, when we proceed with a subsequent document(s), we will 
respond to those comments in the preamble to that document.

XX. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
    We have examined the impacts of this proposed rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993, Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (RFA) 
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social 
Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 
(UMRA) (March 22, 1995, Pub. L. 104-4), Executive Order 13132 on 
Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C. 
804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule has been designated as an ``economically'' 
significant rule under section 3(f)(1) of Executive Order 12866. 
Accordingly, the rule has been reviewed by the Office of Management and 
Budget. We have prepared a Regulatory Impact Analysis that, to the best 
of our ability, presents the costs and benefits of the proposed rule. 
We are soliciting public comments on the Regulatory Impact Analysis 
provided.
2. Statement of Need
    This proposed rule requests public comment on the CMS proposal to 
update the Medicare hospital outpatient prospective payment rates and 
the ambulatory surgical center prospective payment rates for CY 2012. 
The proposed rule is necessary to enable CMS to acquire and consider 
the public comments on the proposed changes to payment policies and 
payment rates for services furnished by hospitals and CMHCs to 
outpatients for CY 2012. We are required under section 
1833(t)(3)(C)(ii) of the Act to update annually the OPPS conversion 
factor

[[Page 42372]]

used to determine the APC payment rates. We also are required under 
section 1833(t)(9)(A) of the Act to review, not less often than 
annually, and revise the groups, the relative payment weights, and the 
wage and other adjustments described in section 1833(t)(2) of the Act. 
In addition, we must review the clinical integrity of payment groups 
and weights at least annually.
    This proposed rule also requests public comment on the CMS proposal 
to update the ASC payment rates for CY 2012. The proposed rule is 
necessary to enable CMS to acquire and consider public comments on the 
proposed changes to payment policies and payment rates for covered 
surgical procedures and covered ancillary services that are performed 
in an ASC for CY 2012. Because the ASC payment rates are based on the 
OPPS relative weights for the majority of the procedures performed in 
ASCs, the ASC payment rates are updated annually to reflect annual 
changes to the OPPS weights. In addition, because the services provided 
in ASCs are identified by HCPCS codes which are reviewed and revised 
either quarterly or annually, depending on the HCPCS codes, it is 
necessary to update the ASC payment rates annually to reflect these 
changes to HCPCS codes. In addition, we are required under section 
1833(i)(1) of the Act to review and update the list of surgical 
procedures that can be performed in an ASC not less often than every 2 
years.
    Section 1833(t)(17) of the Act requires that subsection (d) 
hospitals that fail to meet quality reporting requirements under the 
Hospital OQR Program to incur a reduction of 2.0 percentage points to 
their OPD fee schedule increase factor. In section XIV. of this 
proposed rule, we are proposing additional policies affecting the 
Hospital OQR Program for CY 2013, CY 2014, and CY 2015 that hospitals 
would have to meet in order to receive the full OPD fee schedule 
increase factor. We are soliciting public comments on these proposed 
additional policies.
    In this proposed rule, to further implement section 6001(a)(3) of 
the Affordable Care Act, we set forth the proposed process for a 
hospital to request an exception to the prohibition on expansion of 
facility capacity under the whole hospital and rural provider 
exceptions to the physician self-referral prohibition. We also set 
forth a related proposal for amendments to the patient safety 
requirements in the provider agreement regulations. We are soliciting 
public comments on these proposed changes.
    Section 1886(o)(1)(B) of the Act directs the Secretary to begin 
making value-based incentive payments under the Hospital VBP Program to 
hospitals for discharges occurring on or after October 1, 2012. In this 
proposed rule, we are proposing to add one chart-abstracted measure for 
the FY 2014 payment determination under the Hospital Inpatient VBP 
Program. We are soliciting public comments on this proposed additional 
measure.
    Section 109(b) of the MIEA TRHCA states that the Secretary may 
implement a quality reporting system for ASCs in a manner so as to 
provide for a reduction of 2.0 percentage point s in any annual update 
with respect to the year involved, for failure to report on quality 
measures. In this proposed rule, we are proposing to establish an ASC 
Quality Reporting Program with the collection of seven quality measures 
beginning in CY 2012.
3. Overall Impacts for Proposed OPPS and ASC Provisions
    We estimate that the effects of the proposed OPPS provisions that 
would be implemented by this proposed rule would result in expenditures 
exceeding $100 million in any 1 year. We estimate the total increase 
(from proposed changes in this proposed rule as well as enrollment, 
utilization, and case-mix changes) in expenditures under the OPPS for 
CY 2012 compared to CY 2011 to be approximately $3.285 billion. Because 
this proposed rule for the OPPS is ``economically significant'' as 
measured by the $100 million threshold and also a major rule under the 
Congressional Review Act, we have prepared a regulatory impact analysis 
that, to the best of our ability, presents the costs and benefits of 
this rulemaking. Table 51 of this proposed rule displays the 
redistributional impact of the proposed CY 2012 changes on OPPS payment 
to various groups of hospitals and for CMHCs.
    We estimate that the effects of the proposed ASC provisions that 
would be implemented by this proposed rule for the ASC payment system 
would result in expenditures exceeding $100 million in any one year. We 
estimate the total increase (from proposed changes in this proposed 
rule as well as enrollment, utilization, and case-mix changes) in 
expenditures under the ASC payment system for CY 2012 compared to CY 
2011 to be approximately $224 million. Because this proposed rule for 
the ASC payment system is ``economically significant'' as measured by 
the $100 million threshold and also a major rule under the 
Congressional Review Act, we have prepared a regulatory impact analysis 
of changes to the ASC payment system that, to the best of our ability, 
presents the costs and benefits of this rulemaking. Table 52 and Table 
53 of this proposed rule display the redistributional impact of the CY 
2012 proposed changes on ASC payment, grouped by specialty area and 
then grouped by procedures with the greatest ASC expenditures, 
respectively.
4. Detailed Economic Analyses
a. Effects of Proposed OPPS Changes in This Proposed Rule
    We are proposing to update the OPPS payment rates and to revise 
several OPPS payment policies for CY 2012. We are required under 
section 1833(t)(3)(C)(ii) of the Act to update annually the conversion 
factor used to determine the APC payment rates. We also are required 
under section 1833(t)(9)(A) of the Act to review, not less often than 
annually, and revise the groups, the relative payment weights, and the 
wage and other adjustments described in section 1833(t)(2) of the Act. 
In addition, we must review the clinical integrity of payment groups 
and weights at least annually. Consistent with our historical proactice 
in this proposed rule, we are proposing to update the conversion factor 
and the wage index adjustment for hospital outpatient services 
furnished beginning January 1, 2012, as we discuss in sections II.B. 
and II.C., respectively, of this proposed rule. We discuss our 
implementation of section 10324 of the Affordable Care Act, as amended 
by HCERA, authorizing a wage index of 1.00 for certain frontier States. 
We also are proposing to revise the relative APC payment weights using 
claims data for services furnished on and after January 1, 2010, 
through and including December 31, 2010, and updated cost report 
information. We are proposing to continue the current payment 
adjustment for rural SCHs, including EACHs. Finally, we list the 19 
drugs and biologicals in Table 26 of this proposed rule that we are 
proposing to remove from pass-through payment status for CY 2012.
    Under this proposed rule, we estimate that the update change to the 
conversion factor and other adjustments (but not including the effects 
of outlier payments, pass-through estimates, and the application of the 
frontier State wage adjustment for CY 2012), would increase total OPPS 
payments by 1.5 percent in CY 2012. The proposed changes to the APC 
weights, the changes to the wage indices, the continuation of a payment 
adjustment for rural SCHs, including EACHs, and the proposed

[[Page 42373]]

payment adjustment for cancer hospitals would not increase OPPS 
payments because these changes to the OPPS are budget neutral. However, 
these proposed updates would change the distribution of payments within 
the budget neutral system as shown in Table 51 below and described in 
more detail in this section. We also estimate that the total proposed 
change in payments between CY 2011 and CY 2012, considering all 
payments, including proposed changes in estimated total outlier 
payments, pass-through payments, and the application of the frontier 
State wage adjustment outside of budget neutrality, in addition to the 
application of the proposed OPD fee schedule increase factor after all 
adjustments required by sections 1833(t)(3)(F) and 1833(t)(3)(G) of the 
Act, would increase total estimated OPPS payments by 1.5 percent.
(1) Limitations of Our Analysis
    The distributional impacts presented here are the projected effects 
of the proposed CY 2012 policy changes on various hospital groups. We 
post on the CMS Web site our hospital-specific estimated payments for 
CY 2012 with the other supporting documentation for this proposed rule. 
To view the hospital-specific estimates, we refer readers to the CMS 
Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/. At the Web 
site, select ``regulations and notices'' from the left side of the page 
and then select ``CMS-1525-P'' from the list of regulations and 
notices. The hospital-specific file layout and the hospital-specific 
file are listed with the other supporting documentation for this 
proposed rule. We show hospital-specific data only for hospitals whose 
claims were used for modeling the impacts shown in Table 51 below. We 
do not show hospital-specific impacts for hospitals whose claims we 
were unable to use. We refer readers to section II.A.2. of this 
proposed rule for a discussion of the hospitals whose claims we do not 
use for ratesetting and impact purposes.
    We estimate the effects of the proposed individual policy changes 
by estimating payments per service, while holding all other payment 
policies constant. We use the best data available, but do not attempt 
to predict behavioral responses to our policy changes. In addition, we 
do not make adjustments for future changes in variables such as service 
volume, service mix, or number of encounters. As we have done in 
previous rules, we are soliciting public comment and information about 
the anticipated effects of our proposed changes on providers and our 
methodology for estimating them.
(2) Estimated Effects of This Proposed Rule on Hospitals
    Table 51 below shows the estimated impact of this proposed rule on 
hospitals. Historically, the first line of the impact table, which 
estimates the proposed change in payments to all facilities, has always 
included cancer and children's hospitals, which are held harmless to 
their pre-BBA amount. We also include CMHCs in the first line that 
includes all providers because we include CMHCs in our weight scalar 
estimate. As discussed in section II.F. of this proposed rule, we are 
proposing to extend an adjustment to certain cancer hospitals under 
section 3138 of the Affordable Care Act. Because these hospitals would 
continue to be eligible to receive hold harmless payments (under our 
standard policy), we now include a second line for all hospitals, 
excluding permanently held harmless hospitals and CMHCs, and we also 
include a column that shows the impact on other hospitals of the 
proposed budget neutral cancer adjustment.
    We present separate impacts for CMHCs in Table 51 because CMHCs are 
paid only for partial hospitalization services and CMHCs are a 
different provider type from hospitals. In CY 2011, we are paying CMHCs 
under APC 0172 (Level I Partial Hospitalization (3 services) for CMHCs) 
and APC 0173 (Level II Partial Hospitalization (4 or more services) for 
CMHCs), and we are paying hospitals for partial hospitalization 
services under APC 0175 (Level I Partial Hospitalization (3 services) 
for hospital-based PHPs) and APC 0176 (Level II Partial Hospitalization 
(4 or more services) for hospital-based PHPs). For CY 2012, we are 
proposing to continue this APC payment structure and to base payment 
fully on the median costs calculated using claims and cost report data 
for the type of provider for which rates are being set, that is, 
hospital or CMHC. We display the impact on CMHCs of this proposed 
policy below, and we discuss the impact on hospitals as part of our 
discussion of the impact of proposed changes on hospitals for CY 2012.
    The estimated increase in the total payments made under the OPPS is 
determined largely by the increase to the conversion factor set under 
the methodology in the statute. The distributional impacts presented do 
not include assumptions about changes in volume and service mix. 
Section 1833(t)(3)(C)(iv) of the Act provides that, for purposes of 
this subparagraph subject to paragraph (17) and subparagraph (F) of 
this paragraph, the OPD fee schedule increase factor is equal to the 
market basket percentage increase applicable under section 
1886(b)(3)(B)(iii) of the Act. The proposed market basket percentage 
increase applicable under section 1886(b)(3)(B)(iii) of the Act, which 
we refer to as the IPPS market basket in this discussion, is 2.8 
percent. However, section 1833(t)(3)(F)(i) of the Act reduces that 2.8 
percent by the proposed productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act which we propose to be 1.2 percentage 
points (which is the MFP adjustment for FY 2012 as proposed in the FY 
2012 IPPS/LTCH proposed rule), and section 1833(t)(3)(F)(ii) and 
1833(t)(3)(G)(ii) of the Act further reduce the amount by 0.1 
percentage point, resulting in the OPD fee schedule increase factor of 
1.5 percent, which we are proposing to use in the calculation of the CY 
2012 OPPS proposed conversion factor. We refer readers to section II.B. 
of this proposed rule for a detailed discussion of the calculation of 
the conversion factor and the source of its components. Section 10324 
of the Affordable Care Act, as amended by HCERA, further authorized 
additional expenditures outside budget neutrality for hospitals in 
certain frontier States that have a wage index of 1.00. The amounts 
attributable to this frontier State wage index adjustment are 
incorporated into the CY 2012 estimates in Table 51.
    Table 51 shows the estimated redistribution of hospital and CMHC 
payments among providers as a result of APC reconfiguration and 
recalibration; wage indices and the rural adjustment; the combined 
impact of the APC recalibration, wage and rural adjustment effects, and 
the OPD fee schedule increase factor update to the conversion factor; 
the effect of the proposed budget neutral adjustment to payments made 
to the 11 cancer hospitals that meet the classification criteria in 
section 1886(d)(1)(B)(v) of the Act; the frontier State wage index 
adjustment; and, finally, estimated redistribution considering all 
proposed payments for CY 2012 relative to all payments for CY 2011, 
including the impact of changes in estimated outlier payments, and 
changes to the pass-through payment estimate. We did not model an 
explicit budget neutrality adjustment for the rural adjustment for SCHs 
because we are not proposing to make any changes to the policy for CY 
2012. Because the proposed updates to the conversion factor (including 
the update of the OPD fee schedule increase factor, that is, the 
proposed IPPS market basket amount

[[Page 42374]]

