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[Federal Register Volume 77, Number 146 (Monday, July 30, 2012)]
[Proposed Rules]
[Pages 45061-45233]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-16813]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

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

[CMS-1589-P]
RIN 0938-AR10

Hospital Outpatient Prospective and Ambulatory Surgical Center 
Payment Systems and Quality Reporting Programs; Electronic Reporting 
Pilot; Inpatient Rehabilitation Facilities Quality Reporting Program; 
Quality Improvement Organization Regulations

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) and the Medicare 
ambulatory surgical center (ASC) payment system for CY 2013 to 
implement applicable statutory requirements and changes arising from 
our continuing experience with these systems. In this proposed rule, we 
describe the proposed changes to the amounts and factors used to 
determine the payment rates for Medicare services paid under the OPPS 
and those paid under the ASC payment system. In addition, we are 
proposing updates and refinements to the requirements for the Hospital 
Outpatient Quality Reporting (OQR) Program, the ASC Quality Reporting 
(ASCQR) Program, and the Inpatient Rehabilitation Facility (IRF) 
Quality Reporting Program. We also are proposing revisions to the 
electronic reporting pilot for the Electronic Health Record (EHR) 
Incentive Program, and the various regulations governing Quality 
Improvement Organizations (QIOs), including the secure transmittal of 
electronic medical information, beneficiary complaint resolution and 
notification processes, and technical changes.

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 September 
4, 2012.

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

[[Page 45062]]

    1. Electronically. You may (and we encourage you to) submit 
electronic comments on this regulation to http://www.regulations.gov. 
Follow the instructions under the ``submit a comment'' tab.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1589-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-1589-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.
    For information on viewing public comments, we refer readers to the 
beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Marjorie Baldo, (401) 786-4617, for 
issues related to new CPT and Level II HCPCS codes, exceptions to the 2 
times rule, and new technology APCs.
    Jennifer Bean, (410) 786-4827, for issues related to the Hospital 
Outpatient Quality Reporting Program.
    Anita Bhatia, (410) 786-7236, for issues related to the ASCQR 
Program.
    Douglas Brown, (410) 786-0028, for issues related to Electronic 
Health Record Incentive Program Electronic Reporting Pilot.
    Carrie Bullock, (401) 786-0378, for issues related to device-
dependent APCs, blood products, and no cost/full credit and partial 
credit devices.
    Erick Chuang, (410) 786-1816, for issues related to OPPS APC 
weights, mean calculation, copayments, wage index, outlier payments, 
and rural hospital payments.
    Caroline Gallaher, (410) 786-8705, for issues related to Inpatient 
Rehabilitation Facilities Quality Reporting Program.
    Alpha-Banu Huq, (410) 786-8687, for issues related to OPPS drugs, 
radiopharmaceuticals, biologicals, blood clotting factors, and packaged 
items/services.
    Twi Jackson, (410) 786-1159, for issues related to hospital 
outpatient visits, extended assessment composite APC, and inpatient-
only procedures.
    Thomas Kessler, (410) 786-1991, for issues related to QIO 
regulations.
    Marina Kushnirova, (410) 786-2682, for issues related to OPPS 
status indicators and comment indicators.
    Barry Levi, (410) 786-4529, for issues related to OPPS pass-through 
devices, brachytherapy sources, intraoperative radiation therapy 
(IORT), brachytherapy composite APC, multiple imaging composite APCs, 
cardiac resynchronization therapy composite, and cardiac 
electrophysiologic evaluation and ablation composite APC.
    Jana Lindquist, (410) 786-4533, for issues related to partial 
hospitalization and community mental health center issues.
    Ann Marshall, (410) 786-3059, for issues related to OPPS 
supervision, proton beam therapy, and the Hospital Outpatient Payment 
(HOP) Panel.
    John McInnes, (410) 786-0378, for issues related to new technology 
intraocular lenses (NTIOLs).
    Char Thompson, (410) 786-2300, for issues related to OPPS CCRs and 
ambulatory surgical center (ASC) payments.
    Marjorie Baldo, (410) 786-4617, for all other issues related to 
hospital outpatient and ambulatory surgery center payments not 
previously identified.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments 
received before the close of the comment period are available for 
viewing by the public, including any personally identifiable or 
confidential business information that is included in a comment. We 
post all comments received before the close of the comment period on 
the following Web site as soon as possible after they have been 
received: http://www.regulations.gov. Follow the search instructions on 
that Web site to view public comments.
    Comments received timely will also be available for public 
inspection, generally beginning approximately 3 weeks after publication 
of the rule, at the headquarters of the Centers for Medicare & Medicaid 
Services, 7500 Security Boulevard, Baltimore, MD 21244, on Monday 
through Friday of each week from 8:30 a.m. to 4:00 p.m. EST. To 
schedule an appointment to view public comments, phone 1-800-743-3951.

Electronic Access

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

Addenda Available Only Through the Internet on the CMS Web Site

    In the past, a majority of the Addenda referred to in our OPPS/ASC 
proposed and final rules were published in the Federal Register as part 
of the annual rulemakings. However, beginning with the CY 2012 proposed 
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.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. The Addenda relating to the 
ASC payment system are available at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/index.html. Readers who 
experience any problems accessing any of the Addenda

[[Page 45063]]

that are posted on the CMS Web site identified above should contact 
Charles Braver at (410) 786-0378.

Alphabetical List of Acronyms Appearing in This Federal Register 
Document

AHA American Hospital Association
AMA American Medical Association
APC Ambulatory Payment Classification
ASC Ambulatory surgical center
ASCQR Ambulatory Surgical Center Quality Reporting
ASP Average sales price
AWP Average wholesale price
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Balanced Budget Refinement Act of 1999, Public 
Law 106-113
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000, Public Law 106-554
BLS Bureau of Labor Statistics
CAH Critical access hospital
CAP Competitive Acquisition Program
CASPER Certification and Survey Provider Enhanced Reporting
CAUTI Catheter associated urinary tract infection
CBSA Core-Based Statistical Area
CCN CMS Certification Number
CCR Cost-to-charge ratio
CDC Centers for Disease Control and Prevention
CEO Chief executive officer
CERT Comprehensive Error Rate Testing
CLFS Clinical Laboratory Fee Schedule
CMHC Community mental health center
CMS Centers for Medicare & Medicaid Services
CPI-U Consumer Price Index for All Urban Consumers
CPT Current Procedural Terminology (copyrighted by the American 
Medical Association)
CQM Clinical quality measure
CR Change request
CY Calendar year
DFO Designated Federal Official
DRA Deficit Reduction Act of 2005, Public Law 109-171
DSH Disproportionate share hospital
EACH Essential access community hospital
ED Emergency department
E/M Evaluation and management
EHR Electronic health record
ESRD End-stage renal disease
FACA Federal Advisory Committee Act, Public Law 92-463
FDA Food and Drug Administration
FFS [Medicare] Fee-for-service
FY Fiscal year
GAO Government Accountability Office
HAI Healthcare-associated infection
HCERA Health Care and Education Reconciliation Act of 2010, Public 
Law 111-152
HCPCS Healthcare Common Procedure Coding System
HCRIS Hospital Cost Report Information System
HEU Highly enriched uranium
HIPAA Health Insurance Portability and Accountability Act of 1996, 
Public Law 104-191
HITECH Health Information Technology for Economic and Clinical 
Health [Act] (found in the American Recovery and Reinvestment Act of 
2009, Pub. L. 111-5)
HOP Hospital Outpatient Payment [Panel]
HOPD Hospital outpatient department
ICD-9-CM International Classification of Diseases, Ninth Revision, 
Clinical Modification
ICD Implantable cardioverter defibrillator
ICU Intensive care unit
IHS Indian Health Service
I/OCE Integrated Outpatient Code Editor
IOL Intraocular lens
IOM Institute of Medicine
IORT Intraoperative radiation treatment
IPPS [Hospital] Inpatient Prospective Payment System
IQR [Hospital] Inpatient Quality Reporting
IRF Inpatient rehabilitation facility
IRF-PAI Inpatient Rehabilitation Facility-Patient Assessment 
Instrument
LDR Low dose rate
LTCH Long-term care hospital
MAC Medicare Administrative Contractor
MAP Measure Application Partnership
MedPAC Medicare Payment Advisory Commission
MEI Medicare Economic Index
MFP Multifactor productivity
MGCRB Medicare Geographic Classification Review Board
MIEA-TRHCA Medicare Improvements and Extension Act under Division B, 
Title I of the Tax Relief Health Care Act of 2006, Public Law 109-
432
MIPPA Medicare Improvements for Patients and Providers Act of 2008, 
Public Law 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Public Law 108-173
MMEA Medicare and Medicaid Extenders Act of 2010, Public Law 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public 
Law 110-173
MPFS Medicare Physician Fee Schedule
MRA Magnetic resonance angiography
MRI Magnetic resonance imaging
MSA Metropolitan Statistical Area
NCCI National Correct Coding Initiative
NHSN National Healthcare Safety Network
NQF National Quality Forum
NTIOL New technology intraocular lens
NUBC National Uniform Billing Committee
OACT [CMS] Office of the Actuary
OBRA Omnibus Budget Reconciliation Act of 1996, Public Law 99-509
OIG [HHS] Office of the Inspector General
OMB Office of Management and Budget
OPD [Hospital] Outpatient Department
OPPS [Hospital] Outpatient Prospective Payment System
OPSF Outpatient Provider-Specific File
OQR [Hospital] Outpatient Quality Reporting
OT Occupational therapy
PCR Payment-to-cost ratio
PE Practice expense
PHP Partial hospitalization program
PHS Public Health Service [Act], Public Law 96-88
PPI Producer Price Index
PPS Prospective payment system
PPV Pneumococcal pneumonia
PQRS Physician Quality Reporting System
PT Physical therapy
QDC Quality data code
QIO Quality Improvement Organization
RAC Recovery Audit Contractor
RFA Regulatory Flexibility Act
RTI Research Triangle Institute, International
RVU Relative value unit
SCH Sole community hospital
SCOD Specified covered outpatient drugs
SI Status indicator
SIR Standardized infection ratio
SLP Speech-language pathology
TOPs Transitional Outpatient Payments
USPSTF United States Preventive Services Task Force
UTI Urinary tract infection
VBP Value-based purchasing
WAC Wholesale acquisition cost

Table of Contents

I. Summary and Background
    A. Executive Summary of This Proposed Rule
    1. Purpose
    2. Summary of the Major Provisions
    3. Summary of Costs and Benefits
    B. Legislative and Regulatory Authority for the Hospital OPPS
    C. Excluded OPPS Services and Hospitals
    D. Prior Rulemaking
    E. Advisory Panel on Hospital Outpatient Payment (HOP Panel or 
the Panel), Formerly Named the Advisory Panel on Ambulatory Payment 
Classification Groups (APC Panel)
    1. Authority of the Panel
    2. Establishment of the Panel
    3. Panel Meetings and Organizational Structure
    F. Public Comments Received on the CY 2012 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 Costs 
Used for Ratesetting
    a. Claims Preparation
    b. Splitting Claims and Creation of ``Pseudo'' Single Procedure 
Claims
    (1) Splitting Claims
    (2) Creation of ``Pseudo'' Single Procedure Claims
    c. Completion of Claim Records and Geometric Mean Cost 
Calculations
    (1) General Process
    (2) Recommendations of the Advisory Panel on Hospital Outpatient 
Payment Regarding Data Development
    d. Proposed Calculation of Single Procedure APC Criteria-Based 
Costs
    (1) Device-Dependent APCs
    (2) Blood and Blood Products
    (3) Endovascular Revascularization of the Lower Extremity (APCs 
0083, 0229, and 0319)

[[Page 45064]]

    (4) Non-Congenital Cardiac Catheterization (APC 0080)
    (5) Computed Tomography of Abdomen/Pelvis (APCs 0331 and 0334)
    (6) Brachytherapy Sources
    e. Proposed Calculation of Composite APC Criteria-Based 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 (APC 0108)
    f. Proposed Geometric Mean-Based Relative Payment Weights
    3. Proposed Changes to Packaged Services
    a. Background
    b. Proposed Clarification of Regulations at 42 CFR 419.2(b)
    c. Packaging Recommendations of the HOP Panel (``The Panel'') at 
its February 2012 Meeting
    d. Proposed Packaging of Drugs, Biologicals, and 
Radiopharmaceuticals
    (1) Existing Packaging Policies
    (2) Clarification of Packaging Policy for Anesthesia Drugs
    e. Proposed Packaging of Payment for Diagnostic 
Radiopharmaceuticals, Contrast Agents, and Implantable Biologicals 
(``Policy-Packaged'' Drugs and Devices)
    f. Summary of Proposals
    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
    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. Proposed Payment Adjustment for Certain Cancer Hospitals for 
CY 2013
    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 CY 2012 Level II HCPCS and CPT 
Codes Effective April 1, 2012 and July 1, 2012 for Which We Are 
Soliciting Public Comments in This CY 2013 Proposed Rule
    2. Proposed Process for New Level II HCPCS Codes That Will Be 
Effective October 1, 2012 and New CPT and Level II HCPCS Codes That 
Will Be Effective January 1, 2013 for Which We Will Be Soliciting 
Public Comments in the CY 2013 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
    3. Proposed Payment Adjustment Policy for Radioisotopes Derived 
From Non-Highly Enriched Uranium Sources
    a. Background
    b. Proposed Payment Policy
    D. Proposed OPPS APC-Specific Policies
    1. Placement of Amniotic Membrane (APC 0233)
    2. Proton Beam Therapy (APCs 0664 and 0667)
    3. Intraoperative Radiation Therapy (IORT) (APC 0412)
    a. Background
    b. CY 2013 Proposals for CPT Codes 77424, 77425, and 77469
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 2013 Policy
    2. Proposed Provisions for Reducing Transitional Pass-Through 
Payments to Offset Costs Packaged Into APC Groups
    a. Background
    b. Proposed CY 2013 Policy
    3. Proposed Clarification of Existing Device Category Criterion
    a. Background
    b. Proposed Clarification of CY 2013 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 2013
    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
    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 CY 2013 Payment Policy
    4. Proposed Payment Policy for Therapeutic Radiopharmaceuticals
    5. Proposed Payment for Blood Clotting Factors
    6. Proposed Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes, but Without OPPS Hospital 
Claims 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
    C. Transitional Care Management
VIII. Proposed Payment for Partial Hospitalization Services
    A. Background
    B. Proposed PHP APC Update for CY 2013
    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 for the Supervision of Outpatient Services in 
Hospitals and CAHs
    A. Conditions of Payment for Physical Therapy, Speech-Language 
Pathology, and Occupational Therapy Services in Hospitals and CAHs
    B. Enforcement Instruction for the Supervision of Outpatient 
Therapeutic Services in CAHs and Small Rural Hospitals
XI. Outpatient Status--Solicitation of Public Comments

[[Page 45065]]

XII. Proposed CY 2013 OPPS Payment Status and Comment Indicators
    A. Proposed CY 2013 OPPS Payment Status Indicator Definitions
    B. Proposed CY 2013 Comment Indicator Definitions
XIII. OPPS Policy and Payment Recommendations
    A. MedPAC Recommendations
    B. GAO Recommendations
    C. OIG Recommendations
XIV. Proposed Updates to the Ambulatory Surgical Center (ASC) 
Payment System
    A. Background
    1. Legislative Authority, Statutory Authority, and Prior 
Rulemaking for the ASC Payment System
    2. Policies Governing Changes to the Lists of Codes and Payment 
Rates for ASC Covered Surgical Procedures and Covered Ancillary 
Services
    B. 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 2012 for Which We Are 
Soliciting Public Comments in This CY 2013 OPPS/ASC Proposed Rule
    3. Proposed Process for New Level II HCPCS Codes and Category I 
and Category III CPT Codes for Which We Will Be Soliciting Public 
Comments in the CY 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
    b. Proposed Covered Surgical Procedures Designated as Office-
Based
    (1) Background
    (2) Proposed Changes for CY 2013 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 2013
    d. Proposed Adjustment to ASC Payments for No Cost/Full Credit 
and Partial Credit Devices
    e. ASC Treatment of Surgical Procedures Proposed for Removal 
From the OPPS Inpatient List for CY 2013
    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 2013
    c. Waiver of Coinsurance and Deductible for Certain Preventive 
Services
    d. Payment for the Cardiac Resynchronization Therapy Composite
    e. Proposed Payment for Low Dose Rate (LDR) Prostate 
Brachytherapy Services
    2. Proposed Payment for Covered Ancillary Services
    a. Background
    b. Proposed Payment for Covered Ancillary Services for CY 2013
    E. New Technology Intraocular Lenses (NTIOLs)
    1. NTIOL Cycle and Evaluation Criteria
    2. NTIOL Application Process for Payment Adjustment
    3. Requests to Establish New NTIOL Classes for CY 2013 and 
Deadline for Public Comments
    4. Payment Adjustment
    5. Proposed Revisions to the Major NTIOL Criteria Described in 
42 CFR 416.195
    6. Request for Public Comments on the ``Other Comparable 
Clinical Advantages'' Improved Outcome
    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 2013 and 
Future Years
    b. Updating the ASC Conversion Factor
    3. Display of Proposed CY 2013 ASC Payment Rates
XV. Hospital Outpatient Quality Reporting Program Updates
    A. Background
    1. Overview
    2. Statutory History of Hospital Outpatient Quality Reporting 
(Hospital OQR) Program
    3. Measure Updates and Data Publication
    a. Process for Updating Quality Measures
    b. Publication of Hospital OQR Program Data
    B. Proposed Process for Retention of Hospital OQR Program 
Measures Adopted in Previous Payment Determinations
    C. Removal or Suspension of Quality Measures From the Hospital 
OQR Program Measure Set
    1. Considerations in Removing Quality Measures From the Hospital 
OQR Program
    2. Suspension of One Chart-Abstracted Measure for the CY 2014 
and Subsequent Years Payment Determinations
    3. Deferred Data Collection of OP-24: Cardiac Rehabilitation 
Measure: Patient Referral from an Outpatient Setting for the CY 2014 
Payment Determination
    D. Quality Measures for CY 2015 Payment Determination
    E. Possible Quality Measures Under Consideration for Future 
Inclusion in the Hospital OQR Program
    F. Proposed Payment Reduction for Hospitals That Fail To Meet 
the Hospital OQR Program Requirements for the CY 2013 Payment Update
    1. Background
    2. Proposed Reporting Ratio Application and Associated 
Adjustment Policy for CY 2013
    G. Proposed Requirements for Reporting of Hospital OQR Data for 
the CY 2014 Payment Determination and Subsequent Years
    1. Administrative Requirements for the CY 2014 Payment 
Determination and Subsequent Years
    2. Form, Manner, and Timing of Data Submitted for the Hospital 
OQR Program for the CY 2014 Payment Determination and Subsequent 
Years
    a. Background
    b. General Requirements
    c. Proposed Chart-Abstracted Measure Requirements for CY 2014 
and Subsequent Payment Determination Years
    d. Proposed Claims-Based Measure Data Requirements for the CY 
2014 and CY 2015 Payment Determinations
    e. Proposed Structural Measure Data Requirements for the CY 2014 
Payment Determination and Subsequent Years
    f. Proposed Data Submission Requirements for OP-22: ED-Patient 
Left Before Being Seen for the CY 2015 Payment Determination
    g. Proposed Population and Sampling Data Requirements for the CY 
2014 Payment Determination and Subsequent Years
    3. Proposed Hospital OQR Program Validation Requirements for 
Chart-Abstracted Measure Data Submitted Directly to CMS for the CY 
2014 Payment Determination and Subsequent Years
    a. Random Selection of Hospitals for Data Validation of Chart-
Abstracted Measures for the CY 2014 Payment Determination and 
Subsequent Years
    b. Targeting and Proposed Targeting Criteria for Data Validation 
Selection for CY 2014 Payment Determination and for Subsequent Years
    c. Proposed Methodology for Encounter Selection for the CY 2014 
Payment Determination and Subsequent Years
    d. Validation Score Calculation for the CY 2014 Payment 
Determination and Subsequent Years
    H. Proposed Hospital OQR Reconsideration and Appeals Procedures 
for the CY 2014 Payment Determination and Subsequent Years
    I. Proposed Extraordinary Circumstances Extension or Waiver for 
the CY 2013 Payment Determination and Subsequent Years
    J. Electronic Health Records (EHRs)
    K. Proposed 2013 Medicare EHR Incentive Program Electronic 
Reporting Pilot for Eligible Hospitals and CAHs
XVI. Requirements for the Ambulatory Surgical Centers Quality 
Reporting (ASCQR) Program
    A. Background
    1. Overview
    2. Statutory History of the ASC Quality Reporting (ASCQR) 
Program
    3. History of the ASCQR Program
    B. ASCQR Program Quality Measures

[[Page 45066]]

    1. Proposed Considerations in the Selection of ASCQR Program 
Quality Measures
    2. ASCQR Program Quality Measures
    3. ASC Measure Topics for Future Consideration
    4. Clarification Regarding the Process for Updating ASCQR 
Program Measures
    C. Proposed Requirements for Reporting of ASC Quality Data
    1. Form, Manner, and Timing for Claims-Based Measures for the CY 
2014 Payment Determination and Subsequent Payment Determination 
Years
    a. Background
    b. Proposals Regarding Form, Manner, and Timing for Claims-Based 
Measures for CY 2015 and Subsequent Payment Determination Years
    2. Data Completeness and Minimum Threshold for Claims-Based 
Measures Using QDCs
    a. Background
    b. Proposals Regarding Data Completeness Requirements for the CY 
2015 Payment Determination and Subsequent Payment Determination 
Years
    D. Proposed Payment Reduction for ASCs That Fail To Meet the 
ASCQR Program Requirements
    1. Statutory Background
    2. Proposed Reduction to the ASC Payment Rates for ASCs That 
Fail To Meet the ASCQR Program Requirements Beginning with the CY 
2014 Payment Determination and Subsequent Payment Determination 
Years
XVII. Proposed Inpatient Rehabilitation Facility (IRF) Quality 
Reporting Program Updates
    A. Overview
    B. Updates to IRF QRP Measures Which Are Made as a Result of 
Review by the NQF Process
    C. Proposed Process for Retention of IRF Quality Measures 
Adopted in Previous Rulemaking Cycles
    D. Adopted Measures for the FY 2014 Payment Determination
    1. Clarification Regarding Existing IRF Quality Measures That 
Have Undergone Changes During NQF Measure Maintenance Processes
    2. Proposed Updates to the ``Percent of Residents Who Have 
Pressure Ulcers That Are New or Worsened'' Measure
XVIII. Proposed Revisions to the Quality Improvement Organization 
(QIO) Regulations (42 CFR Parts 476, 478, and 480)
    A. Summary of Proposed Changes
    B. Quality of Care Review
    1. Beneficiary Complaint Reviews
    2. Completion of General Quality of Care Reviews
    C. Use of Confidential Information That Explicitly or Implicitly 
Identifies Patients
    D. Secure Transmissions of Electronic Versions of Medical 
Information
    E. Active Staff Privileges
    F. Proposed Technical Corrections
XIX. Files Available to the Public Via the Internet
XX. Collection of Information Requirements
    A. Legislative Requirements for Solicitation of Comments
    B. Proposed Requirements in Regulation Text
    C. Proposed Associated Information Collections Not Specified in 
Regulatory Text
    1. Hospital OQR Program
    2. Hospital OQR Program Measures for the CY 2013, CY 2014, CY 
2015, and CY 2016 Payment Determinations
    3. Proposed Hospital OQR Program Validation Requirements for CY 
2014
    4. Proposed Hospital OQR Program Reconsideration and Appeals 
Procedures
    5. ASCQR Program Requirements
    6. IRF QRP
XXI. Response to Comments
XXII. Economic Analyses
    A. Regulatory Impact Analysis
    1. Introduction
    2. Statement of Need
    3. Overall Impacts for OPPS and ASC Provisions
    4. Detailed Economic Analyses
    a. Estimated Effects of Proposed OPPS Changes
    (1) Limitations of Our Analysis
    (2) Estimated Effects of Proposed OPPS Changes on Hospitals
    (3) Estimated Effects of Proposed OPPS Changes on CMHCs
    (4) Estimated Effect of Proposed OPPS Changes on Beneficiaries
    (5) Estimated Effects of Proposed OPPS Changes on Other 
Providers
    (6) Estimated Effects of Proposed OPPS Changes on the Medicare 
and Medicaid Programs
    (7) Alternative OPPS Policies Considered
    b. Estimated Effects of ASC Payment System Proposals
    (1) Limitations of Our Analysis
    (2) Estimated Effects of ASC Payment System Proposals on ASCs
    (3) Estimated Effects of ASC Payment System Proposals on 
Beneficiaries
    (4) Alternative ASC Payment Policies Considered
    c. Effects of the Proposed Revisions to the QIO Regulations
    d. Accounting Statements and Tables
    e. Effects of Proposed Requirements for the Hospital OQR Program
    f. Effects of the Proposed EHR Incentive Program Electronic 
Reporting Pilot
    g. Effects of Proposals for the ASCQR Program
    h. Effects of Proposed Updates to the IRF QRP
    B. Regulatory Flexibility Act (RFA) Analysis
    C. Unfunded Mandates Reform Act Analysis
    D. Conclusion
XXIII. Federalism Analysis

I. Executive Summary and Background

A. Executive Summary of This Proposed Rule

1. Purpose
    In this proposed rule, we are proposing to update the payment 
policies and payment rates for services furnished to Medicare 
beneficiaries in hospital outpatient departments and ASCs beginning 
January 1, 2013. Section 1833(t) of the Social Security Act (the Act) 
requires us to annually review and update the relative payment weights 
and conversion factor for services payable under the OPPS. Under 
section 1833(i) of the Act, we annually review and update the ASC 
payment rates. We describe these and various other statutory 
authorities in the relevant sections of this proposed rule.
    In addition to establishing payment rates for CY 2013, we are 
proposing updates and new requirements under the Hospital OQR Program, 
the ASCQR Program, and the IRF Quality Reporting Program. We also are 
proposing certain revisions to the electronic reporting pilot for the 
EHR Incentive Program and to the regulations governing the Quality 
Improvement Organizations (QIOs), including the secure transmittal of 
electronic medical information, beneficiary complaint resolution and 
notification processes, and technical corrections.
2. Summary of the Major Provisions
     OPPS Update: For CY 2013, we are proposing to increase 
payment rates under the OPPS by an OPD fee schedule increase factor of 
2.1 percent. This increase is based on the projected hospital inpatient 
market basket percentage increase of 3.0 percent for inpatient services 
paid under the hospital inpatient prospective payment system (IPPS), 
minus the proposed multifactor productivity (MFP) adjustment of 0.8 
percentage points, and minus a 0.1 percentage point adjustment required 
by the Affordable Care Act. Under this proposal, we estimate that total 
payments, including beneficiary cost-sharing for CY 2013 to the more 
than 4,000 facilities paid under the OPPS (including general acute care 
hospitals, children's hospitals, cancer hospitals, and community mental 
health centers (CMHCs)), would be approximately $48.1 billion, an 
increase of approximately $4.6 billion compared to CY 2012 payments, or 
$700 million excluding our estimated changes in enrollment, 
utilization, and case-mix.
    We are proposing to continue implementing the statutory 2.0 
percentage point reduction in payments for hospitals failing to meet 
the hospital outpatient quality reporting requirements, by applying a 
reporting ratio of 0.980 to the OPPS payments and copayments for all 
applicable services.
     Geometric Mean-Based Relative Payment Weights: CMS has 
discretion under the statute to set OPPS payments based upon either the 
estimated mean or median costs of services within an Ambulatory Payment 
Classification

[[Page 45067]]

(APC) group, the unit of payment. To improve our cost estimation, for 
CY 2013, we are proposing to use the geometric mean costs of services 
within an APC to determine the relative payment weights of services, 
rather than the median costs that we have used since the inception of 
the OPPS. Our analysis shows that the proposed change to means would 
have a limited payment impact on most providers, with a small number 
experiencing payment gain or loss based on their service-mix.
     Rural Adjustment: We are proposing to continue an 
adjustment of 7.1 percent to the OPPS payments to certain rural sole 
community hospitals (SCHs), including essential access community 
hospitals (EACHs). This adjustment would apply to all services paid 
under the OPPS, excluding separately payable drugs and biologicals, 
devices paid under the pass-through payment policy, and items paid at 
charges reduced to cost.
     Cancer Hospital Payment Adjustment: For CY 2013, we are 
proposing to continue our policy to provide additional payments to 
cancer hospitals so that the hospital's payment-to-cost ratio (PCR) 
with the payment adjustment is equal to the weighted average PCR for 
the other OPPS hospitals using the most recent submitted or settled 
cost report data. Based on those data, a proposed target PCR of 0.91 
would be used to determine the CY 2013 cancer hospital payment 
adjustment to be paid at cost report settlement. That is, the payment 
amount associated with the cancer hospital payment adjustment would be 
the additional payment needed to result in a proposed PCR equal to 0.91 
for each cancer hospital.
     Payment Adjustment Policy for Radioisotopes Derived from 
Non-Highly Enriched Uranium Sources: The Administration has established 
an agenda to eliminate domestic reliance on reactors outside of the 
United States that produce highly enriched uranium (HEU), and to 
promote the conversion of all medical isotope production to non-HEU 
sources. We are proposing to exercise our statutory authority to make 
payment adjustments necessary to ensure equitable payments, to provide 
an adjustment for CY 2013 to cover the marginal cost of hospital 
conversion to use of non-HEU sources to obtain radioisotopes used in 
medical imaging. The adjustment would cover the marginal cost of 
radioisotopes produced from non-HEU sources over the costs of 
radioisotopes produced by HEU sources.
     Payment of Drugs, Biologicals, and Radiopharmaceuticals: 
For CY 2013, we are proposing to pay for the acquisition and pharmacy 
overhead costs of separately payable drugs and biologicals that do not 
have pass-through status at the statutory default of average sales 
price (ASP) plus 6 percent.
     Supervision of Hospital Outpatient Therapeutic Services: 
We are clarifying the application of the supervision regulations to 
physical therapy, speech-language pathology, and occupational therapy 
services that are furnished in OPPS hospitals and critical access 
hospitals (CAHs). We are proposing to extend the enforcement 
instruction for CAHs and certain small rural hospitals for one final 
year through CY 2013.
     Outpatient Status: We are concerned about recent increases 
in the length of time that Medicare beneficiaries spend as outpatients 
receiving observation services. In addition, hospitals continue to 
express concern about Medicare Part B rebilling policies when a 
hospital inpatient claim is denied because the admission was not 
medically necessary. We are providing an update on the Part A to Part B 
Rebilling Demonstration that is in effect for CY 2012 through CY 2014, 
which was designed to assist us in evaluating these issues. In 
addition, we are soliciting public comments on potential clarifications 
or changes to our policies regarding patient status that may be 
appropriate.
     Ambulatory Surgical Center Payment Update: For CY 2013, we 
are proposing to increase payment rates under the ASC payment system by 
an MFP-adjusted CPI-U update factor of 1.3 percent. This increase is 
based on a projected CPI-U update of 2.2 percent minus a multifactor 
productivity adjustment required by the Affordable Care Act that is 
projected to be 0.9 percent. Based on this update, we estimate that 
total ASC payments, including beneficiary cost-sharing, for CY 2013 
would be approximately $4.103 billion, an increase of approximately 
$211 million compared to estimated CY 2012 payments.
     New Technology Intraocular Lenses: We are proposing 
significant revisions to the regulations governing payments for new 
technology intraocular lens (NTIOLs), specifically Sec.  416.195(a)(2) 
and Sec.  416.195(a)(4). We are proposing to revise Sec.  416.195(a)(2) 
to require that the IOL's FDA-approved labeling contain a claim of a 
specific clinical benefit based on a new lens characteristic in 
comparison to currently available IOLs. We are proposing to revise 
Sec.  416.195(a)(4) to require that any specific clinical benefit 
referred to in Sec.  416.195(a)(2) must be supported by evidence that 
demonstrates that the IOL results in a measurable, clinically 
meaningful, improved outcome.
     Ambulatory Surgical Center Quality Reporting (ASCQR) 
Program: For the ASCQR Program, we are seeking public comment on our 
approach for future measure selection and development as well as 
proposing certain measures for future inclusion in the ASCQR Program 
measure set. For the CY 2015 payment determination and subsequent years 
payment determinations, we are proposing requirements regarding the 
dates for submission, payment, and completeness for claims-based 
measures. We also are proposing how the payment rates would be reduced 
for ASCs that fail to meet program requirements beginning in CY 2014 
and are clarifying our policy on updating measures.
     Hospital Outpatient Quality Reporting (OQR) Program: For 
the Hospital OQR Program, we are proposing no new measures for CY 2013. 
We also are proposing no new targeting criteria to select hospitals for 
validation of medical records. We are confirming the suspension of data 
collection for specific measures. We are proposing that the criteria we 
would consider when determining whether to retire measures for the 
Hospital Inpatient Quality Reporting (IQR) Program are applicable 
likewise to the Hospital OQR Program. We are proposing that measures 
adopted in future rulemaking are automatically adopted for all 
subsequent year payment determinations unless we propose to remove, 
suspend, or replace them. We are proposing changes to administrative 
forms used in the program. We are proposing to extend the deadline for 
submitting a notice of participation form and to enter structural 
measures data.
     Electronic Health Record (EHR) Incentive Program: For the 
EHR Incentive Program, we are proposing to extend the 2012 Medicare EHR 
Incentive Program Electronic Reporting Pilot for Eligible Hospitals and 
CAHs through 2013, exactly as finalized for 2012. Other changes to the 
Medicare and Medicaid EHR Incentive Programs are proposed in a Notice 
of Proposed Rulemaking published in the Federal Register on March 7, 
2012.
     Inpatient Rehabilitation Facility Quality Reporting 
Program (IRF QRP): We are proposing to: (1) Adopt updates on a 
previously adopted measure for the IRF QRP that will affect annual 
prospective payment amounts in FY 2014; (2) adopt a policy that would 
provide that any measure that has been adopted for use in the IRF QRP 
will remain in effect until the measure is

[[Page 45068]]

actively removed, suspended, or replaced; and (3) adopt policies 
regarding when notice-and-comment rulemaking will be used to update 
existing IRF QRP measures.
     Revisions to the Quality Improvement Organization (QIO) 
Regulations: We are proposing to revise the QIO program regulations to: 
(1) Give QIOs the authority to send and receive secure transmissions of 
electronic versions of medical information; (2) provide more detailed 
and improved procedures for QIOs when completing Medicare beneficiary 
complaint reviews and general quality of care reviews, including 
procedures related to a new alternative dispute resolution process 
called ``immediate advocacy''; (3) increase the information 
beneficiaries receive in response to QIO review activities; (4) convey 
to Medicare beneficiaries the right to authorize the release of 
confidential information by QIOs; and (5) make other technical changes 
that are designed to improve the regulations. The technical changes to 
the QIO regulations that we are proposing to improve the regulations 
reflect CMS' commitment to the general principles of the President's 
Executive Order on Regulatory Reform, Executive Order 13563 (January 
18, 2011).
3. Summary of Costs and Benefits
    In sections XXII. and XXIII. of this proposed rule, we set forth a 
detailed analysis of the regulatory and federalism impacts that the 
proposed changes would have on affected entities and beneficiaries. Key 
estimated impacts include the following:
a. Impacts of the OPPS Update
(1) Impacts of All Proposed OPPS Changes
    Table 45 in section XXII. of this proposed rule displays the 
distributional impact to various groups of hospitals and for CMHCs of 
all the proposed OPPS changes for CY 2013 compared to all estimated 
OPPS payments in CY 2012. We estimate that the proposals in this 
proposed rule would result in a 2.1 percent overall increase in OPPS 
payments to providers. We estimate that the increase in OPPS 
expenditures, including beneficiary cost-sharing, would be 
approximately $700 million, not taking into account potential changes 
in enrollment, utilization, and case mix. Taking into account estimated 
spending changes that are attributable to these factors, we estimate an 
increase of approximately $4.6 billion in OPPS expenditures, including 
beneficiary cost-sharing, for CY 2013 compared to CY 2012 OPPS 
expenditures. We estimate that total OPPS payments, including 
beneficiary cost-sharing, would be $48.1 billion for CY 2013.
    We estimated the isolated impact of our proposed OPPS policies on 
CMHCs because CMHCs furnish only partial hospitalization services. 
Continuing the provider-specific structure that we adopted for CY 2011 
and basing payment fully on the data for the type of provider 
furnishing the service, we estimate a 4.4 percent decrease in CY 2013 
payments to CMHCs relative to their CY 2012 payments. This effect is 
largely attributable to a decline in the relative payment weight for 
APC 0173 (Level II Partial Hospitalization (4 or more services) for 
CMHCs) using the proposed geometric mean-based relative payment weights 
as opposed to median-based relative payment weights.
(2) Impacts of Basing APC Relative Weights on Geometric Mean Costs
    We estimate that our proposal to base the APC relative payment 
weights on the geometric mean costs rather than the median costs of 
services within an APC would not significantly impact most providers. 
Payments to low volume urban hospitals and to hospitals for which 
disproportionate share hospital (DSH) data are not available would 
increase by an estimated 2.1 and 4.0 percent, respectively. The 
increase to hospitals without available DSH data is largely 
attributable to payment increases for partial hospitalization and group 
psychotherapy services furnished in the hospital. These hospitals are 
largely non-IPPS psychiatric hospitals. In contrast, payments to CMHCs 
would decrease by an estimated 6.9 percent due primarily to lower 
payments for APC 0173 (Level II Partial Hospitalization (4 or more 
services) for CMHCs).
(3) Impacts of the Updated Wage Indices
    We estimate no significant impacts related to updating the wage 
indices and applying the frontier State wage index. Adjustments to the 
wage indices other than the frontier State wage adjustment would not 
significantly affect most hospitals. Overall, urban hospitals would 
experience no change from CY 2012 to CY 2013, and rural hospitals would 
experience payment decreases of approximately 0.2 percent. Urban 
hospitals in the New England and Pacific regions would experience the 
most significant payment changes with a decrease of 1.2 percent in New 
England and an increase of 1.6 percent in the Pacific region.
    We estimate that all facilities and all hospitals would experience 
a combined increase of 0.1 percent due to the frontier State wage 
index, which is not budget neutral. The frontier State wage index would 
only affect hospitals in the West North Central and Mountain regions, 
with rural hospitals in those regions experiencing slightly greater 
percentage payment increases than urban hospitals in those regions.
(4) Impacts of the Rural Adjustment and the Cancer Hospital Payment 
Adjustment
    There are no significant impacts of our payment proposals for 
hospitals that are eligible for the proposed rural adjustment or for 
the proposed cancer hospital payment adjustment. We are not proposing 
any change in policies for determining the rural and cancer hospital 
payment adjustments, and the proposed adjustment amounts do not 
significantly impact the budget neutrality adjustments for these 
policies.
(5) Impacts of the OPD Fee Schedule Increase Factor
    We estimate that, for most hospitals, the application of the 
proposed OPD fee schedule increase factor of 2.1 percent to the 
conversion factor would mitigate the small negative impacts of the 
budget neutrality adjustments. Certain low volume hospitals and 
hospitals for which DSH data are not available would experience larger 
increases ranging from 4.1 percent to 8.3 percent. We estimate that 
rural and urban hospitals would experience similar increases of 
approximately 2 percent as a result of the proposed OPD fee schedule 
increase factor and other budget neutrality adjustments. Classifying 
hospitals by teaching status or type of ownership suggests that these 
hospitals would receive similar increases.
b. Impacts of the Proposed ASC Payment Update
    For impact purposes, the surgical procedures on the ASC list of 
covered procedures are aggregated into surgical specialty groups using 
CPT and HCPCS code range definitions. The percentage change in 
estimated total payments by specialty groups under the proposed CY 2013 
payment rates compared to estimated CY 2012 payment rates range between 
-2 percent for respiratory system procedures, integumentary system 
procedures, and cardiovascular system procedures to 5 percent for 
nervous system procedures.
c. Impacts of the Hospital OQR Program
    We do not expect our proposals to significantly affect the number 
of

[[Page 45069]]

hospitals that do not receive a full annual payment update.
d. Impacts of the EHR Incentive Program Proposal
    There are no changes from the 2012 OPPS/ASC final rule to the costs 
or impact for the proposed 2013 Medicare EHR Incentive Program 
Electronic Reporting Pilot for Hospitals and CAHs.
e. Impacts of the ASCQR Program
    We do not expect our proposals to significantly affect the number 
of ASCs that do not receive a full annual payment update beginning in 
CY 2014.

B. Legislative and Regulatory Authority for the Hospital OPPS

    When Title XVIII of the Act was enacted, Medicare payment for 
hospital outpatient services was based on hospital-specific costs. In 
an effort to ensure that Medicare and its beneficiaries pay 
appropriately for services and to encourage more efficient delivery of 
care, the Congress mandated replacement of the reasonable cost-based 
payment methodology with a prospective payment system (PPS). The 
Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) added section 
1833(t) to the Act authorizing implementation of a PPS for hospital 
outpatient services. The OPPS was first implemented for services 
furnished on or after August 1, 2000. Implementing regulations for the 
OPPS are located at 42 CFR Parts 410 and 419.
    The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999 (BBRA) (Pub. L. 106-113) made major changes in the hospital OPPS. 
The following Acts made additional changes to the OPPS: the Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 
(BIPA) (Pub. L. 106-554); the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA) (Pub. L. 108-173); the Deficit 
Reduction Act of 2005 (DRA) (Pub. L. 109-171), enacted on February 8, 
2006; the Medicare Improvements and Extension Act under Division B of 
Title I of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA) 
(Pub. L. 109-432), enacted on December 20, 2006; the Medicare, 
Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173), 
enacted on December 29, 2007; the Medicare Improvements for Patients 
and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), enacted on July 
15, 2008; the Patient Protection and Affordable Care Act (Pub. L. 111-
148), enacted on March 23, 2010, as amended by the Health Care and 
Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on 
March 30, 2010 (These two public laws are collectively known as the 
Affordable Care Act.); the Medicare and Medicaid Extenders Act of 2010 
(MMEA, Pub. L. 111-309); the Temporary Payroll Tax Cut Continuation Act 
of 2011 (TPTCCA, Pub. L. 112-78), enacted on December 23, 2011; and 
most recently the Middle Class Tax Relief and Job Creation Act of 2012 
(MCTRJCA, Pub. L. 112-96), enacted on February 22, 2012.
    Under the OPPS, we pay for hospital outpatient services on a rate-
per-service basis that varies according to the APC group to which the 
service is assigned. We use the Healthcare Common Procedure Coding 
System (HCPCS) (which includes certain Current Procedural Terminology 
(CPT) codes) to identify and group the services within each APC. The 
OPPS includes payment for most hospital outpatient services, except 
those identified in section I.C. 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 CMHCs) and 
hospital services that are furnished to inpatients who are entitled to 
Part A and have exhausted their Part A benefits, or who are not so 
entitled.
    The OPPS rate is an unadjusted national payment amount that 
includes the Medicare payment and the beneficiary copayment. This rate 
is divided into a labor-related amount and a nonlabor-related amount. 
The labor-related amount is adjusted for area wage differences using 
the hospital inpatient wage index value for the locality in which the 
hospital or CMHC is located.
    All services and items within an APC group are comparable 
clinically and with respect to resource use (section 1833(t)(2)(B) of 
the Act). In accordance with section 1833(t)(2) of the Act, subject to 
certain exceptions, items and services within an APC group cannot be 
considered comparable with respect to the use of resources if the 
highest median cost (or mean cost, if elected by the Secretary) for an 
item or service in the APC group is more than 2 times greater than the 
lowest median cost (or mean cost, if elected by the Secretary) for an 
item or service within the same APC group (referred to as the ``2 times 
rule''). In implementing this provision, we generally use the cost of 
the item or service assigned to an APC group.
    For new technology items and services, special payments under the 
OPPS may be made in one of two ways. Section 1833(t)(6) of the Act 
provides for temporary additional payments, which we refer to as 
``transitional pass-through payments,'' for at least 2 but not more 
than 3 years for certain drugs, biological agents, brachytherapy 
devices used for the treatment of cancer, and categories of other 
medical devices. For new technology services that are not eligible for 
transitional pass-through payments, and for which we lack sufficient 
clinical information and cost data to appropriately assign them to a 
clinical APC group, we have established special APC groups based on 
costs, which we refer to as New Technology APCs. These New Technology 
APCs are designated by cost bands which allow us to provide appropriate 
and consistent payment for designated new procedures that are not yet 
reflected in our claims data. Similar to pass-through payments, an 
assignment to a New Technology APC is temporary; that is, we retain a 
service within a New Technology APC until we acquire sufficient data to 
assign it to a clinically appropriate APC group.

C. Excluded OPPS Services and Hospitals

    Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to 
designate the hospital outpatient services that are paid under the 
OPPS. While most hospital outpatient services are payable under the 
OPPS, section 1833(t)(1)(B)(iv) of the Act excludes payment for 
ambulance, physical and occupational therapy, and speech-language 
pathology services, for which payment is made under a fee schedule. It 
also excludes screening mammography, diagnostic mammography, and 
effective January 1, 2011, an annual wellness visit providing 
personalized prevention plan services. The Secretary exercised the 
authority granted under the statute to also exclude from the OPPS those 
services that are paid under fee schedules or other payment systems. 
Such excluded services include, for example, the professional services 
of physicians and nonphysician practitioners paid under the MPFS; 
laboratory services paid under the Clinical Laboratory Fee Schedule 
(CLFS); services for beneficiaries with end-stage renal disease (ESRD) 
that are paid under the ESRD composite rate; and services and 
procedures that require an inpatient stay that are paid under the 
hospital IPPS. We set forth the services that are excluded from payment 
under the OPPS in regulations at 42 CFR 419.22.
    Under 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

[[Page 45070]]

with section 1814(b)(3) of the Act; CAHs; hospitals located outside of 
the 50 States, the District of Columbia, and Puerto Rico; and Indian 
Health Service (IHS) hospitals.