less the productivity adjustment required by section 1833(t)(3)(F)(i) 
of the Act and less the adjustment required by sections 
1833(t)(3)(F)(ii) and 1833(t)(3)(G)(ii) of the Act; the subtraction of 
the estimated cost of the cancer adjustment; the subtraction of the 
estimated cost of the rural adjustment; and the subtraction of the 
estimated cost of projected pass-through payment for CY 2012), are 
applied uniformly across services, observed redistributions of payments 
in the impact table for hospitals largely depend on the mix of services 
furnished by a hospital (for example, how the APCs for the hospital's 
most frequently furnished services would change), and the impact of the 
wage index changes on the hospital. However, total payments made under 
this system and the extent to which this proposed rule would 
redistribute money during implementation also would depend on changes 
in volume, practice patterns, and the mix of services billed between CY 
2011 and CY 2012 by various groups of hospitals, which CMS cannot 
forecast.
    Overall, we estimate that the proposed OPPS rates for CY 2012 would 
have a positive effect for providers paid under the OPPS, resulting in 
a 1.5 percent estimated increase in Medicare payments. Removing 
payments to cancer and children's hospitals because their payments are 
held harmless to the pre-OPPS ratio between payment and cost and 
removing payments to CMHCs suggest that these proposed changes would 
result in a 1.1 percent estimated increase in Medicare payments to all 
other hospitals.
    To illustrate the impact of the proposed CY 2012 changes, our 
analysis begins with a baseline simulation model that uses the final CY 
2011 weights, the FY 2011 final IPPS wage indices that include 
reclassifications, and the final CY 2011 conversion factor. Column 2 in 
Table 51 shows the independent effect of the proposed changes resulting 
from the reclassification of services among APC groups and the 
recalibration of APC weights, based on 12 months of CY 2010 OPPS 
hospital claims data and the most recent cost report data. We modeled 
the effect of the proposed APC recalibration changes for CY 2012 by 
varying only the weights (the final CY 2011 weights versus the proposed 
CY 2012 weights calculated using the service mix and volume in the CY 
2010 claims used for this proposed rule) and calculating the percent 
difference in weight. Column 2 also reflects the effect of the proposed 
changes resulting from the APC reclassification and recalibration 
changes and any changes in multiple procedure discount patterns or 
conditional packaging that occur as a result of the proposed changes in 
the relative magnitude of payment weights.
    Column 3 reflects the independent effects of the proposed updated 
wage indices, including the proposed application of budget neutrality 
for the rural floor policy on a nationwide basis. This column excludes 
the effects of the frontier State wage index adjustment, which is not 
budget neutral and is included in Column 6. We did not model a budget 
neutrality adjustment for the rural adjustment for SCHs because we are 
not proposing to make any changes to the policy for CY 2012. We modeled 
the independent effect of updating the wage indices by varying only the 
wage indices, holding APC relative weights, service mix, and the rural 
adjustment constant and using the proposed CY 2012 scaled weights and a 
CY 2011 conversion factor that included a budget neutrality adjustment 
for the effect of changing the wage indices between CY 2011 and CY 
2012.
    Column 4 demonstrates the independent effect of the proposed cancer 
hospital payment adjustment. For CY 2012 we are proposing to make 
additional payment to raise each cancer hospital's payment to cost 
ratio (PCR) to the weighted average PCR for all other hospitals paid 
under the OPPS. We are proposing to accomplish this by adjusting each 
cancer hospital's OPPS payment by the percentage difference between 
their individual PCR (without TOPs) and the weighted average PCR of the 
other hospitals paid under the OPPS. This results in an increase in 
estimated payments to cancer hospitals of 38.8 percent compared to the 
estimated payment that would have been made under the OPPS to these 
hospitals as a class in CY 2011, but does not represent the estimated 
net increase in payment to cancer hospitals for CY 2012. After 
accounting for TOPs that we estimate cancer hospitals would no longer 
receive as a result of increased payment under the OPPS, the net 
increase in estimated payment to cancer hospitals for CY 2012 would be 
approximately 9 percent.
    Column 5 demonstrates the combined ``budget neutral'' impact of 
proposed APC recalibration (that is, Column 2), the wage index update 
(that is, Column 3), as well as the impact of updating the conversion 
factor with the OPD fee schedule increase factor, the proposed 2.8 
percent hospital market basket update less the multifactor productivity 
adjustment required by section 1833(t)(3)(F)(i) of the Act which we are 
proposing to be 1.2 percentage points, and less the 0.1 percentage 
point reduction required by sections 1833(t)(3)(F)(ii) and 
1833(t)(3)(G)(ii) of the Act, which resulted in an OPD fee schedule 
increase factor of 1.5 percent). We modeled the independent effect of 
the budget neutrality adjustments and the OPD fee schedule increase 
factor by using the weights and wage indices for each year, and using a 
CY 2011 conversion factor that included the OPD fee schedule increase 
and a budget neutrality adjustment for differences in wage indices.
    Column 6 demonstrates the cumulative impact of the proposed budget 
neutral adjustments from Columns 2 through 4, and the OPD fee schedule 
increase factor of 1.5 percent reflected in Column 5, combined with the 
non-budget neutral frontier State wage index adjustment, discussed in 
section II.C.1. of this proposed rule. This differs from Column 5 
solely based on application of the proposed nonbudget neutral frontier 
Stage wage index adjustment.
    Column 7 depicts the full impact of the proposed CY 2012 policies 
on each hospital group by including the effect of all the proposed 
changes for CY 2012 (including the APC reconfiguration and 
recalibration shown in Column 2) and comparing them to all estimated 
payments in CY 2011. Column 7 shows the combined budget neutral effects 
of Columns 2 through 4, plus the impact of the frontier State wage 
index adjustment; the proposed change to the fixed-dollar outlier 
threshold from $2,025 to $2,100 as discussed in section II.G. of this 
proposed rule; the change in the hospital OQR payment reduction for the 
small number of hospitals in our impact model that failed to meet the 
reporting requirements (discussed in section XIV.E. of this proposed 
rule); and the impact of increasing the estimate of the percentage of 
total OPPS payments dedicated to transitional pass-through payments. Of 
the 107 hospitals that failed to meet the OQR reporting requirements 
for the full CY 2011 update (and assumed, for modeling purposes, to be 
the same number for CY 2012), we included 30 hospitals in our model 
because they had both CY 2010 claims data and recent cost report data. 
We estimate that the cumulative effect of all proposed changes for CY 
2012 would increase payments to all providers by 1.5 percent for CY 
2012. We modeled the independent effect of all changes in Column 7 
using the final weights for CY 2011 and the proposed weights for CY 
2012. We used the final conversion factor for CY 2011 of $68.876 and 
the proposed CY 2012 conversion factor of $69.420 discussed

[[Page 42375]]

in section II.B. of this proposed rule in this model.
    Column 7 also contains simulated outlier payments for each year. We 
used the charge inflation factor used in the FY 2012 IPPS/LTCH PPS 
proposed rule of 9.08 percent (1.0908) to increase individual costs on 
the CY 2010 claims, and we used the most recent overall CCR in the 
April 2011 Outpatient Provider-Specific File (OPSF) (76 FR 26025). 
Using the CY 2010 claims and a 4.44 percent charge inflation factor, we 
currently estimate that outlier payments for CY 2011, using a multiple 
threshold of 1.75 and a fixed-dollar threshold of $2,025 should be 
approximately 1.1 percent of total payments. Outlier payments of 1.1 
percent are incorporated in the CY 2011 comparison in Column 6. We used 
the same set of claims and a charge inflation factor of 9.08 percent 
(1.0908) and the CCRs in the April 2011 OPSF, with an adjustment of 
0.9850, to reflect relative changes in cost and charge inflation 
between CY 2010 and CY 2012, to model the CY 2012 outliers at 1.0 
percent of estimated total payments using a multiple threshold of 1.75 
and a fixed-dollar threshold of $2,100.
Column 1: Total Number of Hospitals
    The first line in Column 1 in Table 51 shows the total number of 
facilities (4,141), including designated cancer and children's 
hospitals and CMHCs for which we were able to use CY 2010 hospital 
outpatient and CMHC claims to model CY 2011 and CY 2012 payments, by 
classes of hospitals. We excluded all hospitals for which we could not 
accurately estimate CY 2011 or CY 2012 payment and entities that are 
not paid under the OPPS. The latter entities include CAHs, all-
inclusive hospitals, and hospitals located in Guam, the U.S. Virgin 
Islands, Northern Mariana Islands, American Samoa, and the State of 
Maryland. This process is discussed in greater detail in section II.A. 
of this proposed rule. At this time, we are unable to calculate a 
disproportionate share (DSH) variable for hospitals not participating 
in the IPPS. Hospitals for which we do not have a DSH variable are 
grouped separately and generally include freestanding psychiatric 
hospitals, rehabilitation hospitals, and long-term care hospitals. We 
show the total number (3,879) of OPPS hospitals, excluding the hold-
harmless cancer and children's hospitals and CMHCs, on the second line 
of the table. We excluded cancer and children's hospitals because 
section 1833(t)(7)(D) of the Act permanently holds harmless cancer 
hospitals and children's hospitals to their ``pre-BBA amount'' as 
specified under the terms of the statute and, therefore, we removed 
them from our impact analyses. We show the isolated impact on 200 CMHCs 
at the bottom of the impact table and discuss that impact separately 
below.
Column 2: Proposed APC Changes Due to Reassignment and Recalibration
    This column shows the combined effects of the proposed 
reconfiguration, recalibration, and other policies (such as setting 
payment for separately payable drugs and biologicals at ASP+4 percent 
with an accompanying reduction in the amount of cost associated with 
packaged drugs and biologicals and changes in payment for PHP 
services). Overall, we estimate that proposed changes in APC 
reassignment and recalibration across all services paid under the OPPS 
would increase payments to urban hospitals by 0.2 percent. We estimate 
that both large and other urban hospitals would experience an increase 
of 0.2 percent, all attributable to recalibration. We estimate that 
urban hospitals billing fewer than 21,000 lines for OPPS services would 
experience decreases ranging from 0.2 percent to 5.5 percent. The 
decrease of 5.5 percent for urban hospitals billing fewer than 5,000 
lines per year is attributable to the decline in the proposed payment 
for APC 0034 (Mental Health Services Composite), for which the payment 
rate is proposed to be set at the payment rate for APC 0176 (Level II 
Partial Hospitalization (4 or more services) for hospital-based PHPs). 
Urban hospitals billing 21,000 or more lines for OPPS services would 
experience increases of 0.1 to 0.5 percent.
    Overall, we estimate that rural hospitals would experience an 
increase of 0.2 percent as a result of changes to the APC structure. We 
estimate that rural hospitals of all bed sizes would experience 
increases of 0.1 to 0.5 percent as a result of the proposed APC 
recalibration. We estimate that rural hospitals that report fewer than 
5,000 lines for OPPS services would experience a decrease of 1.2 
percent, while rural hospitals that report 5,000 or more lines for OPPS 
services would experience an increase of 0.1 to 0.9 percent in payment 
as a result of proposed APC recalibration.
    Among teaching hospitals, we estimate that the impact resulting 
from APC recalibration would include a decrease of 0.1 percent for 
major teaching hospitals and an increase of 0.3 for minor teaching 
hospitals and nonteaching hospitals.
    Classifying hospitals by type of ownership suggests that voluntary, 
proprietary, and governmental hospitals would experience no change or 
estimated increases of 0.1 to 0.3 percent as a result of the proposed 
APC recalibration. Finally, we estimate that hospitals for which DSH 
payments are not available would experience a decrease of 7.5 to 7.7 
percent. Hospitals for which DSH is not available furnish a large 
number of psychiatric services and we believe that the proposed decline 
in payment for APC 0176 is the cause for this estimated decline in 
payment.
Column 3: Proposed New Wage Indices and the Effect of the Rural 
Adjustment
    This column estimates the impact of applying the proposed FY 2012 
IPPS wage indices for the CY 2012 OPPS without the influence of the 
frontier State wage index adjustment which is not budget neutral. The 
frontier State wage index adjustment is reflected in the combined 
impact shown in Columns 6 and 7. We are proposing to continue the rural 
payment adjustment of 7.1 percent to rural SCHs for CY 2012, as 
described in section II.E.2. of this proposed rule. We estimate that 
the combination of updated wage data and nationwide application of 
rural floor budget neutrality would redistribute payment among regions. 
We also updated the list of counties qualifying for the section 505 
out-migration adjustment. Overall, we estimate that urban hospitals 
would experience no change from CY 2011 to CY 2012, and that rural 
hospitals would experience decreases of 0.2 to 0.4 percent as a result 
of the updated wage indices. We estimate that hospitals located in 
urban New England, Middle Atlantic, West North Central, West South 
Central, and Puerto Rico regions would experience increases of 0.1 to 
0.5 percent while other urban regions would experience no change or 
decreases of 0.2 to 0.7 percent. Hospitals in urban New England are 
expected to see an increase of 3.8 percent as a result of the 
implementation of the rural floor. See section II.C. for more 
information. We estimate that hospitals in rural West North Central, 
West South Central, and Pacific States would experience increases of 
0.1 to 0.5 percent, respectively, while other rural regions would 
experience decreases from 0.2 to 0.7 percent.
Column 4: Proposed Cancer Hospital Payment Adjustment
    This column estimates the budget neutral impact of applying the 
proposed hospital-specific CY 2012 cancer adjustment authorized by 
section 3138 of the Affordable Care Act, which would

[[Page 42376]]

result in an estimated aggregate increase in OPPS payments to dedicated 
cancer hospitals of 38.8 percent for the CY 2012 OPPS. After accounting 
for TOPs that we estimate would no longer be made, the net impact would 
result in an increase in payment to these hospitals of approximately 9 
percent. We estimate that all other hospitals would experience a 
decrease of 0.6 to 0.7 percent in CY 2012 as result of the adjustment 
to payments to the cancer hospitals under this proposed payment 
adjustment.
Column 5: All Proposed Budget Neutrality Changes Combined With the 
Proposed OPD Fee Schedule Increase
    We estimate that, for most classes of hospitals, the addition of 
the proposed OPD fee schedule increase factor of 1.5 percent would 
mitigate the negative impacts created by the budget neutrality 
adjustments made in Columns 2 and 3. While all other classes of 
hospitals would receive an increase after the update is applied to the 
budget neutrality adjustments, urban hospitals that bill fewer than 
11,000 lines and rural hospitals that report fewer than 5,000 lines 
would experience decreases. In particular, urban hospitals that report 
fewer than 5,000 lines would experience a cumulative decrease, after 
application of the proposed OPD fee schedule increase factor and the 
budget neutrality adjustments, of 4.3 percent, largely as a result of 
the proposed decrease in payment for APC 0034 (Mental Health Services 
Composite). OPPS payment for APC 0034 is proposed to continue being set 
to the payment rate of APC 0176 (Level II Partial Hospitalization (4 or 
more services) for hospital-based PHPs), which experienced a decline 
based on updated cost report and hospital claims data.
    Overall, we estimate that these proposed changes would increase 
payments to urban hospitals by 1.1 percent. We estimate that large 
urban hospitals and ``other'' urban hospitals would also experience an 
increase of 1.1 percent. We estimate that rural hospitals would 
experience a 0.8 percent increase as a result of the proposed OPD fee 
schedule increase factor and other budget neutrality adjustments.
    Among teaching hospitals, we estimate that the observed impacts 
resulting from the proposed OPD fee schedule increase factor and other 
budget neutrality adjustments would include an increase of 1.2 percent 
for major teaching hospitals and an increase of 1.0 percent for minor 
teaching hospitals.
    Classifying hospitals by type of ownership suggests that 
proprietary hospitals would experience an estimated increase of 0.7 
percent, while voluntary hospitals would experience an estimated 
increase of 1.2 percent and government hospitals would experience an 
estimated increase of 0.6 percent.
Column 6: Proposed Frontier State Wage Index Adjustment
    This column shows the impact of all budget neutrality adjustments, 
application of the proposed 1.5 percent OPD fee schedule increase 
factor, and the non-budget neutral impact of applying the proposed 
frontier State wage adjustment (that is, the proposed frontier State 
wage index change in addition to all changes reflected in Column 4). In 
general, we estimate that all facilities would experience a combined 
increase of 1.6 percent and that all hospitals would experience a 
combined increase of 1.1 percent. Hospitals in the rural Mountain 
region would experience an increase of 2.3 percent, most of which is 
attributable to the proposed frontier State wage adjustment. Similarly, 
hospitals in both the urban and rural West North Central region would 
experience an increase of 1.8 percent, most of which is attributable to 
the proposed frontier State wage adjustment.
Column 7: All Proposed Changes for CY 2012
    Column 7 compares all proposed changes for CY 2012 to estimated 
final payment for CY 2011, including the proposed changes in the 
outlier threshold, payment reductions for hospitals that failed to meet 
the OQR reporting requirements, and the difference in pass-through 
estimates that are not included in the combined percentages shown in 
Column 5. This column includes estimated payment for a few hospitals 
receiving reduced payment because they did not meet their hospital 
outpatient quality measure reporting requirements; however, we estimate 
that the anticipated change in payment between CY 2011 and CY 2012 for 
these hospitals would be negligible. (We further discuss the estimated 
impacts of hospitals' failure to meet these requirements below in 
section XX.A.4.d. of this proposed rule.) Overall, we estimate that 
facilities would experience an increase of 1.5 percent under this 
proposed rule in CY 2012 relative to total spending in CY 2011. The 
projected 1.5 percent increase for all facilities in Column 7 of Table 
51 reflects the proposed 1.5 percent OPD fee schedule increase factor, 
less 0.00 percent for the change in the pass-through estimate between 
CY 2011 and CY 2012, less 0.06 percent for the difference in estimated 
outlier payments between CY 2011 (1.06 percent) and CY 2012 (1.0 
percent), less 0.09 percent due to the section 508 wage adjustment, 
plus 0.10 percent due to the frontier State wage index adjustment. When 
we exclude cancer and children's hospitals (which are held harmless to 
their pre-BBA amount) and CMHCs, the estimated increase is 1.5 percent 
after rounding.
    We estimate that the combined effect of all proposed changes for CY 
2012 would increase payments to urban hospitals by 1.2 percent. We 
estimate that large urban hospitals would experience a 1.1 percent 
increase, while ``other'' urban hospitals would experience an increase 
of 1.2 percent. We estimate that urban hospitals that bill less than 
5,000 lines of OPPS services would experience a decrease of 4.2 
percent, largely attributable to the proposed decline in payment for 
APC 0034 (Mental Health Services Composite). We estimate that urban 
hospitals that bill 11,000 or more lines of OPPS services would 
experience increases between 0.6 percent and 1.5 percent, while urban 
hospitals that report between 5,000 and 10,999 lines would experience a 
decrease of 0.8 percent.
    Overall, we estimate that rural hospitals would experience a 0.9 
percent increase as a result of the combined effects of all proposed 
changes for CY 2012. We estimate that rural hospitals that bill less 
than 5,000 lines of OPPS services would experience a decrease of 0.7 
percent and that rural hospitals that bill 5,000 or more lines of OPPS 
services would experience increases ranging from 0.8 to 1.7 percent.
    Among teaching hospitals, we estimate that the impacts resulting 
from the combined effects of all proposed changes would include an 
increase of 1.2 percent for major teaching hospitals and 1.1 percent 
for minor teaching hospitals and non-teaching hospitals.
    In our analysis, we have also stratified hospitals by type of 
ownership. Based on this analysis, we estimate that voluntary hospitals 
would receive an increase of 1.3 percent, proprietary hospitals would 
receive an increase of 0.8 percent, and governmental hospitals would 
experience an increase of 0.7 percent.
(3) Estimated Effects of This Proposed Rule on CMHCs
    The last line of Table 51 demonstrates the isolated impact on 
CMHCs. In CY 2011, CMHCs are paid under four APCs for services under 
the OPPS: APC 0172