D. Prior Rulemaking

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

E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel or the 
Panel), Formerly Named the Advisory Panel on Ambulatory Payment 
Classification Groups (APC Panel)

1. Authority of the Panel
    Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of 
Public Law 106-113, and redesignated by section 202(a)(2) of Public Law 
106-113, requires that we consult with an external advisory panel of 
experts to annually review the clinical integrity of the payment groups 
and their weights under the OPPS. In CY 2000, based on section 
1833(t)(9)(A) of the Act and section 222 of the Public Health Service 
(PHS) Act, the Secretary established the Advisory Panel on Ambulatory 
Payment Classification Groups (APC Panel) to fulfill this requirement. 
In CY 2011, based on section 222 of the PHS Act, which gives 
discretionary authority to the Secretary to convene advisory councils 
and committees, the Secretary expanded the panel's scope to include the 
supervision of hospital outpatient therapeutic services in addition to 
the APC groups and weights. To reflect this new role of the panel, the 
Secretary changed the panel's name to the Advisory Panel on Hospital 
Outpatient Payment (the HOP Panel, or the Panel). The Panel is not 
restricted to using data compiled by CMS, and in conducting its review 
it may use data collected or developed by organizations outside the 
Department.
2. Establishment of the Panel
    On November 21, 2000, the Secretary signed the initial charter 
establishing the HOP Panel, at that time named the APC Panel. This 
expert panel, which may be composed of up to 19 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 Panel also is charged with advising the 
Secretary on the appropriate level of supervision for individual 
hospital outpatient therapeutic services. The Panel is technical in 
nature, and it is governed by the provisions of the Federal Advisory 
Committee Act (FACA). Since its initial chartering, the Secretary has 
renewed the Panel's charter five times: on November 1, 2002; on 
November 1, 2004; on November 21, 2006; on November 2, 2008 and 
November 12, 2010. The current charter specifies, among other 
requirements, that: the Panel continues to be technical in nature; is 
governed by the provisions of the FACA; may convene up to three 
meetings per year; has a Designated Federal Official (DFO); and is 
chaired by a Federal Official designated by the Secretary. The current 
charter was amended on November 15, 2011 and the Panel was renamed to 
reflect expanding the Panel's authority to include supervision of 
hospital outpatient therapeutic services and to add CAHs to its 
membership.
    The current Panel membership and other information pertaining to 
the Panel, including its charter, Federal Register notices, membership, 
meeting dates, agenda topics, and meeting reports, can be viewed on the 
CMS Web site at: http://www.cms.gov/FACA/05_Advisory_PanelonAmbulatoryPaymentClassificationGroups.asp#TopOfPage.
3. Panel Meetings and Organizational Structure
    The Panel has held multiple meetings, with the last meeting taking 
place on February 27-29, 2012. Prior to each meeting, we publish a 
notice in the Federal Register to announce the meeting and, when 
necessary, to solicit nominations for Panel membership and to announce 
new members.
    The Panel has established an operational structure that, in part, 
currently includes the use of three subcommittees to facilitate its 
required review process. The three current subcommittees are the Data 
Subcommittee, the Visits and Observation Subcommittee, and the 
Subcommittee for APC Groups and Status Indicator (SI) Assignments 
(previously known as the Packaging Subcommittee).
    The Data Subcommittee is responsible for studying the data issues 
confronting the Panel and for recommending options for resolving them. 
The Visits and Observation Subcommittee reviews and makes 
recommendations to the Panel on all technical issues pertaining to 
observation services and hospital outpatient visits paid under the OPPS 
(for example, APC configurations and APC relative payment weights). The 
Subcommittee for APC Groups and SI Assignments advises the Panel on the 
following issues: the appropriate SIs to be assigned to HCPCS codes, 
including but not limited to whether a HCPCS code or a category of 
codes should be packaged or separately paid; and the 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 Panel during a scheduled Panel meeting, and the Panel 
recommended that the subcommittees continue at the August 2012 Panel 
meeting. We accepted this recommendation. All subcommittee 
recommendations are discussed and voted upon by the full Panel.
    Discussions of the other recommendations made by the Panel at the 
February 2012 Panel meeting are included in the sections of this 
proposed rule that are specific to each recommendation. For discussions 
of earlier 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.

F. Public Comments Received on the CY 2012 OPPS/ASC Final Rule With 
Comment Period

    We received approximately 61 timely pieces of correspondence on the 
CY 2012 OPPS/ASC final rule with comment period that appeared in the 
Federal Register on November 24, 2011 (76 FR 74122), some of which 
contained multiple comments on the interim APC assignments and/or 
status indicators of HCPCS codes identified with comment

[[Page 45071]]

indicator ``NI'' in Addendum B to that final rule with comment period. 
We will 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 the 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 
not less often than annually and revise the relative payment weights 
for APCs. In the April 7, 2000 OPPS final rule with comment period (65 
FR 18482), we explained in detail how we calculated the relative 
payment weights that were implemented on August 1, 2000 for each APC 
group.
    For the CY 2013 OPPS, we are proposing to recalibrate the APC 
relative payment weights for services furnished on or after January 1, 
2013, and before January 1, 2014 (CY 2013), using the same basic 
methodology that we described in the CY 2012 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. Therefore, for the purpose of recalibrating the proposed APC 
relative payment weights for CY 2013, we used approximately 141 million 
final action claims (claims for which all disputes and adjustments have 
been resolved and payment has been made) for hospital outpatient 
department services furnished on or after January 1, 2011, and before 
January 1, 2012. For 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/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    Of the approximately 141 million final action claims for services 
provided in hospital outpatient settings used to calculate the proposed 
CY 2013 OPPS payment rates, approximately 113 million claims were the 
type of bill potentially appropriate for use in setting rates for OPPS 
services (but did not necessarily contain services payable under the 
OPPS). Of the approximately 113 million claims, approximately 5 million 
claims were not for services paid under the OPPS or were excluded as 
not appropriate for use (for example, erroneous cost-to-charge ratios 
(CCRs) or no HCPCS codes reported on the claim). From the remaining 
approximately 108 million claims, we created approximately 110 million 
single records, of which approximately 74 million were ``pseudo'' 
single or ``single session'' claims (created from approximately 28 
million multiple procedure claims using the process we discuss later in 
this section). Approximately 959,000 claims were trimmed out on cost or 
units in excess of +/- 3 standard deviations from the geometric mean, 
yielding approximately 110 million single bills for ratesetting. 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 only use claims (or portions of each claim) 
that are appropriate for ratesetting purposes. Ultimately, we were able 
to use for CY 2013 ratesetting some portion of approximately 95 percent 
of the CY 2011 claims containing services payable under the OPPS.
    The proposed APC relative weights and payments for CY 2013 in 
Addenda A and B to this proposed rule (which are available via the 
Internet on the CMS Web site) were calculated using claims from CY 2011 
that were processed before January 1, 2012. While we have historically 
based the payments on median hospital costs for services in the APC 
groups, we are proposing to establish the cost-based relative payment 
weights of the CY 2013 OPPS using geometric mean costs, as discussed in 
section II.A.2.f. of this proposed rule. Therefore, on the CMS Web 
site, along with Addenda A and B, we are providing a file that presents 
payment information for the proposed CY 2013 OPPS payments based on 
geometric mean costs compared to those based on median costs. 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 relative costs underpinning the APC relative payment 
weights and the CY 2013 payment rates.
b. Proposed Use of Single and Multiple Procedure Claims
    For CY 2013, in general, we are proposing to continue to use single 
procedure claims to set the costs on which the APC relative payment 
weights would be based. We generally use single procedure claims to set 
the estimated costs for APCs because we believe that the OPPS relative 
weights on which payment rates are based should be derived from the 
costs of furnishing one unit of one procedure and because, in many 
circumstances, we are 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 2012 OPPS/ASC final rule with comment period (76 FR 74132 
through 74134). In addition, for CY 2008, we increased packaging and 
created the first composite APCs, and continued those policies through 
CY 2012. Increased packaging and creation of composite APCs also 
increased the number of bills that we were able to use for ratesetting 
by enabling us to use claims that contained multiple major

[[Page 45072]]

procedures that previously would not have been usable. Further, for CY 
2009, we expanded the composite APC model to one additional clinical 
area, multiple imaging services (73 FR 68559 through 68569), which also 
increased the number of bills we were able to use in developing the 
OPPS relative weights on which payments are based. We have continued 
the composite APCs for multiple imaging services through CY 2012, and 
are proposing to continue this policy for CY 2013. We refer readers to 
section II.A.2.e. of this proposed rule for a discussion of the use of 
claims in modeling the 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 2013 
OPPS. This methodology enabled us to create, for this proposed rule, 
approximately 74 million ``pseudo'' single procedure claims, including 
multiple imaging composite ``single session'' bills (we refer readers 
to section II.A.2.e.(5) of this proposed rule for further discussion), 
to add to the approximately 36 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 for ratesetting purposes.
    For CY 2013, we are proposing to bypass 480 HCPCS codes that are 
identified in Addendum N to this proposed rule (which is available via 
the Internet on the CMS Web site). Since the inception of the bypass 
list, which is the 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 2013, data available for the February 27, 2012 meeting of 
the Advisory Panel on Hospital Outpatient Payment (the Panel) from CY 
2011 claims processed through September 30, 2011, and CY 2010 claims 
data processed through June 30, 2011, used to model the payment rates 
for CY 2012) to determine whether it would be appropriate to propose to 
add additional codes to the previous year's bypass list. For CY 2013, 
we are proposing to continue to bypass all of the HCPCS codes on the CY 
2012 OPPS bypass list, with the exception of HCPCS codes that we are 
proposing to be deleted for CY 2013, 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. We also are proposing to add to the bypass list for CY 
2013 HCPCS codes not on the CY 2012 bypass list that, using either the 
CY 2012 final rule data (CY 2010 claims) or the February 27, 2012 Panel 
data (first 9 months of CY 2011 claims), met the empirical criteria for 
the bypass list that are summarized below. Finally, to remain 
consistent with the CY 2013 proposal to develop OPPS relative payment 
weights based on geometric mean costs, we are proposing that the median 
cost of packaging criterion instead be based on the geometric mean cost 
of packaging. The entire list proposed for CY 2013 (including the codes 
that remain on the bypass list from prior years) 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 geometric mean cost of packaging observed in the 
``natural'' single procedure claims is equal to or less than $55. This 
criterion also limits the amount of error in redistributed costs. 
During the assessment of claims against the bypass criteria, we do not 
know the dollar value of the packaged cost that should be appropriately 
attributed to the other procedures on the claim. Therefore, ensuring 
that redistributed costs associated with a bypass code are small in 
amount and volume protects the validity of cost estimates for low cost 
services billed with the bypassed service.
    We note that we are proposing to establish the CY 2013 OPPS 
relative payment weights based on geometric mean costs. To remain 
consistent in the metric used for identifying cost patterns, we are 
proposing to use the geometric mean cost of packaging to identify 
potential codes to add to the bypass list. The proposal to develop the 
CY 2013 OPPS relative payment weights based on geometric mean costs is 
discussed in greater detail in section II.A.2.f. of this proposed rule.
    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 increase would 
prevent continuing decline in the threshold's real value. We are 
proposing for CY 2013, based on the same rationale described for the CY 
2012 OPPS/ASC final rule with comment period (76 FR 74133), to continue 
to update the packaged cost threshold by the market basket increase. By 
applying the final CY 2012 market basket increase of 1.90 percent to 
the prior non-rounded dollar threshold of $52.76 (76 FR 74133), we 
determined that the threshold remains for CY 2013 at $55 ($53.76 
rounded to $55, the nearest $5 increment). Therefore, we are proposing 
to set the geometric mean packaged cost threshold on the CY 2011 claims 
at $55 for a code to be considered for addition to the CY 2013 OPPS 
bypass list.
     The code is not a code for an unlisted service. Unlisted 
codes do not describe a specific service, and thus their costs would 
not be appropriate for bypass list purposes.
    In addition, we 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 2013 OPPS proposal. Some of these codes were identified by CMS 
medical advisors and some were identified in prior years by commenters 
with specialized knowledge of the packaging associated with specific 
services. We also are proposing to continue to include certain HCPCS 
codes on the bypass list in order to purposefully

[[Page 45073]]

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 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 
available via the Internet on the CMS Web site).
    Addendum N to this proposed rule includes the proposed list of 
bypass codes for CY 2013. The list of bypass codes contains codes that 
were reported on claims for services in CY 2011 and, therefore, 
includes codes that were in effect in 2011 and used for billing but 
were deleted for CY 2012. We retained these deleted bypass codes on the 
proposed CY 2013 bypass list because these codes existed in CY 2011 and 
were covered OPD services in that period, and CY 2011 claims data are 
used to calculate CY 2013 payment rates. Keeping these deleted bypass 
codes on the bypass list potentially allows us to create more 
``pseudo'' single procedure claims for ratesetting purposes. ``Overlap 
bypass codes'' that were members of the proposed multiple imaging 
composite APCs are identified by asterisks (*) in the third column of 
Addendum N to this proposed rule. HCPCS codes that we are proposing to 
add for CY 2013 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 2013 bypass list because these codes were either 
deleted from the HCPCS before CY 2011 (and therefore were not covered 
OPD services in CY 2011) or were not separately payable codes under the 
proposed CY 2013 OPPS because these codes are not used for ratesetting 
(and therefore would not need to be bypassed). None of these proposed 
deleted codes are ``overlap bypass'' codes.

Table 1--HCPCS Codes Proposed To Be Removed From the CY 2013 Bypass List
------------------------------------------------------------------------
          HCPCS Code                     HCPCS Short descriptor
------------------------------------------------------------------------
76880........................  Us exam, extremity.
86903........................  Blood typing, antigen screen.
92135........................  Ophth dx imaging post seg.
93231........................  Ecg monitor/record, 24 hrs.
93232........................  ECG monitor/report, 24 hrs.
93236........................  ECG monitor/report, 24 hrs.
------------------------------------------------------------------------

c. Proposed Calculation and Use of Cost-to-Charge Ratios (CCRs)
    For CY 2013, 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 costs on which the proposed CY 2013 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 2011 claims data from the most recent 
available hospital cost reports, in most cases, cost reports beginning 
in CY 2010. For the CY 2013 OPPS proposed rates, we used the set of 
claims processed during CY 2011. We applied the 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/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    To ensure the completeness of the revenue code-to-cost center 
crosswalk, we reviewed changes to the list of revenue codes for CY 2011 
(the year of the claims data we used to calculate the proposed CY 2013 
OPPS payment rates) and found that the National Uniform Billing 
Committee (NUBC) did not add any new revenue codes to the NUBC 2011 
Data Specifications Manual.
    In accordance with our longstanding policy, we calculated CCRs for 
the standard and nonstandard cost centers accepted by the electronic 
cost report database. In general, the most detailed level at which we 
calculated CCRs was the hospital-specific departmental level. For a 
discussion of the hospital-specific overall ancillary CCR calculation, 
we refer readers to the CY 2007 OPPS/ASC final rule with comment period 
(71 FR 67983 through 67985). One longstanding exception to this general 
methodology for calculation of CCRs used for converting charges to 
costs on each claim, as detailed in the CY 2007 OPPS/ASC final rule 
with comment period, is the calculation of blood 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 2011 before determining whether the CCRs for 
such hospitals were valid.
    We then calculated the CCRs for each cost center and the overall 
ancillary CCR for each hospital for which we had claims data. We did 
this using hospital-specific data from the Hospital Cost Report 
Information System (HCRIS). We used the most recent available cost 
report data, in most cases, cost reports with cost reporting periods 
beginning in CY 2010. For this proposed rule, we used the most recently 
submitted cost reports to calculate the CCRs to be used to calculate 
costs for the proposed CY 2013 OPPS payment rates. If the most recently 
available cost report was submitted but not settled, we looked at the 
last settled cost report to determine the ratio of submitted to settled 
cost

[[Page 45074]]

using the overall ancillary CCR, and we then adjusted the most recent 
available submitted, but not settled, cost report using that ratio. We 
then calculated both an overall ancillary CCR and cost center-specific 
CCRs for each hospital. We used the overall ancillary CCR referenced 
above in this section 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 costs for CY 2013.
    Since the implementation of the OPPS, some commenters have raised 
concerns about potential bias in the OPPS cost-based weights due to 
``charge compression,'' which is the practice of applying a lower 
charge markup to higher cost services and a higher charge markup to 
lower cost services. As a result, the cost-based weights may reflect 
some aggregation bias, undervaluing high-cost items and overvaluing 
low-cost items when an estimate of average markup, embodied in a single 
CCR, is applied to items of widely varying costs in the same cost 
center. This issue was evaluated in a report by Research Triangle 
Institute, International (RTI). The RTI final report can be found on 
RTI's Web site at: http://www.rti.org/reports/cms/HHSM-500-fxsp0;2005-
0029I/PDF/Refining--Cost--to--Charge--Ratios--200807--Final.pdf. For a 
complete discussion of the RTI recommendations, public comments, and 
our responses, we refer readers to the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68519 through 68527).
    We addressed the RTI finding that there was aggregation bias in 
both the IPPS and the OPPS cost estimation of expensive and inexpensive 
medical supplies in the FY 2009 IPPS final rule (73 FR 48458 through 
45467). Specifically, we created one cost center for ``Medical Supplies 
Charged to Patients'' and one cost center for ``Implantable Devices 
Charged to Patients,'' essentially splitting the then current cost 
center for ``Medical Supplies Charged to Patients'' into one cost 
center for low-cost medical supplies and another cost center for high-
cost implantable devices in order to mitigate some of the effects of 
charge compression. In determining the items that should be reported in 
these respective cost centers, we adopted commenters' recommendations 
that hospitals should use revenue codes established by the AHA's NUBC 
to determine the items that should be reported in the ``Medical 
Supplies Charged to Patients'' and the ``Implantable Devices Charged to 
Patients'' cost centers. For a complete discussion of the rationale for 
the creation of the new cost center for ``Implantable Devices Charged 
to Patients,'' public comments, and our responses, we refer readers to 
the FY 2009 IPPS final rule.
    The cost center for ``Implantable Devices Charged to Patients'' has 
been available for use for cost reporting periods beginning on or after 
May 1, 2009. In order to develop a robust analysis regarding the use of 
cost data from the ``Implantable Devices Charged to Patients'' cost 
center, we believe that it is necessary to have a critical mass of cost 
reports filed with data in this cost center. In preparation for the CY 
2013 OPPS/ASC proposed rule, we assessed the availability of data in 
the ``Implantable Devices Charged to Patients'' cost center using cost 
reports in the December 31, 2011 quarter ending update of HCRIS, which 
was the latest upload of the cost report data that we could use for the 
CY 2013 proposed rule. We determined that 2,063 hospitals, out of 
approximately 3,800 hospitals, utilized the ``Implantable Devices 
Charged to Patients'' cost center, and we believe that this is a 
sufficient amount of data from which to generate a meaningful analysis. 
Therefore, we are proposing to use data from the ``Implantable Devices 
Charged to Patients'' cost center to create a distinct CCR for use in 
calculating the OPPS relative weights for CY 2013. Table 2 below 
contains a list of APCs that had either a greater than or less than 3.0 
percentage point change in cost when the ``Implantable Devices Charged 
to Patients'' cost center is used to create a distinct CCR compared to 
a CCR created from the combination of the ``Medical Supplies Charged to 
Patients'' and the ``Implantable Devices Charged to Patients'' cost 
centers as was used in the CY 2012 OPPS/ASC final rule with comment 
period.

  Table 2--Percentage Change in APC Cost When the ``Implantable Devices
    Charged to Patients'' Cost Center Is Used To Create Distinct CCR
------------------------------------------------------------------------
                                                            Percentage
            APC                     APC descriptor           change in
                                                               cost
------------------------------------------------------------------------
0654.......................  Level II Insertion/Replacem            6.99
                              of Permanent Pacemaker.
0315.......................  Level II Implantation of               5.71
                              Neurostimulator Generator.
0227.......................  Implantation of Drug                   5.65
                              Infusion Device.
0386.......................  Level II Prosthetic                    4.92
                              Urological Procedures.
0107.......................  Insertion of Cardioverter-             4.89
                              Defibrillator Pulse
                              Generat.
0089.......................  Insertion/Replace of Perm              4.71
                              Pacemaker and Electrodes.
0108.......................  Insertion/Replace/Repair of            4.42
                              Cardioverter-Defibr Sys.
0039.......................  Level I Implantation of                4.35
                              Neurostimulator Generator.
0655.......................  Insert/Replac/Conv of a                4.20
                              Perm Dual Cham Pacemaker.
0680.......................  Insertion of Patient                   3.77
                              Activated Event Recorders.
0090.......................  Level I Insertion/Replacem             3.68
                              of Permanent Pacemaker.
0318.......................  Implanta of Neurostimulator            3.64
                              Pulse Gen and Electrode.
0106.......................  Insert/Replac of Pacemaker             3.10
                              Leads and/or Electrodes.
0387.......................  Level II Hysteroscopy......           -3.16
0100.......................  Cardiac Stress Tests.......           -3.20
0269.......................  Level II Echocardiogram               -3.21
                              Without Contrast.
8002.......................  Level I Extended Assess &             -3.31
                              Management Composite.
0101.......................  Tilt Table Evaluation......           -3.34
0142.......................  Level I Small Intestine               -3.49
                              Endoscopy.
0084.......................  Level I Electrophysiologic            -3.61
                              Procedures.
8000.......................  Cardiac Electrophysiologic            -3.69
                              Eval and Ablation Compo.
0165.......................  Level IV Urinary and Anal             -3.73
                              Procedures.
0270.......................  Level III Echocardiogram              -3.73
                              Without Contrast.
0679.......................  Level II Resuscitation and            -3.76
                              Cardioversion.

[[Page 45075]]

 
0174.......................  Level IV Laparoscopy.......           -3.78
0659.......................  Hyperbaric Oxygen..........           -4.01
0085.......................  Level II Electrophysiologic           -4.15
                              Procedures.
0111.......................  Blood Product Exchange.....           -4.27
0381.......................  Single Allergy Tests.......           -5.10
0370.......................  Multiple Allergy Tests.....           -7.46
0012.......................  Level I Debridement &                 -8.15
                              Destruction.
0251.......................  Level II ENT Procedures....           -8.46
------------------------------------------------------------------------

    In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 
50080), we finalized our proposal to create new standard cost centers 
for ``Computed Tomography (CT),'' ``Magnetic Resonance Imaging (MRI),'' 
and ``Cardiac Catheterization,'' and to require that hospitals report 
the costs and charges for these services under new cost centers on the 
revised Medicare cost report Form CMS 2552-10. As we discussed in the 
FY 2009 IPPS and CY 2009 OPPS/ASC proposed and final rules, RTI also 
found that the costs and charges of CT scans, MRI, and cardiac 
catheterization differ significantly from the costs and charges of 
other services included in the standard associated cost center. RTI 
concluded that both the IPPS and the OPPS relative weights would better 
estimate the costs of those services if CMS were to add standard costs 
centers for CT scans, MRIs, and cardiac catheterization in order for 
hospitals to report separately the costs and charges for those services 
and in order for CMS to calculate unique CCRs to estimate the cost from 
charges on claims data. We refer readers to the FY 2011 IPPS/LTCH PPS 
final rule (75 FR 50075 through 50080) for a more detailed discussion 
on the reasons for the creation of standard cost centers for CT scans, 
MRIs, and cardiac catheterization. The new standard cost centers for CT 
scans, MRIs, and cardiac catheterization are effective for cost report 
periods beginning on or after May 1, 2010, on the revised cost report 
Form CMS-2552-10. However, because cost reports that were filed on the 
revised cost report Form CMS-2552-10 are not currently accessible in 
the HCRIS, we were unable to calculate distinct CCRs for CT scans, MRI, 
and cardiac catheterization using the new standard cost centers for 
these services. We believe that we will have cost report data available 
for an analysis of creating distinct CCRs for CT scans, MRIs, and 
cardiac catheterization for the CY 2014 OPPS rulemaking.
    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 Costs Used for 
Ratesetting
    In this section of this proposed rule, we discuss the use of claims 
to calculate OPPS payment rates for CY 2013. The Hospital OPPS page on 
our Web site on which this proposed rule is posted (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html) provides an accounting of claims used in the development of 
the proposed payment rates. That accounting provides additional detail 
regarding the number of claims derived at each stage of the process. In 
addition, below in this section we discuss the file of claims that 
comprises the data set that is available for purchase under a CMS data 
use agreement. Our Web site, http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html, includes 
information about purchasing the ``OPPS Limited Data Set,'' which now 
includes the additional variables previously available only in the OPPS 
Identifiable Data Set, including ICD-9-CM diagnosis codes and revenue 
code payment amounts. This file is derived from the CY 2011 claims that 
were used to calculate the proposed payment rates for the CY 2013 OPPS.
    In the history of the OPPS, we have traditionally established the 
scaled relative weights on which payments are based using APC median 
costs, which is a process most recently described in the CY 2012 OPPS/
ASC final rule with comment period (76 FR 74188). However, as discussed 
in more detail in section II.A.2.f. of this proposed rule, we are 
proposing to use geometric mean costs to calculate the proposed 
relative weights on which the proposed CY 2013 OPPS payment rates are 
based. While this proposal would change the cost metric on which the 
relative payments are based, the data process in general would remain 
the same, under the methodologies that we use to obtain appropriate 
claims data and accurate cost information in determining estimated 
service cost.
    We used the methodology described in sections II.A.2.a. through 
II.A.2.e. of this proposed rule to calculate the geometric mean costs 
we use to establish the proposed relative weights used in calculating 
the proposed OPPS payment rates for CY 2013 shown in Addenda A and B to 
this proposed rule (which are available via the Internet on the CMS Web 
site). We note that we are providing a file comparing the CY 2013 
proposed payments under the geometric mean cost-based OPPS, relative to 
what they would be under a CY 2013 median-based OPPS. We are providing 
this file so that the public can provide meaningful comment on our 
proposal to base the CY 2013 OPPS relative payment weights on geometric 
mean costs. We refer readers to section II.A.4. of this proposed rule 
for a discussion of the conversion of APC geometric mean costs to 
scaled payment weights.
a. Claims Preparation
    For this proposed rule, we used the CY 2011 hospital outpatient 
claims processed before January 1, 2012, to calculate the geometric 
mean costs of APCs that underpin the proposed relative weights for CY 
2013. To begin the calculation of the proposed relative weights for CY 
2013, we pulled all claims for outpatient services furnished in CY 2011 
from the national claims

[[Page 45076]]

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 113 million claims that contain hospital 
bill types paid under the OPPS.
    1. Claims that were not bill types 12X (Hospital Inpatient 
(Medicare Part B only)), 13X (Hospital Outpatient), 14X (Hospital--
Laboratory Services Provided to Nonpatients), or 76X (Clinic--Community 
Mental Health Center). Other bill types are not paid under the OPPS; 
therefore, these claims were not used to set OPPS payment.
    2. Claims that were bill types 12X, 13X or 14X. Claims with bill 
types 12X and 13X are hospital outpatient claims. Claims with bill type 
14X are laboratory specimen claims, of which we use a subset for the 
limited number of services in these claims that are paid under the 
OPPS.
    3. Claims that were bill type 76X (CMHC).
    To convert charges on the claims to estimated cost, we multiplied 
the charges on each claim by the appropriate hospital-specific CCR 
associated with the revenue code for the charge as discussed in section 
II.A.1.c. of this 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 (that exceeded +/-3 standard deviations from the 
geometric mean after removing error CCRs). In addition, we trimmed the 
CCRs at the cost center (that is, departmental) level by removing the 
CCRs for each cost center as outliers if they exceeded +/-3 standard 
deviations from the geometric mean. We used a four-tiered hierarchy of 
cost center CCRs, which is the revenue code-to-cost center crosswalk, 
to match a cost center to every possible revenue code appearing in the 
outpatient claims that is relevant to OPPS services, with the top tier 
being the most common cost center and the last tier being the default 
CCR. If a hospital's cost center CCR was deleted by trimming, we set 
the CCR for that cost center to ``missing'' so that another cost center 
CCR in the revenue center hierarchy could apply. If no other cost 
center CCR could apply to the revenue code on the claim, we used the 
hospital's overall ancillary CCR for the revenue code in question as 
the default CCR. For example, if a visit was reported under the clinic 
revenue code but the hospital did not have a clinic cost center, we 
mapped the hospital-specific overall ancillary CCR to the clinic 
revenue code. The revenue code-to-cost center crosswalk is available 
for inspection and comment on our Web site: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. Revenue codes that we do not use in establishing relative 
costs or to model impacts are identified with an ``N'' in the revenue 
code-to-cost center crosswalk.
    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 
arithmetic and geometric mean and median cost and a per day arithmetic 
and geometric mean and median cost for drugs and nonimplantable 
biologicals, therapeutic radiopharmaceutical agents, and brachytherapy 
sources, as well as other information used to set payment rates, such 
as a unit-to-day ratio for drugs.
    In the past several years, we have developed payment policy for 
nonpass-through separately paid drugs and biologicals based on a 
redistribution methodology that accounts for pharmacy overhead by 
allocating cost from packaged drugs to separately paid drugs. This 
typically would have required us to reduce the cost associated with 
packaged coded and uncoded drugs in order to allocate that cost. 
However, for CY 2013, we are proposing to pay for separately payable 
drugs and biologicals under the OPPS at ASP+6 percent, based upon the 
statutory default described in section 1833(t)(14)(A)(iii)(II) of the 
Act. Therefore, under this proposal, we would not redistribute the 
packaged cost. 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 in CY 2013.
    We then removed line-items that were not paid during claim 
processing, presumably for a line-item rejection or denial. The number 
of edits for valid OPPS payment in the Integrated Outpatient Code 
Editor (I/OCE) and elsewhere has grown significantly in the past few 
years, especially with the implementation of the full spectrum of 
National Correct Coding Initiative (NCCI) edits. To ensure that we are 
using valid claims that represent the cost of payable services to set 
payment rates, we removed line-items with an OPPS status indicator that 
were not paid during claims processing in the claim year, but have a 
status indicator of ``S,'' ``T,'' ``V,'' or ``X'' in the prospective 
year's payment system. This logic preserves charges for services that 
would not have been paid in the claim year but for which some estimate 
of cost is needed for the prospective year, such as services newly 
proposed to come off the inpatient list for CY 2012 that were assigned 
status indicator ``C'' in the claim year. It also preserves charges for 
packaged services so that the costs can be included in the cost of the 
services with which they are reported, even if the CPT codes for the 
packaged services were not paid because the service is part of another 
service that was reported on the same claim or the code otherwise 
violates claims processing edits.

[[Page 45077]]

    For CY 2013, we are proposing to continue the policy we implemented 
for CY 2012 to exclude line-item data for pass-through drugs and 
biologicals (status indicator ``G'' for CY 2011) and nonpass-through 
drugs and biologicals (status indicator ``K'' for CY 2011) where the 
charges reported on the claim for the line were either denied or 
rejected during claims processing. Removing lines that were eligible 
for payment but were not paid ensures that we are using appropriate 
data. The trim avoids using cost data on lines that we believe were 
defective or invalid because those rejected or denied lines did not 
meet the Medicare requirements for payment. For example, edits may 
reject a line for a separately paid drug because the number of units 
billed exceeded the number of units that would be reasonable and, 
therefore, is likely a billing error (for example, a line reporting 55 
units of a drug for which 5 units is known to be a fatal dose). As with 
our trimming in the CY 2012 OPPS/ASC final rule with comment period (76 
FR 74141) of line-items with a status indicator of ``S,'' ``T,'' ``V,'' 
or ``X,'' we believe that unpaid line-items represent services that are 
invalidly reported and, therefore, should not be used for ratesetting. 
We believe that removing lines with valid status indicators that were 
edited and not paid during claims processing increases the accuracy of 
the data used for ratesetting purposes.
b. Splitting Claims and Creation of ``Pseudo'' Single Procedure Claims
(1) Splitting Claims
    For the CY 2013 OPPS, we then split the remaining claims into five 
groups: single majors; multiple majors; single minors; multiple minors; 
and other claims. (Specific definitions of these groups follow below.) 
For CY 2013, 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 2013, 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 2013 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 geometric mean costs for composite APCs 
from multiple procedure major claims is discussed in section II.A.2.e. 
of this proposed rule.
    Specifically, we are proposing to divide the remaining claims into 
the following five groups:
    1. Single Procedure Major Claims: Claims with a single separately 
payable procedure (that is, status indicator ``S,'' ``T,'' ``V,'' or 
``X,'' which includes codes with status indicator ``Q3''); claims with 
one unit of a status indicator ``Q1'' code (``STVX-packaged'') where 
there was no code with status indicator ``S,'' ``T,'' ``V,'' or ``X'' 
on the same claim on the same date; or claims with one unit of a status 
indicator ``Q2'' code (``T-packaged'') where there was no code with a 
status indicator ``T'' on the same claim on the same date.
    2. Multiple Procedure Major Claims: Claims with more than one 
separately payable procedure (that is, status indicator ``S,'' ``T,'' 
``V,'' or ``X,'' which includes codes with status indicator ``Q3''), or 
multiple units of one payable procedure. These claims 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 for ratesetting. Claims that contain codes to which we have 
assigned status indicator ``Q3''

[[Page 45078]]

(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 are proposing to use the bypass codes listed in Addendum N 
to this proposed rule (which is available via the Internet on our Web 
site) and discussed in section II.A.1.b. of this proposed rule to 
remove separately payable procedures which we determined contained 
limited or no packaged costs or that were otherwise suitable for 
inclusion on the bypass list from a multiple procedure bill. As 
discussed above, we ignore the ``overlap bypass codes,'' that is, those 
HCPCS codes that are both on the bypass list and are members of the 
multiple imaging composite APCs, in this initial assessment for 
``pseudo'' single procedure claims. The proposed CY 2013 ``overlap 
bypass codes'' are listed in Addendum N to this proposed rule (which is 
available via the Internet on the CMS Web site). When one of the two 
separately payable procedures on a multiple procedure claim was on the 
bypass 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 proposed 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 costs on which proposed CY 2013 OPPS 
payment would be based. Having identified ``single session'' claims for 
the imaging composite APCs, we reassessed the claim to determine if, 
after removal of all lines for bypass codes, including the ``overlap 
bypass codes,'' a single unit of a single separately payable code 
remained on the claim. If so, we attributed the packaged costs on the 
claim to the single unit of the single remaining separately payable 
code other than the bypass code to create a ``pseudo'' single procedure 
claim. We also identified line-items of overlap bypass codes as a 
``pseudo'' single procedure claim. This allowed us to use more claims 
data for ratesetting purposes.
    We also are proposing to examine the multiple procedure minor 
claims to determine whether we could create ``pseudo'' single procedure 
claims. Specifically, where the claim contained multiple codes 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 2012 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 2012 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 2012 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 geometric mean 
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 
2012 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 2012 
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 2012 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 2012 and 
set the units to one on that HCPCS code to reflect our policy of paying 
only one unit of a code with a status indicator of ``Q2.'' We then 
packaged all costs for the following into a single cost for the 
selected (``T packaged'') HCPCS code to create a ``pseudo'' single 
procedure claim for that code: Additional units of the status indicator 
``Q2'' HCPCS code with the highest CY 2012 relative 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 2012 relative weights. 
If a status indicator ``Q1'' HCPCS code had a higher CY 2011

[[Page 45079]]

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 proposed 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 XII.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 the CY 2013 
OPPS.
c. Completion of Claim Records and Geometric Mean Cost Calculations
(1) General Process
    We then packaged the costs of packaged HCPCS codes (codes with 
status indicator ``N'' listed in Addendum B to this proposed rule 
(which is referenced in section XIX. 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 3 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 are proposing to 
continue to compare the final list of packaged revenue codes that we 
adopt for CY 2013 to the revenue codes that the I/OCE will package for 
CY 2013 to ensure consistency.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68531), we replaced the NUBC standard abbreviations for the revenue 
codes listed in Table 2 of the CY 2009 OPPS/ASC proposed rule with the 
most current NUBC descriptions of the revenue code categories and 
subcategories to better articulate the meanings of the revenue codes 
without changing the 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 2013, as we did for CY 2012, we reviewed the changes to 
revenue codes that were effective during CY 2011 for purposes of 
determining the charges reported with revenue codes but without HCPCS 
codes that we would propose to package for CY 2013. We believe that the 
charges reported under the revenue codes listed in Table 3 below 
continue to reflect ancillary and supportive services for which 
hospitals report charges without HCPCS codes. Therefore, for CY 2013, 
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 3 below for purposes of calculating the geometric 
mean costs on which the proposed CY 2013 OPPS/ASC payment rates are 
based.

            Table 3--Proposed CY 2013 Packaged Revenue Codes
------------------------------------------------------------------------
       Revenue code                         Description
------------------------------------------------------------------------
0250.....................  Pharmacy; General Classification.
0251.....................  Pharmacy; Generic Drugs.
0252.....................  Pharmacy; Non-Generic Drugs.
0254.....................  Pharmacy; Drugs Incident to Other Diagnostic
                            Services.
0255.....................  Pharmacy; Drugs Incident to Radiology.
0257.....................  Pharmacy; Non-Prescription.
0258.....................  Pharmacy; IV Solutions.
0259.....................  Pharmacy; Other Pharmacy.
0260.....................  IV Therapy; General Classification.
0261.....................  IV Therapy; Infusion Pump.
0262.....................  IV Therapy; IV Therapy/Pharmacy Svcs.
0263.....................  IV Therapy; IV Therapy/Drug/Supply Delivery.
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.

[[Page 45080]]

 
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.
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 2013 OPPS.
    For the remaining claims, we are proposing to then standardize 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 geometric mean 
costs.
    In accordance with our longstanding practice, we also are proposing 
to exclude single and pseudo single procedure claims for which the 
total cost on the claim was outside 3 standard deviations from the 
geometric mean of units for each HCPCS code on the bypass list 
(because, as discussed above, we used claims that contain multiple 
units of the bypass codes).
    After removing claims for hospitals with error CCRs, claims without 
HCPCS codes, claims for immunizations not covered under the OPPS, and 
claims for services not paid under the OPPS, approximately 108 million 
claims were left. Using these approximately 108 million claims, we 
created approximately 110 million single and ``pseudo'' single 
procedure claims, of which we used slightly more than 110 million 
single bills (after trimming out approximately 959,000 claims as 
discussed in section II.A.1.a. of this

[[Page 45081]]

proposed rule) in the CY 2013 geometric mean cost development and 
ratesetting.
    As discussed above, the OPPS has historically developed the 
relative weights on which APC payments are based using APC median 
costs. For the CY 2013 OPPS, we are proposing to calculate the APC 
relative weights using geometric mean costs, and therefore the 
following discussion of the two times rule and relative weight 
development refers to geometric means. For more detail about the CY 
2013 OPPS/ASC proposal to calculate relative payment weights based on 
geometric means, we refer readers to section II.A.2.f. of this proposed 
rule.
    We are proposing to use these claims to calculate the proposed CY 
2013 geometric mean costs for each separately payable HCPCS code and 
each APC. The comparison of HCPCS code-specific and APC geometric mean 
costs determines the applicability of the 2 times rule. Section 
1833(t)(2) of the Act provides that, subject to certain exceptions, the 
items and services within an APC group shall not be treated as 
comparable with respect to the use of resources if the highest median 
cost (or mean cost, if elected by the Secretary) for an item or service 
within the group is more than 2 times greater than the lowest median 
cost (or mean cost, if so elected) for an item or service within the 
same group (the 2 times rule). While we have historically applied the 2 
times rule based on median costs, as part of the CY 2013 proposal to 
develop the OPPS relative payment weights based on geometric mean 
costs, we also are proposing to apply the 2 times rule based on 
geometric mean costs. For a detailed discussion of the CY 2013 proposal 
to develop the APC relative payment weights based on geometric mean 
costs, we refer readers to section II.A.2.f. of this proposed 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 geometric mean cost to be 
significant. This longstanding definition of when a HCPCS code is 
significant for purposes of the 2 times rule was selected because we 
believe that a subset of 1,000 claims is negligible within the set of 
approximately 100 million single procedure or single session claims we 
use for establishing geometric mean costs. Similarly, a HCPCS code for 
which there are fewer than 99 single bills and which comprises less 
than 2 percent of the single major claims within an APC will have a 
negligible impact on the APC geometric mean. We note that this method 
of identifying significant HCPCS codes within an APC for purposes of 
the 2 times rule was used in prior years under the median-based cost 
methodology. Under our CY 2013 proposal to base the relative payment 
weights on geometric mean costs, we believe that this same 
consideration for identifying significant HCPCS codes should apply 
because the principles are consistent with their use in the median-
based system. Unlisted codes are not used in establishing the percent 
of claims contributing to the APC, nor are their costs used in the 
calculation of the APC geometric mean. Finally, we reviewed the 
geometric mean costs for the services for which we 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 geometric mean costs and for other 
reasons. The APC geometric means were recalculated after we reassigned 
the affected HCPCS codes. Both the HCPCS code-specific geometric means 
and the APC geometric means were weighted to account for the inclusion 
of multiple units of the bypass codes in the creation of ``pseudo'' 
single procedure claims.
    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 geometric mean costs 
are calculated using variations of the process outlined above. 
Specifically, section II.A.2.d. of this proposed rule addresses the 
calculation of single APC criteria-based geometric mean costs. Section 
II.A.2.e. of this proposed rule discusses the calculation of composite 
APC criteria-based geometric mean costs. Section VIII.B. of this 
proposed rule addresses the methodology for calculating the geometric 
mean costs for partial hospitalization services.
(2) Recommendations of the Advisory Panel on Hospital Outpatient 
Payment Regarding Data Development
    At the February 27-28, 2012 meeting of the Advisory Panel on 
Hospital Outpatient Payment (the Panel), we provided the Data 
Subcommittee with a list of all APCs fluctuating by greater than 10 
percent when comparing the CY 2012 OPPS final rule median costs based 
on CY 2010 claims processed through June 30, 2011, to those based on CY 
2011 OPPS/ASC final rule data (CY 2009 claims processed through June 
30, 2010). The Data Subcommittee reviewed the fluctuations in the APC 
median costs but did not express particular concerns with the median 
cost changes.
    At the February 27-28, 2012 Panel meeting, the Panel made a number 
of recommendations related to the data process. The Panel's 
recommendations and our responses follow.
    Recommendation 1: The Panel recommends that the work of the Data 
Subcommittee continue.
    CMS Response to Recommendation 1: We are accepting this 
recommendation.
    Recommendation 2: The Panel recommends that Kari S. Cornicelli, 
C.P.A., FHFMA, serve as acting chairperson for the winter 2012 meeting 
of the Data Subcommittee.
    CMS Response to Recommendation 2: We are accepting this 
recommendation.
d. Proposed Calculation of Single Procedure APC Criteria-Based Costs
(1) Device-Dependent APCs
    Device-dependent APCs are populated by HCPCS codes that usually, 
but not always, require that a device be implanted or used to perform 
the procedure. For a full history of how we have calculated payment 
rates for device-dependent APCs in previous years and a detailed 
discussion of how we developed the standard device-dependent APC 
ratesetting methodology, we refer readers to the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66739 through 66742). Overviews of the 
procedure-to-device edits and device-to-procedure edits used in 
ratesetting for device-dependent APCs are available in the CY 2005 OPPS 
final rule with comment period (69 FR 65761 through 65763) and the CY 
2007 OPPS/ASC final rule with comment period (71 FR 68070 through 
68071).
    For CY 2013, we are proposing to use the standard methodology for 
calculating costs for device-dependent APCs that was finalized in the 
CY 2012 OPPS/ASC final rule with comment period (76 FR 74148 through 
74151). This methodology utilizes claims data that generally represent 
the full cost of the required device and the most recent cost report 
data. Specifically, we are proposing to calculate the costs for device-
dependent APCs for CY 2013 using only the subset of single procedure 
claims from CY 2011 claims data that pass the procedure-to-device and 
device-to-procedure edits; do not contain token charges (less than 
$1.01) for devices; do not contain the ``FB'' modifier signifying that 
the device was

[[Page 45082]]

furnished without cost to the provider, 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 
costs for device-dependent APCs gives us the most appropriate costs for 
device-dependent APCs in which the hospital incurs the full cost of the 
device.
    Table 4A below lists the APCs for which we are proposing to use our 
standard device-dependent APC ratesetting methodology for CY 2013. We 
refer readers to Addendum A to this proposed rule (which is available 
via the Internet on the CMS Web site) for the proposed payment rates 
for these device-dependent APCs for CY 2013.

            Table 4A--Proposed CY 2013 Device-Dependent APCs
------------------------------------------------------------------------
                            Proposed CY 2013      Proposed CY 2013 APC
  Proposed CY 2013 APC      status indicator              title
------------------------------------------------------------------------
0039....................  S                     Level I Implantation of
                                                 Neurostimulator
                                                 Generator.
0040....................  S                     Level I Implantation/
                                                 Revision/Replacement of
                                                 Neurostimulator
                                                 Electrodes.
0061....................  S                     Level II Implantation/
                                                 Revision/Replacement of
                                                 Neurostimulator
                                                 Electrodes.
0082....................  T                     Coronary or Non-Coronary
                                                 Atherectomy.
0083....................  T                     Coronary Angioplasty,
                                                 Valvuloplasty, and
                                                 Level I Endovascular
                                                 Revascularization of
                                                 the Lower Extremity.
0084....................  S                     Level I
                                                 Electrophysiologic
                                                 Procedures.
0085....................  T                     Level II
                                                 Electrophysiologic
                                                 Procedures.
0086....................  T                     Level III
                                                 Electrophysiologic
                                                 Procedures.
0089....................  T                     Insertion/Replacement of
                                                 Permanent Pacemaker and
                                                 Electrodes.
0090....................  T                     Insertion/Replacement of
                                                 Pacemaker Pulse
                                                 Generator.
0104....................  T                     Transcatheter Placement
                                                 of Intracoronary
                                                 Stents.
0106....................  T                     Insertion/Replacement of
                                                 Pacemaker Leads and/or
                                                 Electrodes.
0107....................  T                     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 or Pacing
                                                 Electrode.
0656....................  T                     Transcatheter Placement
                                                 of Intracoronary Drug-
                                                 Eluting Stents.
0674....................  T                     Prostate Cryoablation.
0680....................  S                     Insertion of Patient
                                                 Activated Event
                                                 Recorders.
------------------------------------------------------------------------

(2) Blood and Blood Products

    Since the implementation of the OPPS in August 2000, we have made 
separate payments for blood and blood products through APCs rather than 
packaging payment for them into payments for the procedures with which 
they are administered. Hospital payments for the costs of blood and 
blood products, as well as for the costs of collecting, processing, and 
storing blood and blood products, are made through the OPPS payments 
for specific blood product APCs.
    For CY 2013, 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

[[Page 45083]]

report costs and charges for blood cost centers. We would then apply 
this mean ratio to the overall CCRs of hospitals not reporting costs 
and charges for blood cost centers on their cost reports in order to 
simulate blood-specific CCRs for those hospitals. We calculated the 
costs upon which the proposed CY 2013 payment rates for blood and blood 
products are based using the actual blood-specific CCR for hospitals 
that reported costs and charges for a blood cost center and a hospital-
specific simulated blood-specific CCR for hospitals that did not report 
costs and charges for a blood cost center. We note that we used 
geometric mean unit costs for each blood and blood product to calculate 
the proposed payment rates, consistent with the methodology proposed 
for other items and services, discussed in section II.A.2.f. of this 
proposed rule.
    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 2013 would result 
in costs for blood and blood products that appropriately reflect the 
relative estimated costs of these products for hospitals without blood 
cost centers and, therefore, for these blood products in general.
    We refer readers to Addendum B to this proposed rule (which is 
available via the Internet on the CMS Web site) for the proposed CY 
2013 payment rates for blood and blood products (which are identified 
with status indicator ``R''). For a more detailed discussion of the 
blood-specific CCR methodology, we refer readers to the CY 2005 OPPS 
proposed rule (69 FR 50524 through 50525). For a full history of OPPS 
payment for blood and blood products, we refer readers to the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66807 through 66810).
(3) 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 codebook to describe endovascular revascularization procedures of 
the lower extremity performed for occlusive disease. In the CY 2011 
OPPS/ASC final rule with comment period (75 FR 71841 through 71845), we 
discussed the process and methodology by which we assigned the CY 2011 
endovascular revascularization CPT codes to APCs that we believe are 
comparable with respect to clinical characteristics and resources 
required to furnish the services. Specifically, we were able to use the 
existing CY 2009 hospital outpatient claims data and the most recent 
cost report data to create simulated costs for 12 of the 16 new 
separately payable codes for CY 2011. Because the endovascular 
revascularization CPT codes were new for CY 2011, we used our CY 2009 
single and ``pseudo'' single claims data to simulate the new CY 2011 
CPT code definitions. As shown in Table 7 of the CY 2011 OPPS/ASC final 
rule with comment period (75 FR 71844), many of the new endovascular 
revascularization CPT codes were previously reported using a 
combination of CY 2009 CPT codes. In order to simulate costs, we 
selected claims that we believe met the definition for each of the new 
endovascular revascularization CPT codes. Table 7 showed the criteria 
we applied to select a claim to be used in the calculation of the costs 
for the new 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 the CY 2009 CPT codes that, in various combinations, 
reflect the services provided that are described by the new CPT codes 
for CY 2011.
    After determining the simulated costs for the procedures, we 
assigned each CPT code to appropriate APCs based on their clinical 
homogeneity and resource use. Of the 16 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 
(75 FR 71845) displayed their final CY 2011 APC assignments and CPT 
costs. We noted that, because these CPT codes were new for CY 2011, 
they were 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 CY 2011 and subject to public comment. 
We specifically requested public comment on our methodology for 
simulating the costs for these new CY 2011 CPT codes in addition to 
public comments on the payment rates themselves (75 FR 71845).
    As stated in the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74156), for CY 2012, we continued to use the CY 2011 methodology 
in determining the APC assignments for the CPT codes that describe 
endovascular revascularization of the lower extremity. Because previous 
endovascular revascularization CPT codes were in existence prior to CY 
2011 and assigned to designated APCs, we continued to use existing 
hospital outpatient claims and cost report data from established codes 
to simulate estimated costs for the endovascular revascularization CPT 
codes in determining the appropriate APC assignments for CY 2012, as we 
did for CY 2011. In the CY 2012 OPPS/ASC final rule with comment 
period, we also revised the title of APC 0083 from ``Coronary or Non-
Coronary Angioplasty and Percutaneous Valvuloplasty'' to ``Coronary 
Angioplasty, Valvuloplasty, and Level I Endovascular Revascularization 
of the Lower Extremity''; the title of APC 0229 from ``Transcatheter 
Placement of Intravascular Shunts 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''.
    Because the endovascular revascularization of the lower extremity 
CPT codes were new for CY 2011, CY 2013 is the first year of claims 
data that are available for ratesetting for these specific CPT codes. 
For CY 2013, review of the procedures with significant claims data in 
APCs 0083, 0229, and 0319 shows no 2 times rule violation in these 
APCs. We believe that the endovascular revascularization CPT codes in 
APCs 0083, 0229, and 0319 continue to be appropriately placed based on 
clinical homogeneity and resource costs. Therefore, for CY 2013, we are 
proposing to continue to assign the endovascular revascularization CPT 
codes to APCs 0083, 0229, and 0319, as listed in Table 4B below.

[[Page 45084]]

    Table 4B--Proposed APCs to Which Endovascular Revascularization of the Lower Extremity CPT Codes Would Be
                                              Assigned for CY 2013
----------------------------------------------------------------------------------------------------------------
                          CY 2012 short                                         Proposed CY 2013    Proposed CY
   CY 2012 CPT Code         descriptor         CY 2012 SI        CY 2012 APC           SI            2013 APC
----------------------------------------------------------------------------------------------------------------
37220.................  Iliac revasc.....  T                             0083  T                            0083
37221.................  Iliac revasc w/    T                             0229  T                            0229
                         stent.
37222.................  Iliac revasc add-  T                             0083  T                            0083
                         on.
37223.................  Iliac revasc w/    T                             0083  T                            0083
                         stent add-on.
37224.................  Fem/popl revas w/  T                             0083  T                            0083
                         tla.
37225.................  Fem/popl revas w/  T                             0229  T                            0229
                         ather.
37226.................  Fem/popl revasc w/ T                             0229  T                            0229
                         stent.
37227.................  Fem/popl revasc    T                             0319  T                            0319
                         stnt & ather.
37228.................  Tib/per revasc w/  T                             0083  T                            0083
                         tla.
37229.................  Tib/per revasc w/  T                             0229  T                            0229
                         ather.
37230.................  Tib/per revasc w/  T                             0229  T                            0229
                         stent.
37231.................  Tib/per revasc     T                             0319  T                            0319
                         stent & ather.
37232.................  Tib/per revasc     T                             0083  T                            0083
                         add-on.
37233.................  Tib/per revasc w/  T                             0229  T                            0229
                         ather add-on.
37234.................  Revsc opn/prq tib/ T                             0083  T                            0083
                         pero stent.
37235.................  Tib/per revasc     T                             0083  T                            0083
                         stnt & ather.
----------------------------------------------------------------------------------------------------------------

(4) Non-Congenital Cardiac Catheterization (APC 0080)
    For CY 2011, the AMA's CPT Editorial Panel restructured the Cardiac 
Catheterization section of the CPT codebook so that combinations of 
services that were previously reported using multiple codes are now 
reported with one CPT code. This revision deleted several non-
congenital cardiac catheterization-related CPT codes from the 93500 
series and created new CPT codes in the 93400 series and in the 93500 
series. We discussed these coding changes in detail in the CY 2011 
OPPS/ASC final rule with comment period (75 FR 71846 through 71849), 
along with the process by which we assigned the new CPT codes to APCs 
that we believe are comparable with respect to clinical characteristics 
and resources required to furnish the cardiac catheterization services 
described by the new CPT codes. As discussed in that final rule with 
comment period, we were able to use the existing CY 2009 hospital 
outpatient claims data and the most recent cost report data to create 
simulated costs for the new separately payable CPT codes for CY 2011. 
Specifically, to estimate the hospital costs associated with the 20 new 
non-congenital cardiac catheterization-related CPT codes based on their 
CY 2011 descriptors, we used claims and cost report data from CY 2009. 
Because of the substantive coding changes associated with the new non-
congenital cardiac catheterization-related CPT codes for CY 2011, we 
used our CY 2009 single and ``pseudo'' single claims data to simulate 
the new CY 2011 CPT code definitions. We stated that many of the new 
CPT codes were previously reported using multiple CY 2009 CPT codes, 
and we provided a crosswalk of the new CY 2011 cardiac catheterization 
CPT codes mapped to the CY 2009 cardiac catheterization CPT codes in 
Table 11 of the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71849). Table 11 showed the criteria we applied to select a claim to be 
used in the calculation of the cost for the new codes (shown in Column 
A). As we stated in the CY 2011 OPPS/ASC final rule with comment period 
(75 FR 71847 through 71848), we developed these criteria based on our 
clinicians' understanding of services that were reported by the CY 2009 
CPT codes that, in various combinations, reflect the services provided 
that are described in the new CPT codes. We used approximately 175,000 
claims for the new non-congenital catheterization-related CPT codes, 
together with the single and ``pseudo'' single procedure claims for the 
remaining non-congenital catheterization-related CPT codes in APC 0080 
(Diagnostic Cardiac Catheterization), to calculate CPT level costs and 
the cost for APC 0080 of approximately $2,698. We noted that, because 
the CPT codes listed in Table 11 were new for CY 2011, they were 
identified with comment indicator ``NI'' in Addendum B to that final 
rule with comment period to identify them as subject to public comment. 
We specifically requested public comment on our methodology for 
simulating the costs for these new CY 2011 CPT codes, in addition to 
public comments on the payment rates themselves (75 FR 71848).
    For CY 2012, we continued to use the CY 2011 methodology in 
determining the APC assignments for the new cardiac catheterization CPT 
codes. That is, we continued to use the CY 2011 methodology in 
determining the APC assignments for the cardiac catheterization CPT 
codes by using the existing hospital outpatient claims and the cost 
report data from the predecessor cardiac catheterization CPT codes to 
simulate an estimated cost for the new cardiac catheterization CPT 
codes in determining the appropriate APC assignments. Specifically, we 
used the CY 2010 hospital outpatient claims data and the most recent 
cost report data to create simulated costs for the new separately 
payable CPT codes for CY 2012 to determine the payment rates for the 
cardiac catheterization CPT codes. For CY 2012, we did not make any 
changes to the CY 2011 APC assignments of any of the codes assigned to 
APC 0080 because the claims data supported continuation of these APC 
assignments.
    Because the cardiac catheterization CPT codes were new for CY 2011, 
CY 2013 is the first year of claims data that are available for 
ratesetting for these specific CPT codes. For CY 2013, our analysis of 
the CY 2011 claims data available for this proposed rule shows no 
violation in the 2 times rule for the cardiac catheterization CPT codes 
because the lowest cost of a CPT code with significant claims data in 
APC 0080 is approximately $1,716 (for CPT code 93451), while the 
highest cost of a CPT code with significant claims data is 
approximately $3,308 (for CPT code 93461). We believe that the cardiac 
catheterization CPT codes continue to be appropriately placed in APC 
0080 based on clinical homogeneity and resource costs. Therefore, for 
CY 2013, we are proposing to continue to assign the cardiac 
catheterization CPT codes to APC 0080 as listed below in Table 5.

[[Page 45085]]

 Table 5--Proposed APCs to Which Non-Congenital Cardiac Catheterization CPT Codes Would Be Assigned for CY 2013
----------------------------------------------------------------------------------------------------------------
                          CY 2012 short                                         Proposed CY 2013    Proposed CY
  CY 2012 HCPCS code        descriptor         CY 2012 SI        CY 2012 APC           SI            2013 APC
----------------------------------------------------------------------------------------------------------------
93451.................  Right heart cath.  T                             0080  T                            0080
93452.................  Left hrt cath w/   T                             0080  T                            0080
                         ventrclgrphy.
93453.................  R&l hrt cath w/    T                             0080  T                            0080
                         ventriclgrphy.
93454.................  Coronary artery    T                             0080  T                            0080
                         angio s&i.
93455.................  Coronary art/grft  T                             0080  T                            0080
                         angio s&i.
93456.................  R hrt coronary     T                             0080  T                            0080
                         artery angio.
93457.................  R hrt art/grft     T                             0080  T                            0080
                         angio.
93458.................  L hrt artery/      T                             0080  T                            0080
                         ventricle angio.
93459.................  L hrt art/grft     T                             0080  T                            0080
                         angio.
93460.................  R&l hrt art/       T                             0080  T                            0080
                         ventricle angio.
93461.................  R&l hrt art/       T                             0080  T                            0080
                         ventricle angio.
93462.................  L hrt cath         T                             0080  T                            0080
                         trnsptl puncture.
93463.................  Drug admin &       N                               NA  N                              NA
                         hemodynamic meas.
93464.................  Exercise w/        N                               NA  N                              NA
                         hemodynamic meas.
93565.................  Inject l ventr/    N                               NA  N                              NA
                         atrial angio.
93566.................  Inject r ventr/    N                               NA  N                              NA
                         atrial angio.
93567.................  Inject suprvlv     N                               NA  N                              NA
                         aortography.
93568.................  Inject pulm art    N                               NA  N                              NA
                         hrt cath.
----------------------------------------------------------------------------------------------------------------

(5) Computed Tomography of Abdomen/Pelvis (APCs 0331 and 0334)
    For CY 2011, the AMA's CPT Editorial Panel established three new 
codes to describe computed tomography of the abdomen and pelvis. CPT 
codes 74176 (Computed tomography, abdomen and pelvis; without contrast 
material), 74177 (Computed tomography, abdomen and pelvis; with 
contrast material(s)), and 74178 (Computed tomography, abdomen and 
pelvis; without contrast material in one or both body regions, followed 
by contrast material(s) and further sections in one or both body 
regions) were effective January 1, 2011. As shown in Table 6, for CY 
2011, these services were paid in one of two methods under the hospital 
OPPS. They were either paid separately through a single APC or through 
a composite APC. We assigned CPT code 74176 to APC 0332 (Computed 
Tomography Without Contrast), CPT code 74177 to APC 0283 (Computed 
Tomography With Contrast), and CPT code 74178 to APC 0333 (Computed 
Tomography Without Contrast Followed By Contrast). We also assigned CPT 
code 74176 to composite APC 8005 (CT and CTA Without Contrast 
Composite), and CPT codes 74177 and 74178 to composite 8006 (CT and CTA 
With Contrast Composite). We assigned the codes to status indicator 
``Q3'' to indicate that the codes were eligible for composite payment 
under the multiple imaging composite APC methodology when they are 
furnished with other computed tomography procedures to the same patient 
on the same day.
    Consistent with our longstanding policy for new codes, we assigned 
these codes to interim APCs for CY 2011, with comment indicator ``NI'' 
in Addendum B of the CY 2011 OPPS/ASC final rule with comment period 
denoting that the codes were new with an interim APC assignment on 
which comments would be accepted. In accordance with our longstanding 
policy to provide codes to enable payment to be made for new services 
as soon as the code is effective, our interim APC assignments for each 
code were based on our understanding of the resources required to 
furnish the services and their clinical characteristics as defined in 
the code descriptors.

                            Table 6--CY 2011 OPPS APC Assignments for the Computed Tomography of Abdomen and Pelvis CPT Codes
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                              CY 2011
                                                                                          CY 2011 single    single code       CY 2011         CY 2011
           CY 2011  CPT Code                CY 2011 short descriptor        CY 2011 SI       code APC       APC payment    composite APC   composite APC
                                                                                                               rate                        payment rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
74176.................................  Ct abd & pelvis.................              Q3            0332         $193.85            8005         $420.85
74177.................................  Ct abd & pelv w/contrast........              Q3            0283          299.81            8006          628.61
74178.................................  Ct abd & pelv 1/ASC final rule with comment 
period (76 FR 74259), in general, stakeholders who provided comments on 
the interim assignments of these codes for CY 2011 stated that the most 
appropriate approach to establishing payment for these new codes was 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 services 
under the OPPS if we were to establish payment rates for the codes for 
CY 2012 using claims data that reflect the combined cost of the two 
predecessor codes. In addition, at the February 28-March 1, 2011 Panel 
meeting, several presenters reported their concern and disagreement 
with our single APC assignments for these new codes. The presenters 
stated that the payment rates for the single APC assignments reflected 
only half of the true costs of these services based on their internal 
calculated costs. Similar to the public commenters, the

[[Page 45086]]

presenters indicated that, prior to CY 2011, these services were 
reported using a combination of codes, and suggested that CMS revise 
the methodology to include these combinations of codes to determine 
accurate payment rates for these services. Specifically, the presenters 
indicated that simulating the costs for CPT codes 74176, 74177, and 
74178 using historical claims data from the predecessor codes would 
result in the best estimates of costs for these codes and, therefore, 
the most accurate payment rates.
    After examination of our claims data for the predecessor codes, and 
after considering the various concerns and recommendations that we 
received on this issue (specifically, the views of the stakeholders who 
met with us to discuss this issue, the comments received in response to 
the CY 2011 OPPS/ASC final rule with public comment period, and input 
from the Panel at its February 28-March 1, 2011 meeting), we proposed 
to revise our payment methodology for CPT codes 74176, 74177, and 74178 
for CY 2012 (76 FR 42235). That is, we proposed to simulate the costs 
for CPT codes 74176, 74177, and 74178 using historical claims data from 
the predecessor codes to determine the most accurate payment rates for 
these codes. This new proposed payment methodology necessitated 
establishing two new APCs, specifically, APC 0331 (Combined Abdominal 
and Pelvis CT Without Contrast) to which CPT code 74176 would be 
assigned, and APC 0334 (Combined Abdominal and Pelvis CT With Contrast) 
to which CPT codes 74177 and 74178 would be assigned. In addition, we 
proposed to continue to assign CPT code 74176 to composite APC 8005 and 
CPT codes 74177 and 74178 to composite APC 8006 for CY 2012.
    Based on the feedback that we received from the Panel at its August 
10-11, 2011 meeting, and the public comments received on the CY 2012 
OPPS/ASC proposed rule in support of the proposed revised payment 
methodology for CPT codes 74176, 74177, and 74178, we finalized our 
proposals in the CY 2012 OPPS/ASC final rule with comment period. 
Specifically, we reassigned CPT code 74176 from APC 0332 to APC 0331, 
CPT code 74177 from APC 0283 to APC 0334, and CPT code 74178 from APC 
0333 to APC 0334. (We refer readers to the CY 2012 OPPS/ASC final rule 
with comment period for a detailed description of the methodology we 
used to simulate the costs of these procedures using claims data for 
the predecessor CPT codes (76 FR 74259 through 74262).) We also 
continued with our composite APC assignments for these codes. 
Specifically, we continued to assign CPT code 74176 to composite APC 
8005 and CPT codes 74177 and 74178 to composite APC 8006. Table 7 below 
shows the payment rates for these codes for the CY 2012 update.

                            Table 7--CY 2012 OPPS APC Assignments for the Computed Tomography of Abdomen and Pelvis CPT Codes
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                              CY 2012
                                                                                              CY 2012       single code       CY 2012         CY 2012
       CY 2012  CPT Code          CY 2012 short descriptor           CY 2012  SI            single code     APC payment    composite APC   composite APC
                                                                                                APC            rate                        payment rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
74176..........................  Ct abd & pelvis...........  Q3                                     0331         $405.17            8005         $431.60
74177..........................  Ct abd & pelv w/contrast..  Q3                                     0334          580.54            8006          721.12
74178..........................  Ct abd & pelv 1/ASC final rule with comment period 
(76 FR 74262) that we would reassess whether there is a continued need 
for these APCs for the CY 2013 OPPS/ASC update once we have actual 
charges for these services. Because CPT codes 74176, 74177, and 74178 
became effective on January 1, 2011, we have hospital claims data 
available for these codes that we can use for ratesetting for the first 
time. Analysis of the latest CY 2011 hospital outpatient claims data 
for the CY 2013 OPPS/ASC proposed rulemaking update, which is based on 
claims processed with dates of service from January 1, 2011 through 
December 31, 2011, reveals a decrease in costs for the three 
procedures, compared to the costs simulated using predecessor CPT codes 
for CY 2012. CPT code 74176 shows a cost of approximately $314 based on 
312,493 single claims (out of 713,662 total claims), while CPT code 
74177 reveals a cost of approximately $476 based on 367,002 single 
claims (out of 951,296 total claims). In addition, CPT code 74178 shows 
a cost of approximately $537 based on 184,580 single claims (out of 
267,401 total claims). Because we used hospital claims data specific to 
CPT codes 74176, 74177, and 74178, we believe these costs accurately 
reflect the resources associated with providing computed tomography of 
the abdomen and pelvis as described by these CPT codes in the HOPD.
    Furthermore, our analysis of the CY 2011 claims data available for 
this proposed rule shows no 2 times rule violation for either APC 0331 
or APC 0334. Therefore, for CY 2013, we are proposing to continue to 
assign CPT code 74176 to APC 0331 and CPT codes 74177 and 74178 to APC 
0334. (Because we have claims data available for these three CPT codes, 
we will no longer simulate their costs using predecessor codes as we 
did in CY 2012.) In addition, we are proposing to continue to assign 
these codes to their existing composite APCs for CY 2013. Specifically, 
we are proposing to continue to assign CPT code 74176 to composite APC 
8005, and to assign CPT codes 74177 and 74178 to composite APC 8006. 
Table 8 below lists the computed tomography of the abdomen and pelvis 
CPT codes along with their proposed status indicators, and single and 
composite APC assignments for CY 2013.

[[Page 45087]]

    Table 8--Proposed APC Assignments for the Computed Tomography of Abdomen and Pelvis CPT Codes for CY 2013
----------------------------------------------------------------------------------------------------------------
                                                                                    Proposed CY    Proposed  CY
       CY 2012 CPT Code             CY 2012 short          Proposed CY 2013 SI      2013 single   2013 composite
                                      descriptor                                     code APC           APC
----------------------------------------------------------------------------------------------------------------
74176........................  Ct abd & pelvis........  Q3                                  0331            8005
74177........................  Ct abd & pelv w/         Q3                                  0334            8006
                                contrast.
74178........................  Ct abd & pelv 1/> regns  Q3                                  0334            8006
----------------------------------------------------------------------------------------------------------------

 (6) Brachytherapy Sources
    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. For the history of 
OPPS payment for brachytherapy sources, we refer readers to prior OPPS 
proposed and final rules. As we have stated previously (72 FR 66780, 73 
FR 41502, 74 FR 60533 through 60534, 75 FR 71978, and 76 FR 74160), we 
believe that adopting the general OPPS prospective payment methodology 
for brachytherapy sources is appropriate for a number of reasons. The 
general OPPS payment methodology uses costs based on claims data to set 
the relative payment weights for hospital outpatient services. This 
payment methodology results in more consistent, predictable, and 
equitable payment amounts per source across hospitals by averaging the 
extremely high and low values, in contrast to payment based on 
hospitals' charges adjusted to cost. We believe that the OPPS 
prospective payment methodology, as opposed to payment based on 
hospitals' charges adjusted to cost, 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.
    Therefore, for CY 2013, we are proposing to use the costs from CY 
2011 claims data for setting the proposed CY 2013 payment rates for 
brachytherapy sources, as we are proposing for most other items and 
services that would be paid under the CY 2013 OPPS. We based the 
proposed rates for brachytherapy sources using geometric mean unit 
costs for each source, consistent with the methodology proposed for 
other items and services, discussed in section II.A.2.f. of this 
proposed rule. 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 period (72 FR 66785). 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 Pub. 
L. 110-275). That policy is intended to enable us to assign new HCPCS 
codes for new brachytherapy sources to their own APCs, with prospective 
payment rates set based on our consideration of external data and other 
relevant information regarding the expected costs of the sources to 
hospitals.
    Consistent with our policy regarding APC payments made on a 
prospective basis, as we did for CY 2011 and CY 2012, we 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 
specified at 42 CFR 419.43(d). In addition, implementation of 
prospective payment for brachytherapy sources provides opportunities 
for eligible hospitals to receive additional payments in CY 2013 under 
certain circumstances through the 7.1 percent rural adjustment, as 
described in section II.E. of this proposed rule.
    We refer readers to Addendum B to this proposed rule (which is 
available via the Internet on the CMS Web site) for the proposed CY 
2013 payment rates for brachytherapy sources, identified with status 
indicator ``U''. We are inviting public comment on this proposed policy 
and also requesting recommendations 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 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

[[Page 45088]]

which may be low in volume and/or incorrectly coded. Under the OPPS, we 
currently have composite policies for extended assessment and 
management services, low dose rate (LDR) prostate brachytherapy, 
cardiac electrophysiologic evaluation and ablation services, mental 
health services, multiple imaging services, and cardiac 
resynchronization therapy services. We refer readers to the CY 2008 
OPPS/ASC final rule with comment period for a full discussion of the 
development of the composite APC methodology (72 FR 66611 through 66614 
and 66650 through 66652) and the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74163) for more recent background.
    For CY 2013, we are proposing to continue our composite policies 
for extended assessment and management services, LDR prostate 
brachytherapy, cardiac electrophysiologic evaluation and ablation 
services, mental health services, multiple imaging services, and 
cardiac resynchronization therapy services, as discussed in sections 
II.A.2.e.(1), II.A.2.e.(2), II.A.2.e.(3), II.A.2.e.(4), II.A.2.e.(5), 
and II.A.2.e.(6), respectively, of this proposed rule.
(1) Extended Assessment and Management Composite APCs (APCs 8002 and 
8003)
    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 2013. Beginning in CY 2008, we created these two composite APCs to 
provide payment to hospitals in certain circumstances when extended 
assessment and management of a patient occur (an extended visit). In 
most circumstances, observation services are supportive and ancillary 
to the other services provided to a patient. In the circumstances when 
observation care is provided in conjunction with a high level visit or 
direct referral and is an integral part of a patient's extended 
encounter of care, payment is made for the entire care encounter 
through one of the two composite APCs as appropriate. We refer readers 
to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163 
through 74165) for a full discussion of this longstanding policy.
    For CY 2013, we are proposing to continue the extended assessment 
and management composite APC payment methodology and criteria for APCs 
8002 and 8003 that we finalized for CYs 2009 through 2012. We continue 
to believe that the composite APCs 8002 and 8003 and related policies 
provide the most appropriate means of paying for these services. We 
also are proposing to calculate the costs for APCs 8002 and 8003 using 
the same methodology that we used to calculate the costs for composite 
APCs 8002 and 8003 for the CY 2008 OPPS (72 FR 66649). That is, we are 
proposing to use all single and ``pseudo'' single procedure claims from 
CY 2011 that met the criteria for payment of each composite APC and 
apply the standard packaging and trimming rules to the claims before 
calculating the proposed CY 2013 costs. The proposed CY 2013 cost 
resulting from this methodology for composite APC 8002 is approximately 
$446, which was calculated from 17,072 single and ``pseudo'' single 
bills that met the required criteria. The proposed CY 2013 cost for 
composite APC 8003 is approximately $813, which was calculated from 
255,231 single and ``pseudo'' single bills that met the required 
criteria.
    At its February 2012 meeting, the Advisory Panel on Hospital 
Outpatient Payment (the Panel) recommended that CMS continue to report 
clinic/emergency department visit and observation claims data and, if 
CMS identifies changes in patterns of utilization or cost, that CMS 
bring those issues to the Visits and Observation Subcommittee. 
Additionally, the Panel recommended that CMS examine data for discharge 
status, point of entry, age, primary and secondary diagnoses, and type 
of hospital (teaching, nonteaching, rural, urban) for patients 
receiving greater than 48 hours of observation services, if available, 
and report the findings to the Visits and Observation Subcommittee. The 
Panel recommended that the Visits and Observation Subcommittee review 
claims data for HCPCS code G0379 (Direct referral of patient for 
hospital observation care), and consider the appropriate APC group for 
the code. The Panel also recommended that the results of CMS' study on 
unconditionally packaged HCPCS code G0378 (Hospital observation 
service, per hour) be presented to the Visits and Observation 
Subcommittee. The Panel recommended that the work of the Visits and 
Observation Subcommittee continue. We are accepting these 
recommendations and will provide the requested data to the Panel at a 
future meeting.
(2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001)
    LDR prostate brachytherapy is a treatment for prostate cancer in 
which hollow needles or catheters are inserted into the prostate, 
followed by permanent implantation of radioactive sources into the 
prostate through the needles/catheters. At least two CPT codes are used 
to report the composite treatment service because there are separate 
codes that describe placement of the needles/catheters and the 
application of the brachytherapy sources: CPT code 55875 (Transperineal 
placement of needles or catheters into prostate for interstitial 
radioelement application, with or without cystoscopy) and CPT code 
77778 (Interstitial radiation source application; complex), which are 
generally present together on claims for the same date of service in 
the same operative session. In order to base payment on claims for the 
most common clinical scenario, and to further our goal of providing 
payment under the OPPS for a larger bundle of component services 
provided in a single hospital encounter, beginning in CY 2008, we began 
providing a single payment for LDR prostate brachytherapy when the 
composite service, reported as CPT codes 55875 and 77778, is furnished 
in a single hospital encounter. We based the payment for composite APC 
8001 (LDR Prostate Brachytherapy Composite) on the cost derived from 
claims for the same date of service that contain both CPT codes 55875 
and 77778 and that do not contain other separately paid codes that are 
not on the bypass list. We refer 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 2013, we are proposing to continue to pay for LDR prostate 
brachytherapy services using the composite APC methodology proposed and 
implemented for CY 2008 through CY 2012. That is, we are proposing to 
use CY 2011 claims on which both CPT codes 55875 and 77778 were billed 
on the same date of service with no other separately paid procedure 
codes (other than those on the bypass list) to calculate the payment 
rate for composite APC 8001. Consistent with our CY 2008 through CY 
2012 practice, we are proposing not to use the claims that meet these 
criteria in the calculation of the 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. We are proposing that the 
costs for APCs 0163 and 0651 continue

[[Page 45089]]

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 cost upon which to base the composite APC payment rate.
    Using a partial year of CY 2011 claims data available for this CY 
2013 proposed rule, we were able to use 650 claims that contained both 
CPT codes 55875 and 77778 to calculate the cost upon which the proposed 
CY 2013 payment for composite APC 8001 is based. The proposed cost for 
composite APC 8001 for CY 2013 is approximately $3,362.
(3) Cardiac Electrophysiologic Evaluation and Ablation Composite APC 
(APC 8000)
    Effective January 1, 2008, we established APC 8000 (Cardiac 
Electrophysiologic Evaluation and Ablation Composite) to pay for a 
composite service made up of at least one specified electrophysiologic 
evaluation service and one specified electrophysiologic ablation 
service. Correctly coded claims for these services often include 
multiple codes for component services that are reported with different 
CPT codes and that, prior to CY 2008, were always paid separately 
through different APCs (specifically, APC 0085 (Level II 
Electrophysiologic Evaluation), APC 0086 (Ablate Heart Dysrhythm 
Focus), and APC 0087 (Cardiac Electrophysiologic Recording/Mapping)). 
Calculating a composite APC for these services allowed us to utilize 
many more claims than were available to establish the individual APC 
costs for these services, and advanced our stated goal of promoting 
hospital efficiency through larger payment bundles. In order to 
calculate the cost upon which the payment rate for composite APC 8000 
is based, we used multiple procedure claims that contained at least one 
CPT code from Group A for evaluation services and at least one CPT code 
from Group B for ablation services reported on the same date of service 
on an individual claim. Table 9 in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66656) identified the CPT codes that are assigned 
to Groups A and B. For a full discussion of how we identified the Group 
A and Group B procedures and established the payment rate for the 
cardiac electrophysiologic evaluation and ablation composite APC, we 
refer readers to the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66655 through 66659). Where a service in Group A is furnished on 
a date of service that is different from the date of service for a 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 2013, 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 2012. 
We continue to believe that the cost for these services calculated from 
a high volume of correctly coded multiple procedure claims would result 
in an accurate and appropriate proposed payment for cardiac 
electrophysiologic evaluation and ablation services when at least one 
evaluation service is furnished during the same clinical encounter as 
at least one ablation service. Consistent with our CY 2008 through CY 
2012 practice, we are proposing not to use the claims that meet the 
composite payment criteria in the calculation of the costs for APCs 
0085 and 0086, to which the CPT codes in both Groups A and B for 
composite APC 8000 are otherwise assigned. The costs for APCs 0085 and 
0086 would continue to be calculated using single procedure claims.
    For CY 2013, using a partial year of CY 2011 claims data available 
for this proposed rule, we were able to use 11,358 claims containing a 
combination of Group A and Group B codes to calculate a proposed cost 
of approximately $11,458 for composite APC 8000.
    Table 9 below lists the proposed groups of procedures upon which we 
would base composite APC 8000 for CY 2013.

 Table 9--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    CY 2012  CPT   single code CY   Proposed CY 2013 SI (composite)
          Group A and one in Group B                Code          2013 APC
----------------------------------------------------------------------------------------------------------------
                                                     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.
----------------------------------------------------------------------------------------------------------------

[[Page 45090]]

 (4) Mental Health Services Composite APC (APC 0034)
    For CY 2013, 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 treatments for CY 
2013. We refer readers to the April 7, 2000 OPPS final rule with 
comment period (65 FR 18452 to 18455) for the initial discussion of 
this longstanding policy and the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74168) for more recent background.
    Specifically, we are proposing that when the aggregate payment for 
specified mental health services provided by one hospital to a single 
beneficiary on one date of service based on the payment rates 
associated with the APCs for the individual services exceeds the 
maximum per diem partial hospitalization payment, those specified 
mental health services would be assigned to APC 0034 (Mental Health 
Services Composite). We are proposing to continue to set the payment 
rate for APC 0034 at the same rate as we are proposing to pay for APC 
0176 (Level II Partial Hospitalization (4 or more services) for 
Hospital-Based PHPs), which is the maximum partial hospitalization per 
diem payment, and that the hospital would continue to be paid one unit 
of APC 0034. Under this proposal, the I/OCE would continue to determine 
whether to pay for these specified mental health services individually 
or make a single payment at the same rate as the APC 0176 per diem rate 
for partial hospitalization for all of the specified mental health 
services furnished by the hospital on that single date of service. We 
continue to believe that the costs associated with administering a 
partial hospitalization program represent the most resource-intensive 
of all outpatient mental health treatments. Therefore, we do not 
believe that we should pay more for services under the OPPS than the 
partial hospitalization per diem rate.
(5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 
8008)
    Effective January 1, 2009, we provide a single payment each time a 
hospital bills more than one imaging procedure within an imaging family 
on the same date of service, in order to reflect and promote the 
efficiencies hospitals can achieve when performing multiple imaging 
procedures during a single session (73 FR 41448 through 41450). We 
utilize three imaging families based on imaging modality for purposes 
of this methodology: (1) Ultrasound; (2) computed tomography (CT) and 
computed tomographic angiography (CTA); and (3) magnetic resonance 
imaging (MRI) and magnetic resonance angiography (MRA). The HCPCS codes 
subject to the multiple imaging composite policy and their respective 
families are listed in Table 8 of the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74171 through 74175).
    While there are three imaging families, there are five multiple 
imaging composite APCs due to the statutory requirement 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.
    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).
    For CY 2013, we are proposing to continue to pay for all multiple 
imaging procedures within an imaging family performed on the same date 
of service using the multiple imaging composite payment methodology. We 
continue to believe that this policy would continue to reflect and 
promote the efficiencies hospitals can achieve when performing multiple 
imaging procedures during a single session. The proposed CY 2013 
payment rates for the five multiple imaging composite APCs (APC 8004, 
APC 8005, APC 8006, APC 8007, and APC 8008) are based on costs 
calculated from a partial year of CY 2011 claims available for this CY 
2013 OPPS/ASC proposed rule that qualified for composite payment under 
the current policy (that is, those claims with more than one procedure 
within the same family on a single date of service). To calculate the 
proposed costs, we used the same methodology that we used to calculate 
the final CY 2012 costs for these composite APCs, as described in the 
CY 2012 OPPS/ASC final rule with comment period (76 FR 74169). The 
imaging HCPCS codes that we removed from the bypass list for purposes 
of calculating the proposed multiple imaging composite APC costs, 
pursuant to our established methodology (76 FR 74169), appear in Table 
11 of this proposed rule.
    We were able to identify approximately 1.0 million ``single 
session'' claims out of an estimated 1.5 million potential composite 
cases from our ratesetting claims data, more than half of all eligible 
claims, to calculate the proposed CY 2013 costs for the multiple 
imaging composite APCs.
    Table 10 below lists the proposed HCPCS codes that would be subject 
to the multiple imaging composite policy and their respective families 
and approximate proposed composite APC costs for CY 2013. Table 11 
below lists the OPPS imaging family services that overlap with HCPCS 
codes on the proposed CY 2013 bypass list.

[[Page 45091]]

 Table 10--Proposed OPPS IMaging Families and Multiple Imaging Procedure
                             Composite APCs
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                          Family 1--Ultrasound
------------------------------------------------------------------------
  Proposed CY 2013 APC 8004     Proposed CY 2013 Approximate APC Cost =
    (Ultrasound Composite)                        $201
------------------------------------------------------------------------
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 2013 APC 8005 (CT   Proposed CY 2013 Approximate APC Cost =
   and CTA without Contrast                       $412
         Composite)*
------------------------------------------------------------------------
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 2013 APC 8006 (CT   Proposed CY 2013 Approximate APC Cost =
    and CTA with Contrast                         $700
          Composite)
------------------------------------------------------------------------
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.
------------------------------------------------------------------------

[[Page 45092]]

 
* 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 2013 APC 8007           Proposed CY 2013 Approximate
(MRI and MRA without Contrast  APC Cost = $725
         Composite)*
------------------------------------------------------------------------
70336........................  Magnetic image, jaw joint.
70540........................  Mri orbit/face/neck w/o dye.
70544........................  Mr angiography head w/o dye.
70547........................  Mr angiography neck w/o dye.
70551........................  Mri brain w/o dye.
70554........................  Fmri brain by tech.
71550........................  Mri chest w/o dye.
72141........................  Mri neck spine w/o dye.
72146........................  Mri chest spine w/o dye.
72148........................  Mri lumbar spine w/o dye.
72195........................  Mri pelvis w/o dye.
73218........................  Mri upper extremity w/o dye.
73221........................  Mri joint upr extrem w/o dye.
73718........................  Mri lower extremity w/o dye.
73721........................  Mri jnt of lwr extre w/o dye.
74181........................  Mri abdomen w/o dye.
75557........................  Cardiac mri for morph.
75559........................  Cardiac mri w/stress img.
C8901........................  MRA w/o cont, abd.
C8904........................  MRI w/o cont, breast, uni.
C8907........................  MRI w/o cont, breast, bi.
C8910........................  MRA w/o cont, chest.
C8913........................  MRA w/o cont, lwr ext.
C8919........................  MRA w/o cont, pelvis.
C8932........................  MRA, w/o dye, spinal canal.
C8935........................  MRA, w/o dye, upper extr.
------------------------------------------------------------------------
  Proposed CY 2013 APC 8008           Proposed CY 2013 Approximate
  (MRI and MRA with Contrast   APC Cost = $1,066
          Composite)
------------------------------------------------------------------------
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.

[[Page 45093]]

 
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 APC 8007.
------------------------------------------------------------------------

 Table 11--Proposed OPPS Imaging Family Services Overlapping With HCPCS
                    Codes on the CY 2013 Bypass List
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                          Family 1--Ultrasound
------------------------------------------------------------------------
76700..........................  Us exam, abdom, complete.
76705..........................  Echo exam of abdomen.
76770..........................  Us exam abdo back wall, comp.
76775..........................  Us exam abdo back wall, lim.
76776..........................  Us exam k transpl w/Doppler.
76856..........................  Us exam, pelvic, complete.
76870..........................  Us exam, scrotum.
76857..........................  Us exam, pelvic, limited.
------------------------------------------------------------------------
             Family 2--CT and CTA with and without Contrast
------------------------------------------------------------------------
70450..........................  Ct head/brain w/o dye.
70480..........................  Ct orbit/ear/fossa w/o dye.
70486..........................  Ct maxillofacial w/o dye.
70490..........................  Ct soft tissue neck w/o dye.
71250..........................  Ct thorax w/o dye.
72125..........................  Ct neck spine w/o dye.
72128..........................  Ct chest spine w/o dye.
72131..........................  Ct lumbar spine w/o dye.
72192..........................  Ct pelvis w/o dye.
73200..........................  Ct upper extremity w/o dye.
73700..........................  Ct lower extremity w/o dye.
74150..........................  Ct abdomen w/o dye.
------------------------------------------------------------------------
             Family 3--MRI and MRA with and without Contrast
------------------------------------------------------------------------
70336..........................  Magnetic image, jaw joint.
70544..........................  Mri 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 (APC 0108)
    Cardiac resynchronization therapy (CRT) uses electronic devices to 
sequentially pace both sides of the heart to improve its output. CRT 
utilizing a pacing electrode implanted in combination with an 
implantable cardioverter defibrillator (ICD) is known as CRT-D. 
Hospitals commonly report the implantation of a CRT-D system using CPT 
codes 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 33249 (Insertion or repositioning of electrode lead(s) 
for single or dual chamber pacing cardioverter-defibrillator and 
insertion of pulse generator). As described in the CY 2012 OPPS/ASC 
final rule with comment period (76 FR 74176), over the past several 
years, stakeholders have pointed out significant fluctuations in the 
payment rate for CPT code 33225 and that, because the definition of CPT 
code 33225 specifies that the pacing electrode is inserted at the same 
time as an ICD or pacemaker, CMS would not have many valid claims upon 
which to calculate an accurate cost. In response to these concerns, we 
established a policy beginning in CY 2012 to recognize CPT codes 33225 
and 33249 as a single, composite service when the procedures are 
performed on the same day and to assign them to APC 0108 (Insertion/
Replacement/Repair of AICD Leads, Generator, and Pacing Electrodes) 
when they appear together on a claim with the same date of service. We 
refer readers to the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74176 through 74182) for a full description of how we developed 
this policy.
    As described in the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74182), hospitals continue to use the same CPT codes to report 
CRT-D implantation services, and the I/OCE will identify when the 
combination of CPT codes 33225 and 33249 on the same day qualify for 
composite service payment. We make a single composite payment for such 
cases. When not performed on the same day as the service described by 
CPT code 33225, the service described by CPT code 33249 is also 
assigned to APC 0108. When not performed on the same day as the service 
described by CPT code 33249, the service described by CPT code 33225 is 
assigned to APC 0655.
    We refer readers to the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74176 through 74182) for a full description of how we 
developed this policy.
    In order to ensure that hospitals correctly code for CRT services 
in the future, we also finalized a policy in the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74182) to implement claims processing 
edits that will return to providers incorrectly coded claims on which a 
pacing electrode insertion (the procedure described by CPT code 33225) 
is billed without one of the following procedures to insert an ICD or 
pacemaker, as specified by the AMA in the CPT codebook:
     33206 (Insertion or replacement of permanent pacemaker 
with transvenous electrode(s); atrial);
     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);

[[Page 45094]]

     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).
    For CY 2013, we are proposing to continue to recognize CRT-D as a 
single, composite service as described above and finalized in the CY 
2012 OPPS/ASC final rule with comment period. By continuing to 
recognize these procedures as a single, composite service, we are able 
to use a higher volume of correctly coded claims for CPT code 33225, 
which, because of its add-on code status, is always performed in 
conjunction with another procedure and, therefore, to address the 
inherent ratesetting challenges associated with CPT code 33225. We also 
note that this policy is consistent with the principles of a 
prospective payment system, specifically to place similar services that 
utilize technologies with varying costs in the same APC in order to 
promote efficiency and decision making based on individual patient's 
clinical needs rather than financial considerations. In calculating the 
costs upon which the payment rate for APC 0108 is based for CY 2013, 
for this proposed rule, we included single procedure claims for the 
individual services assigned to APC 0108, as well as single procedure 
claims that contain the composite CRT-D service, defined as the 
combination of CPT codes 33225 and 33249 with the same date of service. 
We were able to use 9,790 single bills from the CY 2013 proposed rule 
claims data to calculate a proposed cost of approximately $31,491 for 
APC 0108. Because CPT codes 33225 and 33249 may be treated as a 
composite service for payment purposes, we are proposing to continue to 
assign them status indicator ``Q3'' (Codes that may be paid through a 
composite APC) in Addendum B to this proposed rule. The assignment of 
CPT codes 33225 and 33249 to APC 0108 when treated as a composite 
service is also reflected in Addendum M to this proposed rule (which is 
available via the Internet on the CMS Web site).
    We note that we have revised the claims processing edits in place 
for CPT code 33225 due to revised guidance from the AMA in the CPT code 
book specifying the codes that should be used in conjunction with CPT 
code 33225. Specifically, on February 27, 2012, the AMA posted a 
correction as errata to the CY 2012 CPT code book on the AMA web site 
at http://www.ama-assn.org/resources/doc/cpt/cpt-corrections.pdf. This 
correction removed CPT code 33222 (Revision or relocation of skin 
pocket for pacemaker) as a service that should be provided in 
conjunction with CPT code 33225, and added CPT codes 33228 (Removal of 
permanent pacemaker pulse generator with replacement of pacemaker pulse 
generator; dual lead system), 33229 (Removal of permanent pacemaker 
pulse generator with replacement of pacemaker pulse generator; multiple 
lead system), 33263 (Removal of pacing cardioverter-defibrillator pulse 
generator with replacement of pacing cardioverter-defibrillator pulse 
generator; dual lead system), and 33264 (Removal of pacing 
cardioverter-defibrillator pulse generator with replacement of pacing 
cardioverter-defibrillator pulse generator; multiple lead system). In 
accordance with this revised guidance, we deleted CPT code 33222 as a 
code that can satisfy the claims processing edit for CPT code 33225, 
and added CPT codes 33228, 33229, 33263, and 33264 as codes that can 
satisfy this edit beginning in CY 2012.
f. Proposed Geometric Mean-Based Relative Payment Weights
    When the Medicare program was first implemented, payment for 
hospital services (inpatient and outpatient) was based on hospital-
specific reasonable costs attributable to furnishing services to 
Medicare beneficiaries. Although payment for most Medicare hospital 
inpatient services became subject to a PPS under section 1886(d) of the 
Act in 1983, Medicare hospital outpatient services continued to be paid 
based on hospital-specific costs. This methodology for payment provided 
little incentive for hospitals to furnish such outpatient services 
efficiently and in a cost effective manner. At the same time, advances 
in medical technology and changes in practice patterns were bringing 
about a shift in the site of medical care from the inpatient setting to 
the outpatient setting.
    In the Omnibus Budget Reconciliation Act of 1986 (OBRA 1986) (Pub. 
L. 99-509), the Congress paved the way for development of a PPS for 
hospital outpatient services. Section 9343(g) of OBRA 1986 mandated 
that fiscal intermediaries require hospitals to report claims for 
services under the Healthcare Common Procedure Coding System (HCPCS). 
Section 9343(c) of OBRA 1986 extended the prohibition against 
unbundling of hospital services under section 1862(a)(14) of the Act to 
include outpatient services as well as inpatient services. The codes 
under the HCPCS enabled us to determine which specific procedures and 
services were billed, while the extension of the prohibition against 
unbundling ensured that all nonphysician services provided to hospital 
outpatients were reported on hospital bills and captured in the 
hospital outpatient data that were used to develop an outpatient PPS.
    The brisk increase in hospital outpatient services further led to 
an interest in creating payment incentives to promote more efficient 
delivery of hospital outpatient services through a Medicare outpatient 
PPS. Section 9343(f) of OBRA 1986 and section 4151(b)(2) of the Omnibus 
Budget Reconciliation Act of 1990 (OBRA 1990) (Pub. L. 101-508), 
required that we develop a proposal to replace the hospital outpatient 
payment system with a PPS and submit a report to the Congress on the 
proposed system. The statutory framework for the OPPS was established 
by the Balanced Budget Act (BBA) of 1997 (Pub. L. 105-33) with section 
4523 amending section 1833 of the Act by adding subsection (t), which 
provides for a PPS for hospital outpatient department services and the 
BBRA of 1999 (Pub. L. 106-113), with section 201 further amending 
section 1833(t) of the Act. The implementing regulations for these 
statutory authorities were codified at 42 CFR Part 419, effective for 
services furnished on or after August 1, 2000.
    Section 1833 of the Act set forth the methodological requirements 
for developing the PPS for hospital outpatient services (the OPPS). At 
the onset of the OPPS, there was significant concern over observed 
increases in the volume of outpatient services, and corresponding 
rapidly growing beneficiary coinsurance. Accordingly, much of the focus 
was on finding ways to address those issues. The OPPS statute, section 
1833(t)(2)(C) of the Act, initially provided that relative payment 
weights for covered outpatient department services be established based 
on median costs under section 4523(a) of the BBA of 1997. Later, 
section 201(f) of the BBRA of 1999 amended section 1833(t)(2)(C) of the 
Act to allow the Secretary the discretion to base the establishment of 
relative payment weights on either median or mean hospital costs. Since 
the OPPS was initially implemented, we have established relative 
payment weights based on the median hospital costs for both statistical 
reasons and timely implementation concerns. The proposed