[[Page 42377]]

(Level I Partial Hospitalization (3 services) for CMHCs); APC 0173 
(Level II Partial Hospitalization (4 or more services) for CMHCs); APC 
0175 (Level I Partial Hospitalization (3 services) for hospital-based 
PHPs); and APC 0176 (Level II Partial Hospitalization (4 or more 
services) for hospital-based PHPs). We implemented these four APCs for 
CY 2011. We adopted payment rates for each APC based on the cost data 
derived from claims and cost reports for the provider type to which the 
APC is specific and provided a transition to CMHC rates based solely on 
CMHC data for the two CMHC PHP per diem rates. For CY 2012, we are 
proposing to continue the four APC provider-specific structure we 
adopted for CY 2011 and to base payment fully on the cost data for the 
type of provider furnishing the service. We modeled the impact of this 
APC policy assuming that CMHCs would continue to provide the same 
number of days of PHP care, with each day having either 3 services or 4 
or more services, as seen in the CY 2010 claims data used for this CY 
2012 OPPS/ASC proposed rule. We excluded days with one or two services 
because our policy only pays a per diem rate for partial 
hospitalization when 3 or more qualifying services are provided to the 
beneficiary. Because the relative payment weights for APC 0172 and APC 
0173 for CMHCs both decline in CY 2012 due to CMHC cost data for 
partial hospitalization services provided by CMHCs, we estimate that 
there would be a 34.2 percent decrease in payments to CMHCs due to 
these APC policy changes (shown in Column 2).
    Column 3 shows that the estimated impact of adopting the proposed 
CY 2012 wage index values have no influence on payments to CMHCs. 
Column 4 shows that CMHCs would receive a 0.7 percent reduction as a 
result of the proposed cancer hospital adjustment. We note that all 
providers paid under the OPPS, including CMHCs, would receive a 
proposed 1.5 percent OPD fee schedule increase factor. Column 5 shows 
that combining this proposed OPD fee schedule increase factor, along 
with proposed changes in APC policy for CY 2012 and the proposed CY 
2012 wage index updates, results in an estimated decrease of 33.2 
percent. Column 6 shows that adding the frontier State wage adjustment 
results in no change to the cumulative 33.2 percent decrease. Column 7 
shows that adding the proposed changes in outlier and pass-though 
payments would result in a 33.1 percent decrease in payment for CMHCs 
that reflects all proposed changes for CY 2012.
    The impact of the changes to hospital payment rates for partial 
hospitalization services is reflected in the impact of all proposed 
changes on hospitals. The impact of the decline in payment for APC 0034 
appears most notably in small urban hospitals that furnish primarily 
outpatient psychiatric services.
    All providers paid under the OPPS would receive a proposed 1.5 
percent OPD fee schedule increase factor under this policy. Combining 
this proposed OPD fee schedule increase factor with proposed changes in 
APC policy for CY 2012, the proposed CY 2012 wage index updates, and 
with proposed changes in outlier and pass-through payments, we estimate 
that the combined impact on hospitals within the OPPS system would be a 
1.5 percent increase in total payment for CY 2012. Table 51 presents 
the estimated impact of the proposed changes to the OPPS for CY 2012.

                   Table 51--Estimated Impact of the CY 2012 Proposed Changes for the Hospital Outpatient Prospective Payments System
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 (1)           (2)           (3)          (4)          (5)          (6)          (7)
                                                            --------------------------------------------------------------------------------------------
                                                                                                                    Comb (cols
                                                                                           New wage    New cancer    2, 3,4)     Comb (col
                                                              Number of        APC        index and     hospital       with       5) with
                                                              hospitals   Recalibration     rural       payment       market      frontier   All changes
                                                                                          adjustment   adjustment     basket     wage index
                                                                                                                      update     adjustment
--------------------------------------------------------------------------------------------------------------------------------------------------------
ALL FACILITIES *...........................................        4,141           0.0           0.0          0.0          1.5          1.6          1.5
ALL HOSPITALS..............................................        3,879           0.2           0.0         -0.6          1.0          1.1          1.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
(Excludes hospitals permanently held harmless and CMHCs)
--------------------------------------------------------------------------------------------------------------------------------------------------------
URBAN HOSPITALS............................................        2,928           0.2           0.0         -0.6          1.1          1.2          1.2
    LARGE URBAN (GT 1 MILL.)...............................        1,592           0.2           0.0         -0.7          1.1          1.1          1.1
    OTHER URBAN (LE 1 MILL.)...............................        1,336           0.2           0.0         -0.6          1.1          1.3          1.2
RURAL HOSPITALS............................................          951           0.2          -0.3         -0.7          0.8          1.0          0.9
    SOLE COMMUNITY.........................................          385           0.1          -0.2         -0.6          0.8          1.3          0.9
    OTHER RURAL............................................          566           0.3          -0.4         -0.7          0.8          0.8          0.9
BEDS (URBAN):
    0-99 BEDS..............................................        1,007          -0.1           0.1         -0.7          0.8          0.9          0.8
    100-199 BEDS...........................................          856           0.4           0.1         -0.7          1.3          1.4          1.3
    200-299 BEDS...........................................          445           0.4           0.1         -0.7          1.3          1.5          1.4
    300-499 BEDS...........................................          417           0.2          -0.1         -0.6          1.0          1.0          1.0
    500 + BEDS.............................................          203           0.0           0.1         -0.6          1.0          1.0          1.1
BEDS (RURAL):
    0-49 BEDS..............................................          340           0.2          -0.1         -0.7          0.9          1.1          1.0
    50-100 BEDS............................................          364           0.1          -0.3         -0.6          0.6          0.9          0.7
    101-149 BEDS...........................................          140           0.5          -0.2         -0.7          1.1          1.3          1.2
    150-199 BEDS...........................................           60           0.2          -0.4         -0.7          0.6          1.2          0.7
    200 + BEDS.............................................           47           0.1          -0.3         -0.6          0.8          0.8          0.8
VOLUME (URBAN):
    LT 5,000 Lines.........................................          611          -5.5           0.4         -0.7         -4.3         -4.2         -4.2
    5,000-10,999 Lines.....................................          146          -1.5          -0.1         -0.7         -0.8         -0.6         -0.8
    11,000-20,999 Lines....................................          255          -0.2          -0.1         -0.7          0.6          0.6          0.6
    21,000-42,999 Lines....................................          490           0.5          -0.1         -0.7          1.2          1.2          1.2
    42,999-89,999 Lines....................................          738           0.5           0.1         -0.7          1.5          1.5          1.5
    GT 89,999 Lines........................................          688           0.1           0.0         -0.6          1.0          1.1          1.1

[[Page 42378]]

 
VOLUME (RURAL):
    LT 5,000 Lines.........................................           71          -1.2          -0.2         -0.7         -0.7          1.4         -0.7
    5,000-10,999 Lines.....................................           81           0.9           0.1         -0.7          1.8          1.9          1.7
    11,000-20,999 Lines....................................          184           0.3          -0.3         -0.7          0.8          1.0          0.8
    21,000-42,999 Lines....................................          286           0.4          -0.3         -0.7          0.9          1.2          1.0
    GT 42,999 Lines........................................          329           0.1          -0.3         -0.6          0.7          0.9          0.8
REGION (URBAN):
    NEW ENGLAND............................................          150           0.0           3.8         -0.6          4.6          4.6          4.4
    MIDDLE ATLANTIC........................................          351           0.1           0.1         -0.6          1.1          1.1          1.0
    SOUTH ATLANTIC.........................................          452           0.3          -0.6         -0.7          0.6          0.6          0.7
    EAST NORTH CENT........................................          469           0.3          -0.6         -0.6          0.6          0.6          0.6
    EAST SOUTH CENT........................................          184           0.4          -0.7         -0.6          0.5          0.5          0.7
    WEST NORTH CENT........................................          193           0.1           0.1         -0.6          1.1          1.8          1.3
    WEST SOUTH CENT........................................          489           0.3           0.3         -0.7          1.4          1.4          1.5
    MOUNTAIN...............................................          202           0.2           0.0         -0.6          1.0          1.4          1.2
    PACIFIC................................................          390           0.0          -0.2         -0.7          0.7          0.7          0.8
    PUERTO RICO............................................           48           0.3           0.5         -0.7          1.6          1.6          1.7
REGION (RURAL):
    NEW ENGLAND............................................           26          -0.5          -0.5         -0.6         -0.1         -0.1          0.1
    MIDDLE ATLANTIC........................................           68           0.2          -0.2         -0.6          0.9          0.9          1.0
    SOUTH ATLANTIC.........................................          162           0.4          -0.2         -0.7          1.0          1.0          1.1
    EAST NORTH CENT........................................          126           0.2          -0.7         -0.7          0.4          0.4          0.3
    EAST SOUTH CENT........................................          172           0.6          -0.6         -0.7          0.8          0.8          0.9
    WEST NORTH CENT........................................          101          -0.4           0.2         -0.6          0.7          1.8          1.0
    WEST SOUTH CENT........................................          201           0.4           0.1         -0.7          1.3          1.3          1.3
    MOUNTAIN...............................................           66           0.2          -0.6         -0.6          0.5          2.3          0.5
    PACIFIC................................................           29           0.1           0.5         -0.6          1.5          1.5          1.7
TEACHING STATUS:
    NON-TEACHING...........................................        2,891           0.3          -0.1         -0.7          1.0          1.1          1.1
    MINOR..................................................          699           0.3          -0.1         -0.6          1.0          1.2          1.1
    MAJOR..................................................          289          -0.1           0.4         -0.6          1.2          1.2          1.2
DSH PATIENT PERCENT:
    0......................................................            7          -0.7           0.0         -0.7          0.1          0.1          0.3
    GT 0-0.10..............................................          343           0.2           0.2         -0.7          1.2          1.3          1.3
    0.10-0.16..............................................          359           0.4          -0.4         -0.7          0.8          0.9          0.8
    0.16-0.23..............................................          733           0.3           0.0         -0.7          1.1          1.3          1.1
    0.23-0.35..............................................        1,037           0.3           0.0         -0.6          1.2          1.3          1.2
    GE 0.35................................................          789           0.1           0.1         -0.6          1.0          1.0          1.2
    DSH NOT AVAILABLE **...................................          611          -7.5           0.5         -0.7         -6.2         -6.2         -6.1
URBAN TEACHING/DSH:
TEACHING & DSH                                                       901           0.2           0.1         -0.6          1.1          1.2          1.2
    NO TEACHING/DSH........................................        1,446           0.4          -0.1         -0.7          1.2          1.2          1.3
    NO TEACHING/NO DSH.....................................            6          -0.7           0.0         -0.7          0.1          0.1          0.3
    DSH NOT AVAILABLE **...................................          575          -7.7           0.6         -0.7         -6.3         -6.3         -6.2
    TYPE OF OWNERSHIP:.....................................
    VOLUNTARY..............................................        2,060           0.3           0.1         -0.6          1.2          1.3          1.3
    PROPRIETARY............................................        1,259           0.0          -0.1         -0.7          0.7          0.8          0.8
    GOVERNMENT.............................................          560           0.1          -0.4         -0.6          0.6          0.6          0.7
CMHCs......................................................          200         -34.2           0.0         -0.7        -33.2        -33.2        -33.1
Cancer Hospitals...........................................           11           0.2           0.6         38.8         41.5         41.5         37.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
Column (1) shows total hospitals and/or CMHCs.
Column (2) shows the impact of proposed changes resulting from the reclassification of HCPCS codes among APC groups and the proposed recalibration of
  APC weights based on CY 2010 hospital claims data.
Column (3) shows the proposed budget neutral impact of updating the wage index by applying the FY 2012 hospital inpatient wage index. See section II.C.
  for discussion of the estimated increase in payments to urban New England hospitals.
Column (4) shows the proposed budget neutral estimated impact within the OPPS of applying a proposed cancer hospital adjustment to all OPPS services.
  However, we note that after accounting for the TOPs that we estimate cancer hospitals would no longer receive, the proposed net increase in payment to
  cancer hospitals would be approximately 9 percent.
Column (5) shows the impact of all proposed budget neutrality adjustments and the proposed addition of the 1.5 percent OPD fee schedule increase factor
  (2.8 percent reduced by 1.2 percentage points for the proposed productivity adjustment and further reduced by 0.1 percentage point in order to satisfy
  statutory requirements set forth in the Affordable Care Act).
Column (6) shows the proposed non-budget neutral impact of applying the frontier State wage adjustment, after application of the CY 2012 proposed OPD
  fee schedule increase factor.
Column (7) shows the proposed additional adjustments to the conversion factor resulting from a proposed change in the pass-through estimate and adds
  proposed outlier payments. This column also shows the expiration of section 508 wages on September 30, 2011 and the application of the proposed
  frontier State wage adjustment for CY 2012.

[[Page 42379]]

 
* These 4,141 providers include children and cancer hospitals, which are held harmless to pre-BBA amounts, and CMHCs.
** Complete DSH numbers are not available for providers that are not paid under IPPS, including rehabilitation, psychiatric, and long-term care
  hospitals.