[[Page 45095]]

rule for the OPPS was published prior to the passage of the BBRA of 
1999, which amended the Act to permit the use of mean costs. At that 
time, we noted that making payment for hospital outpatient services 
based on the median cost of each APC was a way of discouraging upcoding 
that occurs when individual services that are similar have disparate 
median costs, as well as associating services for which there are low 
claims volume into the appropriate classifications based on clinical 
patterns and their resource consumption (63 FR 47562).
    As discussed in the CY 2000 OPPS final rule with comment period (65 
FR 18482 through 18483), initial implementation of the payment system 
for hospital outpatient services was delayed due to multiple extensions 
of the proposed rule comment period, Year 2000 (Y2K) system concerns, 
and other systems challenges in developing the OPPS. Even though the 
BBRA of 1999 passed during that period of time, and provided the 
Secretary with the discretion to establish relative payment weights 
under the OPPS based on mean hospital costs, we determined that 
reconstructing the database to evaluate the impact of using mean costs 
would have postponed implementation of the OPPS further. There were 
important challenges at the time, including being responsive to 
stakeholder comments regarding the initial OPPS and addressing 
implementation issues so that the payment and claims processing systems 
would work correctly. To do so in a timely manner was critical; 
therefore, median costs were selected as an appropriate metric on which 
to base payment relativity, both based on the statistical reasons noted 
above, and practical implementation concerns.
    In addition to the reasons discussed above, developing relative 
payment weights based on median costs was a way of attenuating the 
impact of cost outlier cases. In an environment where facility coding 
practices were still in their infancy, median costs served to minimize 
the impact of any coding errors. Using median costs to establish 
service cost relativity served the same function as any measure of 
central tendency (including means), ensuring that the payment weights 
used in the OPPS would, in general, account for the variety of costs 
associated with providing a service.
    Since the beginning of the OPPS and throughout its development, we 
have striven to find ways to improve our methods for estimating the 
costs associated with providing services. The dialogue with the public 
regarding these issues, the meaningful information and recommendations 
that the Panel (previously the APC Panel) has provided, and the 
policies we have established to better derive the costs on which OPPS 
payment is calculated have contributed to improving cost estimation. 
However, challenges remain in our continuing effort to better estimate 
the costs associated with providing services. These challenges include 
our limited ability to obtain more meaningful information from the 
claims and cost report data available and ensuring that the approach 
used to calculate the payments for services accurately captures the 
relative costs associated with providing them. Over the years, we have 
implemented many changes to the OPPS cost modeling process to help 
address these challenges.
    To obtain more information from the claims data we have available, 
we first began bypassing codes from the standard process to develop 
``pseudo'' single claims in CY 2003 (67 FR 66746). In CY 2006, this 
concept later evolved into the bypass list (and its corresponding 
criteria for addition) which allows us to extract more cost information 
from claims that would otherwise be unusable for modeling service cost 
(70 FR 68525). In CY 2008, we examined clinical areas where packaging 
of services was appropriate, which allows us to use more claims in 
modeling the payments for primary procedures and encourage providers to 
make cost efficient choices where possible (72 FR 66610 through 66649). 
In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66590), 
we noted that this packaging approach increased the number of 
``natural'' single bills, while simultaneously reducing the universe of 
codes requiring single bills for ratesetting. Beginning in CY 2008, we 
also established composite APCs for services that are typically 
provided together in the same encounter, allowing us to use even more 
previously unusable claims (due to containing multiple separately 
payable major codes) for modeling service cost, as well as develop APCs 
that reflect the combined encounter (72 FR 66650 through 66658). We 
have implemented many steps to obtain more information from the claims 
and cost report data available to us, and continue to examine ways in 
which we can derive more meaningful information on service costs for 
use in ratesetting.
    In our experience in working with the OPPS, we also have 
implemented many processes to ensure that the cost information we 
derive from cost reports and claims data is accurate. In the beginning 
of the OPPS, we implemented a cost trim of three standard deviations 
outside the geometric mean cost, similar to the cost data trim in the 
IPPS, because it would ensure that the most aberrant data were removed 
from ratesetting (65 FR 18484). We also have implemented similar trims 
to the hospital departmental CCR and claims based unit data related to 
the services (71 FR 67985 through 67987).
    During the CY 2008 rulemaking cycle, we contracted with Research 
Triangle Institute, International (RTI) to examine possible 
improvements to the OPPS cost estimation process after they had 
investigated similar issues in the IPPS setting (72 FR 66659 through 
66602). There was significant concern that charge compression, which 
results from the hospital practice of attaching a higher mark-up to 
charges for low cost supplies and a lower mark-up to charges for higher 
cost supplies, was influencing the cost estimates on which the OPPS 
relative payment weights are based. Based on RTI's recommendations, in 
CY 2009, we finalized modifications to the Medicare cost report form to 
create an ``Implantable Medical Devices Charged to Patients'' cost 
center to address public commenter concerns related to charge 
compression in the ``Medical Supplies Charged to Patients'' cost center 
(73 FR 48458 through 48467). These modifications helped to address 
potential issues related to hospital markup practices and how they are 
reflected in the CCRs in the Medicare cost reporting form.
    In CY 2010, we incorporated a line item trim into our data process 
that removed lines that were eligible for OPPS payment in the claim 
year but received no payment, presumably because of a line item 
rejection or denial due to claims processing edits (74 FR 60359). This 
line item trim was developed with the goal of using additional lines to 
model prospective payment.
    In addition to these process changes that were designed to include 
more accurate cost data in ratesetting, we have developed a number of 
nonstandard modeling processes to support service or APC specific 
changes. For example, in the device dependent APCs, we have 
incorporated edits into the cost estimation process to ensure that the 
full cost of the device is incorporated into the primary procedure.
    While we have already implemented numerous changes to the data 
process in order to obtain accurate resource cost estimates associated 
with providing a procedure, we continue to examine possible areas of 
improvement. In the past, commenters have expressed

[[Page 45096]]

concern over the degree to which payment rates reflect the costs 
associated with providing a service, believing that, in some cases, 
high cost items or services that might be packaged are not accordingly 
reflected in the payment weights (72 FR 66629 through 66630 and 66767). 
As mentioned above, in the CY 2008 OPPS/ASC final rule with comment 
period, we developed a packaging policy that identified a number of 
clinical areas where services would be commonly performed in a manner 
that was typically ancillary and supportive to other primary 
procedures. Packaging for appropriate clinical areas provides an 
incentive for efficient and cost-effective delivery of services. In 
that final rule with comment period, we recognized that there were 
strengths and weaknesses associated with using median costs as the 
metric for developing the OPPS payment weights (72 FR 66615). Medians 
are generally more stable than means because they are less sensitive to 
extreme observations, but they also do not reflect subtle changes in 
cost distributions. As a result, the use of medians rather than means 
under the OPPS usually results in relative weight estimates being less 
sensitive to packaging decisions, as well as changes in the cost model 
due to factors such as the additional claims processed between the 
proposed rule and the final rule.
    The OPPS, like other prospective payment systems, relies on the 
concept of averaging, where the payment may be more or less than the 
estimated costs of providing a service or package of services for a 
particular patient (73 FR 68570). Establishing the cost-based relative 
payment weights based on a measure of central tendency, such as means 
or medians, ensures that the payments for the package of services 
should generally account for the variety of costs associated with 
providing those services. Prospective payments are ultimately adjusted 
for budget neutrality and updated by an OPD update factor, which 
affects the calculated payments, but the accuracy of the cost-based 
weights is critical in ensuring that the relative payment weights are 
adjusted appropriately.
    We recognize that median costs have historically served and may 
continue to serve as an appropriate measure on which to establish 
relative payments weights. However, as discussed above, the metric's 
resistance to outlier observations is balanced by its limited ability 
to be reflective of changes to the dataset used to model cost or 
changes beyond the center of the dataset. While there was significant 
concern in the initial years of the OPPS regarding outlier cost values 
and the possible introduction of potentially aberrant values in the 
cost modeling, hospital experience in coding under the system, the data 
modeling improvements we have made to obtain more accurate cost 
information while removing erroneous data, and other changes in our 
experience with the system have all lessened the potential impact of 
error values (rather than actual, accurate cost outliers). As noted 
above, over the history of the OPPS, we have made multiple refinements 
to the data process to better capture service costs, respond to 
commenter concerns regarding the degree to which OPPS relative payment 
weights accurately reflect service cost and APC payment volatility from 
year to year, and better capture the variety of resource cost 
associated with providing a service as provided under section 
1833(t)(2)(C) of the Act. For CY 2013, we are proposing to shift the 
basis for the CY 2013 APC relative payment weights that underpin the 
OPPS from median costs to geometric means based costs.
    Geometric means better encompass the variation in costs that occur 
when providing a service because, in addition to the individual cost 
values that are reflected by medians, geometric means reflect the 
magnitude of the cost measurements, and are thus more sensitive to 
changes in the data. We believe developing the OPPS relative payment 
weights based on geometric mean costs would better capture the range of 
costs associated with providing services, including those cases 
involving high cost packaged items or services, and those cases where 
very efficient hospitals have provided services at much lower costs. 
The use of geometric mean costs also would allow us to detect changes 
in the cost of services earlier, because changes in cost often diffuse 
into the industry over time as opposed to impacting all hospitals 
equally at the same time. Medians and geometric means both capture the 
impact of uniform changes, that is, those changes that influence all 
providers, but only geometric means capture cost changes that are 
introduced slowly into the system on a case-by-case or hospital-by-
hospital basis.
    An additional benefit of this proposal relates to the two times 
rule, described in section III.B. of this proposed rule, which is our 
primary tool for identifying clinically similar services that have 
begun to deviate in terms of their financial resource requirements. 
Basing HCPCS projections on geometric mean costs would increase the 
sensitivity of this tool as we configure the APC mappings because it 
would allow us to detect differences when higher costs occur in a 
subset of services even if the number of services does not change. This 
information would allow us to better ensure that the practice patterns 
associated with all the component codes appropriately belong in the 
same APC.
    In addition to better incorporating those cost values that surround 
the median and, therefore, describing a broader range of clinical 
practice patterns, basing the relative payment weights on geometric 
mean costs may also promote better stability in the payment system. In 
the short term, geometric mean-based relative payment weights would 
make the relative payment weights more reflective of the service costs. 
Making this change also may promote more payment stability in the long 
term by including a broader range of observations in the relative 
payment weights, making them less susceptible to gaps in estimated cost 
near the median observation and also making changes in the relative 
payment weight a better function of changes in estimated service costs.
    We note that this proposed change would bring the OPPS in line with 
the IPPS, which utilizes hospital costs derived from claims and cost 
report data to calculate prospective payments, and specifically, mean 
costs rather than median costs to form the basis of the relative 
payment weights associated with each of the payment classification 
groups. We stated in the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74181) our intent to explore methods to ensure our 
payment systems do not provide inappropriate payment incentives to 
provide services in one setting of care as opposed to another setting 
of care based on financial considerations rather than clinical needs. 
By adopting a means cost based approach to calculating relative payment 
weights under the OPPS, we expect to achieve greater consistency 
between the methodologies used to calculate payment rates under the 
IPPS and the OPPS, which would put us in a better position from an 
analytic perspective to make cross-system comparisons and examine 
issues of payment parity.
    For the reasons described above, we are proposing to establish the 
CY 2013 OPPS relative payment weights based on geometric mean costs. 
While this would involve a change to the metric used to develop the 
relative payment weights, the use of claims would not be affected. We 
are proposing to continue subsetting claims using the data processes 
for modeling the standard APCs and the criteria-based APCs described in 
section II.A.2. of this

[[Page 45097]]

proposed rule, where appropriate. The reasoning behind implementing 
modeling edits or changes in the criteria-based APCs would not be 
affected because the process of developing the relative payment weights 
based on a measure of central tendency is the last step of the modeling 
process, and occurs only once the set of claims used in ratesetting has 
been established.
    One important step that occurs after the development of relative 
payment weights is the assignment of individual HCPCS codes (services) 
to APCs. In our analysis of the impacts of a process conversion to 
geometric means, we determined that the change to means would not 
significantly influence the application of the 2 times rule. Very few 
services would need to be shifted to new APCs because of 2 times rule 
violations as the use of geometric means would resolve some violations 
that would exist under medians even as it creates others due to new 
cost projections. The net impact of the proposed change results in 
seven more violations of the 2 times rule created by the entire 
rebasing process than would exist if median-based values were used.
    During the development of this proposal, we also determined that 
the cumulative effect of data shifts over the 12 years of OPPS 
introduced a number of inconsistencies in the APC groupings based on 
clinical and resource homogeneity. We believe that a shift to payments 
derived from geometric means would improve our ability to identify 
resource distinctions between previously homogenous services, and we 
intend to use this information over the next year to reexamine our APC 
structure and assignments to consider further ways of increasing the 
stability of payments for individual services over time.
    We note that this proposal to establish all OPPS relative payment 
weights using geometric mean costs would apply to all APCs that would 
have previously been paid based on median costs. In addition, we are 
proposing that the relative payment weights for line item based 
payments such as brachytherapy sources, which are discussed in section 
II.A.2.d.(6) of this proposed rule, as well as blood and blood 
products, which are discussed in II.A.2.d.(2) of this proposed rule, be 
calculated based on their geometric mean costs for the CY 2013 OPPS.
    The CY 2013 proposal to base relative payment weights on geometric 
mean costs would specifically include the CMHC and hospital-based 
partial hospitalization program APCs, which were previously based on 
median per diem costs. Their estimated payments would continue to be 
included in the budget neutral weight scaling process, and their 
treatment is similar to other nonstandard APCs discussed in section 
II.A. of this proposed rule. The process for developing a set of claims 
that is appropriate for modeling these APCs would continue to be the 
same as in recent years, with the only proposed difference being that a 
geometric mean per diem cost would be calculated rather than a median 
per diem cost. The proposed CY 2013 partial hospitalization payment 
policies are described in section VIII. of this proposed rule.
    We believe it is important to make the transition from medians to 
means across all APCs in order to capture the complete range of costs 
associated with all services, and to ensure that the relative payment 
weights of the various APCs are properly aligned. If some OPPS payments 
calculated using relative payment weights are based on means while 
others are based on medians, the ratio of the two payments will not 
accurately reflect the ratio of the relative costs reported by the 
hospitals. This is of particular significance in the process of 
establishing the budget neutral weight scaler, discussed in section 
II.A.4. of this proposed rule.
    We note that the few proposed exceptions to the applications of the 
geometric mean-based relative payment weights would be the same 
exceptions that exist when median-based weights are applied, including 
codes paid under different payment systems or not paid under the OPPS, 
items and services not paid by Medicare, items or services paid at 
reasonable cost or charges reduced to cost, among others. For more 
information about the various proposed payment status indicators for CY 
2013, we refer readers to Addendum D1 to this proposed rule (which are 
available via the Internet on the CMS Web site).
    We are proposing for CY 2013 that payment for nonpass-through 
separately payable drugs and biologicals will continue to be developed 
through its own separate process. Payments for drugs and biologicals 
are included in the budget neutrality adjustments, under the 
requirements in section 1833(t)(9)(B) of the Act, but the budget 
neutral weight scaler is not applied to their payments because they are 
developed through a separate methodology, outside the relative payment 
weight based process. We note that, for CY 2013, we are proposing to 
pay for nonpass-through separately payable drugs and biologicals under 
the OPPS at ASP+6 percent, based upon the statutory default described 
in section 1833(t)(14)(A)(iii)(II) of the Act. Also, as is our standard 
methodology, for CY 2013, we are proposing to use payment rates based 
on the ASP data from the fourth quarter of CY 2011 for budget 
neutrality estimates, packaging determinations, and the impact 
analyses. For items that did not have an ASP-based payment rate, such 
as some therapeutic radiopharmaceuticals, we are proposing to use their 
mean unit cost derived from the CY 2011 hospital claims data to 
determine their per day cost. The proposed nonpass-through separately 
payable drug and biological payment policy for CY 2013 is described in 
greater detail in section V.B. of this proposed rule.
    Under the revised ASC payment system that was effective January 1, 
2008, we established a standard ASC ratesetting methodology that bases 
payment for most ASC covered surgical procedures and some covered 
ancillary services on the OPPS relative payment weights (72 FR 42491 
through 42493). Therefore, because we are proposing to calculate CY 
2013 OPPS relative payment weights using geometric mean costs, we also 
are proposing that CY 2013 ASC payment rates under the standard ASC 
ratesetting methodology would be calculated using the OPPS relative 
payment weights that are based on geometric mean costs. We note that 
proposing to base the relative payment weights on geometric mean costs 
rather than median costs affects the proposed CY 2013 payment rates. 
Differences in the proposed payment rates, as with any changes from 
year to year, affect other parts of the OPPS, including the proposed 
copayments described in section II.I. of this proposed rule as well as 
the proposed fixed-dollar outlier threshold described in section II.G. 
of this proposed rule.
    Under this CY 2013 proposal to base the relative payment weights on 
geometric means, we also are proposing to revise the related 
regulations that currently reflect a median cost-based OPPS to instead 
reflect a geometric mean cost-based OPPS. Specifically, we are 
proposing to revise 42 CFR 419.31, which describes the 2 times rule 
discussed in section III.B. of this proposed rule and the development 
of weights based on the cost metrics discussed in section II.A.4 of 
this proposed rule.
    In the Addenda to this proposed rule (which are available via 
Internet on the CMS Web site), we are including a comparison file that 
identifies differences in the proposed payments between a geometric 
means-based OPPS and a median-based OPPS. In section XXII. of this 
proposed rule, which

[[Page 45098]]

discusses the regulatory impact analysis, we are providing an 
additional column in the impact tables for the OPPS that identifies the 
estimated impact due to APC recalibration of a geometric means-based 
OPPS as well as a column that estimates the impact of recalibration 
based on CY 2011 claims and historical cost report data. We are 
including in the Addenda to this proposed rule (which is available via 
the Internet on the CMS Web site) data that compare the budget neutral 
OPPS payments based on geometric means to the budget neutral OPPS 
payments based on medians. As depicted in the impact tables, many 
provider categories would experience limited impacts under the proposal 
to base the OPPS relative payment weights on geometric means. We note 
that the impact tables only estimate the OPPS payment impact based on 
the most current available claims and cost report data, and that 
providers' actual payments may vary, depending on the mix of services 
provided in the actual claims year. Also, the budget neutral payment 
adjustments ensure that, under either a geometric mean-based system or 
a median cost-based system, aggregate OPPS payments would remain the 
same.
    Section XXII. of this proposed rule contains an OPPS provider 
impact table that estimates the effect of proposed policy changes and 
budget neutrality adjustments on provider payment under the CY 2013 
OPPS. Column 3 of the impact table shows the estimated impact by 
provider category of calculating the CY 2013 OPPS payments based on 
geometric mean costs rather than median cost. While the proposal to 
shift the basis for relative payment weights to geometric mean costs 
may involve some changes to the relative weights on which OPPS payments 
are based, providers generally experience limited impacts to payment as 
a result of the CY 2013 proposal. Those provider categories that 
improve significantly as a result of the proposal to base the CY 2013 
relative payment weights on geometric mean costs generally included 
non-IPPS hospitals that provided psychiatric, hospital-based partial 
hospitalization, and other services whose relative payment weights 
improved based on geometric mean costs. As noted above, we recognize 
that there may be fluctuations in the relative payment weights based on 
this CY 2013 proposal, but we believe that this proposal represents an 
improvement that more accurately estimates the costs associated with 
providing services.
    In our experience developing the OPPS, we have implemented many 
changes to obtain more cost information from the claims and cost report 
data available to us, in an effort to arrive at more accurate estimates 
of service cost. Many of those changes are described above and in prior 
OPPS final rules. Despite the challenges created by the complexity of 
the data and the diversity of facility accounting systems, we continue 
to examine possible process and data changes that may further improve 
precision, validity, and utility. Commenters have historically 
expressed concerns about the degree to which OPPS relative payment 
weights are reflective of the service costs associated with providing 
them, APC payment rate volatility from year to year, and other cost 
modeling related issues. We recognize that some of those issues will 
continue because they are related to naturally occurring changes in the 
economic environment, clinical practice, and the nature of payment 
systems, among other reasons. However, we believe that basing the OPPS 
relative payment weights on geometric means would better capture the 
range of costs associated with providing services, improve payment 
accuracy while limiting year-to-year volatility, and allow 
reconfigurations in the APC environment using a metric that provides 
greater computational depth. For these reasons, and those discussed 
above, we are proposing to base the CY 2013 OPPS/ASC relative payment 
weights on geometric mean costs.
3. Proposed Changes to Packaged Services
a. Background
    Like other prospective payment systems, the OPPS relies on the 
concept of averaging, where the payment may be more or less than the 
estimated cost of providing a specific service or bundle of specific 
services for a particular patient. However, with the exception of 
outlier cases, overall payment is adequate to ensure access to 
appropriate care. The OPPS packages payment for multiple interrelated 
services into a single payment to create incentives for providers to 
furnish services in the most efficient way by enabling hospitals to 
manage their resources with maximum flexibility, thereby 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, which could result if separate 
payment is provided for the items. Packaging also encourages hospitals 
to negotiate with manufacturers and suppliers to reduce the purchase 
price of items and services or to explore alternative group purchasing 
arrangements, thereby encouraging the most economical health care. 
Similarly, packaging encourages hospitals to establish protocols that 
ensure that necessary services are furnished, while scrutinizing the 
services ordered by practitioners to maximize the efficient use of 
hospital resources. Packaging payments into larger payment bundles 
promotes the predictability and accuracy of payment for services over 
time. Finally, packaging also may reduce the importance of refining 
service-specific payment because packaged payments include costs 
associated with higher cost cases requiring many ancillary services and 
lower cost cases requiring fewer ancillary services. For these reasons, 
packaging payment for items and services that are typically ancillary 
and supportive to a primary service has been a fundamental part of the 
OPPS since its implementation in August 2000.
    We use the term ``dependent service'' to refer to the HCPCS codes 
that represent services that are typically ancillary and supportive to 
a primary diagnostic or therapeutic modality. We use the term 
``independent service'' to refer to the HCPCS codes that represent the 
primary therapeutic or diagnostic modality into which we package 
payment for the dependent service. In future years, as we consider the 
development of larger payment groups that more broadly reflect services 
provided in an encounter or episode of care, it is possible that we 
might propose to bundle payment for a service that we now refer to as 
``independent.''
    We assign status indicator ``N'' to those HCPCS codes of dependent 
services that we believe are always integral to the performance of the 
primary modality; therefore, we always package their costs into the 
costs of the separately paid primary services with which they are 
billed. Services assigned to status indicator ``N'' are unconditionally 
packaged.
    We assign status indicator ``Q1'' (STVX-Packaged Codes), ``Q2'' (T-
Packaged Codes), or ``Q3'' (Codes that may be paid through a composite 
APC) to each conditionally packaged HCPCS code. An STVX-packaged code 
describes a HCPCS code whose payment is packaged with one or more 
separately paid primary services with the status indicator of ``S,'' 
``T,'' ``V,'' or ``X'' furnished in the hospital outpatient encounter. 
A T-packaged code describes a code whose payment is only packaged

[[Page 45099]]

with one or more separately paid surgical procedures with the status 
indicator of ``T'' are provided during the hospital outpatient 
encounter. STVX-packaged codes and T-packaged codes are paid separately 
in those uncommon cases when they do not meet their respective criteria 
for packaged payment. STVX-packaged codes and T-packaged codes are 
conditionally packaged. We refer readers to section XII.A.1. of this 
proposed rule and Addendum D1, which is available via the Internet on 
the CMS Web site with other Addenda, for a complete listing of status 
indicators and the meaning of each status indicator.
    Hospitals include HCPCS codes and charges for packaged services on 
their claims, and the estimated costs associated with those packaged 
services are then added to the costs of separately payable procedures 
on the same claims to establish prospective payment rates. We encourage 
hospitals to report all HCPCS codes that describe packaged services 
provided, unless the CPT Editorial Panel or CMS provides other 
guidance. The appropriateness of the OPPS payment rates depends on the 
quality and completeness of the claims data that hospitals submit for 
the services they furnish to Medicare beneficiaries.
    In addition to the packaged items and services listed in 42 CFR 
419.2(b), in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66610 through 66659), we adopted the packaging of payment for items and 
services in seven categories with the primary diagnostic or therapeutic 
modality to which we believe these items and services are typically 
ancillary and supportive. The seven categories are: (1) Guidance 
services; (2) image processing services; (3) intraoperative services; 
(4) imaging supervision and interpretation services; (5) diagnostic 
radiopharmaceuticals; (6) contrast media; and (7) observation services. 
We specifically chose these categories of HCPCS codes for packaging 
because we believe that the items and services described by the codes 
in these categories are typically ancillary and supportive to a primary 
diagnostic or therapeutic modality and, in those cases, are an integral 
part of the primary service they support. Packaging under the OPPS also 
includes composite APCs, which are described in section II.A.2.e. of 
this proposed rule.
b. Proposed Clarification of the Regulations at 42 CFR 419.2(b)
    We are proposing to clarify the regulatory language at 42 CFR 
419.2(b) to make explicit that the OPPS payments for the included costs 
of the nonexclusive list of items and services covered under the OPPS 
referred to in this paragraph are packaged into the payments for the 
related procedures or services with which such items and services are 
provided. This proposed clarification is consistent with our 
interpretation and application of Sec.  419.2(b) since the inception of 
the OPPS. We invite public comments on this proposed clarification.
c. Packaging Recommendations of the HOP Panel (``The Panel'') at Its 
February 2012 Meeting
    During its February 2012 meeting, the Panel made five 
recommendations related to packaging and to the function of the 
subcommittee. One additional recommendation that originated from the 
APC Groups and Status Indicator (SI) Assignment Subcommittee about 
observation services is discussed in section II.A.2.e. of this proposed 
rule. The report of the February 2012 meeting of the Panel may be found 
on the CMS Web site at: http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.
    Below we present each of the Panel's five packaging recommendations 
and our responses to those recommendations.
    Panel Recommendation: CMS should delete HCPCS code G0259 (Injection 
procedure for sacroiliac joint; arthrography) and HCPCS code G0260 
(Injection procedure for sacroiliac joint; provision of anesthetic, 
steroid and/or other therapeutic agent, with or without arthrography), 
and instead use CPT code 27096 (Injection procedure for sacroiliac 
joint, anesthetic/steroid, with image guidance (fluoroscopy or CT) 
including arthrography, when performed) with a status indicator of 
``T,'' and assign CPT code 27096 to APC 0207 (Level III Nerve 
Injections).
    CMS Response: For CY 2012, we assigned CPT code 27096 to status 
indicator ``B,'' meaning that this code is not payable under the OPPS. 
In order to receive payment for procedures performed on the sacroiliac 
joint with or without arthrography or with image guidance under the 
OPPS, hospitals must use either HCPCS code G0259, which is assigned to 
status indicator ``N'' for CY 2012, or HCPCS code G0260, which is 
assigned to status indicator ``T'' for CY 2012, as appropriate. CMS 
created HCPCS codes G0259 and G0260 to separate and distinguish the 
image guidance procedure from the therapeutic injection procedure for 
the sacroiliac joint. As stated above, guidance procedures are packaged 
under the OPPS because we believe that they are typically ancillary and 
supportive to a primary diagnostic or therapeutic modality and are an 
integral part of the primary service they support.
    We believe that the existence of HCPCS codes G0259 and G0260 is 
necessary to assign appropriate packaged payment for the image guidance 
procedure, according to our established packaging policy, and separate 
payment for the therapeutic injection procedure. Therefore, we are not 
accepting the Panel's recommendation and are proposing to follow 
previously established policy and to continue to assign HCPCS code 
G0259 to status indicator ``N,'' HCPCS code G0260 to status indicator 
``T,'' and CPT code 27096 to status indicator ``B'' for CY 2013.
    Panel Recommendation: CMS provide data to the APC Groups and SI 
Subcommittee on the following arthrography services, so that the 
Subcommittee can consider whether the SI for these services should be 
changed from ``N'' to ``S'':
     HCPCS code 21116 (Injection procedure for 
temporomandibular joint arthrography);
     HCPCS code 23350 (Injection procedure for shoulder 
arthrography or enhanced CT/MRI shoulder arthrography);
     HCPCS code 24220 (Injection procedure for elbow 
arthrography);
     HCPCS code 25246 (Injection procedure for wrist 
arthrography);
     HCPCS code 27093 (Injection procedure for hip 
arthrography; without anesthesia);
     HCPCS code 27095 (Injection procedure for hip 
arthrography; with anesthesia);
     HCPSC code 27096 (Injection procedure for sacroiliac 
joint, anesthetic/steroid with image guidance (fluoroscopy or CT) 
including arthrography when performed);
     HCPCS code 27370 (Injection procedure for knee 
arthrography); and
     HCPCS code 27648 (Injection procedure for ankle 
arthrography).
    CMS Response: We are accepting the Panel's recommendation that CMS 
provide data to the APC Groups and SI Assignment Subcommittee on HCPCS 
codes 21116, 23350, 24220, 25246, 27093, 27095, 27096, 27370, and 27648 
at a future Panel meeting.
    Panel Recommendation: CMS change the status indicator for HCPCS 
code 19290 (Preoperative placement of needle localization wire, breast) 
from ``N'' to ``Q1'' and continue to monitor the frequency of the code 
when used in isolation.
    CMS Response: We agree with the Panel that proposing a status 
indicator of ``Q1'' is appropriate for HCPCS code

[[Page 45100]]

19290. This status indicator would allow for separate payment when this 
procedure is performed alone or packaged payment when this procedure is 
performed with an associated surgical procedure. Therefore, we are 
accepting the Panel's recommendation and are proposing to assign HCPCS 
code 19290 to APC 0340 (Minor Ancillary Procedures) and status 
indicator ``Q1'' for the CY 2013 OPPS. APC 0340 has a proposed cost of 
approximately $50.19 for CY 2013.
    Panel Recommendation: Judith Kelly, R.H.I.T., R.H.I.A., C.C.S., 
remain the chair of the APC Groups and SI Subcommittee.
    CMS Response: We are accepting the Panel's recommendation that 
Judith Kelly, R.H.I.T., R.H.I.A., C.C.S., continue to chair the APC 
Groups and SI Assignment Subcommittee.
    Panel Recommendation: The work of the APC Groups and SI Assignment 
Subcommittee continue.
    CMS Response: We are accepting the Panel's recommendation that the 
work of the APC Groups and SI Assignment Subcommittee continue.
d. Proposed Packaging of Drugs, Biologicals, and Radiopharmaceuticals
(1) Existing Packaging Policies
    In the OPPS, we currently package five categories of drugs, 
biologicals, and radiopharmaceuticals (unless temporary pass-through 
status applies): (1) Those with per day costs at or below the packaging 
threshold; (2) diagnostic radiopharmaceuticals; (3) contrast agents; 
(4) anesthesia drugs; and (5) drugs treated as surgical supplies. 
Anesthesia drugs are discussed further in section II.A.3.c.(2) of this 
proposed rule. For detailed discussions of the established packaging 
policies for diagnostic radiopharmaceuticals and contrast agents, we 
refer readers to the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66765 through 66768). For further details on drugs treated as 
surgical supplies, we refer readers to the CY 2003 OPPS final rule (67 
FR 66767) and Chapter 15, Section 50.2 of the Medicare Benefit Policy 
Manual.
(2) Clarification of Packaging Policy for Anesthesia Drugs
    It has been longstanding OPPS policy to package ``anesthesia'' and 
``supplies and equipment for administering and monitoring anesthesia or 
sedation,'' as described in 42 CFR 419.2(b)(4) and (b)(5). As described 
above, items and services paid under the OPPS that are typically 
ancillary and supportive to a primary diagnostic or therapeutic 
modality and, in those cases, are considered dependent items and 
services are packaged into the payment of their accompanying 
independent primary service. In accordance with our current policy on 
packaging items and services, drugs that are used to produce anesthesia 
in all forms are ancillary and supportive to a primary diagnostic or 
therapeutic modality, and are included in our definition of 
``anesthesia'' as described in Sec.  419.2(b)(4) and (b)(5). However, 
we recognize that some anesthesia drugs may qualify for transitional 
pass-through status under section 1833(t)(6) of the Act. Therefore, in 
this proposed rule, we are clarifying that our general policy is to 
package drugs used to produce anesthesia, and that those anesthesia 
drugs with pass-through status will be packaged upon the expiration of 
pass-through status. We are inviting public comment on our 
clarification of the existing packaging policies for anesthesia drugs 
under Sec.  419.2(b)(4) and (b)(5).
e. 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 
the CYs 2005 through 2009 exemption for 5-HT3 antiemetics). However, as 
established in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66766 through 66768), we began packaging payment for all diagnostic 
radiopharmaceuticals and contrast agents into the payment for the 
associated procedure, regardless of their per day costs. In addition, 
in CY 2009, we adopted a policy that packaged the payment for nonpass-
through implantable biologicals into payment for the associated 
surgical procedure on the claim, regardless of their per day cost (73 
FR 68633 through 68636). We refer to diagnostic radiopharmaceuticals 
and contrast agents collectively as ``policy-packaged'' drugs. We refer 
to implantable biologicals as ``devices'' because, in CY 2010, we 
finalized a policy to treat implantable biologicals as devices for OPPS 
payment purposes (74 FR 60471 through 60477).
    As set forth at Sec.  419.2(b), as a prospective payment system, 
the OPPS establishes a national payment rate, standardized for 
geographical wage differences, that includes operating and capital-
related costs that are directly related and integral to performing a 
procedure or furnishing a service on an outpatient basis, and in 
general, these costs include, but are not limited to, implantable 
prosthetics, implantable durable medical equipment, and medical and 
surgical supplies. Packaging costs into a single aggregate payment for 
a service, encounter, or episode-of-care is a fundamental principle 
that distinguishes a prospective payment system from a fee schedule. In 
general, packaging the costs of items and services into the payment for 
the primary procedure or service with which they are associated 
encourages hospital efficiency and also enables hospitals to manage 
their resources with maximum flexibility.
    Prior to CY 2008, we noted that the proportion of drugs, 
biologicals, and radiopharmaceuticals that were separately paid under 
the OPPS had increased in recent years, a pattern that we also observed 
for procedural services under the OPPS. Our final CY 2008 policy that 
packaged payment for all nonpass-through diagnostic 
radiopharmaceuticals and contrast agents, regardless of their per day 
costs, contributed significantly to expanding the size of the OPPS 
payment bundles and is consistent with the principles of a prospective 
payment system.
    As discussed in more detail in the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68645 through 68649), we presented several 
reasons supporting our initial policy to package payment of diagnostic 
radiopharmaceuticals and contrast agents into their associated 
procedures on a claim. Specifically, we stated that we believed 
packaging was appropriate because: (1) The statutorily required OPPS 
drug packaging threshold had expired; (2) diagnostic 
radiopharmaceuticals and contrast agents function effectively as 
supplies that enable the provision of an independent service, rather 
than serving themselves as a therapeutic modality; and (3) section 1833 
(t)(14)(A)(iii) of the Act required that payment for specified covered 
outpatient drugs (SCODs) be set prospectively based on a measure of 
average hospital acquisition cost (76 FR 74307).
    Therefore, we believe it is appropriate to propose to continue to 
treat diagnostic radiopharmaceuticals and contrast agents differently 
from specified covered outpatient drugs (SCODs) for CY 2013. 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

[[Page 45101]]

day costs, for CY 2013. 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 for the associated 
echocardiography imaging procedure, regardless of whether the agent met 
the OPPS drug packaging threshold. We refer readers to the CY 2010 
OPPS/ASC final rule with comment period for a detailed discussion of 
nuclear medicine and echocardiography services (74 FR 35269 through 
35277).
    For CY 2013, we are proposing to make an additional payment of $10 
for diagnostic radiopharmaceuticals that utilize the Tc-99m 
radioisotope produced by non-HEU methods. We are proposing to base this 
payment on the best available estimations of the marginal costs 
associated with non-HEU radioisotope production, pursuant to our 
authority described in section 1833(t)(2)(E) of the Act which allows us 
to establish ``other adjustments as determined to be necessary to 
ensure equitable payments'' under the OPPS. We describe this proposed 
policy in further detail in section III.C.3. of this proposed rule.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68634), we began packaging the payment for all nonpass-through 
implantable biologicals into payment for the associated surgical 
procedure because we consider these products to always be ancillary and 
supportive to independent services, similar to implantable 
nonbiological devices that are always packaged. We continued to follow 
this policy in CY 2012 (76 FR 74306 through 74310). Specifically, we 
continue to package payment for nonpass-through implantable 
biologicals, also known as devices that are surgically inserted or 
implanted (through a surgical incision or a natural orifice) into the 
body. For CY 2013, we are proposing to continue to apply the policies 
finalized in CY 2012, to package payment for nonpass-through 
implantable biologicals (``devices'') that are surgically inserted or 
implanted (through a surgical incision or a natural orifice) into the 
body.
    Although our final CY 2009 policy (which we are proposing to 
continue for CY 2013 as discussed below) packaged payment for all 
diagnostic radiopharmaceuticals and contrast agents into the payment 
for their associated procedures, we are proposing to continue to 
provide payment for these items in CY 2013 based on a proxy for average 
acquisition cost, as we did in CY 2009. We continue to believe that the 
line-item estimated cost for a diagnostic radiopharmaceutical or 
contrast agent in our claims data is a reasonable approximation of 
average acquisition and preparation and handling costs for diagnostic 
radiopharmaceuticals and contrast agents, respectively. As we discussed 
in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68645), 
we believe that hospitals have adapted to the CY 2006 coding changes 
for radiopharmaceuticals and responded to our instructions to include 
charges for radiopharmaceutical handling in their charged for the 
radiopharmaceutical products. Further, because the standard OPPS 
packaging methodology packaged the total estimated cost of each 
diagnostic radiopharmaceutical and contrast agent on each claim 
(including the full range of costs observed on the claims) with the 
costs of associated procedures for ratesetting, this packaging approach 
is consistent with considering the average cost for diagnostic 
radiopharmaceuticals and contrast agents. In addition, as we noted in 
the CY 2009 OPPS/ASC final rule with comment period (72 FR 68646), 
these drugs, biologicals, or radiopharmaceuticals for which we have not 
established a separate APC and, therefore, for which payment would be 
packaged rather than separately provided under the OPPS, are considered 
to not be SCODs. Similarly, drugs and biologicals with per day costs of 
less than $80 in CY 2013, which is the proposed packaging threshold for 
CY 2013, that are packaged and for which a separate APC has not been 
established also are not SCODs. This reading is consistent with our 
proposed payment policy whereby we package payment for diagnostic 
radiopharmaceuticals and contrast agents and provide payment for these 
products through payment for their associated procedures.
f. Summary of Proposals
    The HCPCS codes that we are proposing for unconditionally packaged 
(for which we are proposing to continue to assign status indicator 
``N''), or conditionally packaged (for which we are proposing continue 
to assign status indicators ``Q1,'' ``Q2,'' or ``Q3''), are displayed 
in Addendum B of this proposed rule (which is available via the 
Internet on the CMS Web site). The supporting documents for this CY 
2013 OPPS/ASC proposed rule, including, but not limited to, Addendum B, 
are available on the CMS Web site at: http://www.cms.gov/Medicare/ 
Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. To 
view the proposed status indicators by HCPCS code in Addendum B, select 
``CMS 1589-P'' and then select the folder labeled ``2013 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.
4. Proposed Calculation of OPPS Scaled Payment Weights
    For CY 2013, we are proposing to calculate the relative payment 
weights for each APC for CY 2013 shown in Addenda A and B to this 
proposed rule (which are available via the Internet on the CMS Web 
site) using the APC costs discussed in sections II.A.1. and II.A.2. of 
this proposed rule. In years prior to CY 2007, we standardized all the 
relative payment weights to APC 0601 (Mid-Level Clinic Visit) because 
mid-level clinic visits were among the most frequently performed 
services in the hospital outpatient setting. We assigned APC 0601 a 
relative payment weight of 1.00 and divided the median cost for each 
APC by the median cost for APC 0601 to derive the relative payment 
weight for each APC.
    Beginning with the CY 2007 OPPS (71 FR 67990), we standardized all 
of the relative payment weights for APC 0606 (Level 3 Clinic Visits) 
because we deleted APC 0601 as part of the reconfiguration of the 
clinic visit APCs. We selected APC 0606 as the base because APC 0606 
was the mid-level clinic visit APC (that is, Level 3 of five levels). 
For CY 2013, we are proposing to base the relative payment weights on 
which OPPS payments will be made by using geometric mean costs, as 
described in section II.A.2.f. of this proposed rule. However, in an 
effort to maintain consistency in calculating unscaled weights that 
represent the cost of some of the most frequently provided services, we 
are proposing to continue to use the cost of the mid-level clinic visit 
APC (APC 0606) in calculating unscaled weights. Following our general 
methodology for establishing relative payment weights derived from APC 
costs, but using the proposed CY 2013 geometric mean cost for APC 0606, 
for CY 2013, we are proposing to assign APC 0606 a relative payment 
weight of 1.00 and to divide the geometric mean cost of each APC by the 
proposed geometric mean cost for APC 0606 to derive the proposed 
unscaled relative payment weight for each APC. The choice of the APC on 
which to base the proposed relative payment weights for all other APCs 
does not affect the payments made under the OPPS

[[Page 45102]]

because we scale the weights for budget neutrality.
    Section 1833(t)(9)(B) of the Act requires that APC reclassification 
and recalibration changes, wage index changes, and other adjustments be 
made in a budget neutral manner. Budget neutrality ensures that the 
estimated aggregate weight under the OPPS for CY 2013 is neither 
greater than nor less than the estimated aggregate weight that would 
have been made without the changes. To comply with this requirement 
concerning the APC changes, we are proposing to compare the estimated 
aggregate weight using the CY 2012 scaled relative payment weights to 
the estimated aggregate weight using the proposed CY 2013 unscaled 
relative payment weights. For CY 2012, we multiplied the CY 2012 scaled 
APC relative weight applicable to a service paid under the OPPS by the 
volume of that service from CY 2011 claims to calculate the total 
weight for each service. We then added together the total weight for 
each of these services in order to calculate an estimated aggregate 
weight for the year. For CY 2013, we are proposing to perform the same 
process using the proposed CY 2013 unscaled weights rather than scaled 
weights. We then calculate the proposed weight scaler by dividing the 
CY 2012 estimated aggregate weight by the proposed CY 2013 estimated 
aggregate weight. The service-mix is the same in the current and 
prospective years because we use the same set of claims for service 
volume in calculating the aggregate weight for each year. For a 
detailed discussion of the weight scaler calculation, we refer readers 
to the OPPS claims accounting document available on the CMS Web site 
at: http://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html. We are proposing to include estimated 
payments to CMHCs in our comparison of estimated unscaled weights in CY 
2013 to estimated total weights in CY 2012 using CY 2011 claims data, 
holding all other components of the payment system constant to isolate 
changes in total weight. Based on this comparison, we adjusted the 
proposed unscaled relative payment weights for purposes of budget 
neutrality. The proposed CY 2013 unscaled relative payment weights were 
adjusted by multiplying them by a proposed weight scaler of 1.3504 to 
ensure that the proposed CY 2013 relative payment weights are budget 
neutral.
    Section 1833(t)(14) of the Act provides the payment rates for 
certain SCODs. Section 1833(t)(14)(H) of the Act states that 
``Additional expenditures resulting from this paragraph shall not be 
taken into account in establishing the conversion factor, weighting, 
and other adjustment factors for 2004 and 2005 under paragraph (9), but 
shall be taken into account for subsequent years.'' Therefore, the cost 
of those SCODs (as discussed in section V.B.3. of this proposed rule) 
was included in the proposed budget neutrality calculations for the CY 
2013 OPPS.
    We note that we are providing additional information, in 
association with this proposed rule, so that the public can provide 
meaningful comment on our proposal to base the CY 2013 OPPS relative 
payment weights on geometric mean costs. We will make available online 
a file that compares the calculated CY 2013 proposed OPPS payments 
using geometric mean costs to those that would be calculated based on 
median costs. The proposed scaled relative payment weights listed in 
Addenda A and B to this proposed rule (which are 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 2013 IPPS/LTCH PPS proposed 
rule (77 FR 27975), consistent with current law, based on IHS Global 
Insight, Inc.'s first quarter 2012 forecast of the FY 2013 market 
basket increase, the proposed FY 2013 IPPS market basket update is 3.0 
percent. However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(ii) of the 
Act, as added by section 3401(i) of Public Law 111-148 and as amended 
by section 10319(g) of that law and further amended by section 1105(e) 
of Public Law 111-152, provide adjustments to the OPD fee schedule 
increase factor for CY 2013.
    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 that section. Specifically, section 
1833(t)(3)(F)(i) of the Act requires that, for 2012 and subsequent 
years, the OPD fee schedule increase factor under subparagraph (C)(iv) 
be reduced by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi)(II) of the 
Act defines the productivity adjustment as equal to the 10-year moving 
average of changes in annual economy-wide, private nonfarm business 
multifactor productivity (MFP) (as projected by the Secretary for the 
10-year period ending with the applicable fiscal year, year, cost 
reporting period, or other annual period) (the ``MFP adjustment''). In 
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 51692), we 
finalized our methodology for calculating and applying the MFP 
adjustment. In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27975 
through 27976), we discuss the calculation of the proposed MFP 
adjustment for FY 2013, which is 0.8 percentage point.
    We are proposing that if more recent data are subsequently 
available after the publication of this proposed rule (for example, a 
more recent estimate of the market basket increase and the MFP 
adjustment), we would use such data, if appropriate, to determine the 
CY 2013 market basket update and the MFP adjustment, components in 
calculating the OPD fee schedule increase factor under sections 
1833(t)(3)(C)(iv) and (F) of the Act, in the CY 2013 OPPS/ASC final 
rule with comment period.
    In addition, section 1833(t)(3)(F)(ii) of the Act requires that 
for, each of 2010 through 2019, the OPD fee schedule increase factor 
under section 1833(t)(3)(C)(iv) of the Act be reduced by the adjustment 
described in section 1833(t)(3)(G) of the Act. For CY 2013, section 
1833(t)(3)(G)(ii) of the Act provides a 0.1 percentage point reduction 
to the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) 
of the Act. Therefore, in accordance with sections 1833(t)(3)(F)(ii) 
and 1833(t)(3)(G)(ii) of the Act, we are proposing to apply a 0.1 
percentage point reduction to the OPD fee schedule increase factor for 
CY 2013.
    We note that section 1833(t)(3)(F) of the Act provides that 
application of this subparagraph may result in the OPD fee schedule 
increase factor under section 1833(t)(3)(C)(iv) of the Act being less 
than 0.0 for a year, and may result in payment rates under the OPPS for 
a year being less than such payment rates for the preceding year. As 
described in further detail below, we are proposing to apply an OPD fee 
schedule increase factor of 2.1 percent for the CY 2013 OPPS (3.0 
percent, which is the proposed estimate of the hospital inpatient 
market basket percentage increase, less the proposed 0.8

[[Page 45103]]

percentage point MFP adjustment, less the 0.1 percentage point 
additional adjustment).
    We note that hospitals that fail to meet the Hospital OQR Program 
reporting requirements would to be subject to an additional reduction 
of 2.0 percentage points from the OPD fee schedule increase factor 
adjustment to the conversion factor that would be used to calculate the 
OPPS payment rates made for their services, as required by section 
1833(t)(17) of the Act. As a result, those hospitals failing to meet 
the Hospital OQR Program reporting requirements would receive an OPD 
fee schedule increase factor of 0.1 (3.0 percent, which is the proposed 
estimate of the hospital inpatient market basket percentage increase, 
less the proposed 0.8 percentage point MFP adjustment, less the 0.1 
percentage point additional adjustment, less 2.0 percentage point for 
the Hospital OQR Program reduction). For further discussion of the 
Hospital OQR Program, we refer readers to section XV.F. of this 
proposed rule.
    In this proposed rule, we are proposing to amend 42 CFR 
419.32(b)(1)(iv)(B) by adding a new paragraph (4) to reflect the 
requirement in section 1833(t)(3)(F)(i) of the Act that, for CY 2013, 
we reduce the OPD fee schedule increase factor by the 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 an additional 0.1 percentage point for CY 
2013.
    To set the OPPS conversion factor for CY 2013, we are proposing to 
increase the CY 2012 conversion factor of $70.016 by 2.1 percent. In 
accordance with section 1833(t)(9)(B) of the Act, we are proposing to 
further adjust the conversion factor for CY 2013 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 an overall 
proposed budget neutrality factor of 1.0003 for wage index changes by 
comparing proposed total estimated payments from our simulation model 
using the proposed FY 2013 IPPS wage indices to those payments using 
the current (FY 2012) IPPS wage indices, as adopted on a calendar year 
basis for the OPPS (77 FR 27946 through 27955).
    For CY 2013, we are not proposing to make a change to our rural 
adjustment policy, as discussed in section II.E. of this proposed rule. 
Therefore, the proposed budget neutrality factor for the rural 
adjustment is 1.0000.
    For CY 2013, we are proposing to continue previously established 
policies for implementing the cancer hospital payment adjustment 
described in section 1833(t)(18) of the Act, as discussed in section 
II.F. of this proposed rule. We are proposing to calculate a CY 2013 
budget neutrality adjustment factor for the cancer hospital payment 
adjustment by comparing the estimated total CY 2013 payments under 
section 1833(t) of the Act including the proposed CY 2013 cancer 
hospital payment adjustment to the estimated CY 2013 total payments 
using the CY 2012 final cancer hospital payment adjustment under 
sections 1833(t)(18)(B) and 1833(t)(2)(E) of the Act. The difference in 
the CY 2013 estimated payments due to applying the proposed CY 2013 
cancer hospital payment adjustment relative to the CY 2012 final cancer 
hospital payment adjustment does not have a significant impact on the 
budget neutrality calculation. Therefore, we are proposing to apply a 
proposed budget neutrality adjustment factor of 1.0000 to the 
conversion factor to ensure that the cancer hospital payment adjustment 
is budget neutral.
    For this proposed rule, we estimate that pass-through spending for 
both drugs and biologicals and devices for CY 2013 would equal 
approximately $84 million, which represents 0.18 percent of total 
projected CY 2013 OPPS spending. Therefore, the proposed conversion 
factor would also be adjusted by the difference between the 0.22 
percent estimate of pass-through spending for CY 2012 and the 0.18 
percent estimate of CY 2013 pass-through spending, resulting in a 
proposed adjustment for CY 2013 of 0.04 percent. Finally, estimated 
payments for outliers would remain at 1.0 percent of total OPPS 
payments for CY 2013.
    The proposed OPD fee schedule increase factor of 2.1 percent for CY 
2013 (that is, the estimate of the hospital inpatient market basket 
percentage increase of 3.0 percent less the proposed 0.8 percentage 
point MFP adjustment and less the 0.1 percentage point required under 
section 1833(t)(3)(F) of the Act), the required proposed wage index 
budget neutrality adjustment of approximately 1.0003, the proposed 
cancer hospital payment adjustment of 1.000, and the proposed 
adjustment of 0.04 percent of projected OPPS spending for the 
difference in the pass-through spending result in a proposed conversion 
factor for CY 2013 of $71.537.
    Hospitals that fail to meet the reporting requirements of the 
Hospital OQR Program would continue to be subject to a further 
reduction of 2.0 percentage points to the OPD fee schedule increase 
factor adjustment to the conversion factor that would be used to 
calculate the OPPS payment rates made for their services as required by 
section 1833(t)(17) of the Act. For a complete discussion of the 
Hospital OQR Program requirements and the payment reduction for 
hospitals that fail to meet those requirements, we refer readers to 
section XV.F. of this proposed rule. To calculate the proposed CY 2013 
reduced market basket conversion factor for those hospitals that fail 
to meet the requirements of the Hospital OQR Program for the full CY 
2013 payment update, we are proposing to make all other adjustments 
discussed above, but using a proposed reduced OPD fee schedule update 
factor of 0.1 percent (that is, the proposed OPD fee schedule increase 
factor of 2.1 percent further reduced by 2.0 percentage points as 
required by section 1833(t)(17)(A)(i) of the Act for failure to comply 
with the Hospital OQR requirements). This results in a proposed reduced 
conversion factor for CY 2013 of $70.106 for those hospitals that fail 
to meet the Hospital OQR requirements (a difference of -$1.431 in the 
conversion factor relative to those hospitals that met the Hospital OQR 
requirements).
    In summary, for CY 2013, we are proposing to use a conversion 
factor of $71.537 in the calculation of the national unadjusted payment 
rates for those items and services for which payment rates are 
calculated using geometric mean costs. For further discussion on the 
proposal to base the CY 2013 OPPS relative payment weights using 
geometric mean costs, we refer readers to section II.A.2.f. of this 
proposed rule. We are proposing to amend Sec.  419.32(b)(1)(iv)(B) by 
adding a new paragraph (4) to reflect the reductions to the OPD fee 
schedule increase factor that are required for CY 2013 in order to 
satisfy the statutory requirements of sections 1833(t)(3)(F) and 
(t)(3)(G)(ii) of the Act. We are proposing to use a reduced conversion 
factor of $70.106 in the calculation of payments for hospitals that 
fail to comply with the Hospital OQR Program requirements to reflect 
the reduction to the OPD fee schedule increase factor that is required 
by section 1833(t)(17) of the Act.

C. Proposed Wage Index Changes

    Section 1833(t)(2)(D) of the Act requires the Secretary to 
determine a wage adjustment factor to account for geographic wage 
differences in a portion of the OPPS payment rate, which

[[Page 45104]]

includes the copayment standardized amount and is attributable to labor 
and labor-related costs. This portion of the OPPS payment rate is 
called the OPPS labor-related share. This adjustment must be made in a 
budget neutral manner and budget neutrality is discussed in section 
II.B. of this 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 2013 OPPS. We refer readers to section II.H. of 
this proposed rule for a description and example of how the wage index 
for a particular hospital is used to determine the payment for the 
hospital.
    As discussed in section II.A.2.c. of this proposed rule, for 
estimating APC costs, we standardize 60 percent of estimated claims 
costs for geographic area wage variation using the same FY 2013 pre-
reclassified wage index that the IPPS uses to standardize costs. This 
standardization process removes the effects of differences in area wage 
levels from the determination of a national unadjusted OPPS payment 
rate and the copayment amount.
    As published in the original OPPS April 7, 2000 final rule with 
comment period (65 FR 18545), the OPPS has consistently adopted the 
final fiscal year IPPS wage index as the calendar year wage index for 
adjusting the OPPS standard payment amounts for labor market 
differences. Thus, the wage index that applies to a particular acute 
care short-stay hospital under the IPPS also applies to that hospital 
under the OPPS. As initially explained in the September 8, 1998 OPPS 
proposed rule (63 FR 47576), we believed that using the IPPS wage index 
as the source of an adjustment factor for the OPPS is reasonable and 
logical, given the inseparable, subordinate status of the HOPD within 
the hospital overall. In accordance with section 1886(d)(3)(E) of the 
Act, the IPPS wage index is updated annually.
    The Affordable Care Act contained provisions affecting the wage 
index. These provisions were discussed in the CY 2012 OPPS/ASC final 
rule with comment period (77 FR 74191). As discussed in that final rule 
with comment period, section 10324 of the Affordable Care Act requires 
a ``frontier State'' wage index floor of 1.00 in certain cases. For the 
CY 2013 OPPS, we are proposing to implement this provision in the same 
manner as we did for CY 2012. That is, frontier State hospitals would 
receive a wage index of 1.00 if the otherwise applicable wage index 
(including reclassification, rural floor, and rural floor budget 
neutrality) is less than 1.00. Similar to our current policy for HOPDs 
that are affiliated with multicampus hospital systems, the HOPD 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 and FY 2012 IPPS/LTCH 
PPS final rules (75 FR 50160 through 50161 and 76 FR 51586, 
respectively) and the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27951) 
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 2013 IPPS wage indices continue to reflect a 
number of adjustments implemented over the past few years, including, 
but not limited to, reclassification of hospitals to different 
geographic areas, the rural floor provisions, an adjustment for 
occupational mix, and an adjustment to the wage index based on 
commuting patterns of employees (the out-migration adjustment). We 
refer readers to the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27946 
through 27955) for a detailed discussion of all proposed changes to the 
FY 2013 IPPS wage indices. In addition, we refer readers to the CY 2005 
OPPS final rule with comment period (69 FR 65842 through 65844) and 
subsequent OPPS rules for a detailed discussion of the history of these 
wage index adjustments as applied under the OPPS.
    Section 102 of the Medicare and Medicaid Extender Act, extended 
through FY 2011, section 508 reclassifications as well as certain 
special exceptions. The most recent extension of these special wage 
indices was included in section 302 of the Temporary Payroll Tax Cut 
Continuation Act of 2011 (Pub. L. 112-78), as amended by section 3001 
of the Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. 
112-96). These legislative provisions extended certain section 508 
reclassifications and special exception wage indices for a 6-month 
period during FY 2012, from October 1, 2011 through March 31, 2012. We 
implemented this latest extension in a notice (CMS-1442-N) published in 
the Federal Register on April 20, 2012 (77 FR 23722). Therefore, the 
extension is no longer applicable, effective with FY 2013. As we did 
for CY 2010, we revised wage index values for certain special exception 
hospitals from January 1, 2012 through June 30, 2012, under the OPPS, 
in order to give these hospitals the special exception wage indices 
under the OPPS for the same time period as under the IPPS. In addition, 
because the OPPS pays on a calendar year basis, the end date under the 
OPPS for certain nonsection 508 and nonspecial exception providers to 
receive special wage indices was June 30, 2012, instead of March 31, 
2012, so that these providers also received a full 6 months of payment 
under the revised wage index comparable to the IPPS.
    For purposes of the OPPS, we are proposing to continue our policy 
in CY 2013 of allowing non-IPPS hospitals paid under the OPPS to 
qualify for the out-migration adjustment if they are located in a 
section 505 out-migration county (section 505 of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA)). 
We note that, because non-IPPS hospitals cannot reclassify, they are 
eligible for the out-migration wage adjustment. Table 4J listed in the 
FY 2013 IPPS/LTCH PPS proposed rule (and made available via the 
Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) identifies 
counties eligible for the out-migration adjustment and hospitals that 
would receive the adjustment for FY 2013. We note that, beginning with 
FY 2012, under the IPPS, an eligible hospital that waives its Lugar 
status in order to receive the out-migration adjustment has effectively 
waived its deemed urban status and, thus, is rural for all purposes 
under the IPPS, including being considered rural for the 
disproportionate share hospital (DSH) payment adjustment, effective for 
the fiscal year in which the hospital receives the out-migration 
adjustment. We refer readers to the FY 2013 IPPS/LTCH PPS proposed rule 
(77 FR 27952) for a more detailed discussion on the Lugar redesignation 
waiver for the out-migration adjustment). As we have done in prior 
years, we are including Table 4J as Addendum L to this proposed rule

[[Page 45105]]

with the addition of non-IPPS hospitals that would receive the section 
505 out-migration adjustment under the CY 2013 OPPS. Addendum L is 
available via the Internet on the CMS Web site.
    In response to concerns frequently expressed by providers and other 
relevant parties that the current wage index system does not 
effectively reflect the true variation in labor costs for a large 
cross-section of hospitals, two studies were undertaken by the 
Department. First, section 3137(b) of the Affordable Care Act required 
the Secretary to submit to Congress a report that includes a plan to 
comprehensively reform the Medicare wage index applied under section 
1886(d) of the Act. In developing the plan, the Secretary was directed 
to take into consideration the goals for reforming the wage index that 
were set forth by the Medicare Payment Advisory Commission (MedPAC) in 
its June 2007 report entitled ``Report to Congress: Promoting Greater 
Efficiency in Medicare'' and to ``consult with relevant affected 
parties.'' Second, the Secretary commissioned the Institute of Medicine 
(IOM) to ``evaluate hospital and physician geographic payment 
adjustments, the validity of the adjustment factors, measures and 
methodologies used in those factors, and sources of data used in those 
factors.'' Reports on both of these studies for geographic adjustment 
to hospital payments recently have been released. For summaries of the 
studies, their findings, and recommendations on reforming the wage 
index system, we refer readers to section IX.B. of the preamble of the 
FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28116 through 28119).
    As stated earlier in this section, we continue to believe that 
using the IPPS wage index as the source of an adjustment factor for the 
OPPS is reasonable and logical, given the inseparable, subordinate 
status of the HOPD within the hospital overall. Therefore, we are 
proposing to use the final FY 2013 IPPS wage indices for calculating 
OPPS payments in CY 2013. 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 2013 IPPS wage indices referenced in this discussion of 
the wage index. We refer readers to the CMS Web site for the OPPS at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. At this link, readers will find a 
link to the proposed FY 2013 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 2013 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 2013, 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 2013 OPPS relative weights. 
Table 12 below lists the proposed CY 2013 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 the final settled status by applying the differential between 
settled to submitted overall CCRs for the cost centers relevant to 
outpatient services from the most recent pair of final settled and 
submitted cost reports. We then weight each hospital's CCR by the 
volume of separately paid line-items on hospital claims that correspond 
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 2013 OPPS/ASC proposed rule, approximately 62 percent 
of the submitted cost reports utilized in the default ratio 
calculations represented data for cost reporting periods ending in CY 
2010, and approximately 38 percent were for cost reporting periods 
ending in CY 2009. For Maryland, we used an overall weighted average 
CCR for all hospitals in the Nation as a substitute for Maryland CCRs. 
Few hospitals in Maryland are eligible to receive payment under the 
OPPS, which limits the data available to calculate an accurate and 
representative CCR. The weighted CCR is used for Maryland because it 
takes into account each hospital's volume, rather than treating each 
hospital equally. We refer readers to the CY 2005 OPPS final rule with 
comment period (69 FR 65822) for further discussion and the rationale 
for our longstanding policy of using the national average CCR for 
Maryland. In general, observed changes in the statewide average default 
CCRs between CY 2012 and CY 2013 are modest and the few significant 
changes are associated with areas that have a small number of 
hospitals.
    Table 12 below lists the proposed statewide average default CCRs 
for OPPS services furnished on or after January 1, 2013.

[[Page 45106]]

                                Table 12--Proposed CY 2013 Statewide Average CCRs
----------------------------------------------------------------------------------------------------------------
                                                                                               Previous default
                   State                             Urban/rural           Proposed CY 2013    CCR (CY 2012 OPPS
                                                                              default CCR         final rule)
----------------------------------------------------------------------------------------------------------------
ALASKA....................................  RURAL.......................               0.489               0.487
ALASKA....................................  URBAN.......................               0.303               0.305
ALABAMA...................................  RURAL.......................               0.208               0.210
ALABAMA...................................  URBAN.......................               0.193               0.194
ARKANSAS..................................  RURAL.......................               0.219               0.221
ARKANSAS..................................  URBAN.......................               0.233               0.245
ARIZONA...................................  RURAL.......................               0.238               0.237
ARIZONA...................................  URBAN.......................               0.191               0.190
CALIFORNIA................................  RURAL.......................               0.192               0.193
CALIFORNIA................................  URBAN.......................               0.203               0.201
COLORADO..................................  RURAL.......................               0.331               0.342
COLORADO..................................  URBAN.......................               0.227               0.226
CONNECTICUT...............................  RURAL.......................               0.364               0.365
CONNECTICUT...............................  URBAN.......................               0.287               0.288
DISTRICT OF COLUMBIA......................  URBAN.......................               0.300               0.302
DELAWARE..................................  RURAL.......................               0.280               0.280
DELAWARE..................................  URBAN.......................               0.349               0.347
FLORIDA...................................  RURAL.......................               0.182               0.182
FLORIDA...................................  URBAN.......................               0.166               0.164
GEORGIA...................................  RURAL.......................               0.237               0.238
GEORGIA...................................  URBAN.......................               0.213               0.214
HAWAII....................................  RURAL.......................               0.323               0.321
HAWAII....................................  URBAN.......................               0.306               0.306
IOWA......................................  RURAL.......................               0.297               0.296
IOWA......................................  URBAN.......................               0.267               0.269
IDAHO.....................................  RURAL.......................               0.417               0.417
IDAHO.....................................  URBAN.......................               0.357               0.353
ILLINOIS..................................  RURAL.......................               0.239               0.238
ILLINOIS..................................  URBAN.......................               0.230               0.230
INDIANA...................................  RURAL.......................               0.285               0.292
INDIANA...................................  URBAN.......................               0.256               0.262
KANSAS....................................  RURAL.......................               0.276               0.279
KANSAS....................................  URBAN.......................               0.211               0.208
KENTUCKY..................................  RURAL.......................               0.215               0.217
KENTUCKY..................................  URBAN.......................               0.241               0.239
LOUISIANA.................................  RURAL.......................               0.242               0.247
LOUISIANA.................................  URBAN.......................               0.225               0.224
MARYLAND..................................  RURAL.......................               0.275               0.276
MARYLAND..................................  URBAN.......................               0.246               0.246
MASSACHUSETTS.............................  RURAL.......................               0.427               0.427
MASSACHUSETTS.............................  URBAN.......................               0.322               0.322
MAINE.....................................  RURAL.......................               0.445               0.438
MAINE.....................................  URBAN.......................               0.449               0.453
MICHIGAN..................................  RURAL.......................               0.303               0.305
MICHIGAN..................................  URBAN.......................               0.302               0.305
MINNESOTA.................................  RURAL.......................               0.470               0.482
MINNESOTA.................................  URBAN.......................               0.321               0.320
MISSOURI..................................  RURAL.......................               0.242               0.243
MISSOURI..................................  URBAN.......................               0.263               0.260
MISSISSIPPI...............................  RURAL.......................               0.226               0.224
MISSISSIPPI...............................  URBAN.......................               0.183               0.189
MONTANA...................................  RURAL.......................               0.431               0.434
MONTANA...................................  URBAN.......................               0.384               0.386
NORTH CAROLINA............................  RURAL.......................               0.253               0.251
NORTH CAROLINA............................  URBAN.......................               0.254               0.257
NORTH DAKOTA..............................  RURAL.......................               0.322               0.322
NORTH DAKOTA..............................  URBAN.......................               0.414               0.421
NEBRASKA..................................  RURAL.......................               0.318               0.318
NEBRASKA..................................  URBAN.......................               0.254               0.252
NEW HAMPSHIRE.............................  RURAL.......................               0.317               0.323
NEW HAMPSHIRE.............................  URBAN.......................               0.292               0.291
NEW JERSEY................................  URBAN.......................               0.207               0.212
NEW MEXICO................................  RURAL.......................               0.256               0.264
NEW MEXICO................................  URBAN.......................               0.278               0.288
NEVADA....................................  RURAL.......................               0.234               0.233
NEVADA....................................  URBAN.......................               0.162               0.167
NEW YORK..................................  RURAL.......................               0.420               0.419
NEW YORK..................................  URBAN.......................               0.367               0.356
OHIO......................................  RURAL.......................               0.321               0.320
OHIO......................................  URBAN.......................               0.237               0.234

[[Page 45107]]

 
OKLAHOMA..................................  RURAL.......................               0.239               0.239
OKLAHOMA..................................  URBAN.......................               0.213               0.217
OREGON....................................  RURAL.......................               0.314               0.311
OREGON....................................  URBAN.......................               0.335               0.328
PENNSYLVANIA..............................  RURAL.......................               0.266               0.270
PENNSYLVANIA..............................  URBAN.......................               0.200               0.199
PUERTO RICO...............................  URBAN.......................               0.504               0.492
RHODE ISLAND..............................  URBAN.......................               0.264               0.270
SOUTH CAROLINA............................  RURAL.......................               0.210               0.211
SOUTH CAROLINA............................  URBAN.......................               0.215               0.214
SOUTH DAKOTA..............................  RURAL.......................               0.307               0.307
SOUTH DAKOTA..............................  URBAN.......................               0.252               0.252
TENNESSEE.................................  RURAL.......................               0.210               0.211
TENNESSEE.................................  URBAN.......................               0.195               0.199
TEXAS.....................................  RURAL.......................               0.235               0.236
TEXAS.....................................  URBAN.......................               0.205               0.196
UTAH......................................  RURAL.......................               0.373               0.379
UTAH......................................  URBAN.......................               0.359               0.359
VIRGINIA..................................  RURAL.......................               0.227               0.226
VIRGINIA..................................  URBAN.......................               0.237               0.239
VERMONT...................................  RURAL.......................               0.408               0.407
VERMONT...................................  URBAN.......................               0.384               0.384
WASHINGTON................................  RURAL.......................               0.366               0.368
WASHINGTON................................  URBAN.......................               0.301               0.298
WISCONSIN.................................  RURAL.......................               0.352               0.351
WISCONSIN.................................  URBAN.......................               0.310               0.311
WEST VIRGINIA.............................  RURAL.......................               0.281               0.280
WEST VIRGINIA.............................  URBAN.......................               0.341               0.337
WYOMING...................................  RURAL.......................               0.379               0.386
WYOMING...................................  URBAN.......................               0.301               0.302
----------------------------------------------------------------------------------------------------------------

E. Proposed OPPS Payments to Certain Rural and Other Hospitals

1. Hold Harmless Transitional Payment Changes
    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 TOPs were 
temporary payments for most providers and intended to ease their 
transition from the prior reasonable cost-based payment system to the 
OPPS system. There are two types of hospitals excepted from the policy 
described above, cancer hospitals and children's hospitals. 
Specifically, such a hospital could receive TOPs to the extent its PPS 
amount was less than its pre-BBA amount in the applicable year. Section 
1833(t)(7)(D)(i) of the Act originally provided for TOPs to rural 
hospitals with 100 or fewer beds for covered OPD services furnished 
before January 1, 2004. However, section 411 of Public Law 108-173 (the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003) 
amended section 1833(t)(7)(D)(i) of the Act to extend these payments 
through December 31, 2005, for rural hospitals with 100 or fewer beds. 
Section 411 also extended the TOPs to sole community hospitals (SCHs) 
located in rural areas for services furnished during the period that 
began with the provider's first cost reporting period beginning on or 
after January 1, 2004, and ending on December 31, 2005. Accordingly, 
the authority for making TOPs under section 1833(t)(7)(D)(i) of the 
Act, as amended by section 411 of 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 (the Deficit Reduction Act of 
2005) extended the TOPs for covered OPD services furnished on or after 
January 1, 2006, and before January 1, 2009, for rural hospitals having 
100 or fewer beds that are not SCHs. Section 5105 of Public Law 109-171 
also reduced the TOPs to rural hospitals from 100 percent of the 
difference between the provider's OPPS payments and the pre-BBA amount. 
This provision provided that, in cases in which the OPPS payment was 
less than the provider's pre-BBA amount, the amount of payment would be 
increased by 95 percent of the 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 applied to 
essential access community hospitals (EACHs), which are considered to 
be SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Accordingly, 
by law, EACHs are treated as SCHs. In the CY 2007 OPPS/ASC final rule 
with comment period (71 FR 68010), we stated that EACHs were not 
eligible for TOPs under Public Law 109-171. However, we stated they 
were eligible for the adjustment for rural SCHs authorized under 
section 411 of Public Law 108-173. 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.

[[Page 45108]]

    In the CY 2009 OPPS/ASC proposed rule (73 FR 41461), we stated 
that, effective for services provided on or after January 1, 2009, 
rural hospitals with 100 or fewer beds that are not SCHs would no 
longer be eligible for TOPs, in accordance with section 5105 of Public 
Law 109-171. However, subsequent to issuance of the CY 2009 OPPS/ASC 
proposed rule, section 147 of Public Law 110-275 (the Medicare 
Improvements for Patients and Providers Act of 2008) amended section 
1833(t)(7)(D)(i) of the Act by extending the period of TOPs to rural 
hospitals with 100 beds or fewer for 1 year, for services provided 
before January 1, 2010. Section 147 of 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 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 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 (Pub. L. 111-148) amended section 
1833(t)(7)(D)(i)(III) of the Act by extending the period of TOPs to 
rural hospitals that are not SCHs with 100 beds or fewer for 1 year, 
for services provided before January 1, 2011. Section 3121(a) of the 
Affordable Care Act amended section 1833(t)(7)(D)(i)(III) of the Act 
and extended the period of TOPs to SCHs (including EACHs) for 1 year, 
for services provided before January 1, 2011, and section 3121(b) of 
the Affordable Care Act removed the 100-bed limitation applicable to 
such SCHs for covered OPD services furnished on 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 self-implementing TOPs extensions and 
amendments described in section 3121 of the Affordable Care Act.
    Section 108 of the Medicare and Medicaid Extenders Act of 2010 
(MMEA) (Pub. L. 111-309) extended for 1 year the hold harmless 
provision for a rural hospital with 100 or fewer beds that is not an 
SCH (as defined in section 1886(d)(5)(D)(iii) of the Act). Therefore, 
for such a hospital, for services furnished before January 1, 2012, 
when the PPS amount is less than the provider's pre-BBA amount, the 
amount of payment to the hospital is increased by 85 percent of the 
amount of the difference between the two payments. In addition, section 
108 of the MMEA also extended for 1 year the hold harmless provision 
for an SCH (as defined in section 1886(d)(5)(D)(iii) of the Act 
(including EACHs) and removed the 100-bed limit applicable to such SCHs 
for covered OPD services furnished on or after January 1, 2010, and 
before January 1, 2012. Therefore, for such hospitals, for services 
furnished before January 1, 2012, when the PPS amount is less than the 
provider's pre-BBA amount, the amount of payment to the hospital is 
increased by 85 percent of the amount of the difference between the two 
payments. Effective for services provided on or after January 1, 2012, 
a rural hospital with 100 or fewer beds that is not an SCH and an SCH 
(including EACHs) are no longer be eligible for TOPs, in accordance 
with section 108 of the MMEA. In the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74199), we revised our regulations at Sec.  
419.70(d) to conform the regulation text to the self-implementing 
provisions of section 108 of the MMEA described above.
    Subsequent to issuance of the CY 2012 OPPS/ASC final rule with 
comment period, section 308 of the Temporary Payroll Tax Cut 
Continuation Act of CY 2011 (Pub. L. 112-78), as amended by section 
3002 of the Middle Class Tax Relief and Jobs Creation Act (Pub. L. 112-
96), extended through December 31, 2012, the hold harmless provision 
for a rural hospital with 100 or fewer beds that is not an SCH (as 
defined in section 1886(d)(5)(D)(iii) of the Act). Therefore, for such 
a hospital, for services furnished before January 1, 2013, when the PPS 
amount is less than the provider's pre-BBA amount, the amount of 
payment is increased by 85 percent of the amount of the difference 
between the two payments.
    Section 308 of Public Law 112-78 also extended through February 29, 
2012 the hold harmless provision for an SCH (as defined in section 
1886(d)(5)(D)(iii) of the Act), including an EACH, without the bed size 
limitation. Therefore, for such hospitals, for services furnished 
before March 1, 2012, when the PPS amount is less than the provider's 
pre-BBA amount, the amount of payment is increased by 85 percent of the 
amount of the difference between the two payments. However, section 
3002 of Public Law 112-96 extended through December 31, 2012, the hold 
harmless provision for an SCH (as defined in section 1886(d)(5)(D)(iii) 
of the Act), including an EACH, that has no more than 100 beds. 
Therefore, for such hospitals, for services furnished before January 1, 
2013, when the PPS amount is less than the provider's pre-BBA amount, 
the amount of payment is increased by 85 percent of the amount of the 
difference between the two payments. Accordingly, we are proposing to 
revise Sec.  419.70(d) of the regulations to reflect the TOPs 
extensions and amendments described in section 308 of Public Law 112-78 
and section 3002 of Public Law 112-96.
    Effective for services provided on or after March 1, 2012, SCHs 
(including EACHs) with greater than 100 beds are no longer eligible for 
TOPs, in accordance with section 308 of Public Law 112-78. Effective 
for services provided on or after January 1, 2013, a rural hospital 
with 100 or fewer beds that is not an SCH and an SCH (including an 
EACH) are no longer eligible for TOPs, in accordance with section 3002 
of Public Law 112-96.
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,

[[Page 45109]]

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 outlier payments and copayment. As we 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 2012. 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 2013 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 (76 
FR 46232). We intend to reassess the 7.1 percent adjustment in the 
future by examining differences between urban hospitals' costs and 
rural hospitals' costs using updated claims data, cost reports, and 
provider information.

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 TOPs to ensure that they do not receive a payment that 
is lower under the OPPS than the payment they would have received 
before implementation of the OPPS, as set forth in section 
1833(t)(7)(F) of the Act. The ``pre-BBA'' payment amount is an amount 
equal to the product of the reasonable cost of the hospital for covered 
outpatient services for the portions of the hospital's cost reporting 
period (or periods) occurring in the current year and the base payment-
to-cost ratio (PCR) for the hospital. The ``pre-BBA'' amount, including 
the determination of the base PCR, are defined at 42 CFR 419.70(f). 
TOPs are calculated on Worksheet E, Part B, of the Hospital and 
Hospital Health Care Complex Cost Report (Form CMS-2552-96 or Form CMS-
2552-10, as applicable) each year. Section 1833(t)(7)(I) of the Act 
exempts TOPs from budget neutrality calculations.
    Section 3138 of the Affordable Care Act amended section 1833(t) of 
the Act by adding a new paragraph (18), which instructs the Secretary 
to conduct a study to determine if, under the OPPS, outpatient costs 
incurred by cancer hospitals described in section 1886(d)(1)(B)(v) of 
the Act with respect to APC groups exceed the costs incurred by other 
hospitals furnishing services under section 1833(t) of the Act, as 
determined appropriate by the Secretary. In addition, section 3138 of 
the Affordable Care Act requires the Secretary to take into 
consideration the cost of drugs and biologicals incurred by such 
hospitals when studying cancer hospital costliness. Further, section 
3138 of the Affordable Care Act provides that if the Secretary 
determines that cancer hospitals' costs with respect to APC groups are 
determined to be greater than the costs of other hospitals furnishing 
services under section 1833(t) of the Act, the Secretary shall provide 
an appropriate adjustment under section 1833(t)(2)(E) of the Act to 
reflect these higher costs. After conducting the study required by 
section 3138, we determined in 2012 that outpatient costs incurred by 
the 11 specified cancer hospitals were greater than the costs incurred 
by other OPPS hospitals. For a complete discussion regarding the cancer 
hospital cost study, we refer readers to the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74200 through 74201).
    Based on our findings that costs incurred by cancer hospitals were 
greater than the costs incurred by other OPPS hospitals, we finalized a 
policy to provide a payment adjustment to the 11 specified cancer 
hospitals that reflects the higher outpatient costs as discussed in the 
CY 2012 OPPS/ASC final rule with comment period (76 FR 74202 through 
74206). Specifically, we adopted a policy to provide additional 
payments to each of the 11 cancer hospitals so that each cancer 
hospital's final PCR for services provided in a given calendar year is 
equal to the weighted average PCR (which we refer to as the ``target 
PCR'') for other hospitals paid under the OPPS. The target PCR is set 
in advance of the calendar year and is calculated using the most recent 
submitted or settled cost report data that are available at the time of 
final rulemaking for the calendar year. The amount of the payment 
adjustment is made on an aggregate basis at cost report settlement. We 
note that the changes made by section 1833(t)(18) of the Act do not 
affect the existing statutory provisions that provide for TOPs for 
cancer hospitals. The TOPs are assessed as usual after all payments, 
including the cancer hospital payment adjustment, have been made

[[Page 45110]]

for a cost reporting period. For CY 2012, the target PCR for purposes 
of the cancer hospital payment adjustment is 0.91.
2. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2013
    For CY 2013, we are proposing to continue our policy to provide 
additional payments to cancer hospitals so that each cancer hospital's 
final PCR is equal to the weighted average PCR (or ``target PCR'') for 
the other OPPS hospitals using the most recent submitted or settled 
cost report data that are available at the time of this proposed rule. 
To calculate the proposed CY 2013 target PCR, we used the same extract 
of cost report data from HCRIS, as discussed in section II.A of this 
proposed rule, used to estimate costs for the CY 2013 OPPS. Using these 
cost report data, we included data from Worksheet E, Part B, for each 
hospital, using data from each hospital's most recent cost report, 
whether as submitted or settled. We then limited the dataset to the 
hospitals with CY 2011 claims data that we used to model the impact of 
the proposed CY 2013 APC relative weights (3,975 hospitals) because it 
is appropriate to use the same set of hospitals that we are using to 
calibrate the modeled CY 2013 OPPS. The cost report data for the 
hospitals in this dataset were from cost report periods with fiscal 
year ends ranging from 2010 to 2011. We then removed the cost report 
data of the 48 hospitals located in Puerto Rico from our dataset 
because we do not believe that their cost structure reflects the costs 
of most hospitals paid under the OPPS and, therefore, their inclusion 
may bias the calculation of hospital-weighted statistics. We also 
removed 177 hospitals with cost report data that were not complete 
(missing aggregate OPPS payments, missing aggregate cost data, or 
missing both), so that all cost reports in the study would have both 
the payment and cost data necessary to calculate a PCR for each 
hospital, leading to a proposed analytic file of 3,750 hospitals with 
cost report data.
    Using this smaller dataset of cost report data, we estimated that, 
on average, the OPPS payments to other hospitals furnishing services 
under the OPPS are approximately 91 percent of reasonable cost 
(weighted average PCR of 0.91). Based on these data, we are proposing a 
target PCR of 0.91 that would be used to determine the CY 2013 cancer 
hospital payment adjustment that would be paid at cost report 
settlement. Therefore, we are proposing that the payment amount 
associated with the cancer hospital payment adjustment to be determined 
at cost report settlement would be the additional payment needed to 
result in a proposed target PCR equal to 0.91 for each cancer hospital.

G. Proposed Hospital Outpatient Outlier Payments

1. Background
    Currently, the OPPS provides outlier payments on a service-by-
service basis. In CY 2011, the outlier threshold was determined to be 
met when the cost of furnishing a service or procedure by a hospital 
exceeds 1.75 times the APC payment amount and exceeds the APC payment 
rate plus a $2,025 fixed-dollar threshold. We introduced a fixed-dollar 
threshold in CY 2005, in addition to the traditional multiple 
threshold, in order to better target outlier payments to those high 
cost and complex procedures where a very costly service could present a 
hospital with significant financial loss. If the cost of a service 
meets both of these conditions, the multiple threshold and the fixed-
dollar threshold, the outlier payment is calculated as 50 percent of 
the amount by which the cost of furnishing the service exceeds 1.75 
times the APC payment rate. Before CY 2009, this outlier payment had 
historically been considered a final payment by longstanding OPPS 
policy. However, we implemented a reconciliation process similar to the 
IPPS outlier reconciliation process for cost reports with cost 
reporting periods beginning on or after January 1, 2009, in our CY 2009 
OPPS/ASC final rule with comment period (73 FR 68594 through 68599).
    It has been our policy for the past several years to report the 
actual amount of outlier payments as a percent of total spending in the 
claims being used to model the proposed OPPS. Our current estimate of 
total outlier payments as a percent of total CY 2011 OPPS payment, 
using available CY 2011 claims and the revised OPPS expenditure 
estimate for the 2012 Trustee's Report, is approximately 1.06 percent 
of the total aggregated OPPS payments. Therefore, for CY 2011, we 
estimate that we paid 0.06 percent above the CY 2011 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 2011 claims data and CY 2012 payment rates, we currently estimate 
that the aggregate outlier payments for CY 2012 will be approximately 
1.03 percent of the total CY 2012 OPPS payments. The difference between 
1.0 percent and 1.03 percent is reflected in the regulatory impact 
analysis in section XXII. of this proposed rule. We note that we 
provide proposed estimated CY 2013 outlier payments for hospitals and 
CMHCs with claims included in the claims data that we used to model 
impacts in the Hospital-Specific Impacts--Provider-Specific Data file 
on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
2. Proposed Outlier Calculation
    For CY 2013, we are proposing 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, an amount equal to 0.12 percent of outlier 
payments (or 0.0012 percent of total OPPS payments) would be allocated 
to CMHCs for PHP outlier payments. This is the amount of estimated 
outlier payments that would result from the proposed CMHC outlier 
threshold as a proportion of total estimated OPPS outlier payments. As 
discussed in section VIII.C. of 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 2013 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 $2,400 fixed-dollar 
threshold. This proposed threshold reflects the methodology discussed 
below in this section, as well as the

[[Page 45111]]

proposed APC recalibration for CY 2013.
    We calculated the proposed fixed-dollar threshold for this proposed 
rule using largely the same methodology as we did in CYs 2011 and 2012 
(75 FR 71887 through 71889 and 76 FR 74207 through 74209). For purposes 
of estimating outlier payments for this proposed rule, we used the 
hospital-specific overall ancillary CCRs available in the April 2012 
update to the Outpatient Provider-Specific File (OPSF). The OPSF 
contains provider-specific data, such as the most current CCR, which 
are maintained by the Medicare contractors and used by the OPPS Pricer 
to pay claims. The claims that we use to model each OPPS update lag by 
2 years. For this proposed rule, we used CY 2011 claims to model the CY 
2013 OPPS. In order to estimate the proposed CY 2013 hospital outlier 
payments for this proposed rule, we inflated the charges on the CY 2011 
claims using the same inflation factor of 1.1406 that we used to 
estimate the IPPS fixed-dollar outlier threshold for the FY 2013 IPPS/
LTCH PPS proposed rule (77 FR 28142). We used an inflation factor of 
1.0680 to estimate CY 2012 charges from the CY 2011 charges reported on 
CY 2011 claims. The methodology for determining this charge inflation 
factor is discussed in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 
28142). As we stated in the CY 2005 OPPS final 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, for this CY 2013 OPPS/ASC proposed rule, 
we are proposing to apply the same CCR inflation adjustment factor that 
we are proposing to apply for the proposed FY 2013 IPPS outlier 
calculation to the CCRs used to simulate the proposed CY 2013 OPPS 
outlier payments that determine the fixed-dollar threshold. 
Specifically, for CY 2013, we are proposing to apply an adjustment 
factor of 0.9790 to the CCRs that were in the April 2012 OPSF to trend 
them forward from CY 2012 to CY 2013. The methodology for calculating 
this proposed adjustment was discussed in the FY 2013 IPPS/LTCH PPS 
proposed rule (77 FR 28142 through 28144). We note that due to the 
issue described in the IPPS proposed rule correction notice published 
on June 11, 2012, the operating and capital CCR inflation factors were 
reversed (77 FR 34326). In estimating the proposed CY 2013 OPPS fixed-
dollar outlier threshold, we have applied the corrected CCR inflation 
factor.
    Therefore, to model hospital outlier payments for this CY 2013 
OPPS/ASC proposed rule, we applied the overall CCRs from the April 2012 
OPSF file after adjustment (using the proposed CCR inflation adjustment 
factor of 0.9644 to approximate CY 2013 CCRs) to charges on CY 2011 
claims that were adjusted (using the proposed charge inflation factor 
of 1.1406 to approximate CY 2013 charges). We simulated aggregated CY 
2013 hospital outlier payments using these costs for several different 
fixed-dollar thresholds, holding the 1.75 multiple threshold constant 
and assuming that outlier payments would continue to be made at 50 
percent of the amount by which the cost of furnishing the service would 
exceed 1.75 times the APC payment amount, until the total outlier 
payments equaled 1.0 percent of aggregated estimated total CY 2013 OPPS 
payments. We estimated that a proposed fixed-dollar threshold of 
$2,400, combined with the 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 $2,400 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 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 Program requirements. For hospitals that fail to 
meet the Hospital OQR Program 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 XV. of this proposed 
rule.
3. Proposed 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 outlier 
threshold calculation assumes that overall ancillary CCRs accurately 
estimate hospital costs based on the information available to us at the 
time we set the prospective fixed-dollar outlier threshold. For these 
reasons, and as we have previously discussed in the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68596), we are proposing for CY 
2013, to not 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 conversion factor calculated in 
accordance with section II.B. of this proposed rule and the relative 
weight determined under

[[Page 45112]]

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 available via the Internet on the CMS Web site) 
and for most HCPCS codes to which separate payment under the OPPS has 
been assigned in Addendum B to this proposed rule (which is available 
via the Internet on the CMS Web site) was calculated by multiplying the 
proposed CY 2013 scaled weight for the APC by the proposed CY 2013 
conversion factor.
    We note that section 1833(t)(17) of the Act, which applies to 
hospitals as defined under section 1886(d)(1)(B) of the Act, requires 
that hospitals that fail to submit data required to be submitted on 
quality measures selected by the Secretary, in the form and manner and 
at a time specified by the Secretary, incur a reduction of 2.0 
percentage points to their OPD fee schedule increase factor, that is, 
the annual payment update factor. The application of a reduced OPD fee 
schedule increase factor results in reduced national unadjusted payment 
rates that apply to certain outpatient items and services provided by 
hospitals that are required to report outpatient quality data and that 
fail to meet the Hospital OQR Program (formerly referred to as the 
Hospital Outpatient Quality Data Reporting Program (HOP QDRP)) 
requirements. For further discussion of the payment reduction for 
hospitals that fail to meet the requirements of the Hospital OQR 
Program, we refer readers to section XV. of this 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 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 
2013 OPPS fee schedule increase factor of 2.1 percent.
    Step 1. Calculate 60 percent (the labor-related portion) of the 
national unadjusted payment rate. Since the initial 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) to 
which hospitals are assigned for FY 2013 under the IPPS, 
reclassifications through the MGCRB, section 1886(d)(8)(B) ``Lugar'' 
hospitals, reclassifications under section 1886(d)(8)(E) of the Act, as 
defined in 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 extended section 508 and certain additional 
special exception hospital reclassifications from October 1, 2010 
through September 30, 2011. Section 302 of the Temporary Payroll Tax 
Cut Continuation Act of 2011 (Pub. L. 112-78) as amended by section 
3001 of the Middle Class Tax Relief and Job Creation Act of 2012 (Pub. 
L. 112-96) extended section 508 and certain additional special 
exception hospital reclassifications from October 1, 2011 through March 
31, 2012. Therefore, these reclassifications will not apply to the CY 
2013 OPPS. (For further discussion of the proposed changes to the FY 
2013 IPPS wage indices, as applied to the CY 2013 OPPS, we refer 
readers to section II.C. of this proposed rule). We are proposing to 
continue to apply a wage index floor of 1.00 to frontier States, in 
accordance with section 10324 of the Affordable Care Act.
    Step 3. Adjust the wage index of hospitals located in certain 
qualifying counties that have a relatively high percentage of hospital 
employees who reside in the county, but 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 available via the 
Internet on the CMS Web site) contains the qualifying counties and the 
associated proposed wage index increase developed for the FY 2013 IPPS 
and listed as Table 4J in the FY 2013 IPPS/LTCH PPS proposed rule and 
available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. 
This step is to be followed only if the hospital is not reclassified or 
redesignated under section 1886(d)(8) or section 1886(d)(10) of the 
Act.
    Step 4. Multiply the applicable wage index determined under Steps 2 
and 3 by the amount determined under Step 1 that represents the labor-
related portion of the national unadjusted payment rate.
    The formula below is a mathematical representation of Step 4 and 
adjusts the labor-related portion of the national payment rate for the 
specific service by the wage index.