(4) Estimated Effect of This Proposed Rule on Beneficiaries
    For services for which the beneficiary pays a copayment of 20 
percent of the payment rate, the beneficiary share of payment would 
increase for services for which the OPPS payments would rise and would 
decrease for services for which the OPPS payments would fall. For 
example, for a service assigned to Level IV Needle Biopsy/Aspiration 
Except Bone Marrow (APC 0037) in the CY 2011 OPPS, the national 
unadjusted copayment is $228.76, and the minimum unadjusted copayment 
is $215.24, 20 percent of the national unadjusted payment rate of 
$1,076.14. For CY 2012, the proposed national unadjusted copayment for 
APC 0037 is $225.55, a decline from the copayment in effect for CY 
2011. The proposed minimum unadjusted copayment for APC 0037 is $213.25 
or 20 percent of the proposed CY 2012 national unadjusted payment rate 
for APC 0037 of $1,066.25. The proposed minimum unadjusted copayment 
would decline because the CY 2011 payment rate for APC 0037 would 
decline for CY 2012. For further discussion on the calculation of the 
proposed national unadjusted copayments and minimum unadjusted 
copayments, we refer readers to section II.I. of this proposed rule. We 
note that the proposed rural hospital and cancer hospital payment 
adjustments would result in corresponding increases in the beneficiary 
copayment, where those payment adjustments are applied. In all cases, 
the statute limits beneficiary liability for copayment for a procedure 
to the hospital inpatient deductible for the applicable year. The CY 
2011 hospital inpatient deductible is $1,132 (75 FR 68799 through 
68800). The CY 2012 hospital inpatient deductible was not known at the 
time this proposed rule was developed.
    In order to better understand the impact of changes in copayment on 
beneficiaries, we modeled the percent change in total copayment 
liability using CY 2010 claims. We estimate, using the claims of the 
4,141 hospitals and CMHCs on which our modeling is based, that total 
beneficiary liability for copayments would increase as an overall 
percentage of total payments, from 22.0 percent in CY 2011 to 22.1 
percent in CY 2012 due largely to changes in service mix.
(5) Effects on Other Providers
    The relative weights and payment amounts established under the OPPS 
affect the payments made to ASCs as discussed in section XIII. of this 
proposed rule. No types of providers other than hospitals and ASCs are 
affected by the changes we are proposing in this proposed rule.
(6) Effects on the Medicare and Medicaid Programs
    The effect on the Medicare program is expected to be $3.285 billion 
in additional program payments for OPPS services furnished in CY 2012. 
The effect on the Medicaid program is expected to be limited to 
increased copayments that Medicaid may make on behalf of Medicaid 
recipients who are also Medicare beneficiaries. We refer readers to our 
discussion of the impact on beneficiaries under section XX.A.4.a.(4). 
of this proposed rule.
(7) Alternatives Considered
    Alternatives to the changes we are proposing to make and the 
reasons for our selected alternatives are discussed throughout this 
proposed rule. Some of the major issues discussed in this proposed rule 
and the alternatives considered are discussed below.
 Alternatives Considered for Payment of the Acquisition and 
Pharmacy Overhead Costs of Drugs and Biologicals That Do Not Have Pass-
Through Status
    We are proposing that, for CY 2012, the OPPS would make payment for 
separately payable drugs and biologicals at ASP+4 percent, and this 
payment would continue to represent combined payment for both the 
acquisition and pharmacy overhead costs of separately payable drugs and 
biologicals. In addition, because we are proposing to continue to make 
a pharmacy overhead adjustment for CY 2012, we believe it is 
appropriate to account for inflation that has occurred since the 
overhead redistribution amount of $200 million was applied in CY 2011. 
Therefore, as discussed in further detail in section V.B.3. of this 
proposed rule, we believe that approximately $161 million of the 
estimated $705 million in pharmacy overhead cost currently attributed 
to coded packaged drugs and biologicals with an ASP and $54 million of 
the estimated $502 million in pharmacy overhead cost currently 
attributed to coded and uncoded packaged drugs and biologicals without 
an ASP should, instead, be attributed to separately payable drugs and 
biologicals to provide an adjustment for the pharmacy overhead costs of 
these separately payable products. As a result, we also are proposing 
to reduce the cost of packaged drugs and biologicals that is included 
in the payment for procedural APCs to offset the proposed $215 million 
adjustment to payment for separately payable drugs and biologicals. We 
are proposing that any redistribution of pharmacy overhead cost that 
may arise from CY 2012 final rule claims data would occur only from 
some drugs and biologicals to other drugs and biologicals, thereby 
maintaining the estimated total cost of drugs and biologicals under the 
OPPS.
    We considered two alternatives for payment of the acquisition and 
pharmacy overhead costs of drugs and biologicals that do not have pass-
through status for CY 2012. The first alternative we considered, but 
are not proposing, is to compare the estimated aggregate cost of 
separately payable drugs and biologicals in our claims data to the 
estimated aggregate ASP dollars for separately payable drugs and 
biologicals, using the ASP as a proxy for average acquisition cost, to 
calculate the estimated percent of ASP that would serve as the best 
proxy for the combined acquisition and pharmacy overhead costs of 
separately payable drugs and biologicals (70 FR 68642), but without 
redistribution of estimated pharmacy overhead costs. Under this 
methodology without redistribution, using April 2011 ASP information 
and costs derived from CY 2010 OPPS claims data, we estimated the 
combined acquisition and overhead costs of separately payable drugs and 
biologicals to be ASP-2 percent. As discussed in section V.B.3. of this 
proposed rule, we also determined that the combined acquisition and 
overhead costs of packaged drugs are 188 percent of ASP. We did not 
choose this alternative because we believe that this analysis indicates 
that our standard drug payment methodology has the potential to 
``compress'' the calculated costs of separately payable drugs and 
biologicals to some degree when there is no redistribution of estimated 
pharmacy overhead costs. Further, we recognize that the attribution of 
pharmacy overhead costs to packaged or separately payable drugs and 
biologicals through our standard drug payment methodology of a combined 
payment for

[[Page 42380]]

acquisition and pharmacy overhead costs depends, in part, on the 
treatment of all drugs and biologicals each year under our annual drug 
packaging threshold. Changes to the packaging threshold may result in 
changes to payment for the overhead cost of drugs and biologicals that 
do not reflect actual changes in hospital pharmacy overhead cost for 
those products.
    The second alternative we considered and the one we are proposing 
for CY 2012 is to continue our pharmacy overhead redistribution 
methodology and proposing to apply an inflation allowance and 
redistribute $215 million in overhead costs from packaged coded and 
uncoded drugs and biologicals to separately payable drugs and 
biologicals which would result in a payment for non-pass-through 
separately payable drugs and biologicals at ASP+4 percent, which would 
continue to represent a combined payment for both the acquisition costs 
of separately payable drugs and biologicals and the pharmacy overhead 
costs applicable to these products. We also are proposing to reduce the 
cost of packaged drugs and biologicals that is included in the payment 
for procedural APCs to offset the $215 million adjustment to payment 
for separately payable drugs and biologicals, resulting in payment for 
packaged drugs and biologicals of ASP+123 percent under our proposal.
    We chose this alternative because we believe that it provides the 
most appropriate redistribution of pharmacy overhead costs associated 
with drugs and biologicals, based on the analyses discussed in section 
V.B.3. of this proposed rule.
 Proposed OPPS Payment Adjustment for Certain Cancer Hospitals
    Section 3138 of the Affordable Care Act instructs the Secretary to 
conduct a study to determine if outpatient costs, including the cost of 
drugs and biologicals, incurred by cancer hospitals described in 
section 1886(d)(1)(B)(v) of the Act with respect to ambulatory 
classification groups exceed the costs incurred by other hospitals 
furnishing services under this subsection (section 1833(t) of the Act). 
Further, section 3138 of the Affordable Care Act provides that if the 
cancer hospitals' costs with respect to APC groups are determined to be 
greater than the costs of other hospitals paid under the OPPS, the 
Secretary shall provide an appropriate budget neutral payment 
adjustment to reflect these higher costs.
    As discussed in detail in section II. F. of this proposed rule, 
using the claims and cost report data that we used under the modeled 
proposed CY 2011 OPPS, we constructed our traditional provider-level 
database of costs, modeled payments, units, service mix, wage index and 
other provider information that we typically use to establish class 
adjustments under the OPPS. We observed that cancer hospitals were more 
costly with respect to APC groups than other hospitals paid under the 
OPPS, having a standardized cost per discounted unit of $150.12 
compared to a standardized cost per discounted unit of $94.14 for all 
other hospitals.
    Having reviewed the cost data from the standard analytic database 
and determined that cancer hospitals are more costly with respect to 
APC groups than other hospitals within the OPPS system, we are 
proposing a payment adjustment for cancer hospitals for CY 2012 based 
on a comparison of costliness relative to payments using cost report 
data. Specifically, our proposed adjustment is as follows: If a 
hospital described in section 1886(d)(1)(B)(v) of the Act has a PCR (as 
determined by the Secretary) that is less than the weighted average PCR 
of other hospitals furnishing services under section 1833(t) of the Act 
(as determined by the Secretary) (Target PCR) for covered hospital 
outpatient department services (except pass-through devices defined in 
section 419.66), the payment adjustment is the percentage difference 
between the PCR of the hospital and the Target PCR. The CY 2012 
proposed rule cost report data indicated a cancer hospital weighted 
average PCR of 0.647 (range = 0.56 to 0.82) and a weighted average PCR 
for all other hospitals equal to 0.901. Our proposed adjustment would 
result in an estimated 39.3 percent aggregate increase in budget 
neutral payments to cancer hospitals. For a cancer hospital with an 
individual PCR that is above the weighted average PCR of other 
hospitals furnishing services under the OPPS, we are proposing a zero 
percent adjustment for services furnished on and after January 1, 2012.
    We considered three alternatives for the proposed OPPS payment 
adjustment for certain cancer hospitals. The first alternative we 
considered, but are not proposing, is to use our standard payment 
regression model instead of cost report data to identify an appropriate 
payment adjustment for cancer hospitals. We used this approach in our 
CY 2006 OPPS final rule with comment period to establish the 7.1 
percent payment adjustment for rural SCHs (70 FR 68556 through 68561). 
However, in constructing our analysis of cancer hospitals' costs 
relative to other hospitals, we considered whether our standard 
analytical approach would lead to valid results. The analyses presented 
in the CY 2006 OPPS proposed and final rules were designed to establish 
an adjustment for a large class of rural hospitals. In contrast, 
section 3138 of the Affordable Care Act is specifically limited to 
identifying an adjustment for 11 cancer hospitals to the extent that 
their costs with respect to APC groups exceeded the costs incurred by 
other hospitals furnishing services under section 1833(t) of the Act. 
With such a small sample size (11 out of approximately 4,000 hospitals 
paid under the OPPS), we were concerned that the standard explanatory 
and payment regression models used to establish the rural hospital 
adjustment would lead to imprecise estimates of payment adjustments for 
this small group of hospitals. Further, section 3138 of the Affordable 
Care Act specifies explicitly that cost comparisons between classes of 
hospitals must include the cost of drugs and biologicals. In our CY 
2006 analysis of rural hospitals, we excluded the cost of drugs and 
biologicals in our model because the extreme units associated with 
proper billing for some drugs and biologicals can bias the calculation 
of a service mix index, or volume weighted average APC relative weight, 
for each hospital (70 FR 42698). Therefore, we chose not to pursue our 
standard combination of explanatory and payment regression modeling to 
determine a cancer hospital adjustment.
    The second alternative we considered, but are not proposing, is to 
provide the same adjustment to all cancer hospitals based on the 
difference between the weighted average PCR for all cancer hospitals 
(0.647) and the weighted average PCR for all other hospitals (0.901). 
This class adjustment, instead of a hospital specific adjustment, would 
provide a 39.3 percent payment increase for each cancer hospital. 
Because this alternative did not seem equitable to other hospitals 
furnishing services under OPPS as it would result in a PCR for most 
cancer hospitals that is higher the weighted average PCR of other 
hospitals furnishing services under OPPS and a much larger budget 
neutrality adjustment, we did not propose this alternative.
    The third alternative we considered, and the one we are proposing 
for CY 2012, is to provide a hospital specific payment adjustment to 
cancer hospitals that have a PCR that is less than the weighted average 
PCR of other hospitals furnishing services under the OPPS, for covered 
hospital outpatient department services (except pass-through devices) 
furnished on and after January 1, 2012, based on the percent difference 
between

[[Page 42381]]

each cancer hospital's PCR and the weighted average PCR of other OPPS 
hospitals using the most recent cost report data. For cancer hospitals 
with an individual PCR that is above the weighted average PCR of other 
hospitals furnishing services under the OPPS, we are proposing a zero 
percent adjustment for services furnished on and after January 1, 2012. 
For purposes of calculating a proposed adjustment, we chose to rely on 
this straightforward assessment of payments and costs from the cost 
report data because of the concerns outlined above with respect to the 
small number of hospitals, and because of the challenges associated 
with accurately including drug and biological costs in our standard 
regression models. We believe that an appropriate adjustment would 
redistribute enough payments from other hospitals paid under the OPPS 
to the cancer hospitals to give cancer hospitals a PCR that is 
comparable to the average PCR for other hospitals paid under the OPPS.
 Alternatives Considered for the Supervision of Hospital 
Outpatient Therapeutic Services
    In the CY 2011 OPPS/ASC final rule with comment period (75 FR 
72012), we stated our intent to develop through our CY 2012 rulemaking 
an independent review process that enables the agency to request, with 
stakeholder input, advisory recommendations regarding the appropriate 
supervision level for individual outpatient therapeutic services. We 
considered three alternatives with regard to the nature of the advisory 
recommendations regarding the appropriate supervision level for 
individual outpatient therapeutic services.
    The first alternative we considered but are not proposing is to use 
an existing body other than the APC Panel such as the Relative Value 
Scale Update Committee to make recommendations to CMS with regard to 
the level of supervision that would be required for outpatient 
therapeutic services. We did not choose a different existing body 
because we did not believe there was an alternative that had an 
appropriate balance of subject matter expertise or that would be able 
to furnish the appropriate advice.
    The second alternative we considered but are not proposing is to 
establish a new non-advisory body such as a Technical Expert Panel. We 
did not propose to establish a new entity because currently we have no 
funding to do so. Moreover, it is not clear that the resources of a new 
body are necessary for the supervision deliberations, especially once 
initial determinations are made regarding key services. Also, we 
believe it is important to obtain advice that carries the weight of a 
Federal advisory recommendation.
    The third alternative we considered, and the one we selected, is to 
propose to establish the Federal Advisory APC Panel as an independent 
review body that would evaluate individual outpatient therapeutic 
services for potential assignment by CMS of general (lower) or personal 
(higher) supervision. We are proposing to amend the APC Panel charter 
to render the Panel more appropriate for this task by expanding its 
scope to include the topic of supervision. We also are proposing to add 
two to four members to the Panel who would be representative of CAHs, 
so that all types of hospitals who are subject to the supervision rules 
for payment would be represented in developing the Panel's 
recommendations. We are proposing to use the standard APC Panel 
protocols with respect to frequency of meetings and receiving requests 
for evaluation of services. We believe it is important to obtain advice 
that carries the weight of a Federal advisory recommendation, because 
it may have greater legitimacy both with stakeholders and with CMS 
compared to the opinions of other types of groups. The APC Panel has a 
long and excellent history of providing valuable advice to CMS with 
regard to the clinical issues associated with the APC groupings of 
hospital outpatient therapeutic services under the OPPS, and we believe 
that extension of the function of the Panel to providing advice on 
supervision of individual hospital outpatient therapeutic services will 
result in both full consideration of the views of all types of 
hospitals and the best possible clinical decisions with respect to the 
level of supervision that should be required as a condition of Medicare 
payment.
b. Effects of Proposed ASC Payment System Changes in This Proposed Rule
    On August 2, 2007, we published in the Federal Register the final 
rule for the revised ASC payment system, effective January 1, 2008 (72 
FR 42470). In that final rule, we adopted the methodologies to set 
payment rates for covered ASC services to implement the revised payment 
system so that it would be designed to result in budget neutrality as 
required by section 626 of Pub. L. 108-173; established that the OPPS 
relative payment weights would be the basis for payment and that we 
would update the system annually as part of the OPPS rulemaking cycle; 
and provided that the revised ASC payment rates would be phased in over 
4 years. During the 4-year transition to full implementation of the ASC 
payment rates, payments for surgical procedures performed in ASCs that 
were on the CY 2007 ASC list of covered surgical procedures were made 
using a blend of the CY 2007 ASC payment rate and the ASC payment rate 
calculated according to the ASC standard ratesetting methodology for 
the applicable transitional year. In CY 2009, we paid ASCs using a 50/
50 blend, in which payment was calculated by adding 50 percent of the 
CY 2007 ASC rate for a surgical procedure on the CY 2007 ASC list of 
covered surgical procedures and 50 percent of the CY 2009 ASC rate 
calculated according to the ASC standard ratesetting methodology for 
the same procedure. For CY 2010, we transitioned the blend to a 25/75 
blend of the CY 2007 ASC rate and the CY 2010 ASC payment rate 
calculated according to the ASC standard ratesetting methodology. In CY 
2011, we are paying ASCs for all covered surgical procedures, including 
those on the CY 2007 ASC list, at the ASC payment rates calculated 
according to the ASC standard ratesetting methodology.
    ASC payment rates are calculated by multiplying the ASC conversion 
factor by the ASC relative payment weight. As discussed fully in 
section XIII. of this proposed rule, we set the proposed CY 2012 ASC 
relative payment weights by scaling CY 2012 ASC relative payment 
weights by the ASC scalar of 0.9373. The estimated effects of the 
updated relative payment weights on payment rates during this second 
year of full implementation of the ASC payment rates calculated 
according to the ASC standard ratesetting methodology are varied and 
are reflected in the estimated payments displayed in Tables 52 and 53 
below.
    Beginning in CY 2011, section 3401 of the Affordable Care Act 
requires that the annual update to the ASC payment system, which is the 
consumer price index for all urban consumers (CPI-U), be reduced by the 
productivity adjustment. The Affordable Care Act defines the 
productivity adjustment to be equal to the 10-year moving average of 
changes in annual economy-wide private nonfarm business multi-factor 
productivity (MFP) (as projected by the Secretary for the 10-year 
period ending with the applicable fiscal year, year, cost reporting 
period, or other annual period). We calculated the proposed CY 2012 ASC 
conversion factor by adjusting the CY 2011 ASC conversion factor by 
1.0003 to account for changes in the pre-floor and pre-reclassified 
hospital wage indices between CY 2011 and CY 2012