[[Page 45113]]

    X a 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 an SCH, set forth in the regulations at 
Sec.  412.92, or an EACH, which is considered to be an SCH under 
section 1886(d)(5)(D)(iii)(III) of the Act, and located in a rural 
area, as defined in 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 total payment.
    The formula below is a mathematical representation of Step 6 and 
applies the proposed rural adjustment for rural SCHs.

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

    We have provided examples below of the calculation of both the full 
and reduced national unadjusted payment rates that will apply to 
certain outpatient items and services performed by hospitals that meet 
and that fail to meet the Hospital OQR Program requirements, using the 
steps outlined above. For purposes of this example, we 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 2013 full national unadjusted payment 
rate for APC 0019 is $337.48. The proposed reduced national unadjusted 
payment rate for a hospital that fails to meet the Hospital OQR Program 
requirements is $330.73. This proposed reduced rate is calculated by 
multiplying the reporting ratio of 0.980 by the full unadjusted payment 
rate for APC 0019.
    The proposed FY 2013 wage index for a provider located in CBSA 
35644 in New York is 1.2991. The proposed labor-related portion of the 
full national unadjusted payment is $263.05 (.60 * $337.48 * 1.2991). 
The labor-related portion of the proposed reduced national unadjusted 
payment is $257.79 (.60 * $330.73 * 1.2991). The nonlabor-related 
portion of the full national unadjusted payment is $134.99 (.40 * 
$337.48). The nonlabor-related portion of the proposed reduced national 
unadjusted payment is $132.29 (.40 * $330.73). The sum of the labor-
related and nonlabor-related portions of the proposed full national 
adjusted payment is $398.04 ($263.05 + $134.99). The sum of the reduced 
national adjusted payment is $390.08 ($257.79 + $132.29).

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, the effective 
copayment rate for a covered OPD service paid under the OPPS in CY 
2006, and in calendar years thereafter, shall not exceed 40 percent of 
the APC payment rate.
    Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered 
OPD service (or group of such services) furnished in a year, the 
national unadjusted copayment amount cannot be less than 20 percent of 
the OPD fee schedule amount. However, section 1833(t)(8)(C)(i) of the 
Act limits the amount of beneficiary copayment that may be collected to 
the amount of the inpatient deductible.
    Section 4104 of the Affordable Care Act eliminated the Part B 
coinsurance for preventive services furnished on and after January 1, 
2011, that meet certain requirements, including flexible 
sigmoidoscopies and screening colonscopies, and waived the Part B 
deductible for screening colonoscopies that become diagnostic during 
the procedure. Our discussion of the changes made by the Affordable 
Care Act with regard to copayments for preventive services furnished on 
and after January 1, 2011 may be found in section XII.B. of the CY 2011 
OPPS/ASC final rule with comment period (75 FR 72013).
2. Proposed OPPS Copayment Policy
    For CY 2013, 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 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, 2013, are shown in Addenda A 
and B to this proposed rule (which are available via the Internet on 
the CMS Web site). As discussed in section XV. of this proposed rule, 
for CY 2013, the proposed Medicare beneficiary's minimum unadjusted 
copayment and national unadjusted copayment for a service to which a 
reduced national unadjusted payment rate applies will 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.
    We note that APC copayments may increase or decrease each year 
based on changes in the calculated APC payment rates due to updated 
cost report and claims data, and any changes to the OPPS cost modeling 
process. The CY 2013 proposal to base APC relative weights on geometric 
mean costs also affects proposed APC payment rates and, through them, 
the corresponding beneficiary copayments. However, as described in the 
CY 2004 OPPS/ASC final rule with comment period, the development of the 
copayment methodology generally moves beneficiary copayments closer to 
20 percent of OPPS APC payments (68 FR 63458 through 63459). For a more 
detailed discussion of the proposal to base the APC relative payment 
weights on geometric mean costs, we refer readers to section II.A.2.f. 
of this proposed rule.

[[Page 45114]]

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, $67.50 is 20 percent of the full national 
unadjusted payment rate of $337.48. For APCs with only a minimum 
unadjusted copayment in Addenda A and B of this proposed rule (which 
are available via the Internet on the CMS Web site), the beneficiary 
payment percentage is 20 percent.
    The formula below is a mathematical representation of Step 1 and 
calculates national copayment as a percentage of national payment for a 
given service.
    B is the beneficiary payment percentage.

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

    Step 2. Calculate the appropriate wage-adjusted payment rate for 
the APC for the provider in question, as indicated in Steps 2 through 4 
under section II.H. of this 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, 2013, are shown in Addenda A 
and B to this proposed rule (which are available via the Internet on 
the CMS Web site). We note that the proposed national unadjusted 
payment rates and copayment rates shown in Addenda A and B to this 
proposed rule reflect the proposed full CY 2013 OPD fee schedule 
increase factor discussed in section II.B. 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:
     Category I CPT codes, which describe medical services and 
procedures;
     Category III CPT codes, which describe new and emerging 
technologies, services, and procedures; and
     Level II HCPCS codes, which are used primarily to identify 
products, supplies, temporary procedures, and services not described by 
CPT codes.
    CPT codes are established by the American Medical Association (AMA) 
and the Level II HCPCS codes are established by the CMS HCPCS 
Workgroup. These codes are updated and changed throughout the year. CPT 
and HCPCS code changes that affect the OPPS are published both through 
the annual rulemaking cycle and through the OPPS quarterly update 
Change Requests (CRs). CMS releases new Level II HCPCS codes to the 
public or recognizes the release of new CPT codes by the AMA and makes 
these codes effective (that is, the codes can be reported on Medicare 
claims) outside of the formal rulemaking process via OPPS quarterly 
update CRs. This quarterly process offers hospitals access to codes 
that may more accurately describe items or services furnished and/or 
provides payment or more accurate payment for these items or services 
in a timelier manner than if CMS waited for the annual rulemaking 
process. We solicit public comments on these new codes and finalize our 
proposals related to these codes through our annual rulemaking process. 
In Table 13 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. Because the payment rates 
associated with codes effective July 1 are not available to us in time 
for incorporation into the Addenda of this proposed rule, the Level II 
HCPCS codes and the Category III CPT codes implemented through the July 
2012 OPPS quarterly update CR could not be included in Addendum B to 
this proposed rule. Nevertheless, we are requesting public comments on 
the codes included in the July 2012 OPPS quarterly update and including 
these codes in the preamble to this proposed rule.

                           Table 13--Comment Timeframe for New or Revised HCPCS Codes
----------------------------------------------------------------------------------------------------------------
    OPPS quarterly update CR         Type of code       Effective date      Comments sought     When finalized
----------------------------------------------------------------------------------------------------------------
April l, 2012...................  Level II HCPCS      April 1, 2012.....  CY 2013 OPPS/ASC    CY 2013 OPPS/ASC
                                   Codes.                                  proposed rule.      final rule with
                                                                                               comment period.
July 1, 2012....................  Level II HCPCS      July 1, 2012......  CY 2013 OPPS/ASC    CY 2013 OPPS/ASC
                                   Codes.                                  proposed rule.      final rule with
                                                                                               comment period.
                                  Category I          July 1, 2012......  CY 2013 OPPS/ASC    CY 2013 OPPS/ASC
                                   (certain vaccine                        proposed rule.      final rule with
                                   codes) and III                                              comment period.
                                   CPT codes.
October 1, 2012.................  Level II HCPCS      October 1, 2012...  CY 2013 OPPS/ASC    CY 2014 OPPS/ASC
                                   Codes.                                  final rule with     final rule with
                                                                           comment period.     comment period.

[[Page 45115]]

 
January 1, 2013.................  Level II HCPCS      January 1, 2013...  CY 2013 OPPS/ASC    CY 2014 OPPS/ASC
                                   Codes.                                  final rule with     final rule with
                                                                           comment period.     comment period.
                                  Category I and III  January 1, 2013...  CY 2013 OPPS/ASC    CY 2014 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 solicited public 
comments in this CY 2013 OPPS/ASC proposed rule or whether we will be 
soliciting public comments in the CY 2013 OPPS/ASC final rule with 
comment period. We note that we sought public comments in the CY 2012 
OPPS/ASC final rule with comment period on the new CPT and Level II 
HCPCS codes that were effective January 1, 2012. We also sought public 
comments in the CY 2012 OPPS/ASC final rule with comment period on the 
new Level II HCPCS codes effective October 1, 2011. These new codes, 
with an effective date of October 1, 2011, or January 1, 2012, were 
flagged with comment indicator ``NI'' (New code, interim APC 
assignment; comments will be accepted on the interim APC assignment for 
the new code) in Addendum B to the CY 2012 OPPS/ASC final rule with 
comment period to indicate that we were assigning them an interim 
payment status and an APC and payment rate, if applicable, which were 
subject to public comment following publication of the CY 2012 OPPS/ASC 
final rule with comment period. We will respond to public comments and 
finalize our interim OPPS treatment of these codes in the CY 2013 OPPS/
ASC final rule with comment period.
1. Proposed Treatment of New CY 2012 Level II HCPCS and CPT Codes 
Effective April 1, 2012 and July 1, 2012 for Which We Are Soliciting 
Public Comments in This CY 2013 Proposed Rule
    Through the April 2012 OPPS quarterly update CR (Transmittal 2418, 
Change Request 7748, dated March 2, 2012) and the July 2012 OPPS 
quarterly update CR (Transmittal 2483, Change Request 7847, dated June 
8, 2012), we recognized several new HCPCS codes for separate payment 
under the OPPS. Effective April 1 and July 1 of CY 2012, we made 
effective 13 new Level II HCPCS codes and 7 Category III CPT codes. 
Specifically, 5 new Level II HCPCS codes were effective for the April 
2012 update and another 8 new Level II HCPCS codes were effective for 
the July 2012 update for a total of 13. Seven new Category III CPT 
codes were effective for the July 2012 update. Of the 13 new Level II 
HCPCS codes, we recognized for separate payment 11 of these codes, and 
of the 7 new Category III CPT codes, we recognized for separate payment 
all 7 new Category III CPT codes, for a total of 18 new Level II HCPCS 
and Category III CPT codes that are recognized for separate payment for 
CY 2013.
    Through the April 2012 OPPS quarterly update CR, we allowed 
separate payment for each of the five new Level II HCPCS codes. 
Specifically, as displayed in Table 14 below, we provided separate 
payment for the following HCPCS codes:
     HCPCS code C9288 (Injection, centruroides (scorpion) 
immune f(ab)2 (equine), 1 vial)
     HCPCS code C9289 (Injection, asparaginase Erwinia 
chrysanthemi, 1,000 international units (I.U.))
     HCPCS code C9290 (Injection, bupivacaine liposome, 1 mg)
     HCPCS code C9291 (Injection, aflibercept, 2 mg vial)
     HCPCS code C9733 (Non-ophthalmic fluorescent vascular 
angiography)
    In this proposed rule, we are proposing to assign the Level II 
HCPCS codes listed in Table 14 to the specific proposed APCs and status 
indicators for CY 2013.

Table 14--Level II HCPCS Codes With a Change in OPPS Status Indicator or
                     Newly Implemented in April 2012
------------------------------------------------------------------------
                         CY 2012 long   Proposed CY 2013    Proposed CY
  CY 2012 HCPCS Code      descriptor    status indicator     2013 APC
------------------------------------------------------------------------
C9288................  Injection,       G                           9288
                        centruroides
                        (scorpion)
                        immune f(ab)2
                        (equine), 1
                        vial.
C9289................  Injection,       G                           9289
                        asparaginase
                        Erwinia
                        chrysanthemi,
                        1,000
                        international
                        units (I.U.).
C9290................  Injection,       G                           9290
                        bupivacaine
                        liposome, 1 mg.
C9291*...............  Injection,       G                           9291
                        aflibercept, 2
                        mg vial.
C9733................  Non-ophthalmic   Q2                          0397
                        fluorescent
                        vascular
                        angiography.
------------------------------------------------------------------------
* Level II HCPCS code C9291 (Injection, aflibercept, 2 mg vial) was
  deleted June 30, 2012, and replaced with HCPCS code Q2046 effective
  July 1, 2012.

    Through the July 2012 OPPS quarterly update CR, which included 
HCPCS codes that were made effective July 1, 2012, we allowed separate 
payment for six of the eight new Level II HCPCS codes. Specifically, as 
displayed in Table 15 of this proposed rule, we provided separate 
payment for the following HCPCS codes:
     HCPCS code C9368 (Grafix core, per square centimeter)
     HCPCS code C9369 (Grafix prime, per square centimeter)
     HCPCS code Q2045 (Injection, human fibrinogen concentrate, 
1 mg)
     HCPCS code Q2046 (Injection, aflibercept, 1 mg)
     HCPCS code Q2048 (Injection, doxorubicin hydrochloride, 
liposomal, doxil, 10 mg)
     HCPCS code Q2049 (Injection, doxorubicin hydrochloride, 
liposomal, imported lipodox, 10 mg)
    We note that three of the Level II HCPCS Q-codes that were made 
effective July 1, 2012, were previously

[[Page 45116]]

described by HCPCS J-codes or C-codes that were separately payable 
under the hospital OPPS. First, HCPCS code Q2045 replaced HCPCS code 
J1680 (Injection, human fibrinogen concentrate, 100 mg), beginning July 
1, 2012. HCPCS code J1680 was assigned to status indicator ``K'' 
(Nonpass-through drugs and nonimplantable biologicals, including 
therapeutic radiopharmaceuticals; paid under OPPS; separate APC 
payment) on January 1, 2012. However, because HCPCS code J1680 is 
replaced by HCPCS code Q2045 effective July 1, 2012, we changed its 
status indicator to ``E'' (Not Payable by Medicare) effective July 1, 
2012. Because HCPCS code Q2045 describes the same drug as HCPCS code 
J1680, we continued its separate payment status and assigned it to 
status indicator ``K'' effective July 1, 2012. However, because the 
dosage descriptor for HCPCS code Q2045 is not the same as HCPCS code 
J1680, we assigned HCPCS code Q2045 to a new APC to maintain data 
consistency for future rulemaking. Specifically, HCPCS code Q2045 is 
assigned to APC 1414 (Human fibrinogen conc inj) effective July 1, 
2012.
    Second, HCPCS code Q2046 replaced HCPCS code C9291 (Injection, 
aflibercept, 2 mg vial) effective July 1, 2012. HCPCS code C9291 was 
assigned pass-through status when it was made effective April 1, 2012. 
Because HCPCS code Q2046 describes the same product as HCPCS code 
C9291, we continued its pass-through status and assigned HCPCS code 
Q2046 to status indicator ``G'' as well as assigned it to the same APC, 
specifically APC 9291 (Injection, aflibercept), effective July 1, 2012. 
HCPCS code C9291 is deleted effective June 30, 2012.
    Third, the HCPCS Workgroup replaced HCPCS code J9001 (Injection, 
doxorubicin hydrochloride, all lipid formulations, 10 mg) with new 
HCPCS code Q2048, effective July 1, 2012. Consequently, the status 
indicator for HCPCS code J9001 is changed to ``E'' (Not Payable by 
Medicare) effective July 1, 2012. Because HCPCS code Q2048 describes 
the same drug as HCPCS code J9001, we continued its separate payment 
status and assigned HCPCS code Q2048 to status indicator ``K'' 
effective July 1, 2012. In addition, because, HCPCS code Q2049 is 
similar to HCPCS code Q2048, we assigned HCPCS code Q2049 to status 
indicator ``K'' effective July 1, 2012.
    Of the 15 HCPCS codes that were made effective July 1, 2012, we did 
not recognize for separate payment two HCPCS codes because they are 
both paid under a payment system other than OPPS. Specifically, HCPCS 
code Q2047 (Injection, peginesatide, 0.1 mg (for ESRD on dialysis)) is 
assigned to status indicator ``A'' (Not paid under OPPS; paid by fiscal 
intermediaries/MACs under a fee schedule or payment system other than 
OPPS), and HCPCS code Q2034 (Influenza virus vaccine, split virus, for 
intramuscular use (Agriflu)) is assigned to status indicator ``L'' (Not 
paid under OPPS; paid at reasonable cost).
    Table 15 below includes a complete list of the Level II HCPCS codes 
that were made effective July 1, 2012, with their proposed status 
indicators, proposed APC assignments, and proposed payment rates for CY 
2013.

                           Table 15--New Level II HCPCS Codes Implemented in July 2012
----------------------------------------------------------------------------------------------------------------
                                                                                                    Proposed CY
      CY 2012 HCPCS code       CY 2012 long descriptor   Proposed CY 2013 status    Proposed CY    2013 payment
                                                                indicator            2013 APC          rate
----------------------------------------------------------------------------------------------------------------
C9368........................  Grafix core, per square  G                                   9368           $7.96
                                centimeter.
C9369........................  Grafix prime, per        G                                   9369            0.61
                                square centimeter.
Q2034........................  Influenza virus          L                                    N/A             N/A
                                vaccine, split virus,
                                for intramuscular use
                                (Agriflu).
Q2045 *......................  Injection, human         K                                   1414            0.73
                                fibrinogen
                                concentrate, 1 mg.
Q2046 **.....................  Injection, aflibercept,  G                                   1420          980.50
                                1 mg.
Q2047........................  Injection,               A                                    N/A             N/A
                                peginesatide, 0.1 mg
                                (for ESRD on dialysis).
Q2048 ***....................  Injection, doxorubicin   K                                   7046          537.21
                                hydrochloride,
                                liposomal, doxil, 10
                                mg.
Q2049 [dagger]...............  Injection, doxorubicin   K                                   1421          498.26
                                hydrochloride,
                                liposomal, imported
                                lipodox, 10 mg.
----------------------------------------------------------------------------------------------------------------
* HCPCS code Q2045 replaced HCPCS code J1680 effective July 1, 2012. The status indicator for HCPCS code J1680
  was changed to ``E'' (Not Payable by Medicare) effective July 1, 2012. The proposed payment rate for HCPCS
  code Q2045 is based on ASP+6 percent.
** HCPCS code Q2046 replaced HCPCS code C9291 effective July 1, 2012.
*** HCPCS code Q2048 replaced HCPCS code J9001 effective July 1, 2012. The status indicator for HCPCS code J9001
  was changed to ``E'' (Not Payable by Medicare) effective July 1, 2012. The proposed payment rate for HCPCS
  code Q2048 is based on ASP+6 percent.
[dagger] The proposed payment rate for HCPCS code Q2049 is based on ASP+6 percent.

    For CY 2013, 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 CPT vaccine codes and Category III 
CPT codes that are released on the AMA Web site in January are made 
effective in July of the same year through the July quarterly update 
CR, consistent with the AMA's implementation date for the codes. For 
the July 2012 update, there were no new Category I CPT vaccine codes. 
Through the July 2012 OPPS quarterly update CR (Transmittal 2483, 
Change Request 7847, dated June 8, 2012), we allowed separate payment 
for all seven new Category III CPT codes effective July 1, 2012. 
Specifically, as displayed in Table 16 of this proposed rule, we 
allowed separate payment for the following Category III CPT codes:
     CPT code 0302T (Insertion or removal and replacement of 
intracardiac ischemia monitoring system including imaging supervision 
and interpretation when performed and intra-operative interrogation and 
programming when performed; complete system (includes device and 
electrode))
     CPT code 0303T (Insertion or removal and replacement of 
intracardiac ischemia monitoring system including imaging supervision 
and interpretation when performed and intra-operative interrogation and 
programming when performed; electrode only)
     CPT code 0304T (Insertion or removal and replacement of 
intracardiac ischemia monitoring system including imaging supervision 
and interpretation when performed and intra-operative interrogation and 
programming when performed; device only)
     CPT code 0305T (Programming device evaluation (in person) 
of intracardiac ischemia monitoring system with iterative adjustment of 
programmed values, with analysis, review, and report)

[[Page 45117]]

     CPT code 0306T (Interrogation device evaluation (in 
person) of intracardiac ischemia monitoring system with analysis, 
review, and report)
     CPT code 0307T (Removal of intracardiac ischemia 
monitoring device)
     CPT code 0308T (Insertion of ocular telescope prosthesis 
including removal of crystalline lens)
    Table 16 below lists the Category III CPT codes that were 
implemented in July 2012, along with their proposed status indicators, 
proposed APC assignments, where applicable, and proposed payment rates 
for CY 2013.

                          Table 16--New Category III CPT Codes Implemented in July 2012
----------------------------------------------------------------------------------------------------------------
                                                                                                    Proposed CY
      CY 2012 CPT code         CY 2012 long descriptor       Proposed CY 2013       Proposed CY    2013 payment
                                                             status indicator        2013 APC          rate
----------------------------------------------------------------------------------------------------------------
0302T......................  Insertion or removal and     T                                 0089       $8,275.79
                              replacement of
                              intracardiac ischemia
                              monitoring system
                              including imaging
                              supervision and
                              interpretation when
                              performed and intra-
                              operative interrogation
                              and programming when
                              performed; complete system
                              (includes device and
                              electrode).
0303T......................  Insertion or removal and     T                                 0106        3,780.92
                              replacement of
                              intracardiac ischemia
                              monitoring system
                              including imaging
                              supervision and
                              interpretation when
                              performed and intra-
                              operative interrogation
                              and programming when
                              performed; electrode only.
0304T......................  Insertion or removal and     T                                 0090        6,663.83
                              replacement of
                              intracardiac ischemia
                              monitoring system
                              including imaging
                              supervision and
                              interpretation when
                              performed and intra-
                              operative interrogation
                              and programming when
                              performed; device only.
0305T......................  Programming device           S                                 0690           33.92
                              evaluation (in person) of
                              intracardiac ischemia
                              monitoring system with
                              iterative adjustment of
                              programmed values, with
                              analysis, review, and
                              report.
0306T......................  Interrogation device         S                                 0690           33.92
                              evaluation (in person) of
                              intracardiac ischemia
                              monitoring system with
                              analysis, review, and
                              report.
0307T......................  Removal of intracardiac      T                                 0105        1,718.55
                              ischemia monitoring device.
0308T......................  Insertion of ocular          T                                 0234        1,669.74
                              telescope prosthesis
                              including removal of
                              crystalline lens.
----------------------------------------------------------------------------------------------------------------

    We are soliciting public comments on the CY 2013 proposed status 
indicators and the proposed APC assignments and payment rates for the 
Level II HCPCS codes and the Category III CPT codes that were effective 
April 1, 2012, and July 1, 2012, through the respective OPPS quarterly 
update CRs. These codes are listed in Tables 14, 15, and 16 of this 
proposed rule. We are proposing to finalize their status indicators and 
their APC assignments and payment rates, if applicable, in the CY 2013 
OPPS/ASC final rule with comment period. Because the new Category III 
CPT and Level II HCPCS codes that become effective for July are not 
available to us in time for incorporation into the Addenda to this 
OPPS/ASC proposed rule, our policy is to include the codes, their 
proposed status indicators, proposed APCs (where applicable), and 
proposed payment rates (where applicable) in the preamble to the 
proposed rule but not in the Addenda to the proposed rule. These codes 
are listed in Tables 15 and 16, respectively. We are proposing to 
incorporate these codes into Addendum B to the CY 2013 OPPS/ASC final 
rule with comment period, which is consistent with our annual OPPS 
update policy. The Level II HCPCS codes implemented or modified through 
the April 2012 OPPS update CR and displayed in Table 14 are included in 
Addendum B to this proposed rule (which is available via the Internet 
on the CMS Web site), where their proposed CY 2013 payment rates are 
also shown.
2. Proposed Process for New Level II HCPCS Codes That Will Be Effective 
October 1, 2012 and New CPT and Level II HCPCS Codes That Will Be 
Effective January 1, 2013 for Which We Will Be Soliciting Public 
Comments in the CY 2013 OPPS/ASC Final Rule With Comment Period
    As has been our practice in the past, we incorporate those new 
Category I and III CPT codes and new Level II HCPCS codes that are 
effective January 1 in the final rule with comment period updating the 
OPPS for the following calendar year. These codes are released to the 
public via the CMS HCPCS (for Level II HCPCS codes) and AMA Web sites 
(for CPT codes), and also through the January OPPS quarterly update 
CRs. In the past, we also have released new Level II HCPCS codes that 
are effective October 1 through the October OPPS quarterly update CRs 
and incorporated these new codes in the final rule with comment period 
updating the OPPS for the following calendar year. For CY 2013, these 
codes will be flagged with comment indicator ``NI'' in Addendum B to 
the OPPS/ASC final rule with comment period to indicate that we are 
assigning them an interim payment status which is subject to public 
comment. In addition, the CPT and Level II HCPCS codes that will be 
effective January 1, 2013, will be flagged with comment indicator 
``NI'' in Addendum B to the OPPS/ASC final rule with comment period. 
Specifically, the status indicator and the APC assignment and payment 
rate, if applicable, for all such codes flagged with comment indicator 
``NI'' are open to public comment in the final rule with comment 
period, and we respond to these comments in the OPPS/ASC final rule 
with comment period for the next calendar year's OPPS/ASC update. We 
are proposing to continue this process for CY 2013. Specifically, for 
CY 2013, we are proposing to include in Addendum B to the CY 2013 OPPS/
ASC final rule with comment period the new Category I and III CPT codes 
effective January 1, 2013 (including the Category III CPT codes that 
are released by the AMA in July 2012) that would be incorporated in the 
January 2013 OPPS quarterly update CR and the new Level II HCPCS codes, 
effective October 1, 2012, or January 1, 2013, that would be released 
by CMS in its October 2012 and January 2013 OPPS quarterly update CRs. 
The October 1, 2012 and January 1, 2013 codes would be flagged with 
comment indicator ``NI'' in Addendum B to the CY 2013 OPPS/ASC final 
rule

[[Page 45118]]

with comment period to indicate that we have assigned them an interim 
OPPS payment status for CY 2013. We are proposing that their status 
indicators and their APC assignments and payment rates, if applicable, 
would be open to public comment and would be finalized in the CY 2014 
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 have also developed 
separate APC groups for certain medical devices, drugs, biologicals, 
therapeutic radiopharmaceuticals, and brachytherapy devices.
    We have packaged into payment for each procedure or service within 
an APC group the costs associated with those items or services that are 
directly related to, and supportive of, performing the main independent 
procedures or furnishing the services. Therefore, we do not make 
separate payment for these packaged items or services. For example, 
packaged items and services include:
    (a) Use of an operating, treatment, or procedure room;
    (b) Use of a recovery room;
    (c) Observation services;
    (d) Anesthesia;
    (e) Medical/surgical supplies;
    (f) Pharmaceuticals (other than those for which separate payment 
may be allowed under the provisions discussed in section V. of this 
proposed rule);
    (g) Incidental services such as venipuncture;
    (h) Guidance services, image processing services, intraoperative 
services, imaging, supervision and interpretation services, diagnostic 
radiopharmaceuticals, and contrast media.
    Further discussion of packaged services is included in section 
II.A.3. of this 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 2012 OPPS 
policy, we provide composite APC payment for certain extended 
assessment and management services, low dose rate (LDR) prostate 
brachytherapy, cardiac electrophysiologic evaluation and ablation, 
mental health services, multiple imaging services, and cardiac 
resynchronization therapy services. Further discussion of composite 
APCs is included in section II.A.2.e. of this 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 cost of the services included in 
that APC, relative to the hospital cost of the services included in APC 
0606 (Level 3 Hospital Clinic Visits). The APC weights are scaled to 
APC 0606 because it is the middle level hospital clinic visit APC (the 
Level 3 hospital clinic visit CPT code out of five levels), and because 
middle level hospital clinic visits are among the most frequently 
furnished services in the hospital outpatient setting.
    Section 1833(t)(9)(A) of the Act requires the Secretary to review, 
on a recurring basis occurring no less than annually, and revise the 
groups, the relative payment weights, and the wage and other 
adjustments to take into account changes in medical practice, changes 
in technology, the addition of new services, new cost data, and other 
relevant information and factors. Section 1833(t)(9)(A) of the Act also 
requires the Secretary to consult with an expert outside advisory panel 
composed of an appropriate selection of representatives of providers to 
review (and advise the Secretary concerning) the clinical integrity of 
the APC groups and the relative payment weights recommendations for 
specific services for the CY 2013 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 cost for an item or service in the group is more than 2 times 
greater than the lowest cost for an item or service within the same 
group (referred to as the ``2 times rule''). For CY 2013, we are 
proposing to use the cost of the item or service in implementing this 
provision, as discussed in section II.A.2.f. of this proposed rule. 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 cost of the highest cost item or service within an 
APC group is more than 2 times greater than the cost of the lowest cost 
item or service within that same group. In making this determination, 
we consider only those HCPCS codes that are significant based on the 
number of claims. We note that, for purposes of identifying significant 
HCPCS codes for examination in the 2 times rule, we consider codes that 
have more than 1,000 single major claims or codes that have both 
greater than 99 single major claims and contribute at least 2 percent 
of the single major claims used to establish the APC cost to be 
significant (75 FR 71832). This longstanding definition of when a HCPCS 
code is significant for purposes of the 2 times rule was selected 
because we believe that a subset of 1,000 claims is negligible within 
the set of approximately 100 million single procedure or single session 
claims we use for establishing costs. Similarly, a HCPCS code for which 
there are fewer than 99 single bills and which comprises less than 2 
percent of the single major claims within an APC will have a negligible 
impact on the APC cost. 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 
2013.
    We have identified APCs with 2 times violations for which we are 
proposing

[[Page 45119]]

changes to their HCPCS codes' APC assignments in Addendum B (available 
via the Internet on the CMS Web site) 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. In many cases, the proposed 
HCPCS code reassignments and associated APC reconfigurations for CY 
2013 included in the proposed rule are related to changes in costs of 
services that were observed in the CY 2011 claims data newly available 
for CY 2013 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 2013. In addition, we are proposing to rename existing 
APCs or create new clinical APCs to complement proposed HCPCS code 
reassignments. Addendum B to this CY 2013 OPPS/ASC proposed rule 
identifies with a comment indicator ``CH'' those HCPCS codes for which 
we are proposing a change to the APC assignment or status indicator, or 
both, that were initially assigned in the April 2012 Addendum B Update 
(available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
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 2013, we reviewed all the APCs to 
determine which APCs would not satisfy the 2 times rule. Then we used 
the following criteria to decide whether to propose exceptions to the 2 
times rule for affected APCs:
     Resource homogeneity;
     Clinical homogeneity;
     Hospital outpatient setting utilization;
     Frequency of service (volume); and
     Opportunity for upcoding and code fragments.
    For a detailed discussion of these criteria, we refer readers to 
the April 7, 2000 OPPS final rule with comment period (65 FR 18457 and 
18458).
    Table 17 of this proposed rule lists 21 APCs that we are proposing 
to exempt from the 2 times rule for CY 2013 based on the criteria cited 
above and based on claims data processed from January 1, 2011, through 
December 31, 2011. For the final rule with comment period, we plan to 
use claims data for dates of service between January 1, 2011, and 
December 31, 2011, that were processed on or before June 30, 2012, and 
updated CCRs, if available. Based on the CY 2011 claims data, we found 
21 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 2013, and identified 21 APCs that 
meet the criteria for exception to the 2 times rule for this proposed 
rule. We have not included in this count those APCs where a 2 times 
violation is not a relevant concept, such as APC 0375 (Ancillary 
Outpatient Services when Patient Expires), with an APC cost set based 
on multiple procedure claims. Therefore, we have identified only APCs, 
including those with criteria-based costs, such as device-dependent 
APCs, with 2 times rule violations. These proposed APC exceptions are 
listed in Table 17 below.

    Table 17--Proposed APC Exceptions to the 2 Times Rule for CY 2013
------------------------------------------------------------------------
   Proposed CY 2013 APC              Proposed CY 2013 APC title
------------------------------------------------------------------------
0006.....................  Level I Incision & Drainage.
0012.....................  Level I Debridement & Destruction.
0045.....................  Bone/Joint Manipulation Under Anesthesia.
0057.....................  Bunion Procedures.
0060.....................  Manipulation Therapy.
0105.....................  Repair/Revision/Removal of Pacemakers, AICDs,
                            or Vascular Devices.
0128.....................  Echocardiogram with Contrast.
0152.....................  Level I Percutaneous Abdominal and Biliary
                            Procedures.
0173.....................  Level II Partial Hospitalization (4 or more
                            services) for CMHCs.
0230.....................  Level I Eye Tests & Treatments.
0272.....................  Fluoroscopy.
0325.....................  Group Psychotherapy.
0330.....................  Dental Procedures.
0340.....................  Minor Ancillary Procedures.
0369.....................  Level III Pulmonary Tests.
0403.....................  Level I Nervous System Imaging.
0409.....................  Red Blood Cell Tests.
0604.....................  Level 1 Hospital Clinic Visits.
0655.....................  Insertion/Replacement/Conversion of a
                            Permanent Dual Chamber Pacemaker or Pacing.
0688.....................  Revision/Removal of Neurostimulator Pulse
                            Generator Receiver.
0690.....................  Level I Electronic Analysis of Devices.
------------------------------------------------------------------------

    The proposed 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/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

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

[[Page 45120]]

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'' (Paid under OPPS; 
separate APC payment) and the other set with a status indicator of 
``T'' (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 projected utilization for Medicare beneficiaries 
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 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, for CY 2013, we are proposing 
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.
    Currently, in CY 2012, there are three procedures described by 
HCPCS G-codes 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 1505 (New 
Technology--Level V ($300-$400)); HCPCS code G0418 (Surgical pathology, 
gross and microscopic examination for prostate needle saturation biopsy 
sampling, 41-60 specimens) is assigned to New Technology APC 1506 (New 
Technology--Level VI ($400-$500)); and HCPCS code G0419 (Surgical 
pathology, gross and microscopic examination for prostate needle 
saturation biopsy sampling, greater than 60 specimens) is assigned to 
New Technology APC 1508 (New Technology--Level VIII ($600-$700)). These 
HCPCS codes have been assigned to New Technology APCs since CY 2009.
    Analysis of the hospital outpatient data for claims submitted for 
CY 2011 indicates that prostate saturation biopsy procedures are rarely 
performed on Medicare beneficiaries. For OPPS claims submitted from CY 
2010 through CY 2011, our claims data show no single claim submitted 
for HCPCS code G0417 in CY 2010 or in CY 2011. Similarly, our claims 
data did not show any hospital

[[Page 45121]]

outpatient claims for HCPCS codes G0418 and G0419 from either CY 2010 
or CY 2011. Given the continued lack of cost data for these HCPCS 
codes, we are proposing to reassign these procedures to an APC that is 
appropriate from a clinical standpoint. Specifically, we are proposing 
to reassign HCPCS G-codes G0417, G0418, and G0419 to clinical APC 0661 
(Level V Pathology), which has a proposed APC cost of approximately 
$160 for CY 2013. We believe that all three procedures, as described by 
HCPCS codes G0417, G0418, and G0419, are comparable clinically to other 
pathology services currently assigned to APC 0661 and likely require 
similar resources.
    Table 18 below lists the HCPCS G-codes and associated status 
indicators that we are proposing to reassign from New Technology APCs 
1505, 1506, and 1508 to APC 0661 for CY 2013.

            Table 18--Proposed Reassignment of Procedures Assigned to New Technology APCs for CY 2013
----------------------------------------------------------------------------------------------------------------
                          CY 2012 Short                                        Proposed  CY 2013   Proposed  CY
  CY 2012 HCPCS Code        Descriptor         CY 2012  SI      CY 2012  APC           SI            2013  APC
----------------------------------------------------------------------------------------------------------------
G0417.................  Sat biopsy         S                             1505  X                            0661
                         prostate 21-40.
G0418.................  Sat biopsy         S                             1506  X                            0661
                         prostate 41-60.
G0419.................  Sat biopsy         S                             1508  X                            0661
                         prostate: >60.
----------------------------------------------------------------------------------------------------------------

3. Proposed Payment Adjustment Policy for Radioisotopes Derived From 
Non-Highly Enriched Uranium Sources
a. Background
    Radioisotopes are widely used in modern medical imaging, 
particularly for cardiac imaging and predominantly for the elderly 
(Medicare) population. Technetium-99 (Tc-99m), the radioisotope used in 
the majority of such diagnostic imaging services, is currently produced 
in legacy reactors outside of the United States using highly enriched 
uranium (HEU).
    The Administration has established an agenda to eliminate domestic 
reliance on these reactors, and is promoting the conversion of all 
medical radioisotope production to non-HEU sources. Alternative methods 
for producing Tc-99m without HEU are technologically and economically 
viable, and conversion to such production has begun and is expected to 
be completed within a 5-year time period. We expect this change in the 
supply source for the radioisotope used for modern medical imaging will 
introduce new costs into the payment system that are not accounted for 
in the historical claims data.
    Full Cost Recovery, which is routinely considered in CMS 
reimbursement, is the accounting practice used by producers and 
suppliers to describe the recovery of all contributing costs. Unlike 
legacy sources that often benefit from government subsidized multi-
function facilities, the cost of these alternative methods will be 
increased over the cost of medical radioisotopes produced using HEU 
because hospitals' payments to producers and suppliers will have to 
cover capital expense (such as, for example, the cost of building new 
reactors, particle accelerators, or other very long term investments), 
as well as all other new industry-specific ancillary costs (such as, 
for example, the cost of long-term storage of radioactive waste). 
Hospitals that use medical radioisotopes that are produced from non-HEU 
sources can expect producers and suppliers to pass on to them the full 
impact of these costs.
    In the short term, some hospitals will be able to depend on low 
cost legacy producers using aging subsidized reactors while other 
hospitals will be forced to absorb the full cost of non-HEU alternative 
sources. Over several years, we believe that these cost differentials 
will promote increased regional shortages and create larger cost 
differentials and greater cost variations between hospitals. As a 
result, we believe this change in supply source will create a 
significant payment inequity among hospitals resulting from factors 
that are outside of normal market forces.
b. Proposed Payment Policy
    We are proposing to exercise our authority to establish ``other 
adjustments as determined to be necessary to ensure equitable 
payments'' under the OPPS in accordance with section 1833(t)(2)(E) of 
the Act. We do not believe that we can ensure equitable payments to 
hospitals over the next 4 to 5 years in the absence of an adjustment to 
account for the significant payment inequities created by factors that 
will likely arise due to the change in supply source for the 
radioisotope used commonly in modern medical imaging procedures. We are 
proposing to provide an adjustment for the marginal cost for 
radioisotopes produced from non-HEU sources over the costs for 
radioisotopes produced by HEU sources. We believe such an adjustment 
would ensure equitable payments in light of the Administration's HEU 
agenda, market influences, cost differentials, and cost variations that 
will create significant payment inequities among hospitals.
    For CY 2013, we are proposing to make an additional payment of $10, 
which is an amount based on the best available estimations of the 
marginal costs associated with non-HEU Tc-99m production as calculated 
using Full Cost Recovery. We are proposing to establish a new HCPCS 
code, QXXXX (Tc-99m from non-HEU source, full cost recovery add-on, per 
dose) to describe the Tc-99m radioisotope produced by non-HEU methods 
and used in a diagnostic procedure. Hospitals would be able to report 
this code once per dose along with any diagnostic scan or scans using 
Tc-99m as long as the Tc-99m doses used can be certified by the 
hospital as coming from non-HEU sources and have been priced using a 
Full Cost Recovery accounting methodology. The code would pay hospitals 
for the additional (marginal) cost of using Tc-99m from a non-HEU 
source.
    Hospitals would not be required to make a separate certification of 
the non-HEU source on the claim; the inclusion of the proposed new 
HCPCS QXXXX code on the claim would indicate that the hospital has met 
the conditions of the service definition as it does for any billed 
service. However, in the event of an audit, hospitals would be expected 
to be able to produce documentation that the individual dose delivered 
to the patient was completely produced from a non-HEU source. We are 
proposing three ways in which hospitals could accomplish this.
    First, the hospital could produce documentation such as invoices or 
patient dose labels or tracking sheets that indicated that the 
patient's dose was completely produced from non-HEU sources and priced 
based on Full Cost Recovery. In this first case, the supplier would be 
expected to be able to trace a specific dose to a completely

[[Page 45122]]

non-HEU batch. Current pharmacy recordkeeping is generally able to 
trace all components of radiopharmaceuticals back to their source 
production batches. A hospital would not be compliant with the code 
definition if the documentation indicated the supplier had produced a 
mixed batch and labeled a fraction of the doses equal to the non-HEU 
fraction in the batch.
    Second, a hospital could produce documentation that the entire 
batch of Tc-99m doses derives from non-HEU sources for a specified 
period of time, for example, the time that a single non-HEU based 
generator is in use. This approach would obviate the need for specific 
dose tracking from a claims audit perspective, although that 
information is typically required for other purposes. An attestation 
from the generator supplier would be sufficient evidence for the 
hospital, as would invoices that showed that all Tc-99m during a 
specified period came from inherently non-HEU alternative sources.
    Third, if the industry should implement labeling of generators and/
or doses with labels attesting to 100 percent non-HEU sources priced at 
Full Cost Recovery, documentation of labeled isotope usage using either 
the specific dose approach or the 100 percent hospital usage approach 
could provide evidence of hospital compliance. The hospital would be 
required to retain appropriate documentation within the hospital 
(including pharmacy) records but would not need to keep any specific 
documentation within the individual medical record. Also, we would 
consider a dose to be priced for Full Cost Recovery when the supplier 
could attest that the supply chain adheres to usual industry practices 
to account for Full Cost Recovery, specifically including the capital 
cost of sustainable production and the environmental cost of waste 
management.
    To reduce the administrative overhead for hospitals, we are 
proposing not to require hospitals to separately track additional costs 
for the non-HEU Tc-99m, but to include the cost of the radioisotope in 
the cost of the diagnostic radiopharmaceutical as usual, reporting only 
a token $1 charge for the HCPCS QXXXX code line. We would continue to 
calculate the total costs of radionuclide scans using claims data, and 
would periodically recalculate the estimated marginal cost of non-HEU 
Full Cost Recovery sources using models relying on the best available 
industry reports and projections, and would adjust the payment for 
HCPCS QXXXX code accordingly, reducing the payment for the scans by the 
amount of cost paid through HCPCS QXXXX code payment. We believe this 
proposal would allow us to continuously compensate for unanticipated 
changes in Tc-99m cost attributable to new non-HEU supply sources.

D. Proposed OPPS APC-Specific Policies

1. Placement of Amniotic Membrane (APC 0233)
    In CY 2011, the AMA CPT Editorial Panel revised the long descriptor 
for CPT code 65780 (Ocular surface reconstruction; amniotic membrane 
transplantation, multiple layers) to include the words ``multiple 
layers'' to further clarify the code descriptor. In addition, the AMA 
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 established 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 review all new procedures before assigning them to an APC. In 
determining the APC assignments for CPT codes 65778 and 65779, we took 
into consideration the clinical and resource characteristics involved 
with placement of amniotic membrane products on the eye for wound 
healing via a self-retaining device and a sutured, single-layer 
technique. In the CY 2011 OPPS/ASC final rule with comment period (75 
FR 72402), we assigned CPT code 65778 to APC 0239 (Level II Repair and 
Plastic Eye Procedures), which had a payment rate of approximately 
$559, and CPT code 65779 to APC 0255 (Level II Anterior Segment Eye 
Procedures), which had a payment rate of approximately $519.
    In addition, consistent with our longstanding policy for new codes, 
we assigned these two new CPT codes to interim APCs for CY 2011. 
Specifically, we assigned CPT codes 65778 and 65779 to comment 
indicator ``NI'' in Addendum B of the CY 2011 OPPS/ASC final rule with 
comment period to indicate that the codes were new with an interim APC 
assignment that were subject to public comment. In accordance with our 
longstanding policy, our interim APC assignments for each code was 
based on our understanding of the resources required to furnish the 
service as defined in the code descriptor and on input from our 
physicians.
    At the Panel's February 28-March 1, 2011 meeting, a presenter 
requested the reassignment of CPT codes 65778 and 65779 to APC 0244 
(Corneal and Amniotic Membrane Transplant), which is the same APC to 
which CPT code 65780 is assigned. 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 procedures described by CPT codes 65778 and 65779 are 
very similar to the procedure described by CPT code 65780.
    The Panel recommended that CMS reassign the APC assignments for 
both CPT codes 65778 and 65779. Specifically, the Panel recommended the 
reassignment of CPT code 65778 from APC 0239 to APC 0233(Level III 
Anterior Segment Eye Procedures), and the reassignment of CPT code 
65779 from APC 0255 to APC 0233. In addition, the Panel recommended 
that CMS furnish data when data become available for these two codes. 
We noted at that time that because these codes were effective January 
1, 2011, the first available claims data for these codes would be for 
the CY 2013 OPPS rulemaking cycle.
    We accepted the Panel's recommendations. However, in the CY 2012 
OPPS/ASC final rule with comment period (76 FR 74247), we indicated 
that, while we agreed with the Panel's recommendation to reassign CPT 
codes 65778 and 65779 to APC 0233, we believed that CPT code 65778 
should be assigned to a conditionally packaged status indicator of 
``Q2'' to indicate that the procedure would be packaged when it is 
reported with another procedure that is also assigned to status 
indicator ``T''; but in all other circumstances, the code would be paid 
separately. Because the procedure described by CPT code 65778 would 
rarely be provided as a separate, stand-alone service in the HOPD, and 
because the procedure would almost exclusively be provided in addition 
to and following another procedure or service, we proposed to reassign 
CPT code 65778 to a conditionally packaged status indicator of ``Q2.'' 
In addition, our

[[Page 45123]]

medical advisors indicated that the procedure described by CPT code 
65778 is not significantly different than placing a bandage contact 
lens on the surface of the eye to cover a corneal epithelial defect. 
CPT code 65778 describes the simple placement of a special type of 
bandage (a self-retaining amniotic membrane device) on the surface of 
the eye, which would most commonly be used in the HOPD to cover the 
surface of the eye after a procedure that results in a corneal 
epithelial defect.
    At the August 10-11, 2011 Panel Meeting, a presenter urged the 
Panel to recommend to CMS not to conditionally package CPT code 65778 
for CY 2012, and instead, assign it to status indicator ``T.'' Based on 
information presented at the meeting, and after further discussion on 
the issue, the Panel recommended that CMS reassign the status indicator 
for CPT code 65778 from conditionally packaged ``Q2'' to status 
indicator ``T.'' Several commenters also urged CMS not to finalize its 
proposal to conditionally package CPT code 65778 by assigning it a 
status indicator ``Q2'' and instead adopt the Panel's recommendation to 
assign status indicator ``T.''
    After consideration of the Panel's August 2011 recommendation and 
the public comments that we received to the CY 2012 OPPS/ASC proposed 
rule, we finalized our proposal and reassigned the status indicator for 
CPT code 65778 from ``T'' to ``Q2'' effective January 1, 2012 (76 FR 
74246). Given the clinical characteristics of this procedure, we 
believed that conditionally packaging CPT code 65778 was appropriate 
under the OPPS.
    For the CY 2013 OPPS update, we are proposing to continue to assign 
CPT code 65778 to its conditionally packaged status of ``Q2.'' 
Similarly, we believe that we should assign CPT code 65779 to a 
conditionally packaged status of ``Q2.'' Therefore, for CY 2013, we are 
proposing to revise the status indicator for CPT code 65779 from status 
indicator ``T'' to ``Q2'' to indicate that the procedure would be 
packaged when it is reported with another procedure that is also 
assigned to status indicator ``T,'' but in all other circumstances, the 
code would be paid separately. This reassignment would enable hospitals 
to perform either procedures (CPT code 65778 or 65779) when 
appropriate, and would not differentiate one procedure from the other 
because of the status indicator assignment under the OPPS.
    As indicated at the February 28-March 1, 2011 Panel meeting, 
because CPT codes 65778 and 65779 were effective January 1, 2011, the 
first available claims data for these codes would be in CY 2012 for the 
CY 2013 OPPS rulemaking. We now have claims data for CPT codes 65778 
and 65779, and our data show that both procedures are performed in the 
HOPD setting. Analysis of the CY 2011 claims data available for this 
proposed rule, which is based on claims processed from January 1 
through December 31, 2011, reveals that the estimated cost for CPT code 
65778 is approximately $1,025 based on 33 single claims (out of 130 
total claims), and the estimated cost for CPT code 65779 is 
approximately $2,303 based on 35 single claims (out of 260 total 
claims). Based on the clinical similarity to other procedures currently 
assigned to APC 0233, and because there is no violation with the 2 
times rule, we believe that we should continue to assign both CPT codes 
65778 and 65779 to APC 0233, which has a proposed cost of approximately 
$1,150. Review of the procedures assigned to APC 0233 shows that the 
range of the CPT cost for the procedures with significant claims data 
is between approximately $859 (for CPT code 65400 (Removal of eye 
lesion)) and approximately $1,397 (for CPT code 66840 (Removal of lens 
material)).
    In summary, for CY 2013, we are proposing to continue to assign CPT 
code 65778 to its conditionally packaged status of ``Q2'' and to 
reassign the status indicator for CPT code 65779 from ``T'' to ``Q2,'' 
similar to CPT code 65778. In addition, we are proposing to continue to 
assign both CPT codes 65778 and 65779 to APC 0233, which has a proposed 
cost of approximately $1,150. Both procedures and their CY 2013 
proposed APC assignments are displayed in Table 19 below.