[[Page 42382]]

and by applying the proposed CY 2012 MFP-adjusted CPI-U of 0.9 percent 
(2.3 percent CPI-U minus a productivity adjustment of 1.4 percent 
percentage points). The proposed CY 2012 ASC conversion factor is 
$42.329.
(1) Limitations of Our Analysis
    Presented here are the projected effects of the proposed changes 
for CY 2012 on Medicare payment to ASCs. A key limitation of our 
analysis is our inability to predict changes in ASC service mix between 
CY 2010 and CY 2012 with precision. We believe that the net effect on 
Medicare expenditures resulting from the proposed CY 2012 changes would 
be small in the aggregate for all ASCs. However, such changes may have 
differential effects across surgical specialty groups as ASCs continue 
to adjust to the payment rates based on the policies of the revised ASC 
payment system. We are unable to accurately project such changes at a 
disaggregated level. Clearly, individual ASCs would experience changes 
in payment that differ from the aggregated estimated impacts presented 
below.
(2) Estimated Effects of This Proposed Rule on Payments to ASCs
    Some ASCs are multispecialty facilities that perform the gamut of 
surgical procedures, from excision of lesions to hernia repair to 
cataract extraction; others focus on a single specialty and perform 
only a limited range of surgical procedures, such as eye, digestive 
system, or orthopedic procedures. The combined effect on an individual 
ASC of the proposed update to the CY 2012 payments would depend on a 
number of factors, including, but not limited to, the mix of services 
the ASC provides, the volume of specific services provided by the ASC, 
the percentage of its patients who are Medicare beneficiaries, and the 
extent to which an ASC provides different services in the coming year. 
The following discussion presents tables that display estimates of the 
impact of the proposed CY 2012 update to the revised ASC payment system 
on Medicare payments to ASCs, assuming the same mix of services as 
reflected in our CY 2010 claims data. Table 52 depicts the estimated 
aggregate percent change in payment by surgical specialty or ancillary 
items and services group by comparing estimated CY 2011 payments to 
estimated CY 2012 payments, and Table 53 shows a comparison of 
estimated CY 2011 payments to estimated CY 2012 payments for procedures 
that we estimate would receive the most Medicare payment in CY 2012.
    Table 52 shows the estimated effects on aggregate proposed Medicare 
payments under the revised ASC payment system by surgical specialty or 
ancillary items and services group. We have aggregated the surgical 
HCPCS codes by specialty group, grouped all HCPCS codes for covered 
ancillary items and services into a single group, and then estimated 
the effect on aggregated payment for surgical specialty and ancillary 
items and services groups. The groups are sorted for display in 
descending order by estimated Medicare program payment to ASCs. The 
following is an explanation of the information presented in Table 52.
     Column 1--Surgical Specialty or Ancillary Items and 
Services Group indicates the surgical specialty into which ASC 
procedures are grouped or the ancillary items and services group which 
includes all HCPCS codes for covered ancillary items and services. To 
group surgical procedures by surgical specialty, we used the CPT code 
range definitions and Level II HCPCS codes and Category III CPT codes 
as appropriate, to account for all surgical procedures to which the 
Medicare program payments are attributed.
     Column 2--Estimated CY 2011 ASC Payments were calculated 
using CY 2010 ASC utilization (the most recent full year of ASC 
utilization) and CY 2011 ASC payment rates. The surgical specialty and 
ancillary items and services groups are displayed in descending order 
based on estimated CY 2011 ASC payments.
     Column 3--Estimated CY 2012 Percent Change is the 
aggregate percentage increase or decrease in Medicare program payment 
to ASCs for each surgical specialty or ancillary items and services 
group that would be attributable to updates to proposed ASC payment 
rates for CY 2012 compared to CY 2011.
    As seen in Table 52, we estimate that the proposed update to ASC 
rates for CY 2012 would result in a 0 percent decrease in aggregate 
payment amounts for eye and ocular adnexa procedures, a 1 percent 
increase in aggregate payment amounts for digestive system procedures, 
and a 2 percent increase in aggregate payment amounts for nervous 
system procedures.
    Generally, for the surgical specialty groups that account for less 
ASC utilization and spending, we estimate that the payment effects of 
the CY 2012 update are variable. For instance, we estimate that, in the 
aggregate, payment for genitourinary system procedures and hemic & 
lymphatic systems procedures would increase by 5 percent and 4 percent, 
respectively, whereas auditory system procedures and cardiovascular 
system procedures would decrease by 5 percent and 4 percent, 
respectively, under the proposed CY 2012 rates.
    An estimated increase in aggregate payment for the specialty group 
does not mean that all procedures in the group would experience 
increased payment rates. For example, the estimated modest increase for 
CY 2012 for genitourinary system procedures is likely due to an 
increase in the ASC payment weight for some of the high volume 
procedures, such as CPT code 50590 (Fragmenting of kidney stone) where 
estimated payment would increase by 25 percent for CY 2012.
    Also displayed in Table 52 is a separate estimate of Medicare ASC 
payments for the group of separately payable covered ancillary items 
and services. The payment estimates for the covered surgical procedures 
include the costs of packaged ancillary items and services. Payment for 
New Technology Intraocular Lenses (NTIOLs) is captured under this 
category. Because the NTIOL class for reduced spherical aberration 
expired on February 26, 2011, and a new NTIOL class was not approved 
during CY 2011 rulemaking, we redistributed the estimated payment 
dedicated to separately paid NTIOLs in CY 2011 while the NTIOL class 
was active to other services for CY 2012. Therefore, we estimate that 
aggregate payments for these items and services would decrease by 30 
percent for CY 2012.

[[Page 42383]]

  Table 52--Estimated Impact of the Proposed CY 2012 Update to the ASC
    Payment System on Aggregate CY 2012 Medicare Program Payments by
        Surgical Specialty or Ancillary Items and Services Group
------------------------------------------------------------------------
                                      Estimated  CY
                                        2011  ASC        Estimated  CY
     Surgical Specialty Group         payments  (in      2012  percent
                                        millions)          change (3)
(1)                                               (2)                (3)
------------------------------------------------------------------------
Total.............................             $3,400                  1
Eye and ocular adnexa.............              1,435                  0
Digestive system..................                689                  1
Nervous system....................                454                  2
Musculoskeletal system............                420                  2
Genitourinary system..............                150                  5
Integumentary system..............                132                  1
Respiratory system................                 43                  0
Cardiovascular system.............                 32                 -4
Ancillary items and services......                 29                -30
Auditory system...................                 11                 -5
Hematologic & lymphatic systems...                  5                  4
------------------------------------------------------------------------

    Table 53 below shows the estimated impact of the proposed updates 
to the revised ASC payment system on aggregate ASC payments for 
selected surgical procedures during CY 2012. The table displays 30 of 
the procedures receiving the greatest estimated CY 2011 aggregate 
Medicare payments to ASCs. The HCPCS codes are sorted in descending 
order by estimated CY 2011 program payment.
     Column 1-HCPCS code.
     Column 2--Short Descriptor of the HCPCS code.
     Column 3--Estimated CY 2011 ASC Payments were calculated 
using CY 2010 ASC utilization (the most recent full year of ASC 
utilization) and the CY 2011 ASC payment rates. The estimated CY 2011 
payments are expressed in millions of dollars.
     Column 4--Estimated CY 2012 Percent Change reflects the 
percent differences between the estimated ASC payment for CY 2011 and 
the estimated payment for CY 2012 based on the proposed update.
    As displayed in Table 53, 21 of the 30 procedures with the greatest 
estimated aggregate CY 2011 Medicare payment are included in the 3 
surgical specialty groups that are estimated to account for the most 
Medicare payment to ASCs in CY 2011, specifically eye and ocular 
adnexa, digestive system, and nervous system surgical groups. 
Consistent with the estimated payment effects on the surgical specialty 
groups displayed in Table 52 the estimated effects of the proposed CY 
2012 update on ASC payment for individual procedures shown in Table 53 
are varied.
    The ASC procedure for which the most Medicare payment is estimated 
to be made in CY 2011 is the cataract removal procedure reported with 
CPT code 66984 (Cataract surg w/iol 1 stage). We estimate that the 
proposed update to the ASC rates would result in a 0 percent change for 
this procedure in CY 2012. The estimated payment effects on two of the 
other three eye and ocular adnexa procedures included in Table 53 are 
slightly more significant. We estimate that the payment rate for CPT 
code 66821 (After cataract laser surgery) would increase by 2 percent 
and payment for CPT code 67042 (Vit for macular hole) would increase by 
3 percent.
    We estimate that the proposed payment rates for all of the 
digestive system procedures included in Table 53 would change by -3 to 
+3 percent in CY 2012. During the previous 4-year transition to the 
revised ASC payment system, payment for most of the high volume 
digestive system procedures decreased each year because, under the 
previous ASC payment system, the payment rates for many high volume 
endoscopy procedures were almost the same as the payments for the 
procedures under the OPPS.
    The estimated effects of the proposed CY 2012 update on the nine 
nervous system procedures for which the most Medicare ASC payment is 
estimated to be made in CY 2011 would be variable. Our estimates 
indicate that the proposed CY 2012 update would result in payment 
increases of 2 to 3 percent for 6 of the 9 procedures and result in a 1 
to 5 percent decrease for the other 3 nervous system procedures. The 
nervous system procedure for which we estimate a negative effect on CY 
2012 payments is CPT code 63650 (Implant neuroelectrodes) which is 
expected to have payment decrease of 5 percent.
    The estimated payment effects for most of the remaining procedures 
listed in Table 53 would be positive. For example, the payment rate for 
musculoskeletal CPT codes 26055 (Incise finger tendon sheath) is 
estimated to increase 4 percent over the CY 2011 payment rates. 
Musculoskeletal procedures are expected to account for a greater 
percentage of CY 2012 Medicare ASC spending as we estimate that payment 
for procedures in that surgical specialty group would increase under 
the revised payment system in CY 2012.

  Table 53--Estimated Impact of the Proposed CY 2012 Update to the ASC Payment System on Aggregate Payments for
                                               Selected Procedures
----------------------------------------------------------------------------------------------------------------
                                                                            Estimated CY 2011
            CPT/HCPCS Code *                      Short descriptor           ASC payments (in  Estimated CY 2012
                                                                                millions)        percent change
(1)                                      (2)..............................                (3)                (4)
----------------------------------------------------------------------------------------------------------------
66984..................................  Cataract surg w/iol, 1 stage.....             $1,083                  0
43239..................................  Upper GI endoscopy, biopsy.......                158                 -3

[[Page 42384]]

 
45380..................................  Colonoscopy and biopsy...........                133                  2
45378..................................  Diagnostic colonoscopy...........                100                  2
45385..................................  Lesion removal colonoscopy.......                 87                  2
66982..................................  Cataract surgery, complex........                 79                  0
62311..................................  Inject spine l/s (cd)............                 66                  2
64483..................................  Inj foramen epidural l/s.........                 66                  2
66821..................................  After cataract laser surgery.....                 56                  2
15823..................................  Revision of upper eyelid.........                 41                  0
64493..................................  Inj paravert f jnt l/s 1 lev.....                 40                  2
63650..................................  Implant neuroelectrodes..........                 38                 -5
G0105..................................  Colorectal scrn; hi risk ind.....                 32                  3
29881..................................  Knee arthroscopy/surgery.........                 31                  0
29826..................................  Shoulder arthroscopy/surgery.....                 31                  2
64721..................................  Carpal tunnel surgery............                 30                  2
29827..................................  Arthroscop rotator cuf repr......                 27                  2
29880..................................  Knee arthroscopy/surgery.........                 26                  0
63685..................................  Insrt/redo spine n generator.....                 26                 -1
G0121..................................  Colon ca scrn not hi rsk ind.....                 25                  3
45384..................................  Lesion remove colonoscopy........                 24                  2
43235..................................  Uppr gi endoscopy, diagnosis.....                 23                 -3
52000..................................  Cystoscopy.......................                 20                  1
28285..................................  Repair of hammertoe..............                 19                  0
64622..................................  Destr paravertebrl nerve l/s.....                 19                  3
64590..................................  Insrt/redo pn/gastr stimul.......                 16                 -1
62310..................................  Inject spine c/t.................                 16                  2
26055..................................  Incise finger tendon sheath......                 16                  4
50590..................................  Fragmenting of kidney stone......                 15                 25
67042..................................  Vit for macular hole.............                 14                  3
----------------------------------------------------------------------------------------------------------------
* Note that HCPCS codes proposed for deletion for CY 2012 are not displayed in this table.

    The previous ASC payment system served as an incentive to ASCs to 
focus on providing procedures for which they determined Medicare 
payments would support their continued operation. We note that, 
historically, the ASC payment rates for many of the most frequently 
performed procedures in ASCs were similar to the OPPS payment rates for 
the same procedures. Conversely, procedures with ASC payment rates that 
were substantially lower than the OPPS rates were performed least often 
in ASCs. We believed that the revised ASC payment system would 
encourage greater efficiency in ASCs and would promote significant 
increases in the breadth of surgical procedures performed in ASCs 
because it distributes payments across the entire spectrum of covered 
surgical procedures based on a coherent system of relative weights that 
are related to the clinical and facility resource requirements of those 
procedures.
    The CY 2010 claims data that we used to develop the proposed CY 
2012 ASC payment system relative payment weights and rates reflect the 
third year of utilization under the revised payment system. Although 
the changes in the claims data are not large, the data reflect 
increased Medicare ASC spending for procedures that were newly added to 
the ASC list in CY 2008. Our estimates based on CY 2010 data indicate 
that for CY 2012 there would be especially noticeable increases in 
spending for the hematologic and lymphatic systems compared to the 
previous ASC payment system.
(3) Estimated Effects of This Proposed Rule on Beneficiaries
    We estimate that the proposed CY 2012 update to the ASC payment 
system would be generally positive for beneficiaries with respect to 
the new procedures that we are adding to the ASC list of covered 
surgical procedures and for those that we are designating as office-
based for CY 2012. First, other than certain preventive services where 
coinsurance and the Part B deductible is waived to comply with sections 
1833(a)(1) and (b) of the Act, the ASC coinsurance rate for all 
procedures is 20 percent. This contrasts with procedures performed in 
HOPDs, where the beneficiary is responsible for copayments that range 
from 20 percent to 40 percent of the procedure payment. Second, ASC 
payment rates under the revised payment system are lower than payment 
rates for the same procedures under the OPPS; therefore, the 
beneficiary coinsurance amount under the ASC payment system almost 
always would be less than the OPPS copayment amount for the same 
services. (The only exceptions would be if the ASC coinsurance amount 
exceeds the inpatient deductible. The statute requires that copayment 
amounts under the OPPS not exceed the inpatient deductible.) 
Furthermore, the additions to the ASC list of covered surgical 
procedures would provide beneficiaries access to more surgical 
procedures in ASCs. Beneficiary coinsurance for services migrating from 
physicians' offices to ASCs may decrease or increase under the revised 
ASC payment system, depending on the particular service and the 
relative payment amounts for that service in the physician's office 
compared to the ASC. However, for those additional procedures that we 
are proposing to designate as office-based in CY 2012, the beneficiary 
coinsurance amount would be no greater than the beneficiary coinsurance 
in the physician's office.