                  Table 19--Proposed APC Assignments for CPT Codes 65778 and 65779 for CY 2013
----------------------------------------------------------------------------------------------------------------
                          CY 2012 short                                         Proposed CY 2013    Proposed CY
  CY 2012 HCPCS code        descriptor         CY 2012 SI        CY 2012 APC           SI            2013 APC
----------------------------------------------------------------------------------------------------------------
65778.................  Cover eye w/       Q2                            0233  Q2                           0233
                         membrane.
65779.................  Cover eye w/       T                             0233  Q2                           0233
                         membrane suture.
----------------------------------------------------------------------------------------------------------------

2. Proton Beam Therapy (APCs 0664 and 0667)
    APC 0664 (Level I Proton Beam Radiation Therapy) includes two 
procedures, CPT code 77520 (Proton treatment delivery; simple, without 
compensation) with an estimated cost of approximately $331 (based on 
185 single claims of 185 total claims submitted for CY 2011); and CPT 
code 77522 (Proton treatment delivery; simple, with compensation) with 
an estimated cost of approximately $1,191 (based on 14,279 single 
claims of 15,405 total claims submitted for CY 2011). APC 0667 (Level 
II Proton Beam Radiation Therapy) also includes two procedures, CPT 
code 77523 (Proton treatment delivery, intermediate) with an estimated 
cost of approximately $920 (based on 3,009 single claims of 3,202 total 
claims submitted for CY 2011), and CPT code 77525 (Proton treatment 
delivery, complex) with an estimated cost of approximately $483 (based 
on 1,400 single claims of 1,591 total claims submitted for CY 2011). 
Based on these CY 2011 claims data, the estimated cost of APC 0664 is 
approximately $1,171, and the estimated cost of APC 0667 is 
approximately $750.
    Because only three providers bill Medicare for these services, 
their payment rates, which are set annually based on claims data 
according to the standard OPPS ratesetting methodology, may fluctuate 
significantly from year to year. For CY 2013, the estimated cost of APC 
0664 is approximately the same as its CY 2012 payment rate of $1,184. 
However, the estimated cost of APC 0667 has decreased substantially, 
which is largely attributable to cost changes for CPT code 77523. For 
CY 2013, we are proposing to improve the resource homogeneity within 
the proton beam APCs by including the services requiring fewer 
resources in APC 0664 (Level I) and the services requiring greater 
resources in APC 0667 (Level II). Specifically, we are proposing to 
reassign CPT code 77522 to APC 0667 and to reassign CPT code 77525 to 
APC 0664. Under the proposed reassignment, the estimated cost of APC 
0664 is $462 and the estimated cost of APC 0667 is $1,138. We are 
inviting public comments on this proposal.

[[Page 45124]]

3. Intraoperative Radiation Therapy (IORT) (APC 0412)
a. Background
    The AMA CPT Editorial Panel created three new Category I CPT codes 
for intraoperative radiation therapy (IORT), effective January 1, 2012: 
CPT codes 77424 (Intraoperative radiation treatment delivery, x-ray, 
single treatment session); 77425 (Intraoperative radiation treatment 
delivery, electrons, single treatment session); and 77469 
(Intraoperative radiation treatment management). As with all new CPT 
codes for CY 2012, these three codes were included in Addendum B to the 
CY 2012 OPPS/ASC final rule with comment period (available via the CMS 
Web site), effective on January 1, 2012. In accordance with our 
standard practice each year, our clinicians review the many CPT code 
changes that will be effective in the forthcoming year and make 
decisions regarding status indicators and/or APC assignments based on 
their understanding of the nature of the services. We are unable to 
include proposed status indicators and/or APC assignments in the 
proposed rule for codes that are not announced by the AMA CPT Editorial 
Panel prior to the issuance of the proposed rule. Therefore, in 
accordance with our longstanding policy, we include, in the final rule 
with comment period, interim status indicators and/or APC assignments 
for all new CPT codes that are announced by the AMA CPT Editorial Panel 
subsequent to the issuance of the OPPS/ASC proposed rule to enable 
payment for new services as soon as the codes are effective.
    We identified the new codes for IORT for CY 2012 in Addendum B to 
the CY 2012 OPPS/ASC final rule with comment period as being open to 
public comment by showing a comment indicator of ``NI'' and made 
interim status indicator assignments for each of these new IORT codes, 
based on our understanding of the clinical nature of the services they 
describe. Specifically, for CY 2012, we packaged these IORT service 
codes with the surgical procedures with which they are billed, 
assigning them interim status indicators of ``N'' (Items and Services 
Packaged into APC Rates). We did so based on a policy that was adopted 
in the CY 2008 OPPS final rule with comment period (72 FR 66610 through 
66659) to package services that are typically ancillary and supportive 
of a principal diagnostic or therapeutic procedure, which would 
generally include intraoperative services. Because IORT are 
intraoperative services furnished as a single dose during the time of 
the related surgical session, we packaged them into the payment for the 
principal surgical procedures with which they are performed based on 
claims data used for the CY 2012 OPPS/ASC final rule with comment 
period.
    Subsequent to issuance of the CY 2012 OPPS/ASC final rule with 
comment period, stakeholders provided comments on the interim status of 
these IORT service codes for CY 2012, asserting that these services are 
not ancillary to the surgical procedures, urging us to unpackage these 
codes, and requesting that we assign them to an APC reflective of the 
resources used to provide the IORT services. The stakeholders argued 
that IORT services described by CPT codes 77424 and 77425 are separate, 
distinct, and independent radiation treatment services from the 
surgical services to remove a malignant growth. According to the 
commenters, IORT is performed separately by a radiation oncologist and 
a medical physicist when there is concern for residual unresected 
cancer because of narrow margins related to the surgical resection.
b. CY 2013 Proposals for CPT Codes 77424, 77425, and 77469
    Based on the comments and information received on the proposed IORT 
policies contained in the CY 2012 OPPS/ASC final rule with comment 
period, and after further review and consideration of those comments 
and the clinical nature of the IORT procedures, we agree that IORT 
services are not the typical intraoperative services that we package, 
as they are not integral to or dependent upon the surgical procedure to 
remove a malignancy that precedes IORT. Therefore, for CY 2013, we are 
proposing to unpackage CPT codes 77424 and 77425, and assign them to 
APC 0412, currently entitled ``IMRT Treatment Delivery.'' IORT 
treatment services are clinically similar to other radiation treatment 
forms, such as IMRT treatment, which are assigned to APC 0412. 
Furthermore, we are proposing to change the title of APC 0412 to 
``Level III Radiation Therapy'' to encompass a greater number of 
clinically similar radiation treatment modalities. The proposed rule 
cost of APC 0412 based on CY 2011 claims data is approximately $496. As 
is our normal procedure for new CPT codes, we will monitor hospitals' 
costs for furnishing the services described by CPT codes 77424 and 
77425.
    We believe that CPT code 77469 should receive equal treatment to 
other radiation management codes, such as CPT code 77431 (Radiation 
therapy management with complete course of therapy consisting of 1 or 2 
fractions only) and CPT code 77432 (Stereotactic radiation treatment 
management of cranial lesion(s) (complete course of treatment 
consisting of 1 session)), which are assigned status indicator ``B'' 
(Codes that are not recognized by OPPS when submitted on an outpatient 
hospital Part B bill type (12x and 13x)) and are not paid under the 
OPPS. Therefore, we are proposing that the appropriate status indicator 
code assignment for CPT code 77469 be ``B'' for nonpayable status under 
the OPPS for CY 2013, a change from its current CY 2012 status 
indicator assignment of ``N'' for packaged payment status.

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, which is the first date on which pass-through payment may be 
made for any medical device that is described by such category. We 
propose and finalize the dates for expiration of pass-through status 
for device categories as part of the OPPS annual update.
    We also have an established policy to package the costs of the 
devices that are no longer eligible for pass-through payments into the 
costs of the procedures with which the devices are reported in the 
claims data used to set the payment rates (67 FR 66763). Brachytherapy 
sources, which are now separately paid in accordance with section 
1833(t)(2)(H) of the Act, are an exception to this established policy.
    There currently are four device categories eligible for pass-
through payment. These device categories are described by HCPCS code 
C1749 (Endoscope, retrograde imaging/illumination colonoscope device

[[Page 45125]]

(implantable)), which we made effective for pass-through payment 
October 1, 2010; HCPCS codes C1830 (Powered bone marrow biopsy needle) 
and C1840 (Lens, intraocular (telescopic)), which we made effective for 
pass-through payment October 1, 2011; and HCPCS code C1886 (Catheter, 
extravascular tissue ablation, any modality (insertable)), which we 
made effective for pass-through payment January 1, 2012. In the CY 2012 
OPPS/ASC final rule with comment period, we finalized the expiration of 
pass-through payment for C1749, which will expire after December 31, 
2012 (76 FR 74278). Therefore, after December 31, 2012, we will package 
the C1749 device costs into the costs of the procedures with which the 
devices are reported in the hospital claims data used in OPPS 
ratesetting.
b. Proposed CY 2013 Policy
    As stated above, section 1833(t)(6)(B)(iii) of the Act requires 
that, under the OPPS, a category of devices be eligible for 
transitional pass-through payments for at least 2, but not more than 3 
years. Device pass-through categories C1830 and C1840 were established 
for pass-through payments on October 1, 2011, and will have been 
eligible for pass-through payments for more than 2 years but less than 
3 years as of the end of CY 2013. Also, device pass-through category 
C1886 was established for pass-through payments on January 1, 2012, and 
will have been eligible for pass-through payments for at least 2 years 
but less than 3 years as of the end of CY 2013. Therefore, we are 
proposing a pass-through payment expiration date for device categories 
C1830, C1840, and C1886 of December 31, 2013. Under our proposal, 
beginning January 1, 2014, device categories C1830, C1840, and C1886 
will no longer be eligible for pass-through payments, and their 
respective device costs would be packaged into the costs of the 
procedures with which the devices are reported in the claims data.
2. Proposed Provisions for Reducing Transitional Pass-Through Payments 
To Offset Costs Packaged Into APC Groups
a. Background
    Section 1833(t)(6)(D)(ii) of the Act sets the amount of additional 
pass-through payment for an eligible device as the amount by which the 
hospital's charges for a device, adjusted to cost (cost of device) 
exceeds the portion of the otherwise applicable Medicare outpatient 
department fee schedule amount (APC payment amount) associated with the 
device. We have an established policy to estimate the portion of each 
APC payment rate that could reasonably be attributed to the cost of the 
associated devices that are eligible for pass-through payments (66 FR 
59904) for purposes of estimating the portion of the otherwise 
applicable APC payment amount associated with the device. For eligible 
device categories, we deduct an amount that reflects the portion of the 
APC payment amount that we determine is associated with the cost of the 
device, defined as the device APC offset amount, from the charges 
adjusted to cost for the device, as provided by section 
1833(t)(6)(D)(ii) of the Act, to determine the eligible device's pass-
through payment amount. We have consistently employed an established 
methodology to estimate the portion of each APC payment rate that could 
reasonably be attributed to the cost of an associated device eligible 
for pass-through payment, using claims data from the period used for 
the most recent recalibration of the APC rates (72 FR 66751 through 
66752). We establish and update the applicable device APC offset 
amounts for eligible pass-through device categories through the 
transmittals that implement the quarterly OPPS updates.
    We currently have published a list of all procedural APCs with the 
CY 2012 portions (both percentages and dollar amounts) of the APC 
payment amounts that we determine are associated with the cost of 
devices, on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. The dollar 
amounts are used as the device APC offset amounts. In addition, in 
accordance with our established practice, the device APC offset amounts 
in a related APC are used in order to evaluate whether the cost of a 
device in an application for a new device category for pass-through 
payment is not insignificant in relation to the APC payment amount for 
the service related to the category of devices, as specified in our 
regulations at Sec.  419.66(d).
    Beginning in CY 2010, we include packaged costs related to 
implantable biologicals in the device offset calculations in accordance 
with our policy that the pass-through evaluation process and payment 
methodology for implantable biologicals that are surgically inserted or 
implanted (through a surgical incision or a natural orifice) and that 
are newly approved for pass-through status beginning on or after 
January 1, 2010, be the device pass-through process and payment 
methodology only (74 FR 60476).
b. Proposed CY 2013 Policy
    For CY 2013, we are proposing to continue our 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. We are proposing to 
continue our policy, for CY 2013, that the pass-through evaluation 
process and pass-through payment methodology for implantable 
biologicals that are surgically inserted or implanted (through a 
surgical incision or a natural orifice) and that are newly approved for 
pass-through status beginning on or after January 1, 2010, be the 
device pass-through process and payment methodology only. The rationale 
for this policy is provided in the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60471 through 60477). We also 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 are proposing to 
deduct the device APC offset amount from the pass-through payment for 
the device category. As stated earlier, these device APC offset amounts 
also would be used in order to evaluate whether the cost of a device in 
an application for a new device category for pass-through payment is 
not insignificant in relation to the APC payment amount for the service 
related to the category of devices (Sec.  419.66(d)).
    For CY 2013, 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 2013 using the same methodology 
we have historically used to calculate and set device APC offset 
amounts for device categories eligible for pass-through payment, and to 
include the costs of implantable biologicals in the calculation of the 
device APC offset amounts.
    In addition, we are proposing to update, on the CMS Web site at

[[Page 45126]]

http://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html, the list of all procedural APCs with 
the final CY 2013 portions (once available at the time of final 
rulemaking) of the APC payment amounts that we determine are associated 
with the cost of devices so that this information is available for use 
by the public in developing potential CY 2013 device pass-through 
payment applications and by CMS in reviewing those applications.
3. Proposed Clarification of Existing Device Category Criterion
a. Background
    Section 1833(t)(6)(B)(ii)(IV) of the Act directs the Secretary to 
establish a new device category for pass-through payment for which none 
of the pass-through categories in effect (or that were previously in 
effect) is appropriate. Commenters who responded to our various 
proposed rules, as well as applicants for new device categories, had 
expressed concern that some of our existing and previously in effect 
device category descriptors were overly broad, and that the device 
category descriptors as they are currently written may preclude some 
new technologies from qualifying for establishment of a new device 
category for pass-through payment (70 FR 68630 through 68631). As a 
result of these comments, we finalized a policy, effective January 1, 
2006, to create an additional category for devices that meet all of the 
criteria required to establish a new category for pass-through payment 
in instances where we believe that an existing or previously in effect 
category descriptor does not appropriately describe the new device. 
Accordingly, effective January 1, 2006, we revised Sec.  419.66(c)(1) 
of the regulations to reflect this policy change. In order to determine 
if a new device is appropriately described by any existing or 
previously in effect category of devices, we apply two tests based upon 
our evaluation of information provided to us in the device category 
application. First, an applicant for a new device category must show 
that its device is not similar to devices (including related predicate 
devices) whose costs are reflected in the currently available OPPS 
claims data in the most recent OPPS update. Second, an applicant must 
demonstrate that utilization of its device provides a substantial 
clinical improvement for Medicare beneficiaries compared with currently 
available treatments, including procedures utilizing devices in any 
existing or previously in effect device categories. We consider a new 
device that meets both of these tests not to be appropriately described 
by any existing or previously in effect pass-through device categories 
(70 FR 68630 through 68631).
b. Proposed Clarification of CY 2013 Policy
    For CY 2013, we are proposing to clarify the test that requires an 
applicant for a new device category to show that its device is not 
similar to devices (including related predicate devices) whose costs 
are reflected in the currently available OPPS claims data in the most 
recent OPPS update. We are clarifying that this test includes showing 
that a new device is not similar to predicate devices that once 
belonged in any existing or previously in effect pass-through device 
categories. Under this test, a candidate device may not be considered 
to be appropriately described by any existing or previously in effect 
pass-through device categories if the applicant adequately demonstrates 
that the candidate device is not similar to devices (including related 
predicate devices) that belong or once belonged to an existing or any 
previously in effect device category, and that the candidate device is 
not similar to devices whose costs are reflected in the OPPS claims 
data in the most recent OPPS update. The substantial clinical 
improvement criterion, which also must be satisfied in every case, as 
indicated in Sec.  419.66(c)(2) of our regulations, is separate from 
the criterion that a candidate device not be similar to devices in any 
existing or previously in effect pass-through categories. We are 
inviting public comments regarding this proposed clarification.

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

1. Background
    To ensure equitable payment when the hospital receives a device 
without cost or with full credit, in CY 2007, we implemented a policy 
to reduce the payment for specified device-dependent APCs by the 
estimated portion of the APC payment attributable to device costs (that 
is, the device offset) when the hospital receives a specified device at 
no cost or with full credit (71 FR 68071 through 68077). Hospitals are 
instructed to report no cost/full credit cases using the ``FB'' 
modifier on the line with the procedure code in which the no cost/full 
credit device is used. In cases in which the device is furnished 
without cost or with full credit, the hospital is instructed to report 
a token device charge of less than $1.01. In cases in which the device 
being inserted is an upgrade (either of the same type of device or to a 
different type of device) with a full credit for the device being 
replaced, the hospital is instructed to report as the device charge the 
difference between its usual charge for the device being implanted and 
its usual charge for the device for which it received full credit. In 
CY 2008, we expanded this payment adjustment policy to include cases in 
which hospitals receive partial credit of 50 percent or more of the 
cost of a specified device. Hospitals are instructed to append the 
``FC'' modifier to the procedure code that reports the service provided 
to furnish the device when they receive a partial credit of 50 percent 
or more of the cost of the new device. We refer readers to the CY 2008 
OPPS/ASC final rule with comment period for 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 2013, 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. (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.)
    For CY 2013, 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

[[Page 45127]]

inexpensive device whose cost would not constitute a significant 
proportion of the total payment rate for an APC. We continue to believe 
these criteria are appropriate because 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 2013 proposed 
rule data and the clinical characteristics of APCs to determine whether 
the APCs to which the no cost/full credit and partial credit device 
adjustment policy applied in CY 2012 continue to meet the criteria for 
CY 2013, and to determine whether other APCs to which the policy did 
not apply in CY 2012 would meet the criteria for CY 2013. Based on the 
CY 2011 claims data available for this proposed rule, we are not 
proposing any changes to the APCs and devices to which this policy 
applies.
    Table 20 below lists the proposed APCs to which the payment 
adjustment policy for no cost/full credit and partial credit devices 
would apply in CY 2013 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 already 
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 21 below lists the proposed devices to which the payment 
adjustment policy for no cost/full credit and partial credit devices 
would apply in CY 2013. 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 2013, consistent with the three criteria 
discussed earlier in this section, based on the final CY 2011 claims 
data available for the CY 2013 OPPS/ASC final rule with comment period.
    We are proposing, for CY 2013, that OPPS payments for implantation 
procedures to which the ``FB'' modifier is appended are reduced by 100 
percent of the device offset for no cost/full credit cases when both a 
device code listed in Table 21 below is present on the claim, and the 
procedure code maps to an APC listed in Table 20 below. We also are 
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 21 is present on the 
claim and the procedure code maps to an APC listed in Table 20. 
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.

Table 20--Proposed APCs to Which the No Cost/Full Credit and Partial Credit Device Adjustment Policy Would Apply
                                                   in CY 2013
----------------------------------------------------------------------------------------------------------------
                                                                            Proposed  CY 2013  Proposed  CY 2013
                                                                              device offset      device offset
      Proposed CY 2013 APC               Proposed CY 2013 APC Title         percentage for no    percentage for
                                                                            cost/ full credit    partial credit
                                                                                   case               case
----------------------------------------------------------------------------------------------------------------
0039...........................  Level I Implantation of Neurostimulator                   86                 43
                                  Generator.
0040...........................  Level I Implantation/Revision/Replacement                 55                 28
                                  of Neurostimulator Electrodes.
0061...........................  Level II Implantation/Revision/                           66                 33
                                  Replacement of Neurostimulator
                                  Electrodes.
0089...........................  Insertion/Replacement of Permanent                        70                 35
                                  Pacemaker and Electrodes.
0090...........................  Insertion/Replacement of Pacemaker Pulse                  71                 35
                                  Generator.
0106...........................  Insertion/Replacement of Pacemaker Leads                  48                 24
                                  and/or Electrodes.
0107...........................  Insertion of Cardioverter-Defibrillator..                 83                 42
0108...........................  Insertion/Replacement/Repair of AICD                      84                 42
                                  Leads, Generator, and Pacing Electrodes.
0227...........................  Implantation of Drug Infusion Device.....                 82                 41
0259...........................  Level VII ENT Procedures.................                 84                 42
0315...........................  Level II Implantation of Neurostimulator                  88                 44
                                  Generator.
0318...........................  Implantation of Cranial Neurostimulator                   87                 44
                                  Pulse Generator and Electrode.
0385...........................  Level I Prosthetic Urological Procedures.                 63                 31
0386...........................  Level II Prosthetic Urological Procedures                 70                 35
0425...........................  Level II Arthroplasty or Implantation                     58                 29
                                  with Prosthesis.
0648...........................  Level IV Breast Surgery..................                 50                 25
0654...........................  Insertion/Replacement of a permanent dual                 74                 37
                                  chamber pacemaker.
0655...........................  Insertion/Replacement/Conversion of a                     73                 37
                                  Permanent Dual Chamber Pacemaker or
                                  Pacing Electrode.
0680...........................  Insertion of Patient Activated Event                      74                 37
                                  Recorders.
----------------------------------------------------------------------------------------------------------------

[[Page 45128]]

 Table 21--Proposed Devices to Which the No Cost/Full Credit and Partial
         Credit Device Adjustment Policy Would Apply in CY 2013
------------------------------------------------------------------------
Proposed CY 2013 device HCPCS Code    Proposed CY 2013 short descriptor
------------------------------------------------------------------------
C1721.............................  AICD, dual chamber.
C1722.............................  AICD, single chamber.
C1728.............................  Cath, brachytx seed adm.
C1764.............................  Event recorder, cardiac.
C1767.............................  Generator, neurostim, imp.
C1771.............................  Rep dev, urinary, w/sling.
C1772.............................  Infusion pump, programmable.
C1776.............................  Joint device (implantable).
C1777.............................  Lead, AICD, endo single coil.
C1778.............................  Lead, neurostimulator.
C1779.............................  Lead, pmkr, transvenous VDD.
C1785.............................  Pmkr, dual, rate-resp.
C1786.............................  Pmkr, single, rate-resp.
C1789.............................  Prosthesis, breast, imp.
C1813.............................  Prosthesis, penile, inflatab.
C1815.............................  Pros, urinary sph, imp.
C1820.............................  Generator, neuro rechg bat sys.
C1881.............................  Dialysis access system.
C1882.............................  AICD, other than sing/dual.
C1891.............................  Infusion pump, non-prog, perm.
C1895.............................  Lead, AICD, endo dual coil.
C1896.............................  Lead, AICD, non sing/dual.
C1897.............................  Lead, neurostim, test kit.
C1898.............................  Lead, pmkr, other than trans.
C1899.............................  Lead, pmkr/AICD combination.
C1900.............................  Lead coronary venous.
C2619.............................  Pmkr, dual, non rate-resp.
C2620.............................  Pmkr, single, non rate-resp.
C2621.............................  Pmkr, other than sing/dual.
C2622.............................  Prosthesis, penile, non-inf.
C2626.............................  Infusion pump, non-prog, temp.
C2631.............................  Rep dev, urinary, w/o sling.
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 2013 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 available via the 
Internet on the CMS Web site.
    Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through 
payment amount, in the case of a drug or biological, is the amount by 
which the amount determined under section 1842(o) of the Act for the 
drug or biological exceeds the portion of the otherwise applicable 
Medicare OPD fee schedule that the Secretary determines is associated 
with the drug or biological. If the drug or biological is covered under 
a competitive acquisition contract under section 1847B of the Act, the 
pass-through payment amount is determined by the Secretary to be equal 
to the average price for the drug or biological for all competitive 
acquisition areas and the year established under such section as 
calculated and adjusted by the Secretary. However, we note that the 
Part B drug CAP program has been postponed since CY 2009, and such a 
program is not proposed to be reinstated for CY 2013.
    This methodology for determining the pass-through payment amount is 
set forth in regulations at 42 CFR 419.64. These regulations specify 
that the pass-through payment equals the amount determined under 
section 1842(o) of the Act minus the portion of the APC payment that 
CMS determines is associated with the drug or biological. Section 1847A 
of the Act establishes the average sales price (ASP) methodology, which 
is used for payment for drugs and biologicals described in section 
1842(o)(1)(C) of the Act furnished on or after January 1, 2005. The ASP 
methodology, as applied under the OPPS, uses several sources of data as 
a basis for payment, including 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.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.
    For CYs 2005, 2006, and 2007, we estimated the OPPS pass-through 
payment amount for drugs and biologicals to be zero based on our 
interpretation that the ``otherwise applicable Medicare OPD fee 
schedule'' amount was equivalent to the amount to be paid for pass-
through drugs and biologicals under section 1842(o) of the Act (or 
section 1847B of the Act). We concluded for those years that the 
resulting difference between these two rates would be zero. For CYs 
2008 and 2009, we estimated the OPPS pass-through payment amount for 
drugs and biologicals to be $6.6 million and $23.3 million, 
respectively. For CY 2010, we estimated the OPPS pass-through payment 
estimate for drugs and biologicals to be $35.5 million. For CY 2011, we 
estimated the OPPS pass-through payment for drugs and biologicals to be 
$15.5 million. For CY 2012, we estimated the OPPS pass-through payment 
for drugs and biologicals to be $19 million. Our proposed OPPS pass-
through payment estimate for drugs and biologicals in CY 2013 is $32 
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.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment.html.
2. Proposed Drugs and Biologicals With Expiring Pass-Through Status in 
CY 2012
    We are proposing that the pass-through status of 23 drugs and 
biologicals would expire on December 31, 2012, as listed in Table 22 
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, 2012.

[[Page 45129]]

These drugs and biologicals were approved for pass-through status on or 
before January 1, 2011. With the exception of those groups of drugs and 
biologicals that are always packaged when they do not have pass-through 
status, specifically diagnostic radiopharmaceuticals and contrast 
agents, our standard methodology for providing payment for drugs and 
biologicals with expiring pass-through status in an upcoming calendar 
year is to determine the product's estimated per day cost and compare 
it with the OPPS drug packaging threshold for that calendar year (which 
is proposed at $80), 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+6 percent for CY 2013, as discussed further in section V.B.3. of 
this proposed rule). Section II.A.3.d. of this proposed rule discusses 
the packaging of all nonpass-through contrast agents and diagnostic 
radiopharmaceuticals.

      Table 22--Proposed Drugs and Biologicals for Which Pass-Through Status Will Expire December 31, 2012
----------------------------------------------------------------------------------------------------------------
                                                                                                   Proposed  CY
  Proposed  CY 2013  HCPCS Code   Proposed CY 2013 long descriptor      Proposed CY 2013  SI         2013  APC
----------------------------------------------------------------------------------------------------------------
C9275...........................  Injection, hexaminolevulinate     N                                        N/A
                                   hydrochloride, 100 mg, per
                                   study dose.
C9279...........................  Injection, ibuprofen, 100 mg....  N                                        N/A
C9367...........................  Skin substitute, Endoform Dermal  K                                       9367
                                   Template, per square centimeter.
J0221...........................  Injection, alglucosidase alfa,    K                                       1413
                                   (lumizyme), 10 mg.
J0588...........................  Injection, incobotulinumtoxin A,  K                                       9278
                                   1 unit.
J0597...........................  Injection, C-1 esterase           K                                       9269
                                   inhibitor (human), Berinert, 10
                                   units.
J0775...........................  Injection, collagenase            K                                       1340
                                   clostridium histolyticum, 0.01
                                   mg.
J0840...........................  Injection, crotalidae polyvalent  K                                       9274
                                   immune fab (ovine), up to 1
                                   gram.
J0897...........................  Injection, denosumab, 1 mg......  K                                       9272
J1290...........................  Injection, ecallantide, 1 mg....  K                                       9263
J1557...........................  Injection, immune globulin        K                                       9270
                                   (Gammaplex), intravenous, non-
                                   lyophilized (e.g. liquid), 500
                                   mg.
J3095...........................  Injection, telavancin, 10 mg....  K                                       9258
J3262...........................  Injection, tocilizumab, 1 mg....  K                                       9264
J3357...........................  Injection, ustekinumab, 1 mg....  K                                       9261
J3385...........................  Injection, velaglucerase alfa,    K                                       9271
                                   100 units.
J7183...........................  Injection, von Willebrand factor  N                                        N/A
                                   complex (human), Wilate, per
                                   100 IU VWF: RCO.
J7335...........................  Capsaicin 8% patch, per 10        K                                       9268
                                   square centimeters.
J8562...........................  Fludarabine phosphate, oral, 10   K                             ..............
                                   mg.
J9043...........................  Injection, cabazitaxel, 1 mg....  K                                       1339
J9302...........................  Injection, ofatumumab, 10 mg....  K                                       9260
J9307...........................  Injection, pralatrexate, 1 mg...  K                                       9259
J9315...........................  Injection, romidepsin, 1 mg.....  K                                       9265
Q2043...........................  Sipuleucel-t, minimum of 50       K                                       9273
                                   million autologous cd54+ cells
                                   activated with pap-gm-csf,
                                   including leukapheresis and all
                                   other preparatory procedures,
                                   per infusion.
----------------------------------------------------------------------------------------------------------------

3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With New or 
Continuing Pass-Through Status in CY 2013
    We are proposing to continue pass-through status in CY 2013 for 21 
drugs and biologicals. None of these drugs and biologicals will have 
received OPPS pass-through payment for at least 2 years and no more 
than 3 years by December 31, 2012. These drugs and biologicals, which 
were approved for pass-through status between April 1, 2011 and July 1, 
2012, are listed in Table 23 below. The APCs and HCPCS codes for these 
drugs and biologicals approved for pass-through status through April 1, 
2012 are assigned status indicator ``G'' in Addenda A and B of this 
proposed rule and available via the Internet on the CMS Web site.
    Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through 
payment for pass-through drugs and biologicals (the pass-through 
payment amount) as the difference between the amount authorized under 
section 1842(o) of the Act and the portion of the otherwise applicable 
OPD fee schedule that the Secretary determines is associated with the 
drug or biological. Payment for drugs and biologicals with pass-through 
status under 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 
2013, the amount that drugs and biologicals receive under section 
1842(o) of the Act.
    Thus, for CY 2013, 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 
2013. We are proposing that a $0.00 pass-through payment amount would 
be paid for most pass-through drugs and biologicals under the CY 2013 
OPPS because the difference between the amount authorized under section 
1842(o) of the Act, which is ASP+6 percent, and the portion of the 
otherwise applicable OPD fee schedule that the Secretary determines is 
appropriate, proposed at ASP+6 percent, is $0.
    In the case of pass-through contrast agents and diagnostic 
radiopharmaceuticals, their pass-through payment amount would be equal 
to ASP+6 percent because, if not on pass-through status, payment for 
these products would be packaged into the associated procedure. 
Therefore, we are proposing that the difference between ASP+6 percent 
and the ``policy-packaged'' drug APC offset amount for the associated 
clinical APC in which the drug or biological is utilized would be the 
CY 2013 pass-through payment amount for these policy-packaged products.

[[Page 45130]]

    In addition, we are proposing to continue to update pass-through 
payment rates on a quarterly basis on the CMS Web site during CY 2013 
if later quarter ASP submissions (or more recent WAC or AWP 
information, as applicable) indicate that adjustments to the payment 
rates for these pass-through drugs or biologicals are necessary. For a 
full description of this policy, we refer readers to the CY 2006 OPPS/
ASC final rule with comment period (70 FR 42722 and 42723).
    In CY 2013, as is consistent with our CY 2012 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 2013, 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 II.A.3.d. of this proposed 
rule, over the last 5 years, we implemented a policy whereby payment 
for all nonpass-through diagnostic radiopharmaceuticals and contrast 
agents, is packaged into payment for the associated procedure. We are 
proposing to continue the packaging of these items, regardless of their 
per day cost, in CY 2013. As stated earlier, pass-through payment is 
the difference between the amount authorized under section 1842(o) of 
the Act and the portion of the otherwise applicable OPD fee schedule 
that the Secretary determines is associated with the drug or 
biological. Because payment for a drug that is either a diagnostic 
radiopharmaceutical or a contrast agent (identified as a ``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 is 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 2012, 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 2013. Similarly, we are proposing that the associated 
copayment amount for pass-through anesthesia drugs that would otherwise 
be packaged if the item did not have pass-through status would be zero 
for CY 2013. As discussed in further detail in section II.3.c.2. of 
this proposed rule, we are clarifying that our general policy is to 
package drugs used for anesthesia, and that those anesthesia drugs with 
pass-through status will be packaged upon the expiration of pass-
through status.
    The separate OPPS payment to a hospital for the pass-through 
diagnostic radiopharmaceutical, contrast agent, or anesthesia drug is 
not subject to a copayment according to the statute. Therefore, we are 
proposing to not publish a copayment amount for these items in Addenda 
A and B to this proposed rule (which are available via the Internet on 
the CMS Web site).
    The 21 drugs and biologicals that we are proposing to continue on 
pass-through status for CY 2013 or that have been granted pass-through 
status as of July 2012 are displayed in Table 23.

                  Table 23--Proposed Drugs and Biologicals With Pass-Through Status in CY 2013
----------------------------------------------------------------------------------------------------------------
                                                                                                   Proposed  CY
  Proposed  CY 2013  HCPCS code        CY 2013 Long descriptor          Proposed  CY 2013  SI        2013  APC
----------------------------------------------------------------------------------------------------------------
A9584...........................  Iodine I-123 ioflupane,           G                                       9406
                                   diagnostic, per study dose, up
                                   to 5 millicuries.
C9285...........................  Lidocaine 70 mg/tetracaine 70     G                                       9285
                                   mg, per patch.
C9286...........................  Injection, belatacept, 1 mg.....  G                                       9286
C9287...........................  Injection, brentuximab vedotin,   G                                       9287
                                   1 mg.
C9288...........................  Injection, centruroides           G                                       9288
                                   (scorpion) immune f(ab)2
                                   (equine), 1 vial.
C9289...........................  Injection, asparaginase Erwinia   G                                       9289
                                   chrysanthemi, 1,000
                                   international units (I.U.).
C9290...........................  Injection, bupivicaine liposome,  G                                       9290
                                   1 mg.
C9366...........................  EpiFix, per square centimeter...  G                                       9366
C9368 **........................  Grafix core, per square           G                                       9368
                                   centimeter.
C9369 **........................  Grafix prime, per square          G                                       9369
                                   centimeter.
J0131...........................  Injection, acetaminophen, 10 mg.  G                                       9283
J0490...........................  Injection, belimumab, 10 mg.....  G                                       1353
J0638...........................  Injection, canakinumab, 1mg.....  G                                       1311
J0712...........................  Injection, ceftaroline fosamil,   G                                       9282
                                   10 mg.
J1572...........................  Injection, immune globulin,       G                                       0947
                                   (flebogamma/flebogamma dif),
                                   intravenous, non-lyophilized
                                   (e.g. liquid), 500 mg.
J2507...........................  Injection, pegloticase, 1 mg....  G                                       9281
J7180...........................  Injection, factor xiii            G                                       1416
                                   (antihemophilic factor, human),
                                   1 i.u.
J9179...........................  Injection, eribulin mesylate,     G                                       1426
                                   0.1 mg.
J9228...........................  Injection, ipilimumab, 10 mg....  G                                       9284
Q2046 *.........................  Injection, aflibercept, 1 mg....  G                                       1420

[[Page 45131]]

 
Q4124...........................  Oasis Ultra Tri-Layer matrix,     G                                       9365
                                   per square centimeter.
----------------------------------------------------------------------------------------------------------------
* HCPCS code Q2046 replaced HCPCS code C9291 effective July 1, 2012. Because the payment rate associated with
  this code effective July 1, 2012 is not available to us in time for incorporation into the Addenda of this
  proposed rule, the Level II HCPCS codes and the Category III CPT codes implemented through the July 2012 OPPS
  quarterly update CR could not be included in Addendum B to this proposed rule.
** Because the payment rates associated with these codes effective July 1, 2012 are not available to us in time
  for incorporation into the Addenda of this proposed rule, the Level II HCPCS codes and the Category III CPT
  codes implemented through the July 2012 OPPS quarterly update CR could not be included in Addendum B to this
  proposed rule.

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 2013, we are proposing to 
continue to package payment for all nonpass-through diagnostic 
radiopharmaceuticals and contrast agents, as discussed in section 
II.A.3.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 
and the otherwise applicable OPD fee schedule amount. There is 
currently one radiopharmaceutical with pass-through status under the 
OPPS, HCPCS code A9584 (Iodine I-123 ioflupane, diagnostic, per study 
dose, up to 5 millicuries). This product, which is presently referred 
to using HCPCS code A9584, was granted pass-through status using HCPCS 
code C9406 beginning July 1, 2011, and we are proposing that it 
continue receiving pass-through status in CY 2013. We currently apply 
the established radiopharmaceutical payment offset policy to pass-
through payment for this product. As described earlier in section 
V.A.3. of this 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 use the ``policy-packaged'' drug offset 
fraction for APCs containing nuclear medicine procedures, calculated as 
1 minus the following: the cost from single procedure claims in the APC 
after removing the cost for ``policy-packaged'' drugs divided by the 
cost from single procedure claims in the APC.
    In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60480 
through 60484), we finalized a policy to redefine ``policy-packaged'' 
drugs as only nonpass-through diagnostic radiopharmaceuticals and 
contrast agents, as a result of the policy discussed in sections V.A.4. 
and V.B.2.d. of the CY 2010 OPPS/ASC final rule with comment period (74 
FR 60471 through 60477 and 60495 through 60499, respectively) that 
treats nonpass-through implantable biologicals that are surgically 
inserted or implanted (through a surgical incision or a natural 
orifice) and implantable biologicals that are surgically inserted or 
implanted (through a surgical incision or a natural orifice) with newly 
approved pass-through status beginning in CY 2010 or later as devices, 
rather than drugs. To determine the actual APC offset amount for pass-
through diagnostic radiopharmaceuticals that takes into consideration 
the otherwise applicable OPPS payment amount, we multiply the ``policy-
packaged'' drug offset fraction by the APC payment amount for the 
nuclear medicine procedure with which the pass-through diagnostic 
radiopharmaceutical is used and, accordingly, reduce the separate OPPS 
payment for the pass-through diagnostic radiopharmaceutical by this 
amount.
    Beginning in CY 2011 and as discussed in the CY 2011 OPPS/ASC final 
rule with comment period (75 FR 71934 through 71936), we finalized a 
policy to require hospitals to append modifier ``FB'' to specified 
nuclear medicine procedures when the diagnostic radiopharmaceutical is 
received at no cost/full credit. These instructions are contained 
within the I/OCE CMS specifications on the CMS Web site at http://www.cms.gov/Medicare/Coding/OutpatientCodeEdit/index.html.
    For CY 2013 and future years, we 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 24 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

[[Page 45132]]

hospitals to report a token charge of less than $1.01 in cases in which 
the diagnostic radiopharmaceutical is furnished without cost or with 
full credit.
    For CY 2012, we finalized a policy to apply the diagnostic 
radiopharmaceutical offset policy to payment for pass-through 
diagnostic radiopharmaceuticals, as described above. For CY 2013, we 
are proposing to continue to apply the diagnostic radiopharmaceutical 
offset policy to payment for pass-through diagnostic 
radiopharmaceuticals.
    Table 24 below displays the proposed APCs to which nuclear medicine 
procedures would be assigned in CY 2013 and for which we expect that an 
APC offset could be applicable in the case of diagnostic 
radiopharmaceuticals with pass-through status.

  Table 24--Proposed APCs to Which Nuclear Medicine Procedures Would Be
                          Assigned for CY 2013
------------------------------------------------------------------------
      Proposed CY 2013 APC              Proposed CY 2013 APC title
------------------------------------------------------------------------
0308...........................  Positron Emission Tomography (PET)
                                  Imaging.
0377...........................  Level II Cardiac Imaging.
0378...........................  Level II Pulmonary Imaging.
0389...........................  Level I Non-imaging Nuclear Medicine.
0390...........................  Level I Endocrine Imaging.
0391...........................  Level II Endocrine Imaging.
0392...........................  Level II Non-imaging Nuclear Medicine.
0393...........................  Hematologic Processing & Studies.
0394...........................  Hepatobiliary Imaging.
0395...........................  GI Tract Imaging.
0396...........................  Bone Imaging.
0397...........................  Vascular Imaging.
0398...........................  Level I Cardiac Imaging.
0400...........................  Hematopoietic Imaging.
0401...........................  Level I Pulmonary Imaging.
0402...........................  Level II Nervous System Imaging.
0403...........................  Level I Nervous System Imaging.
0404...........................  Renal and Genitourinary Studies.
0406...........................  Level I Tumor/Infection Imaging.
0408...........................  Level III Tumor/Infection Imaging.
0414...........................  Level II Tumor/Infection Imaging.
------------------------------------------------------------------------

c. 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 
and the otherwise applicable OPD fee schedule amount. There currently 
are no contrast agents with pass-through status under the OPPS. As 
described in section V.A.3. of 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.
    Although there are no contrast agents with pass-through status, we 
believe that a payment offset is necessary in the event that a new 
contrast agent is approved for pass-through status during CY 2013, in 
order to provide an appropriate transitional pass-through payment for 
them because all of these items are packaged when they do not have 
pass-through status. In accordance with our standard offset 
methodology, we are proposing for CY 2013 to deduct from the payment 
for new pass-through contrast agents that are approved for pass-through 
status as a drug or biological during CY 2013, an amount that reflects 
the portion of the APC payment associated with predecessor contrast 
agents, in order to ensure no duplicate contrast agent payment is made.
    In CY 2010, we established a policy to estimate the portion of each 
APC payment rate that could reasonably be attributed to the cost of 
predecessor contrast agents when considering new contrast agents for 
pass-through payment (74 FR 60482 through 60484). For CY 2013, as we 
did in CY 2012, we 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 2013 to recognize that when a contrast agent 
with pass-through status is billed with any procedural APC listed in 
Table 25 of this proposed rule, 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/Medicare/ Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html a file that contains the APC offset 
amounts that will be used for that year for purposes of both evaluating 
cost significance for candidate pass-through device categories and 
drugs and biologicals, including contrast agents, and establishing any 
appropriate APC offset amounts. Specifically, the file will continue to 
provide the amounts and percentages of APC payment associated with 
packaged implantable devices, ``policy-packaged'' drugs, and 
``threshold-packaged'' drugs and biologicals for every OPPS clinical 
APC.
    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 24 above and these APCs are displayed in Table 25 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 2013, 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 25, 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 25--Proposed APCs to Which a Contrast Agent Offset May Be
                         Applicable for CY 2013
------------------------------------------------------------------------
     Proposed CY 2013 APC              Proposed CY 2013 APC title
------------------------------------------------------------------------
0080..........................  Diagnostic Cardiac Catheterization.
0082..........................  Coronary or Non-Coronary Atherectomy.