[[Page 42385]]

(4) Alternatives Considered
    Alternatives to the changes we are proposing to make and the 
reasons that we have chosen specific options are discussed throughout 
this proposed rule. Some of the major ASC issues discussed in this 
proposed rule and the options considered are discussed below.
 Alternatives Considered for Office-Based Procedures
    According to our final policy for the revised ASC payment system, 
we designate as office-based those procedures that are added to the ASC 
list of covered surgical procedures in CY 2008 or later years and that 
we determine are predominantly performed in physicians' offices based 
on consideration of the most recent available volume and utilization 
data for each individual procedure HCPCS code and, if appropriate, the 
clinical characteristics, utilization, and volume of related HCPCS 
codes. We establish payment for procedures designated as office-based 
at the lesser of the MPFS nonfacility practice expense payment amount 
or the ASC rate developed according to the standard methodology of the 
revised ASC payment system.
    In developing this proposed rule, we reviewed CY 2010 utilization 
data for all surgical procedures added to the ASC list of covered 
surgical procedures in CY 2008 or later years and for those procedures 
for which the office-based designation is temporary in the CY 2011 
OPPS/ASC final rule with comment period (75 FR 72036 through 72038). 
Based on that review, and as discussed in section XIII.C.1.b. of this 
proposed rule, we are proposing to newly designate 10 surgical 
procedures as permanently office-based and proposing to make temporary 
office-based designations for 8 procedures in CY 2012 that were 
designated as temporarily office-based for CY 2011. We considered two 
alternatives in developing this policy.
    The first alternative we considered was to make no change to the 
procedure payment designations. This would mean that we would pay for 
the ten procedures we are proposing to designate as permanently office-
based and the eight procedures we are proposing to designate as 
temporarily office-based at an ASC payment rate calculated according to 
the standard ratesetting methodology of the revised ASC payment system. 
We did not select this alternative because our analysis of the data and 
our clinical review indicated that all 10 procedures we are proposing 
to designate as permanently office-based, as well as the 8 procedures 
that we are proposing to designate temporarily as office-based, are 
considered to be predominantly performed in physicians' offices. 
Consistent with our final policy adopted in the August 2, 2007 final 
rule (72 FR 42509 through 42513), we were concerned that making 
payments at the standard ASC payment rate for the 10 procedures we are 
proposing to designate as permanently office-based and the 8 procedures 
we are proposing to designate as temporarily office-based could create 
financial incentives for the procedures to shift from physicians' 
offices to ASCs for reasons unrelated to clinical decisions regarding 
the most appropriate setting for surgical care. Further, consistent 
with our policy, we believe that when adequate data become available to 
make permanent determinations about procedures with temporary office-
based designations, maintaining the temporary designation is no longer 
appropriate.
    The second alternative we considered and the one we are proposing 
for CY 2012 is to designate 10 additional procedures as permanently 
office-based for CY 2012 and to designate 8 procedures as temporarily 
office-based in CY 2012 that were designated as temporarily office-
based for CY 2011. We chose this alternative because our claims data 
and clinical review indicate that these procedures could be considered 
to be predominantly performed in physicians' offices. We believe that 
designating these procedures as office-based, which results in the CY 
2012 ASC payment rate for these procedures potentially being capped at 
the CY 2012 physicians' office rate (that is, the MPFS nonfacility 
practice expense payment amount), if applicable, is an appropriate step 
to ensure that Medicare payment policy does not create financial 
incentives for such procedures to shift unnecessarily from physicians' 
offices to ASCs, consistent with our final policy adopted in the August 
2, 2007 final rule.
c. Accounting Statements and Tables
    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), we have prepared two 
accounting statements to illustrate the impacts of this proposed rule. 
The first accounting statement, Table 54 below, illustrates the 
classification of expenditures for the CY 2012 estimated hospital OPPS 
incurred benefit impacts associated with the proposed CY 2012 OPD fee 
schedule increase shown in this proposed rule, based on the FY 2012 
President's Budget. The second accounting statement, Table 55 below, 
illustrates the classification of expenditures associated with the 0.9 
percent proposed CY 2011 update to the revised ASC payment system, 
based on the provisions of this proposed rule and the baseline spending 
estimates for ASCs in the FY 2012 President's Budget. Lastly, both 
tables classify all estimated impacts as transfers.

     Table 54--Accounting Statement: CY 2012 Estimated Hospital OPPS
 Transfers From CY 2011 To CY 2012 Associated With the Proposed CY 2012
              Hospital Outpatient OPD Fee Schedule Increase
------------------------------------------------------------------------
             Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers....  $0.5 billion.
From Whom to Whom.................  Federal Government to outpatient
                                     hospitals and other providers who
                                     received payment under the hospital
                                     OPPS.
                                   -------------------------------------
    Total.........................  $0.5 billion.
------------------------------------------------------------------------

  Table 55--Accounting Statement: Classification of Estimated Transfers
  From CY 2011 to CY 2012 as a Result of the Proposed CY 2012 Update to
                     the Revised ASC Payment System
------------------------------------------------------------------------
             Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers....  $26 million.
From Whom to Whom.................  Federal Government to Medicare
                                     Providers and Suppliers.
                                   -------------------------------------

[[Page 42386]]

 
    Total.........................  $26 million.
------------------------------------------------------------------------

d. Effect of Proposed Requirements for the Hospital Outpatient Quality 
Reporting (OQR) Program
    In section XVI. of the CY 2009 OPPS/ASC final rule with comment 
period (73 FR 68758 through 68781), section XVI. of the CY 2010 OPPS/
ASC final rule with comment period (74 FR 60629 through 60655), and 
section XVI. of the CY 2011 OPPS/ASC final rule with comment period (75 
FR72064 through 72110), we discussed our requirements for subsection 
(d) hospitals to report quality data under the Hospital OQR Program in 
order to receive the full OPD fee schedule increase factor for CY 2010, 
CY 2011, and CY 2012-2014, respectively. In section XIV. of this 
proposed rule, we are proposing additional policies affecting the 
Hospital OQR Program for CY 2013, CY 2014, and CY 2015.
    We determined that 107 hospitals did not meet the requirements to 
receive the full OPD fee schedule increase factor for CY 2011. Most of 
these hospitals (over 90 of the 107) received little or no OPPS payment 
on an annual basis and did not participate in the Hospital OQR Program. 
We estimate that 120 hospitals may not receive the full OPD fee 
schedule increase factor in CY 2012. We are unable at this time to 
estimate the number of hospitals that may not receive the full OPD fee 
schedule increase factor in CY 2013, CY 2014 and CY 2015.
    In section XVI.E.3.a. of the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60647 through 60650), for the CY 2011 payment 
update, as part of the validation process, we required hospitals to 
submit paper copies of requested medical records to a designated 
contractor within the required timeframe. Failure to submit requested 
documentation could result in a 2 percentage point reduction to a 
hospital's CY 2011 OPD fee schedule increase factor, but the failure to 
attain a validation score threshold would not.
    In section XVI.D.3.b of the CY 2011 OPPS/ASC final rule with 
comment period, we finalized our proposal to validate data submitted by 
800 hospitals of the approximately 3,200 participating hospitals for 
purposes of the CY 2012 Hospital OQR Program payment determination. We 
stated our belief that this approach was suitable for the CY Hospital 
OQR Program because it would: Produce a more reliable estimate of 
whether a hospital's submitted data have been abstracted accurately; 
provide more statistically reliable estimates of the quality of care 
delivered in each selected hospital as well as at the national level; 
and reduce overall hospital burden because most hospitals would not be 
selected to undergo validation each year. We adopted a threshold of 75 
percent as the threshold for the validation score because we believed 
this level was reasonable for hospitals to achieve while still ensuring 
accuracy of the data. Additionally, this level is consistent with what 
we adopted in the Hospital Inpatient Quality Reporting (IQR) Program 
(formerly referred to as the Reporting Hospital Quality Data for Annual 
Payment Update (RHQDAPU) program)) (75 FR 50225 through 50229). As a 
result, we believed that the effect of our validation process for CY 
2012 would be minimal in terms of the number of hospitals that would 
not meet all program requirements.
    In this proposed rule, we are proposing to validate data submitted 
by up to 500 of the approximately 3,200 participating hospitals for 
purposes of the CY 2013 Hospital OQR Program payment determination. 
Under our policy for the CY 2011 and CY 2012 payment determinations, 
and under our proposal for CY 2013, we stated that we would conduct a 
measure level validation by assessing whether the measure data 
submitted by the hospital matches the independently reabstracted 
measure data.
    As stated above, we are unable to estimate the number of hospitals 
that may not receive the full OPD fee schedule increase factor in CY 
2013. Therefore, we are unable to estimate the number of hospitals that 
would fail the validation documentation submission requirement for the 
proposed CY 2013 payment update.
    The validation requirements for CY 2011, CY 2012, and the 
validation requirement proposed for CY 2013 would result in result in 
medical record documentation for approximately 7,300 cases for CY 2011, 
9,600 cases per quarter for CY 2012, and approximately 6,000 cases per 
quarter for CY 2013, respectively, being submitted to a designated CMS 
contractor. We would pay for the cost of sending this medical record 
documentation to the designated CMS contractor at the rate of 12 cents 
per page for copying and approximately $1.00 per case for postage. We 
have found that an outpatient medical chart is generally up to 10 
pages. Thus, as a result of validation requirements effective for the 
CY 2011 and CY 2012 payment determinations, and proposed for the CY 
2013 payment determination, respectively, we would have expenditures of 
approximately $16,060 for CY 2011, $21,120 per quarter for CY 2012, and 
approximately $13,200 per quarter for CY 2013. Again, as we would pay 
for the data collection effort, we believe that a requirement for 
medical record documentation for 7,300 total cases for CY 2011, a 
maximum of 12 cases per quarter for 800 hospitals for CY 2012, and a 
maximum of 12 cases per quarter for up to 500 hospitals for CY 2013 
represents a minimal burden to Hospital OQR Program participating 
hospitals.
    In previous years, medical record documentation was requested by a 
CMS contractor and hospitals were given 45 days from the date of the 
request to submit the requested documentation. In section XIV.G.3.d. of 
this proposed rule, for the CY 2013 payment determination, we are 
proposing to reduce the time from 45 days to 30 days for hospitals to 
submit requested medical record documentation to meet our validation 
requirement; this may create an additional administrative burden. The 
total burden would be a maximum of 12 charts for each of the four 
quarters that must be copied and mailed within a 30-day period after 
the end of each quarter. We are proposing this deadline of 30 days to 
align the process with requirements in 42 CFR 476.78(b)(2), which 
allows 30 days for chart submission in the context of QIO review and to 
reduce the time for data validation completion to increase timeliness 
of providing hospitals feedback on their abstraction accuracy.
e. Effects of Proposed Changes to Physician Self-Referral Regulations
    Section 6001(a) of the Affordable Care Act amended the whole 
hospital and rural provider exceptions (sections 1877(d)(2) and (d)(3) 
of the Act,

[[Page 42387]]

respectively) to impose additional restrictions on physician ownership 
or investment in hospitals. The amended whole hospital and rural 
provider exceptions provide that a hospital may not increase the number 
of operating rooms, procedure rooms, and beds beyond that for which the 
hospital was licensed on March 23, 2010 (or, in the case of a hospital 
that did not have a provider agreement in effect as of this date, but 
did have a provider agreement in effect on December 31, 2010, the date 
of effect of such agreement). Section 6001(a)(3) of the Affordable Care 
Act added new section 1877(i)(3)(A)(i) of the Act to set forth that the 
Secretary shall establish and implement an exception process to the 
prohibition on expansion of facility capacity.
    Most physician-owned hospitals are unable to qualify for the 
ownership and investment exception at section 1877(d)(1) of the Act. 
Section 1877(d)(1) of the Act provides an exception for ownership or 
investment in publicly traded securities in a corporation where there 
is stockholder equity exceeding $75 million at the end of the 
corporation's most recent fiscal year or on average during the previous 
3 fiscal years; or the ownership involves mutual funds in a company 
that has assets greater than $75 million. Studies by the OIG and GAO 
have concluded that physician-owned hospitals tend to be smaller and 
are unable to meet the $75 million threshold.
    The proposed regulations at Sec.  411.362(c) set forth the proposed 
process for a hospital to request an exception to the prohibition on 
expansion of facility capacity. Proposed new Sec.  411.362(c)(2) 
outlines the requirements for an applicable hospital request and Sec.  
411.362(c)(3) outlines the requirements for a high Medicaid facility 
request. Our proposed regulations would require each hospital desiring 
an exception to access certain data and make estimates based on that 
data to determine if the hospital meets the relevant criteria. For 
example, a hospital would be required to access data furnished by the 
CMS Healthcare Cost Report Information System (HCRIS) and by the Bureau 
of the Census, in addition to referencing data from the hospital's 
individual cost reports and making certain estimates on the basis of 
its cost report data. We believe the impact of these requirements on 
affected hospitals would be minimal.
    Our proposed regulations would require each hospital requesting an 
exception to provide documentation supporting its calculations to 
demonstrate that it satisfies the relevant criteria. Our proposed 
regulations would further require each hospital to provide 
documentation to support information related to its number of operating 
rooms, procedure rooms, and beds. This information would include, for 
example, the number of operating rooms, procedure rooms, and beds for 
which the hospital is licensed as of the date that the hospital submits 
a request for an exception. Each hospital would also be required to 
provide a detailed explanation regarding whether and how it satisfies 
each of the relevant criteria. We believe physician-owned hospitals 
would be minimally affected by these requirements.
    Our proposed regulations would require each hospital requesting an 
exception to disclose on a public Web site for the hospital that it is 
requesting an exception. Our proposed regulations would require each 
hospital to certify that it does not discriminate and does not permit 
physicians to discriminate against beneficiaries of Federal health care 
programs. In addition, under our proposed regulations, if CMS were to 
receive input from the community related to a particular hospital's 
request for an exception, the hospital may submit a rebuttal statement 
in response to input from the community. We believe the impact of these 
requirements on physician-owned hospitals would be minimal.
    We believe our proposals would affect a relatively small number of 
physician-owned hospitals. We estimate that 265 physician-owned 
hospitals are eligible to apply for an exception. We believe accurately 
estimating the number of hospitals choosing to request an exception 
would be impracticable. Further, we are not aware of any existing data 
or projections that may produce an estimate with reasonable certainty. 
As a result, we are choosing to estimate that each of the 265 eligible 
hospitals will request an exception in order to avoid underestimating 
the potential impact. We are not aware of any data that may indicate 
the potential increase in operation rooms, procedure rooms, or beds 
pursuant to exceptions potentially approved. We also have no data or 
projections that may help estimate the number of physicians that would 
be affected by this proposed rule as a result of their ownership 
interests in hospitals.
    The proposed requirements concerning the criteria and process for 
hospitals seeking an exception to the prohibition on expansion of 
facility capacity are consistent with the physician self-referral 
statute and regulations and the current practices of most hospitals. 
Thus, our proposed requirements would present a negligible impact on 
physician-owned hospitals. Physician-owned hospitals would bear costs 
associated with requesting an exception to the prohibition on facility 
expansion. In part because hospitals are currently undertaking the 
costs of producing a cost report, we believe that the cost of 
referencing the required data and making the required estimates would 
be negligible. In addition, we believe the costs of providing 
supporting documentation, certifying nondiscrimination against 
beneficiaries of Federal health care programs, and submitting other 
required information necessary to request an exception to CMS would be 
minimal.
    We believe that beneficiaries may be positively impacted by these 
proposed provisions. Specifically, an increase in operating rooms, 
procedure rooms, and beds may augment the volume or nature of services 
offered by physician-owned hospitals. An expansion in the number of 
hospital beds may also permit additional inpatient admissions and 
overnight stays. Increased operating rooms, procedure rooms, and beds 
may result in improved access to health care facilities and services. 
We believe that our proposals are necessary to conform our regulations 
to the amendments to section 1877 of the Act. We also believe the 
proposed regulations would help minimize anticompetitive behavior that 
can affect the decision as to where a beneficiary receives health care 
services and would possibly enhance the services furnished.
    In this proposed rule, we are soliciting public comments on each of 
the issues outlined above that contain estimates of the costs and 
benefits of the proposed rule.
f. Effects of Proposed Changes to Provider Agreement Regulations on 
Patient Notification Requirements
    In section XV.D. of this proposed rule, we discuss our proposal 
concerning the requirement that all hospitals and critical access 
hospitals must furnish written notice to their patients at the 
beginning of their hospital stay or outpatient visit if a doctor of 
medicine or a doctor of osteopathy is not present in the hospital 24 
hours per day, 7 days per week, and that the notice must indicate how 
the hospital will meet the medical needs of any patient who develops an 
emergency medical condition at a time when there is no physician 
present in the hospital. In this proposed rule, we are proposing to 
modify the provider agreement regulations to reduce the categories of 
outpatients who must be notified if hospital does not have a doctor of 
medicine or doctor of osteopathy on site

[[Page 42388]]

24 hours per days/7 days per week. We are proposing that only those 
outpatients who receive observation services, surgery, or services 
involving anesthesia must receive written notice. We are not making any 
changes to our patient safety requirements for physician-owned 
hospitals at Sec.  411.362(b)(5)(i). We continue to believe that 
patients should be made aware of whether or not a doctor of medicine or 
a doctor of osteopathy is present in the hospital at all times, and the 
hospital's plans to address patient's emergency medical conditions when 
a doctor of medicine or a doctor of osteopathy is not present.
    We believe our proposed changes to the provider agreement 
regulations would result in only a minor change in the number of 
hospitals that are subject to the disclosure requirements, specifically 
those multicampus hospitals that currently have 24 hour per day, seven 
day per week presence of a doctor of medicine or a doctor of osteopathy 
on one, but not all of their campuses with inpatient services. We 
anticipate that very few multicampus hospitals would fall into this 
category. Rather, the primary impact of the proposed regulation would 
be to change the number of annual written disclosures given by 
hospitals to patients. We believe the cost of implementing these 
provisions borne by hospitals would be limited to a one-time cost 
associated with completing minor revisions to portions of the 
hospitals, policies and procedures related to patient admission and 
registration, as well as providing written notification to patients and 
affected staff. Therefore, we do not believe that these proposed 
changes will have any significant economic impact on hospitals.
    We do not anticipate that our proposals will have a significant 
economic impact on a substantial number of physicians, other health 
care providers and suppliers, or the Medicare or Medicaid programs and 
their beneficiaries. Specifically, we believe that this proposed rule 
will affect mostly hospitals, physicians, and beneficiaries. The 
proposed changes concerning the disclosure of the presence of a doctor 
of medicine or a doctor of osteopathy in hospitals is consistent with 
the physician self-referral statute and regulations as well as the 
current practices of most hospitals. Thus, our physician presence 
disclosure proposal would present a negligible economic impact on the 
hospital.
    Overall, we believe that beneficiaries will be positively impacted 
by these provisions. Specifically, disclosure of physician presence 
equips patients to make informed decisions about where they elect to 
receive care. Our proposal makes no significant change that has the 
potential to impede patient access to health care facilities and 
services. In fact, we believe that our proposal will help minimize 
anti-competitive behavior that can affect the decision as to where a 
beneficiary receives health care services and possibly the quality of 
the services furnished.
g. Effects of Additional Proposed Hospital VBP Program Requirements
    Section 1886(o)(1)(B) of the Act directs the Secretary to begin 
making value-based incentive payments under the Hospital VBP Program to 
hospitals for discharges occurring on or after October 1, 2012. These 
incentive payments will be funded for FY 2013 through a reduction to 
the FY 2013 base operating MS-DRG payment amount for each discharge of 
1 percent, as required by section 1886(o)(7)(B)(i) of the Act. The 
applicable percentage for FY 2014 is 1.25 percent, for FY 2015 is 1.5 
percent, for FY 2016 is 1.75 percent, and for FY 2017 and subsequent 
years is 2 percent. In section XVI.A.3. of this proposed rule, we are 
proposing additional requirements for the FY 2014 Hospital VBP Program. 
Specifically, we are proposing to add one chart-abstracted measure to 
the Hospital VBP measure set for the FY 2014 payment determination. 
Because this additional measure is chart-abstracted and is required for 
the Hospital IQR Program, its inclusion in the Hospital VBP Program 
does not result in any additional burden because the Hospital VBP 
Program uses data that are required for the Hospital IQR Program.
h. Effects of the Proposed EHR Reporting Pilot
    Under section XIV.J. of this proposed rule, we are proposing to 
allow eligible hospitals and CAHs that are participating in the EHR 
Incentive Program to meet the CQM reporting requirement of the program 
for payment year 2012 by participating in the Medicare EHR Incentive 
Program Electronic Reporting Pilot. This proposal would facilitate the 
use of an electronic infrastructure that supports the use of EHRs by 
hospitals and CAHs to meet the requirements in various CMS programs and 
reduce reporting burden simultaneously. Through this pilot, we have 
encouraged hospitals to take steps toward the adoption of EHRs that 
will allow for reporting of clinical quality data from EHRs to a CMS 
data repository. We expect that the submission of quality data through 
EHRs will provide a foundation for establishing the capacity of 
hospitals to send, and for CMS, in the future, to receive, quality 
measures via hospital EHRs for the Hospital IQR Program's measures. 
Hospitals that choose to participate in the EHR Incentive Program by 
means of this pilot for the purpose of meeting the CQM reporting 
requirement of Meaningful Use will be taking those first steps toward 
reporting clinical quality data in such a way.

B. Regulatory Flexibility Act (RFA) Analysis

    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, we estimate that 
most hospitals, ASCs and CMHCs are small entities as that term is used 
in the RFA. For purposes of the RFA, most hospitals are considered 
small businesses according to the Small Business Administration's size 
standards with total revenues of $34.5 million or less in any single 
year. Most ASCs and most CMHCs are considered small businesses with 
total revenues of $10 million or less in any single year. For details, 
see the Small Business Administration's Web site at http://sba.gov; 
choose ``Contracting'' and select ``Table of Small Business Size 
Standards'' in PDF or Excel.
    In addition, section 1102(b) of the Social Security Act requires us 
to prepare a regulatory impact analysis if a rule may have a 
significant impact on the operations of a substantial number of small 
rural hospitals. This analysis must conform to the provisions of 
section 603 of the RFA. For purposes of section 1102(b) of the Act, we 
define a small rural hospital as a hospital that is located outside of 
a metropolitan statistical area and has fewer than 100 beds. We 
estimate that this proposed rule may have a significant impact on 
approximately 704 small rural hospitals.
    The analysis above, together with the remainder of this preamble, 
provides a Regulatory Flexibility Analysis and a Regulatory Impact 
Analysis.

C. Unfunded Mandates Reform Act Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. That threshold 
level is currently approximately $135 million. This proposed rule would 
not mandate any requirements for State,

[[Page 42389]]

local, or tribal governments, nor would it affect private sector costs.

D. Conclusion

    The changes we are proposing would affect all classes of hospitals 
paid under the OPPS and would affect both CMHCs and ASCs. We estimate 
that most classes of hospitals paid under the OPPS would experience a 
modest increase or a minimal decrease in payment for services furnished 
under the OPPS in CY 2012. Table 51 demonstrates the estimated 
distributional impact of the OPPS budget neutrality requirements that 
would result in a 1.5 percent increase in payments for all services 
paid under the OPPS in CY 2012, after considering all proposed changes 
to APC reconfiguration and recalibration, as well as the proposed OPD 
fee schedule increase factor, wage index changes, including the 
proposed frontier State wage index adjustment, estimated payment for 
outliers, and changes to the pass-through payment estimate. However, 
some classes of providers that are paid under the OPPS would experience 
significant gains and others would experience modest losses in OPPS 
payments in CY 2012. Specifically, we estimate that the 11 dedicated 
cancer hospitals that met the classification criteria in section 
1883(d)(1)(B)(v) of the Act, as a class, would receive an increase in 
payments under the OPPS of 38.8 percent for CY 2012, although after 
accounting for the TOPs that we estimate they would no longer receive 
due to increased payments under the OPPS, the net increase in payment 
to these hospitals would be approximately 9 percent. In contrast, we 
estimate that CMHCs would see an overall decrease in payment of 33.1 
percent as a result of the proposed full transition in CY 2012 to 
payment rates for partial hospitalization services at CMHCs based on 
cost report and claims data submitted by CMHCs.
    The proposed updates to the ASC payment system for CY 2012 would 
affect each of the approximately 5,000 ASCs currently approved for 
participation in the Medicare program. The effect on an individual ASC 
would depend on its mix of patients, the proportion of the ASC's 
patients that are Medicare beneficiaries, the degree to which the 
payments for the procedures offered by the ASC are changed under the 
revised payment system, and the extent to which the ASC provides a 
different set of procedures in the coming year. Table 52 demonstrates 
the estimated distributional impact among ASC surgical specialties of 
the MFP-adjusted CPI-U update of 0.9 percent proposed for CY 2012.

XXI. Federalism Analysis

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct costs on State and local 
governments, preempts State law, or otherwise has Federalism 
implications.
    We have examined the OPPS and ASC provisions included in this 
proposed rule in accordance with Executive Order 13132, Federalism, and 
have determined that they would not have a substantial direct effect on 
State, local or tribal governments, preempt State law, or otherwise 
have a Federalism implication. As reflected in Table 51 of this 
proposed rule, we estimate that OPPS payments to governmental hospitals 
(including State and local governmental hospitals) would increase by 
1.5 percent under this proposed rule. While we do not know the number 
of ASCs with government ownership, we anticipate that it is small. We 
believe that the proposed provisions related to payments to ASCs in CY 
2012 would not affect payments to any ASCs owned by government 
entities.
    The analyses we have provided in section XX.A. of this proposed 
rule, in conjunction with the remainder of this document, demonstrates 
that this proposed rule is consistent with the regulatory philosophy 
and principles identified in Executive Order 12866, the RFA, and 
section 1102(b) of the Act.
    This proposed rule would affect payments to a substantial number of 
small rural hospitals and a small number of rural ASCs, as well as 
other classes of hospitals and ASCs, and some effects may be 
significant.

List of Subjects

42 CFR Part 410

    Health facilities, Health professions, Laboratories, Medicare, 
Rural areas, X-rays.

42 CFR Part 411

    Kidney diseases, Medicare, Physician referral, Reporting and 
recordkeeping requirements.

42 CFR Part 416

    Health facilities, Health professions, Medicare, Reporting and 
recordkeeping requirements.

42 CFR Part 419

    Hospitals, Medicare, Reporting and recordkeeping requirements.

42 CFR Part 489

    Health facilities, Medicare, Reporting and recordkeeping 
requirements.

42 CFR Part 495

    Computer technology, Electronic health records, Electronic 
transactions, Health, Health care. Health information technology, 
Health insurance, Health records, Hospitals, Incorporation by 
reference, Laboratories, Medicaid, Medicare, Privacy, Reporting and 
recordkeeping requirements, Public health, Security.
    For reasons stated in the preamble of this document, the Centers 
for Medicare & Medicaid Services is proposing to amend 42 CFR Chapter 
IV as set forth below:

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

    1. The authority citation for Part 410 continues to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

    2. Section 410.27 is amended by--
    a. Revising the section heading.
    b. Revising paragraph (a).
    c. In paragraph (b), removing the cross-reference ``Sec.  410.168'' 
and adding in its place the cross-reference ``Sec.  410.29''.
    d. In paragraph (c), removing the cross-reference ``Sec.  410.168'' 
and adding in its place the cross-reference ``subpart G of Part 424 of 
this chapter''.
    e. Redesignating paragraphs (d) through (f) as paragraphs (e) 
through (g), respectively.
    f. Adding a new paragraph (d).
    The revisions and addition read as follows:

Sec.  410.27  Therapeutic outpatient hospital or CAH services and 
supplies incident to a physician's or nonphysician practitioner's 
service: Conditions.

    (a) Medicare Part B pays for therapeutic hospital or CAH services 
and supplies furnished incident to a physician's or nonphysician 
practitioner's service, which are defined as all services and supplies 
furnished to hospital or CAH outpatients that are not diagnostic 
services and that aid the physician or nonphysician practitioner in the 
treatment of the patient, including drugs and biologicals that cannot 
be self-administered, if--
    (1) They are furnished--
    (i) By or under arrangements made by the participating hospital or 
CAH, except in the case of a SNF resident as provided in Sec.  
411.15(p) of this subchapter;

[[Page 42390]]

    (ii) As an integral although incidental part of a physician's or 
nonphysician practitioner's services;
    (iii) In the hospital or CAH or in a department of the hospital or 
CAH, as defined in Sec.  413.65 of this subchapter; and
    (iv) Under the direct supervision (or other level of supervision as 
specified by CMS for the particular service) of a physician or a 
nonphysician practitioner as specified in paragraph (g) of this 
section, subject to the following requirements:
    (A) For services furnished in the hospital or CAH, or in an 
outpatient department of the hospital or CAH, both on and off-campus, 
as defined in Sec.  413.65 of this subchapter, ``direct supervision'' 
means that the physician or nonphysician practitioner must be 
immediately available to furnish assistance and direction throughout 
the performance of the procedure. It does not mean that the physician 
or nonphysician practitioner must be present in the room when the 
procedure is performed;
    (B) Certain therapeutic services and supplies may be assigned 
either general supervision or personal supervision. When such 
assignment is made, general supervision means the definition specified 
at Sec.  410.32(b)(3)(i), and personal supervision means the definition 
specified at Sec.  410.32(b)(3)(iii);
    (C) Nonphysician practitioners may directly supervise services that 
they may personally furnish in accordance with State law and all 
additional requirements, including those specified in Sec. Sec.  
410.71, 410.73, 410.74, 410.75, 410.76, and 410.77;
    (D) For pulmonary rehabilitation, cardiac rehabilitation, and 
intensive cardiac rehabilitation services, direct supervision must be 
furnished by a doctor of medicine or a doctor of osteopathy, as 
specified in Sec. Sec.  410.47 and 410.49, respectively; and
    (E) For nonsurgical extended duration therapeutic services 
(extended duration services), which are hospital or CAH outpatient 
therapeutic services that can last a significant period of time, have a 
substantial monitoring component that is typically performed by 
auxiliary personnel, have a low risk of requiring the physician's or 
appropriate nonphysician practitioner's immediate availability after 
the initiation of the service, and are not primarily surgical in 
nature, Medicare requires a minimum of direct supervision during the 
initiation of the service which may be followed by general supervision 
at the discretion of the supervising physician or the appropriate 
nonphysician practitioner. ``Initiation'' means the beginning portion 
of the nonsurgical extended duration therapeutic service which ends 
when the patient is stable and the supervising physician or the 
appropriate nonphysician practitioner determines that the remainder of 
the service can be delivered safely under general supervision.
    (2) In the case of partial hospitalization services, also meet the 
conditions of paragraph (e) of this section.
* * * * *
    (d) Rules on emergency services furnished to outpatients in a 
foreign country are specified in subpart H of Part 424 of this chapter.
* * * * *

PART 411--EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE 
PAYMENT

    3. The authority citation for Part 411 continues to read as 
follows:
    Authority: Secs. 1102, 1860D-1 through 1860D-42, 1871, and 1877 of 
the Social Security Act (42 U.S.C. 1302, 1395w-101 through 1395w-152, 
1395hh and 1395nn).
    4. Section 411.362 is amended by--
    a. Adding in paragraph (a) definitions of ``baseline number of 
operating rooms, procedure rooms, and beds'' and ``main campus of the 
hospital'' in alphabetical order.
    b. Revising paragraph (b)(2).
    c. Adding paragraph (c).
    The revision and additions read as follows:

Sec.  411.362  Additional requirements concerning physician ownership 
and investment in hospitals.

    (a) * * *
    Baseline number of operating rooms, procedure rooms, and beds means 
the number of operating rooms, procedure rooms, and beds for which the 
applicable hospital or high Medicaid facility is licensed as of March 
23, 2010 (or, in the case of a hospital that did not have a provider 
agreement in effect as of such date, but does have a provider agreement 
in effect on December 31, 2010, the date of effect of such agreement).
    Main campus of the hospital means ``campus'' as defined at Sec.  
413.65(a)(2).
* * * * *
    (b) * * *
    (2) Prohibition on facility expansion. The hospital may not 
increase the number of operating rooms, procedure rooms, and beds 
beyond that for which the hospital is licensed on March 23, 2010 (or, 
in the case of a hospital that did not have a provider agreement in 
effect as of this date, but does have a provider agreement in effect on 
December 31, 2010, the effective date of such agreement), unless an 
exception is granted pursuant to paragraph (c) of this section.
* * * * *
    (c) Criteria for an individual hospital seeking an exception to the 
prohibition on facility expansion.
    (1) General. An applicable hospital or high Medicaid facility may 
request an exception from the prohibition on facility expansion up to 
once every 2 years from the date of a CMS decision on the hospital's 
most recent request.
    (2) Criteria for applicable hospital. An applicable hospital is a 
hospital that satisfies all of the following criteria:
    (i) Population increase. Is located in a county that has a 
percentage increase in population that is at least 150 percent of the 
percentage increase in population of the State in which the hospital is 
located during the most recent 5-year period for which data are 
available as of the date that the hospital submits its request. To 
calculate State and county population growth, a hospital must use 
Bureau of the Census estimates.
    (ii) Medicaid inpatient admissions. Has an annual percent of total 
inpatient admissions under Medicaid that is equal to or greater than 
the average percent with respect to such admissions for all hospitals 
located in the county in which the hospital is located for each of the 
3 most recent fiscal years for which data are available as of the date 
that the hospital submits its request. A hospital must use filed 
hospital cost report discharge data to estimate its annual percent of 
total inpatient admissions under Medicaid.
    (iii) Nondiscrimination. Does not discriminate against 
beneficiaries of Federal health care programs and does not permit 
physicians practicing at the hospital to discriminate against such 
beneficiaries.
    (iv) Average bed capacity. Is located in a State in which the 
average bed capacity in the State is less than the national average bed 
capacity for each of the 3 most recent fiscal years for which data are 
available as of the date that the hospital submits its request.
    (v) Average bed occupancy. Has an average bed occupancy rate that 
is greater than the average bed occupancy rate in the State in which 
the hospital is located for each of the 3 most recent fiscal years for 
which data are available as of the date that the hospital submits its 
request. A hospital must use filed hospital cost report data to 
determine its average bed occupancy rate.
    (3) Criteria for high Medicaid facility. A high Medicaid facility 
is a hospital that satisfies all of the following criteria:

[[Page 42391]]

    (i) Sole hospital. Is not the sole hospital in the county in which 
the hospital is located.
    (ii) Medicaid inpatient admissions. With respect to each of the 3 
most recent fiscal years for which data are available as of the date 
the hospital submits its request, has an annual percent of total 
inpatient admissions under Medicaid that is estimated to be greater 
than such percent with respect to such admissions for any other 
hospital located in the county in which the hospital is located. A 
hospital must use filed hospital cost report discharge data to estimate 
its annual percentage of total inpatient admissions under Medicaid and 
the annual percentages of total inpatient admissions under Medicaid for 
every other hospital located in the county in which the hospital is 
located.
    (iii) Nondiscrimination. Does not discriminate against 
beneficiaries of Federal health care programs and does not permit 
physicians practicing at the hospital to discriminate against such 
beneficiaries.
    (4) Procedure for submitting a request. (i) A hospital must either 
mail an original and one copy of the written request to CMS or submit 
the request electronically to CMS. If a hospital submits the request 
electronically, the hospital must mail an original hard copy of the 
signed certification set forth in paragraph (c)(4)(iii) of this section 
to CMS.
    (ii) A request must include the following information:
    (A) The name, address, National Provider Identification number(s) 
(NPI), Tax Identification Number(s) (TIN), and CMS Certification 
Number(s) (CCN) of the hospital requesting an exception.
    (B) The county in which the hospital requesting an exception is 
located.
    (C) The name, title, address, and daytime telephone number of a 
contact person who will be available to discuss the request with CMS on 
behalf of the hospital.
    (D) A statement identifying the hospital as an applicable hospital 
or high Medicaid facility and a detailed explanation with supporting 
documentation regarding whether and how the hospital satisfies each of 
the criteria for an applicable hospital or high Medicaid facility. The 
request must state that the hospital does not discriminate against 
beneficiaries of Federal health care programs and does not permit 
physicians practicing at the hospital to discriminate against such 
beneficiaries.
    (E) Documentation supporting the hospital's calculations of its 
baseline number of operating rooms, procedure rooms, and beds; the 
hospital's number of operating rooms, procedure rooms, and beds for 
which the hospital is licensed as of the date that the hospital submits 
a request for an exception; and the additional number of operating 
rooms, procedure rooms, and beds by which the hospital requests to 
expand.
    (iii) A request must include the following certification signed by 
an authorized representative of the hospital: ``With knowledge of the 
penalties for false statements provided by 18 U.S.C. 1001, I certify 
that all of the information provided in the request and all of the 
documentation provided with the request is true and correct to the best 
of my knowledge and belief.'' An authorized representative is the chief 
executive officer, chief financial officer, or other comparable officer 
of the hospital.
    (5) Community input and timing of complete request. Upon submitting 
a request for an exception and until the hospital receives a CMS 
decision, the hospital must disclose on any public Web site for the 
hospital that it is requesting an exception. Individuals and entities 
in the hospital's community may provide input with respect to the 
hospital's request no later than 30 days after CMS publishes notice of 
the hospital's request in the Federal Register. Such input must take 
the form of written comments. The written comments must be either 
mailed or submitted electronically to CMS.
    (i) If CMS does not receive written comments from the community, a 
request will be deemed complete at the end of the 30-day period.
    (ii) If CMS receives written comments from the community, the 
hospital has 30 days after CMS notifies the hospital of the written 
comments to submit a rebuttal statement. A request will be deemed 
complete at the end of this 30-day period regardless of whether the 
hospital submits a rebuttal statement.
    (6) A permitted increase under this section--
    (i) May not exceed 200 percent of the hospital's baseline number of 
operating rooms, procedure rooms, and beds; and
    (ii) May occur only in facilities on the hospital's main campus.
    (7) Publication of final decisions. Not later than 60 days after 
receiving a complete request, CMS will publish the final decision in 
the Federal Register.
    (8) Limitation on review. There shall be no administrative or 
judicial review under section 1869, section 1878, or otherwise of the 
process under this section (including the establishment of such 
process).

PART 416--AMBULATORY SURGICAL SERVICES

    5. The citation for Part 416 continues to read as follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

    6. Section 416.166 is amended by revising paragraph (b) to read as 
follows:

Sec.  416.166  Covered surgical procedures.

* * * * *
    (b) General standards. Subject to the exclusions in paragraph (c) 
of this section, covered surgical procedures are surgical procedures 
specified by the Secretary and published in the Federal Register and/or 
via the Internet on the CMS Web site that are separately paid under the 
OPPS, that would not be expected to pose a significant safety risk to a 
Medicare beneficiary when performed in an ASC, and for which standard 
medical practice dictates that the beneficiary would not typically be 
expected to require active medical monitoring and care at midnight 
following the procedure.
* * * * *
    7. Section 416.171 is amended by revising paragraphs (b) and (d) to 
read as follows:

Sec.  416.171  Determination of payment rates for ASC services.

* * * * *
    (b) Exception. The national ASC payment rates for the following 
items and services are not determined in accordance with paragraph (a) 
of this section but are paid an amount derived from the payment rate 
for the equivalent item or service set under the payment system 
established in part 419 of this subchapter as updated annually in the 
Federal Register and/or via the Internet on the CMS Web site.
* * * * *
    (d) Limitation on payment rates for office-based surgical 
procedures and covered ancillary radiology services. Notwithstanding 
the provisions of paragraph (a) of this section, for any covered 
surgical procedure under Sec.  416.166 that CMS determines is commonly 
performed in physicians' offices or for any covered ancillary radiology 
service, excluding those listed in paragraphs (d)(1) and (2) of this 
section, the national unadjusted ASC payment rates for these procedures 
and services will be the lesser of the amount determined under 
paragraph (a) of this section or the amount calculated at the 
nonfacility practice expense relative value units under Sec.  
414.22(b)(5)(i)(B) of this subchapter multiplied by the

[[Page 42392]]

conversion factor described in Sec.  414.20(a)(3) of this subchapter.
    (1) The national unadjusted ASC payment rate for covered ancillary 
radiology services that involve certain nuclear medicine procedures 
will be the amount determined under paragraph (a) of this section.
    (2) The national unadjusted ASC payment rate for covered ancillary 
radiology services that use contrast agents will be the amount 
determined under paragraph (a) of this section.
* * * * *
    8. Section 416.173 is revised to read as follows:

Sec.  416.173  Publication of revised payment methodologies and payment 
rates.

    CMS publishes annually, through notice and comment rulemaking in 
the Federal Register and/or via the Internet on the CMS Web site, the 
payment methodologies and payment rates for ASC services and designates 
the covered surgical procedures and covered ancillary services for 
which CMS will make an ASC payment and other revisions as appropriate.

PART 419--PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT 
DEPARTMENT SERVICES

    9. The authority citation for Part 419 continues to read as 
follows:

    Authority: Secs. 1102, 1833(t), and 1871 of the Social Security 
Act (42 U.S.C. 1302, 1395(t), and1395hh).

    10. Section 419.32 is amended by:
    a. Revising paragraph (b)(1)(iv)(A).
    b. Removing the word ``and'' that appears at the end of paragraph 
(b)(1)(iv)(B)(1).
    c. Removing the period and adding ``; and'' in its place at the end 
of paragraph (b)(1)(iv)(B)(2).
    d. Adding a new paragraph (b)(1)(iv)(B)(3).
    The revision and addition read as follows:

Sec.  419.32  Calculation of prospective payment rates for hospital 
outpatient services.

* * * * *
    (b) * * *
    (1) * * *
    (iv)(A) For calendar year 2003 and subsequent years, by the 
hospital inpatient market basket percentage increase applicable under 
section 1886(b)(3)(B)(iii) of the Act, reduced by the factor(s) 
specified in paragraph (b)(1)(iv)(B) of this section.
    (B) * * *
    (3) For calendar year 2012, a multifactor productivity adjustment 
(as determined by CMS) and 0.1 percentage point.
* * * * *
    11. Section 419.43 is amended by adding paragraph (i) to read as 
follows:

Sec.  419.43  Adjustments to national program payment and beneficiary 
copayment amounts.

* * * * *
    (i) Payment adjustment for certain cancer hospitals.--(1) General 
rule. CMS provides for a payment adjustment for covered hospital 
outpatient department services furnished on or after January 1, 2012, 
by a hospital described in section 1886(d)(1)(B)(v) of the Act.
    (2) Amount of payment adjustment. The amount of the payment 
adjustment under paragraph (i)(1) of this section is determined by the 
Secretary as follows:
    (i) If a hospital described in section 1886(d)(1)(B)(v) of the Act 
has a payment-to-cost ratio (as determined by the Secretary) that is 
less than the weighted average payment-to-cost ratio of other hospitals 
furnishing services under section 1833(t) of the Act (as determined by 
the Secretary) (referred to as the target payment-to-cost ratio), for 
covered hospital outpatient department services except pass-through 
devices as defined in Sec.  419.66, the payment adjustment is the 
percentage difference between the payment-to-cost ratio of the hospital 
and the target payment-to-cost ratio.
    (ii) If a hospital described in section 1886(d)(1)(B)(v) of the Act 
has a payment-to-cost ratio (as determined by the Secretary) that is 
less than the weighted average payment-to-cost ratio of other hospitals 
furnishing services under section 1866(t) of the Act (as determined by 
the Secretary) (referred to as the target payment-to-cost ratio), for 
pass-through devices as defined in Sec.  419.66, the payment adjustment 
is zero percent.
    (iii) If a hospital described in section 1886(d)(1)(B)(v) of the 
Act has a payment-to-cost ratio (as determined by the Secretary) that 
is greater than the target payment-to-cost ratio (as determined by the 
Secretary), for covered hospital outpatient department services, the 
payment adjustment is zero percent.
    (3) Budget neutrality. CMS establishes the payment adjustment under 
paragraph (i)(1) of this section in a budget neutral manner.
    12. Section 419.70 is amended by revising paragraphs (d)(2) 
introductory text and (d)(6) to read as follows:

Sec.  419.70  Transitional adjustments to limit decline in payments.

* * * * *
    (d) * * *
    (2) Temporary treatment for small rural hospitals on or after 
January 1, 2006. For covered hospital outpatient services furnished in 
a calendar year from January 1, 2006, through December 31, 2011, for 
which the prospective payment system amount is less than the pre-BBA 
amount, the amount of payment under this part is increased by 95 
percent of that difference for services furnished during CY 2006, 90 
percent of that difference for services furnished during CY 2007, and 
85 percent of that difference for services furnished during CYs 2008, 
2009, 2010, and 2011 if the hospital--
* * * * *
    (6) Temporary treatment for sole community hospitals on or after 
January 1, 2010, and through December 31, 2011. For covered hospital 
outpatient services furnished on or after January 1, 2010, through 
December 31, 2011, for which the prospective payment system amount is 
less than the pre-BBA amount, the amount of payment under this part is 
increased by 85 percent of that difference if the hospital is a sole 
community hospital as defined in Sec.  412.92 of this chapter or is an 
essential access community hospital as described under Sec.  412.109 of 
this chapter.
* * * * *

PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL

    13. The authority citation for Part 489 continues to read as 
follows:

    Authority: Secs. 1102, 1819, 1820(e), 1861, 1864(m), 1866, 1869, 
and 1871 of the Social Security Act (42 U.S.C. 1302, 1395i-3, 1395x, 
1395aa(m), 1395cc, 1395ff, and 1395hh).

    14. Section 489.20 is amended by revising paragraph (w) to read as 
follows:

Sec.  489.20  Basic commitments.

* * * * *
    (w)(1) In the case of a hospital as defined in Sec.  489.24(b), to 
furnish written notice to all patients at the beginning of their 
planned or unplanned inpatient hospital stay or at the beginning of any 
planned or unplanned outpatient visit for observation, surgery or any 
other procedure requiring anesthesia, if a doctor of medicine or a 
doctor of osteopathy is not present in the hospital 24 hours per day, 7 
days per week, in order to assist the patients in making informed 
decisions regarding their care, in accordance with Sec.  482.13(b)(2) 
of this subchapter. For purposes of this paragraph, a planned hospital 
stay or

[[Page 42393]]

outpatient visit begins with the provision of a package of information 
regarding scheduled preadmission testing and registration for a planned 
hospital admission for inpatient care or outpatient service. An 
unplanned hospital stay or outpatient visit begins at the earliest 
point at which the patient presents to the hospital.
    (2) In the case of a hospital that is a main provider and has one 
or more remote locations of a hospital or one or more satellites, as 
these terms are defined in Sec.  413.65(a)(2), Sec.  412.22(h), or 
Sec.  412.25(e) of this chapter, as applicable, the determination is 
made separately for the main provider and each remote location or 
satellite whether notice to patients is required. Notice is required at 
each location at which inpatient services are furnished at which a 
doctor of medicine or doctor of osteopathy is not present 24 hours per 
day, 7 days per week.
    (3) The written notice must state that the hospital does not have a 
doctor of medicine or a doctor of osteopathy present in the hospital 24 
hours per day, 7 days per week, and must indicate how the hospital will 
meet the medical needs of any patient who develops an emergency medical 
condition, as defined in Sec.  489.24(b), at a time when there is no 
doctor of medicine or doctor of osteopathy present in the hospital.
    (4) Before admitting a patient or providing an outpatient service 
to outpatients for whom a notice is required, the hospital must receive 
a signed acknowledgment from the patient stating that the patient 
understands that a doctor of medicine or doctor of osteopathy may not 
be present during all hours services are furnished to the patient.
    (5) Each dedicated emergency department, as that term is defined in 
Sec.  489.24(b), in a hospital in which a doctor of medicine or doctor 
of osteopathy is not present 24 hours per day, 7 days per week must 
post a notice conspicuously in a place or places likely to be noticed 
by all individuals entering the dedicated emergency department. The 
posted notice must state that the hospital does not have a doctor of 
medicine or a doctor of osteopathy present in the hospital 24 hours per 
day, 7 days per week, and must indicate how the hospital will meet the 
medical needs of any patient with an emergency medical condition, as 
defined in Sec.  489.24(b), at a time when there is no doctor of 
medicine or doctor of osteopathy present in the hospital.

PART 495--STANDARDS FOR THE ELECTRONIC HEALTH RECORD TECHNOLOGY 
INCENTIVE PROGRAM

    15. The authority citation for Part 495 continues to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).
    16. Section 495.8 is amended by revising paragraph (b)(2)(ii) and 
adding paragraph (b)(2)(vi) to read as follows:

Sec.  495.8  Demonstration of meaningful use criteria.

* * * * *
    (b) * * *
    (2) * * *
    (ii) Reporting clinical quality information. For Sec.  495.6(f)(9) 
``Reporting hospital clinical quality measures to CMS or, in the case 
of Medicaid eligible hospitals, the States,'' report the hospital 
quality measures selected by CMS to CMS (or in the case of Medicaid 
eligible hospitals, the States) in the form and manner specified by CMS 
(or in the case of Medicaid eligible hospitals, the States).
* * * * *
    (vi) Exception for Medicare eligible hospitals and CAHs for FY 
2012--Participation in the Medicare EHR Incentive Program Electronic 
Reporting Pilot. In order to satisfy the clinical quality measure 
reporting objective in Sec.  495.6(f)(9), aside from attestation, a 
Medicare eligible hospital or CAH may participate in the Medicare EHR 
Incentive Program Electronic Reporting Pilot.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; Program No. 93.774, Medicare--
Supplementary Medical Insurance Program; and Program No. 93.778 
(Medical Assistance)

    Dated: June 24, 2011.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: June 28, 2011.
Kathleen Sebelius,
Secretary.
[FR Doc. 2011-16949 Filed 7-1-11; 4:15 pm]
BILLING CODE 4120-01-P
```