[[Page 45133]]

 
0083..........................  Coronary Angioplasty, Valvuloplasty, and
                                 Level I Endovascular Revascularization
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..........................  Level II Endovascular Revascularization
                                 of the Lower Extremity.
0278..........................  Diagnostic Urography.
0279..........................  Level II Angiography and Venography.
0280..........................  Level III Angiography and Venography.
0283..........................  Computed Tomography with Contrast.
0284..........................  Magnetic Resonance Imaging and Magnetic
                                 Resonance Angiography with Contrast.
0333..........................  Computed Tomography without Contrast
                                 followed by Contrast.
0334..........................  Combined Abdomen and Pelvis CT with
                                 Contrast.
0337..........................  Magnetic Resonance Imaging and Magnetic
                                 Resonance Angiography without Contrast
                                 followed by Contrast.
0375..........................  Ancillary Outpatient Services When
                                 Patient Expires.
0383..........................  Cardiac Computed Tomographic Imaging.
0388..........................  Discography.
0442..........................  Dosimetric Drug Administration.
0653..........................  Vascular Reconstruction/Fistula Repair
                                 with Device.
0656..........................  Transcatheter Placement of Intracoronary
                                 Drug-Eluting Stents.
0662..........................  CT Angiography.
0668..........................  Level I Angiography and Venography.
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 2012 OPPS, we currently pay for drugs, biologicals, 
and radiopharmaceuticals that do not have pass-through status in one of 
two ways: As a packaged payment included in the payment for the 
associated service, or as a separate payment (individual APCs). We 
explained in the April 7, 2000 OPPS final rule with comment period (65 
FR 18450) that we generally package the cost of drugs and 
radiopharmaceuticals into the APC payment rate for the procedure or 
treatment with which the products are usually furnished. Hospitals do 
not receive separate payment for packaged items and supplies, and 
hospitals may not bill beneficiaries separately for any packaged items 
and supplies whose costs are recognized and paid within the national 
OPPS payment rate for the associated procedure or service. (Transmittal 
A-01-133, issued on November 20, 2001, explains in greater detail the 
rules regarding separate payment for packaged services.)
    Packaging costs into a single aggregate payment for a service, 
procedure, or episode-of-care is a fundamental principle that 
distinguishes a prospective payment system from a fee schedule. In 
general, packaging the costs of items and services into the payment for 
the primary procedure or service with which they are associated 
encourages hospital efficiencies and also enables hospitals to manage 
their resources with maximum flexibility.
2. Proposed Criteria for Packaging Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
a. Background
    As indicated in section V.B.1. of this proposed rule, in accordance 
with section 1833(t)(16)(B) of the Act, the threshold for establishing 
separate APCs for payment of drugs and biologicals was set to $50 per 
administration during CYs 2005 and 2006. In CY 2007, we used the four 
quarter moving average Producer Price Index (PPI) levels for 
Pharmaceutical Preparations (Prescription) to trend the $50 threshold 
forward from the third quarter of CY 2005 (when the Pub. L. 108-173 
mandated threshold became effective) to the third quarter of CY 2007. 
We then rounded the resulting dollar amount to the nearest $5 increment 
in order to determine the CY 2007 threshold amount of $55. Using the 
same methodology as that used in CY 2007 (which is discussed in more 
detail in the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68085 through 68086)), we set the packaging threshold for establishing 
separate APCs for drugs and biologicals at $60 for CYs 2008 and 2009. 
For CY 2010, we set the packaging threshold at $65; for CY 2011, we set 
the packaging threshold at $70; and for CY 2012, we set the packaging 
threshold at $75.
    Following the CY 2007 methodology, for this CY 2013 proposed rule, 
we used the most recently available four quarter moving average PPI 
levels to trend the $50 threshold forward from the third quarter of CY 
2005 to the third quarter of CY 2013 and rounded the resulting dollar 
amount ($81.59) to the nearest $5 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 2013; rather, this change in terminology reflects a 
change to the BLS naming convention for this series.) We refer below to 
this series generally as the PPI for Prescription Drugs.
    We chose this PPI as it reflects price changes associated with the 
average mix of all pharmaceuticals in the overall economy. In addition, 
we chose this price series because it is publicly available and 
regularly published, improving public access and transparency. 
Forecasts of the PPI for Prescription Drugs are developed by IHS Global 
Insight, Inc., a nationally recognized economic and financial 
forecasting firm. As actual inflation for past quarters replaced 
forecasted amounts, the PPI estimates for prior quarters have been 
revised (compared with those used in the CY 2007 OPPS/

[[Page 45134]]

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 2013 of $80. (For a more 
detailed discussion of the OPPS drug packaging threshold and the use of 
the PPI for Prescription Drugs, we refer readers to the CY 2007 OPPS/
ASC final rule with comment period (71 FR 68085 through 68086).)
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 the proposed CY 2013 packaging status for all nonpass-
through drugs and biologicals that are not policy packaged for this 
proposed rule, we calculated on a HCPCS code-specific basis the per day 
cost of all drugs, nonimplantable biologicals, and therapeutic 
radiopharmaceuticals (collectively called ``threshold-packaged'' drugs) 
that had a HCPCS code in CY 2011 and were paid (via packaged or 
separate payment) under the OPPS. We used data from CY 2011 claims 
processed before January 1, 2012 for this calculation. However, we did 
not perform this calculation for those drugs and biologicals with 
multiple HCPCS codes that include different dosages as described in 
section V.B.2.c. of this proposed rule or for diagnostic 
radiopharmaceuticals, contrast agents, and implantable biologicals that 
we are proposing to continue to package in CY 2013, as discussed in 
section V.B.2.d. of this proposed rule.
    In order to calculate the per day costs for drugs, nonimplantable 
biologicals, and therapeutic radiopharmaceuticals to determine their 
proposed packaging status in CY 2013, we used the methodology that was 
described in detail in the CY 2006 OPPS proposed rule (70 FR 42723 
through 42724) and finalized in the CY 2006 OPPS final rule with 
comment period (70 FR 68636 through 70 FR 68638). For each drug and 
nonimplantable biological HCPCS code, we used an estimated payment rate 
of ASP+6 percent (which is the payment rate we are proposing for 
separately payable drugs and nonimplantable biologicals for CY 2013, as 
discussed in more detail in section V.B.3.b. of this proposed rule) to 
calculate the CY 2013 proposed rule per day costs. We used the 
manufacturer submitted ASP data from the fourth quarter of CY 2011 
(data that were used for payment purposes in the physician's office 
setting, effective April 1, 2012) to determine the proposed rule per 
day cost.
    As is our standard methodology, for CY 2013 we are proposing to use 
payment rates based on the ASP data from the fourth quarter of CY 2011 
for budget neutrality estimates, packaging determinations, impact 
analyses, and completion of Addenda A and B to this proposed rule 
(which are available via the Internet on the CMS Web site) because 
these are the most recent data available for use at the time of 
development of this proposed rule. These data were also the bases for 
drug payments in the physician's office setting, effective April 1, 
2012. For items that did not have an ASP-based payment rate, such as 
some therapeutic radiopharmaceuticals, we used their mean unit cost 
derived from the CY 2011 hospital claims data to determine their per 
day cost.
    We are proposing to package items with a per day cost less than or 
equal to $80, and identify items with a per day cost greater than $80 
as separately payable. Consistent with our past practice, we 
crosswalked historical OPPS claims data from the CY 2011 HCPCS codes 
that were reported to the CY 2012 HCPCS codes that we display in 
Addendum B of this proposed rule (which is available via the Internet 
on the CMS Web site) for payment in CY 2013.
    Our policy during previous cycles of the OPPS has been to use 
updated ASP and claims data to make final determinations of the 
packaging status of HCPCS codes for drugs, nonimplantable biologicals, 
and therapeutic radiopharmaceuticals for the OPPS/ASC final rule with 
comment period. We note that it is also our policy to make an annual 
packaging determination for a HCPCS code only when we develop the OPPS/
ASC final rule with comment period for the update year. Only HCPCS 
codes that are identified as separately payable in the final rule with 
comment period will be subject to quarterly updates. For our 
calculation of per day costs of HCPCS codes for drugs and 
nonimplantable biologicals in the CY 2013 OPPS/ASC final rule with 
comment period, we are proposing to use ASP data from the first quarter 
of CY 2012, which is the basis for calculating payment rates for drugs 
and biologicals in the physician's office setting using the ASP 
methodology, effective July 1, 2012, along with updated hospital claims 
data from CY 2011. We note that we also are proposing to use these data 
for budget neutrality estimates and impact analyses for the CY 2013 
OPPS/ASC final rule with comment period.
    Payment rates for HCPCS codes for separately payable drugs and 
nonimplantable biologicals included in Addenda A and B to the final 
rule with comment period will be based on ASP data from the second 
quarter of CY 2012. These data will be the basis for calculating 
payment rates for drugs and biologicals in the physician's office 
setting using the ASP methodology, effective October 1, 2012. These 
physician's office payment rates would then be updated in the January 
2013 OPPS update, based on the most recent ASP data to be used for 
physician's office and OPPS payment as of January 1, 2013. For items 
that do not currently have an ASP-based payment rate, we are proposing 
to recalculate their mean unit cost from all of the CY 2011 claims data 
and updated cost report information available for the CY 2013 final 
rule with comment period to determine their final per day cost.
    Consequently, the packaging status of some HCPCS codes for drugs, 
nonimplantable biologicals, and therapeutic radiopharmaceuticals in 
this CY 2013 OPPS/ASC 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 cost fluctuates relative to the proposed CY 
2013 OPPS drug packaging threshold and the drug's payment status 
(packaged or separately payable) in CY 2012. Specifically, for CY 2013, 
consistent with our historical practice, we 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 based on the updated 
drug packaging threshold and on the final updated data:
     HCPCS codes for drugs and nonimplantable biologicals that 
were paid separately in CY 2012 and that are proposed for separate 
payment in CY 2013, and that then have per day costs equal to or less 
than $80, based on the updated ASPs and hospital claims data used for 
this CY 2013 proposed rule, would continue to receive separate payment 
in CY 2013.
     HCPCS codes for drugs and nonimplantable biologicals that 
were packaged in CY 2012 and that are proposed for separate payment in 
CY 2013, and that then have per day costs equal to or less than $80, 
based on the updated ASPs and hospital claims data

[[Page 45135]]

used for this CY 2013 proposed rule, would remain packaged in CY 2013.
     HCPCS codes for drugs and nonimplantable biologicals for 
which we are proposing packaged payment in CY 2013 but then have per 
day costs greater than $80, based on the updated ASPs and hospital 
claims data used for this CY 2013 proposed rule, would receive separate 
payment in CY 2013.
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 included few 
units and days for a number of newly recognized HCPCS codes, resulting 
in our concern that these data reflected claims from only a small 
number of hospitals, even though the drug or biological itself may be 
reported by many other hospitals under the most common HCPCS code. 
Based on these findings from our first available claims data for the 
newly recognized HCPCS codes, we believed that adopting our standard 
HCPCS code-specific packaging determinations for these codes could lead 
to payment incentives for hospitals to report certain HCPCS codes 
instead of others, particularly because we do not currently require 
hospitals to report all drug and biological HCPCS codes under the OPPS 
in consideration of our previous policy that generally recognized only 
the lowest dosage HCPCS code for a drug or biological for OPPS payment.
    For CY 2013, we continue to believe that adopting the standard 
HCPCS code-specific packaging determinations for these codes could lead 
to payment incentives for hospitals to report certain HCPCS codes for 
drugs instead of others. Making packaging determinations on a drug-
specific basis eliminates these incentives and allows hospitals 
flexibility in choosing to report all HCPCS codes for different dosages 
of the same drug or only the lowest dosage HCPCS code. Therefore, we 
are proposing to continue our policy to make packaging determinations 
on a drug-specific basis, rather than a HCPCS code-specific basis, for 
those HCPCS codes that describe the same drug or biological but 
different dosages in CY 2013.
    For CY 2013, in order to propose a packaging determination that is 
consistent across all HCPCS codes that describe different dosages of 
the same drug or biological, we aggregated both our CY 2011 claims data 
and our pricing information at ASP+6 percent across all of the HCPCS 
codes that describe each distinct drug or biological in order to 
determine the mean units per day of the drug or biological in terms of 
the HCPCS code with the lowest dosage descriptor. HCPCS codes J3472 
(Injection, hyaluronidase, ovine, preservative free, per 1000 usp 
units), Q0171 (Chlorpromazine hydrochloride, 10 mg, oral, FDA approved 
prescription antiemetic, for use as a complete therapeutic substitute 
for an IV antiemetic at the time of chemotherapy treatment, not to 
exceed a 48-hour dosage regimen), Q0172 (Chlorpromazine hydrochloride, 
25 mg, oral, FDA approved prescription anti-emetic, for use as a 
complete therapeutic substitute for an IV anti-emetic at the time of 
chemotherapy treatment, not to exceed a 48-hour dosage regimen), Q0175 
(Perphenazine, 4 mg, oral, FDA approved prescription anti-emetic, for 
use as a complete therapeutic substitute for an IV anti-emetic at the 
time of chemotherapy treatment, not to exceed a 48-hour dosage 
regimen), Q0176 (Perphenazine, 8 mg, oral, FDA approved prescription 
anti-emetic, for use as a complete therapeutic substitute for an IV 
anti-emetic at the time of chemotherapy treatment, not to exceed a 48-
hour dosage regimen), Q0177 (Hydroxyzine pamoate, 25 mg, oral, FDA 
approved prescription 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), and Q0178 (Hydroxyzine 
pamoate, 50 mg, oral, FDA approved prescription anti-emetic, for use as 
a complete therapeutic substitute for an IV anti-emetic at the time of 
chemotherapy treatment, not to exceed a 48-hour dosage regimen) did not 
have pricing information available for the ASP methodology and, as is 
our current policy for determining the packaging status of other drugs, 
we used the mean unit cost available from the fourth quarter CY 2011 
claims data to make the packaging determinations for these drugs. For 
all other drugs and biologicals that have HCPCS codes describing 
different dosages, we then multiplied the weighted average ASP+6 
percent per unit payment amount across all dosage levels of a specific 
drug or biological by the estimated units per 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 26 below.

[[Page 45136]]

    Table 26--Proposed HCPCS Codes to Which the CY 2013 Drug-Specific
             Packaging Determination Methodology Would Apply
------------------------------------------------------------------------
   Proposed CY 2013         Proposed CY 2013 long       Proposed CY 2013
      HCPCS code                  descriptor                   SI
------------------------------------------------------------------------
C9257................  Injection, bevacizumab, 0.25 mg  K
J9035................  Injection, bevacizumab, 10 mg..  K
J1020................  Injection, methylprednisolone    N
                        acetate, 20 mg.
J1030................  Injection, methylprednisolone    N
                        acetate, 40 mg.
J1040................  Injection, methylprednisolone    N
                        acetate, 80 mg.
J1070................  Injection, testosterone          N
                        cypionate, up to 100 mg.
J1080................  Injection, testosterone          N
                        cypionate, 1 cc, 200 mg.
J1440................  Injection, filgrastim (g-csf),   K
                        300 mcg.
J1441................  Injection, filgrastim (g-csf),   K
                        480 mcg.
J1460................  Injection, gamma globulin,       N
                        intramuscular, 1 cc.
J1560................  Injection, gamma globulin,       N
                        intramuscular over 10 cc.
J1642................  Injection, heparin sodium,       N
                        (heparin lock flush), per 10
                        units.
J1644................  Injection, heparin sodium, per   N
                        1000 units.
J1850................  Injection, kanamycin sulfate,    N
                        up to 75 mg.
J1840................  Injection, kanamycin sulfate,    N
                        up to 500 mg.
J2270................  Injection, morphine sulfate, up  N
                        to 10 mg.
J2271................  Injection, morphine sulfate,     N
                        100mg.
J2788................  Injection, rho d immune          K
                        globulin, human, minidose, 50
                        micrograms (250 i.u.).
J2790................  Injection, rho d immune          K
                        globulin, human, full dose,
                        300 micrograms (1500 i.u.).
J2920................  Injection, methylprednisolone    N
                        sodium succinate, up to 40 mg.
J2930................  Injection, methylprednisolone    N
                        sodium succinate, up to 125 mg.
J3120................  Injection, testosterone          N
                        enanthate, up to 100 mg.
J3130................  Injection, testosterone          N
                        enanthate, up to 200 mg.
J3471................  Injection, hyaluronidase,        N
                        ovine, preservative free, per
                        1 usp unit (up to 999 usp
                        units).
J3472................  Injection, hyaluronidase,        N
                        ovine, preservative free, per
                        1000 usp units.
J7050................  Infusion, normal saline          N
                        solution , 250 cc.
J7040................  Infusion, normal saline          N
                        solution, sterile (500 ml=1
                        unit).
J7030................  Infusion, normal saline          N
                        solution , 1000 cc.
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,  N
                        oral, FDA approved
                        prescription anti-emetic, for
                        use as a complete therapeutic
                        substitute for an IV anti-
                        emetic at the time of
                        chemotherapy treatment, not to
                        exceed a 48-hour dosage
                        regimen.
Q0165................  Prochlorperazine maleate, 10     N
                        mg, oral, FDA approved
                        prescription anti-emetic, for
                        use as a complete therapeutic
                        substitute for an IV anti-
                        emetic at the time of
                        chemotherapy treatment, not to
                        exceed a 48-hour dosage
                        regimen.
Q0167................  Dronabinol, 2.5 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 dosage
                        regimen.
Q0168................  Dronabinol, 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 dosage
                        regimen.
Q0169................  Promethazine hydrochloride,      N
                        12.5 mg, oral, FDA approved
                        prescription anti-emetic, for
                        use as a complete therapeutic
                        substitute for an IV
                        antiemetic at the time of
                        chemotherapy treatment, not to
                        exceed a 48-hour dosage
                        regimen.
Q0170................  Promethazine hydrochloride, 25   N
                        mg, oral, FDA approved
                        prescription anti-emetic, for
                        use as a complete therapeutic
                        substitute for an IV
                        antiemetic at the time of
                        chemotherapy treatment, not to
                        exceed a 48-hour dosage
                        regimen.
Q0171................  Chlorpromazine hydrochloride,    N
                        10 mg, oral, FDA approved
                        prescription antiemetic, for
                        use as a complete therapeutic
                        substitute for an IV
                        antiemetic at the time of
                        chemotherapy treatment, not to
                        exceed a 48-hour dosage
                        regimen.
Q0172................  Chlorpromazine hydrochloride,    N
                        25 mg, oral, FDA approved
                        prescription anti-emetic, for
                        use as a complete therapeutic
                        substitute for an IV anti-
                        emetic at the time of
                        chemotherapy treatment, not to
                        exceed a 48-hour dosage
                        regimen.
Q0175................  Perphenazine, 4 mg, oral, FDA    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 dosage
                        regimen.
Q0176................  Perphenazine, 8 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 dosage
                        regimen.
Q0177................  Hydroxyzine pamoate, 25 mg,      N
                        oral, FDA approved
                        prescription anti-emetic, for
                        use as a complete therapeutic
                        substitute for an IV anti-
                        emetic at the time of
                        chemotherapy treatment, not to
                        exceed a 48-hour dosage
                        regimen.
Q0178................  Hydroxyzine pamoate, 50 mg,      N
                        oral, FDA approved
                        prescription anti-emetic, for
                        use as a complete therapeutic
                        substitute for an IV anti-
                        emetic at the time of
                        chemotherapy treatment, not to
                        exceed a 48-hour dosage
                        regimen.
------------------------------------------------------------------------

[[Page 45137]]

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.
    It has been our longstanding policy to treat all separately payable 
drugs and biologicals, which includes SCODs, and drugs and biological 
that are not SCODs, the same. Therefore, we apply the payment 
methodology in section 1833(t)(14)(A)(iii)(I) of the Act to SCODs, as 
required by statute, but we also apply it to separately payable drugs 
and biologicals that are not SCODs, which is a policy choice rather 
than a statutory requirement. Later in the discussion of our proposed 
policy for CY 2013, we are proposing to apply section 
1833(t)(14)(A)(iii)(II) of the Act to all separately payable drugs and 
biologicals. Although we do not distinguish SCODs in that discussion, 
we note that we are required to apply section 1833(t)(14)(A)(iii)(II) 
of the Act to SCODs, but we are choosing to apply it to other 
separately payable drugs and biologicals, consistent with our history 
of using the same payment methodology for all separately payable drugs 
and biologicals.
    In the CY 2006 OPPS proposed rule (70 FR 42728 through 42731), we 
discussed the June 2005 report by MedPAC regarding pharmacy overhead 
costs in HOPDs and summarized the findings of that study. In response 
to the MedPAC findings, in the CY 2006 OPPS proposed rule (70 FR 
42729), we discussed our belief that, because of the varied handling 
resources required to prepare different forms of drugs, it would be 
impossible to exclusively and appropriately assign a drug to a certain 
overhead category that would apply to all hospital outpatient uses of 
the drug. Therefore, our CY 2006 OPPS proposal included a proposal to 
establish three distinct Level II HCPCS C-codes and three corresponding 
APCs for drug handling categories to differentiate overhead costs for 
drugs and biologicals (70 FR 42730). We also proposed: (1) To combine 
several overhead categories recommended by MedPAC; (2) to establish 
three drug handling categories, as we believed that larger groups would 
minimize the number of drugs that may fit into more than one category 
and would lessen any undesirable payment policy incentives to utilize 
particular forms of drugs or specific preparation methods; (3) to 
collect hospital charges for these HCPCS C-codes for 2 years; and (4) 
to ultimately base payment for the corresponding drug handling APCs on 
CY 2006 claims data available for the CY 2008 OPPS.
    In the CY 2006 OPPS final rule with comment period (70 FR 68659 
through 68665), we discussed the public comments we received on our 
proposal regarding pharmacy overhead. The overwhelming majority of 
commenters did not support our proposal regarding pharmacy overhead and 
urged us not to finalize this policy, as it would be administratively 
burdensome for hospitals to establish charges for HCPCS codes for 
pharmacy overhead and to report them. Therefore, we did not finalize 
this proposal for CY 2006. Instead, we established payment for 
separately payable drugs and biologicals at ASP+6 percent, which we 
calculated by comparing the estimated aggregate cost of separately 
payable drugs and biologicals in our claims data to the estimated 
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

[[Page 45138]]

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 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.

[[Page 45139]]

As a result of this approach, no redistribution of cost would occur 
from other services to drugs and biologicals or vice versa.
    While we had no way of assessing whether this current distribution 
of overhead cost to coded packaged drugs and biologicals with an ASP 
was appropriate, we acknowledged that the established method of 
converting billed charges to costs had the potential to ``compress'' 
the calculated costs to some degree. Further, we recognized that the 
attribution of pharmacy overhead costs to packaged or separately 
payable drugs and biologicals through our standard drug payment 
methodology of a combined payment for acquisition and pharmacy overhead 
costs depends, in part, on the treatment of all drugs and biologicals 
each year under our annual drug packaging threshold. Changes to the 
packaging threshold may result in changes to payment for the overhead 
cost of drugs and biologicals that do not reflect actual changes in 
hospital pharmacy overhead cost for those products. For these reasons, 
we stated that we believed some portion, but not all, of the total 
overhead cost that is associated with coded packaged drugs and 
biologicals (the difference between aggregate cost for those drugs and 
biologicals on the claims and ASP dollars for the same drugs and 
biologicals), based on our standard drug payment methodology, should, 
at least for CY 2010, be attributed to separately payable drugs and 
biologicals.
    We acknowledged that the observed combined payment for acquisition 
and pharmacy overhead costs of ASP-2 percent for separately payable 
drugs and biologicals may be too low and ASP+247 percent for coded 
packaged drugs and biologicals with reported ASP data in the CY 2010 
claims data may be too high (74 FR 35327 and 35328). Therefore, we 
stated that a middle ground would represent the most accurate 
redistribution of pharmacy overhead cost. Our assumption was that 
approximately one-third to one-half of the total pharmacy overhead cost 
currently associated with coded packaged drugs and biologicals in the 
CY 2008 claims data offered a more appropriate allocation of drug and 
biological cost to separately payable drugs and biologicals (74 FR 
35328). One third of the $395 million of pharmacy overhead cost 
associated with packaged drugs and biologicals was $132 million, 
whereas one-half was $198 million.
    Within the one-third to one-half parameters, we proposed 
reallocating $150 million in drug and biological cost observed in the 
claims data from coded packaged drugs and biologicals with an ASP to 
separately payable drugs and biologicals for CY 2010 for their pharmacy 
overhead costs. Based on this redistribution, we proposed a CY 2010 
payment rate for separately payable drugs and biologicals of ASP+4 
percent.
    In the CY 2010 OPPS final rule with comment period, we adopted a 
transitional payment rate of ASP+4 percent based on a pharmacy overhead 
adjustment methodology for CY 2010 that redistributed $200 million from 
packaged drug and biological cost to separately payable drug cost (74 
FR 60499 through 60518). This $200 million included the proposed $150 
million redistribution from the pharmacy overhead cost of coded 
packaged drugs and biologicals for which an ASP is reported and an 
additional $50 million dollars from the total uncoded drug and 
biological cost to separately payable drugs and biologicals as a 
conservative estimate of the pharmacy overhead cost of uncoded packaged 
drugs and biologicals that should be appropriately associated with the 
cost of separately payable drugs and biologicals (74 FR 60517). We 
stated that this was an intentionally conservative estimate as we could 
not identify definitive evidence that uncoded packaged drug and 
biological cost included a pharmacy overhead amount comparable to that 
of coded packaged drugs and biologicals with an ASP. We stated that we 
could not know the amount of overhead associated with these drugs 
without making significant assumptions about the amount of pharmacy 
overhead cost associated with the drugs and biologicals captured by 
these uncoded packaged drug costs (74 FR 60511 through 60513). In 
addition, as in prior years, we reiterated our commitment to continue 
in our efforts to refine our analyses.
    For CY 2011, we continued the CY 2010 pharmacy overhead adjustment 
methodology (74 FR 60500 through 60512). Consistent with our 
supposition that the combined payment for average acquisition and 
pharmacy overhead costs under our standard methodology may understate 
the cost of separately payable drugs and biologicals and related 
pharmacy overhead for those drugs and biologicals, we redistributed 
$150 million from the pharmacy overhead cost of coded packaged drugs 
and biologicals with an ASP and redistributed $50 million from the cost 
of uncoded packaged drugs and biologicals, for a total redistribution 
of $200 million from costs for coded and uncoded packaged drugs to 
separately payable drugs and biologicals, with the result that we pay 
separately paid drugs and biologicals at ASP+5 percent for CY 2011. The 
redistribution amount of $150 million in overhead cost from coded 
packaged drugs and biologicals with an ASP and $50 million in costs 
from uncoded packaged drugs and biologicals without an ASP were within 
the parameters established in the CY 2010 OPPS/ASC final rule. In 
addition, as in prior years, we described some of our work to improve 
our analyses during the preceding year, including an analysis of 
uncoded packaged drug and biological cost and our evaluation of the 
services with which uncoded packaged drug cost appears in the claims 
data. We conducted this analysis in an effort to assess how much 
uncoded drugs resemble coded packaged drugs (75 FR 71966). We stated 
that, in light of this information, we were not confident that the 
drugs captured by uncoded drug cost are the same drugs captured by 
coded packaged drug cost, and therefore, we did not believe we could 
assume that they are the same drugs, with comparable overhead and 
handling costs. Without being able to calculate the ASP for these 
uncoded packaged drugs and biologicals and without being able to gauge 
the magnitude of overhead complexity associated with these drugs and 
biologicals, we did not believe that we should have assumed that the 
same amount of proportional overhead should be redistributed between 
coded and uncoded packaged drugs, and therefore, we redistributed $50 
million from uncoded packaged drugs and $150 million from coded 
packaged drugs (75 FR 71966). We reiterated our commitment to continue 
to refine our drug pricing methodology and noted that we would continue 
to pursue the most appropriate methodology for establishing payment for 
drugs and biologicals under the OPPS and continue to evaluate the 
appropriateness of this methodology when we establish each year's 
payment for drugs and biologicals under the OPPS (75 FR 71967).
    For CY 2012, we continued our overhead adjustment methodology of 
redistributing \1/3\ to \1/2\ of allocated overhead for coded packaged 
drugs or $150 million plus an additional $50 million in allocated 
overhead for uncoded packaged drugs. Additionally, we finalized a 
policy to update these amounts by the PPI for pharmaceuticals and 
redistributed $161 million in allocated overhead from coded packaged 
drugs and $54 million from uncoded packaged drugs. We further finalized 
a policy to hold the redistributed proportion of packaged drugs 
constant between the proposed

[[Page 45140]]

and the final rule, which increased the final redistribution amount in 
the CY 2012 final rule to $240.3 million ($169 million from coded 
packaged drugs and $71.3 million from uncoded packaged drugs). This 
approach resulted in a final payment rate of ASP+4 percent for 
separately payable drugs.
b. Proposed CY 2013 Payment Policy
    In reexamining our current drug payment methodology for this CY 
2013 OPPS/ASC proposed rule, we reviewed our past efforts to determine 
an appropriate payment methodology for drugs and biologicals, as 
described above. Since the inception of the OPPS, we have remained 
committed to establishing a drug payment methodology that is 
predictable, accurate, and appropriate. Pharmacy stakeholders and the 
hospital community have also, throughout the years, continually 
emphasized the importance of both predictable and accurate payment 
rates for drugs, noting that a payment methodology that emphasizes 
predictability and accuracy leads to appropriate payment rates that 
reflect the cost of drugs and biologicals (including overhead) in 
HOPDs. Pertinent stakeholders also have noted that predictable and 
accurate payment rates minimize the effect of anomalies in the claims 
data that may incorrectly influence the future payment for services. We 
understand that, with predictable payment rates, hospitals are better 
able to plan for the future.
    As discussed above, since CY 2006, we have attempted to establish a 
drug payment methodology that reflects hospitals' acquisition costs for 
drugs and biologicals while taking into account relevant pharmacy 
overhead and related handling expenses. We have attempted to collect 
more data on hospital overhead charges for drugs and biologicals by 
making several proposals that would require hospitals to change the way 
they report the cost and charges for drugs. None of these proposals 
were adopted due to significant stakeholder concern, including that 
hospitals stated that it would be administratively burdensome to report 
hospital overhead charges. We established a payment policy for 
separately payable drugs and biologicals, authorized by section 
1833(t)(14)(A)(iii)(I) of the Act, based on an ASP+X amount that is 
calculated by comparing the estimated aggregate cost of separately 
payable drugs and biologicals in our claims data to the estimated 
aggregate ASP dollars for separately payable drugs and biologicals, 
using the ASP as a proxy for average acquisition cost (70 FR 68642). As 
we previously stated, we refer to this methodology as our standard drug 
payment methodology.
    In CY 2010, taking into consideration comments made by the pharmacy 
stakeholders and acknowledging the limitations of the reported data due 
to charge compression and hospitals' reporting practices, we added an 
``overhead adjustment'' (an internal adjustment of the data) by 
redistributing cost from coded and uncoded packaged drugs and 
biologicals to separately payable drugs in order to provide more 
appropriate payments for drugs and biologicals in the HOPD. We 
continued this overhead adjustment methodology through CY 2012, and 
further refined our overhead adjustment methodology by finalizing a 
policy to update the redistribution amount for inflation and keep the 
redistribution ratio constant between the proposed rule and the final 
rule.
    Application of the standard drug payment methodology, with the 
overhead adjustment, has always yielded a finalized payment rate in the 
range of ASP+4 percent to ASP+6 percent for nonpass-through separately 
payable drugs. We believe that the historic ASP+4 to ASP+6 percentage 
range is an appropriate payment rate for separately payable drugs and 
biologicals administered within the HOPD, including acquisition and 
pharmacy overhead and related expenses. However, because of continuing 
uncertainty about the full cost of pharmacy overhead and acquisition 
cost, based in large part on the limitations of the submitted hospital 
charge and claims data for drugs, we are concerned that the continued 
use of our current standard drug payment methodology (including the 
overhead adjustment) still may not appropriately account for average 
acquisition and pharmacy overhead cost and, therefore, may result in 
payment rates that are not as predictable, accurate, or appropriate as 
they could be.
    Section 1833(t)(14)(A)(iii)(II) of the Act requires an alternative 
methodology for determining payment rates for SCODs wherein, if 
hospital acquisition cost data are not available, payment shall be 
equal (subject to any adjustment for overhead costs) to payment rates 
established under the methodology described in section 1842(o), section 
1847A, or section 1847B of the Act, as calculated and adjusted by the 
Secretary as necessary. Considering stakeholder and provider feedback, 
continued limitations of the hospital claims and cost data on drugs and 
biologicals, and Panel recommendations, we are proposing for CY 2013 to 
pay for separately payable drugs and biologicals at ASP+6 percent based 
on section 1833 (t)(14)(A)(iii)(II) of the Act, hereinafter referred to 
as the statutory default.
    As noted above, section 1833(t)(14)(A)(iii)(II) of the Act 
authorizes the Secretary to calculate and adjust, as necessary, the 
average price for a drug in the year established under section 1842(o), 
1847A, or 1847B of the Act, as the case may be, in determining payment 
for SCODs. Pursuant to sections 1842(o) and 1847A of the Act, physician 
Part B drugs are paid at ASP+6 percent. We believe that proposing the 
statutory default of ASP+6 percent is appropriate at this time as it 
yields increased predictability in payment for separately payable drugs 
and biologicals under the OPPS. We believe that ASP+6 percent is an 
appropriate payment amount because it is consistent with payment 
amounts yielded by our drug payment methodologies over the past 7 
years. We are proposing that the ASP+6 percent payment amount for 
separately payable drugs and biologicals requires no further 
adjustment, and represents the combined acquisition and pharmacy 
overhead payment for drugs and biologicals for CY 2013.
    Our goals continue to be to develop a method that accurately and 
predictably estimates acquisition and overhead costs for separately 
payable drugs and biologicals in order to pay for them appropriately. 
If a better payment methodology is developed in the future, then the 
proposed policy to pay ASP+6 according to the statutory default would 
be an interim step in the development of this payment policy. We 
recognize the challenges in doing so given current data sources and the 
objective of maintaining the smallest administrative burden possible.
    We are proposing that payments for separately payable drugs and 
biologicals are included in the budget neutrality adjustments, under 
the requirements in section 1833(t)(9)(B) of the Act, and that the 
budget neutral weight scaler is not applied in determining payments for 
these separately paid drugs and biologicals.
    At the February 2012 Panel meeting, the Panel made four 
recommendations on drugs and biologicals paid under the OPPS. First, 
the Panel recommended that CMS require hospitals to bill all drugs that 
are described by Healthcare Common Procedure Coding System (HCPCS) 
codes under revenue code 0636. While we agree that drugs and 
biologicals may be reported under revenue code 0636, we believe that 
drugs and biologicals may also be appropriately reported in revenue 
code categories other than revenue code

[[Page 45141]]

0636, including but not limited to, revenue codes 025x and 062x. As we 
stated in the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71966), we recognize that hospitals may carry the costs of drugs and 
biologicals in multiple cost centers and that it may not be appropriate 
to report the cost of all drugs and biologicals in one specified 
revenue code. Additionally, we generally require hospitals to follow 
National Uniform Billing Committee (NUBC) guidance for the choice of an 
appropriate revenue code that is also appropriate for the hospital's 
internal accounting processes. Therefore, we are not accepting the 
Panel's recommendation to require hospitals to bill all drugs that are 
described by HCPCS codes under revenue code 0636. However, we continue 
to believe that OPPS ratesetting is most accurate when hospitals report 
charges for all items and services that have HCPCS codes using those 
HCPCS codes, regardless of whether payment for the items and services 
is packaged. It is our standard ratesetting methodology to rely on 
hospital cost report and charge information as it is reported to us 
through the claims data. We continue to believe that more complete data 
from hospitals identifying the specific drugs that were provided during 
an episode of care may improve payment accuracy for drugs in the 
future. Therefore, we continue to encourage hospitals to change their 
reporting practices if they are not already reporting HCPCS codes for 
all drugs and biologicals furnished, whether specific HCPCS codes are 
available for those drugs and biologicals.
    Second, the Panel recommended that CMS exclude data from hospitals 
that participate in the 340B program from its ratesetting calculations 
for drugs. Under the proposed statutory default payment rate of ASP+6 
percent, hospitals' 340B status does not affect the drug payment rate.
    Third, the Panel recommended that CMS freeze the packaging 
threshold at $75 until the drug payment issue is more equitably 
addressed. The OPPS is based on the concept of payment for groups of 
services that share clinical and resource characteristics. We believe 
that the packaging threshold is reasonable based on the initial 
establishment in law of a $50 threshold for the CY 2005 OPPS, that 
updating the $50 threshold is consistent with industry and government 
practices, and that the PPI for Prescription Drugs is an appropriate 
mechanism to gauge Part B drug inflation. Therefore, we are not 
accepting the Panel's recommendation to freeze the packaging threshold 
at $75 until the drug payment issue is more equitably addressed. 
Instead, as discussed in section V.B.2. of this proposed rule, we are 
proposing an OPPS drug packaging threshold for CY 2013 of $80. However, 
we do believe that we have addressed the drug payment issue by 
proposing to pay for separately paid drugs and biologicals at ASP+6 
percent for CY 2013 based upon the statutory default.
    Finally, the Panel recommended that CMS pay hospitals for 
separately payable drugs at a rate of average sales price (ASP) + 6 
percent. This Panel recommendation is consistent with our CY 2013 
proposed payment rate based upon the statutory default under section 
1833(t)(14)(A)(iii)(II) of the Act, which authorizes us to pay for 
drugs and biologicals under the OPPS at ASP+6 percent, when hospital 
acquisition cost data are not available.
4. Proposed Payment Policy for Therapeutic Radiopharmaceuticals
    Beginning in CY 2010 and continuing for CY 2012, we established a 
policy to pay for separately paid therapeutic radiopharmaceuticals 
under the ASP methodology adopted for separately payable drugs and 
biologicals. We allow manufacturers to submit the ASP data in a 
patient-specific dose or patient-ready form in order to properly 
calculate the ASP amount for a given HCPCS code. If ASP information is 
unavailable for a therapeutic radiopharmaceutical, then we base 
therapeutic radiopharmaceutical payment on mean unit cost data derived 
from hospital claims. We believe that the rationale outlined in the CY 
2010 OPPS/ASC final rule with comment period (74 FR 60524 through 
60525) for applying the principles of separately payable drug pricing 
to therapeutic radiopharmaceuticals continues to be appropriate for 
nonpass-through separately payable therapeutic radiopharmaceuticals in 
CY 2013. Therefore, we are proposing for CY 2013 to pay all nonpass-
through, separately payable therapeutic radiopharmaceuticals at ASP+6 
percent, based on the statutory default described in section 
1833(t)(14)(A)(iii)(II) of the Act. We are proposing to continue to set 
payment rates for therapeutic radiopharmaceuticals based on ASP 
information, if available, for a ``patient ready'' dose and updated on 
a quarterly basis for products for which manufacturers report ASP data. 
For a full discussion of how a ``patient ready'' dose is defined, we 
refer readers to the CY 2010 OPPS/ASC final rule with comment period 
(74 FR 60520 through 60521). We also are proposing to rely on CY 2011 
mean unit cost data derived from hospital claims data for payment rates 
for therapeutic radiopharmaceuticals for which ASP data are unavailable 
and to update the payment rates for separately payable therapeutic 
radiopharmaceuticals, according to our usual process for updating the 
payment rates for separately payable drugs and biologicals, on a 
quarterly basis if updated ASP information is available. For a complete 
history of the OPPS payment policy for therapeutic 
radiopharmaceuticals, we refer readers to the CY 2005 OPPS final rule 
with comment period (69 FR 65811), the CY 2006 OPPS final rule with 
comment period (70 FR 68655), and the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60524).
    The proposed CY 2013 payment rates for nonpass-through separately 
payable therapeutic radiopharmaceuticals are included in Addenda A and 
B to this proposed rule (which are available via the Internet on the 
CMS Web site).
5. Proposed Payment for Blood Clotting Factors
    For CY 2012, we provided payment for blood clotting factors under 
the same methodology as other nonpass-through separately payable drugs 
and biologicals under the OPPS and continued paying an updated 
furnishing fee. That is, for CY 2012, we provided payment for blood 
clotting factors under the OPPS at ASP+4 percent, plus an additional 
payment for the furnishing fee. We note that when blood clotting 
factors are provided in physicians' offices under Medicare Part B and 
in other Medicare settings, a furnishing fee is also applied to the 
payment. The CY 2012 updated furnishing fee is $0.181 per unit.
    For CY 2013, we are proposing to pay for blood clotting factors at 
ASP+6 percent, consistent with our proposed payment policy for other 
nonpass-through separately payable drugs and biologicals, and to 
continue our policy for payment of the furnishing fee using an updated 
amount. Our policy to pay for a furnishing fee for blood clotting 
factors under the OPPS is consistent with the methodology applied in 
the physician office and inpatient hospital setting, and first 
articulated in the CY 2006 OPPS final rule with comment period (70 FR 
68661) and later discussed in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66765). The proposed furnishing fee update 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

[[Page 45142]]

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 are proposing to announce the actual 
figure for the percent change in the applicable CPI and the updated 
furnishing fee calculated based on that figure through applicable 
program instructions and posting on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.
6. Proposed Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes but Without OPPS Hospital Claims 
Data
    The Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (Pub. L. 108-173) did not address the OPPS payment in CY 2005 
and after for drugs, biologicals, and radiopharmaceuticals that have 
assigned HCPCS codes, but that do not have a reference AWP or approval 
for payment as pass-through drugs or biologicals. Because there is no 
statutory provision that dictated payment for such drugs, biologicals, 
and radiopharmaceuticals in CY 2005, and because we had no hospital 
claims data to use in establishing a payment rate for them, we 
investigated several payment options for CY 2005 and discussed them in 
detail in the CY 2005 OPPS final rule with comment period (69 FR 65797 
through 65799).
    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 and the CY 2012 OPPS/ASC final rule with comment 
period at ASP+4 percent (76 FR 74330 through 74332).
    For CY 2013, we are proposing to provide payment for new CY 2013 
drugs (excluding contrast agents and diagnostic radiopharmaceuticals), 
nonimplantable biologicals, and therapeutic radiopharmaceuticals, at 
ASP+6 percent, consistent with the proposed CY 2013 payment methodology 
for other separately payable nonpass-through drugs, nonimplantable 
biologicals, and therapeutic radiopharmaceuticals to pay at ASP+6 
percent based on the statutory default. We believe this proposed policy 
would ensure that new nonpass-through drugs, nonimplantable biologicals 
and therapeutic radiopharmaceuticals would be treated like other drugs, 
nonimplantable biologicals, and therapeutic radiopharmaceuticals under 
the OPPS.
    We also are proposing to continue to package payment for all new 
nonpass-through diagnostic radiopharmaceuticals and contrast agents 
with HCPCS codes but without claims data (those new CY 2013 diagnostic 
radiopharmaceuticals, contrast agents, and implantable biological HCPCS 
codes that do not crosswalk to predecessor HCPCS codes). This is 
consistent with the proposed policy packaging all existing nonpass-
through diagnostic radiopharmaceuticals and contrast agents, as 
discussed in more detail in section II.A.3.d. of this proposed rule.
    In accordance with the OPPS ASP methodology, in the absence of ASP 
data, for CY 2013, 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 
and are not diagnostic radiopharmaceuticals and contrast agents. 
However, we noted that if the WAC is also unavailable, we would make 
payment at 95 percent of the product's most recent AWP. We also are 
proposing to assign status indicator ``K'' (for separately paid 
nonpass-through drugs and nonimplantable biologicals, including 
therapeutic radiopharmaceuticals) to HCPCS codes for new drugs and 
nonimplantable biologicals without OPPS claims data and for which we 
have not granted pass-through status. With respect to new, nonpass-
through drugs, nonimplantable biologicals, and therapeutic 
radiopharmaceuticals for which we do not have ASP data, we 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 2013 at ASP+6 percent) for 
items that have not been granted pass-through status. This proposed 
policy, which utilizes the ASP methodology that requires us to use WAC 
data when ASP data are unavailable and 95 percent of AWP when WAC and 
ASP data are unavailable, for new nonpass-through drugs and biologicals 
with an ASP, is consistent with prior years' policies for these items, 
and would ensure that new nonpass-through drugs, nonimplantable 
biologicals, and therapeutic radiopharmaceuticals would be treated like 
other drugs, nonimplantable biologicals, and therapeutic 
radiopharmaceuticals under the OPPS,

[[Page 45143]]

unless they are granted pass-through status.
    Similarly, we are proposing to continue to base the initial payment 
for new therapeutic radiopharmaceuticals with HCPCS codes, but which do 
not have pass-through status and are 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 
radiopharmaceuticals at 95 percent of the products' most recent AWP 
because we would not have mean costs from hospital claims data upon 
which to base payment. As we are proposing with new drugs and 
biologicals, we are proposing to continue our policy of assigning 
status indicator ``K'' to HCPCS codes for new therapeutic 
radiopharmaceuticals without OPPS claims data for which we have not 
granted pass-through status.
    Consistent with other ASP-based payment, for CY 2013 we are 
proposing to announce any changes to the payment amounts for new drugs 
and biologicals in the CY 2013 OPPS/ASC final rule with comment period 
and also on a quarterly basis on the CMS Web site during CY 2013 if 
later quarter ASP submissions (or more recent WACs or AWPs) indicate 
that changes to the payment rates for these drugs and biologicals are 
necessary. The payment rates for new therapeutic radiopharmaceuticals 
would also be changed accordingly based on later quarter ASP 
submissions. We note that the new CY 2013 HCPCS codes for drugs, 
biologicals and therapeutic radiopharmaceuticals are not available at 
the time of development of this proposed rule. However, these agents 
will be included in Addendum B to the CY 2013 OPPS/ASC final rule with 
comment period (which will be available via the Internet on the CMS Web 
site), where they will be assigned comment indicator ``NI.'' This 
comment indicator reflects that their interim final OPPS treatment is 
open to public comment in the CY 2013 OPPS/ASC final rule with comment 
period.
    There are several nonpass-through drugs and biologicals that were 
payable in CY 2011 and/or CY 2012 for which we did not have CY 2011 
hospital claims data available for 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 2013, we calculated an 
estimate of the per day cost of each of these items by multiplying the 
payment rate of each product based on ASP+6 percent, similar to other 
nonpass-through drugs and biologicals paid separately under the OPPS, 
by an estimated average number of units of each product that would 
typically be furnished to a patient during one day in the hospital 
outpatient setting. This rationale was first adopted in the CY 2006 
OPPS/ASC final rule with comment period (70 FR 68666 and 68667).
    We 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 
2013. We are proposing to pay separately for items with an estimated 
per day cost greater than $80 (with the exception of diagnostic 
radiopharmaceuticals and contrast agents, which we are proposing to 
continue to package regardless of cost as discussed in more detail in 
section II.A.3.d. of this proposed rule) in CY 2013. We are proposing 
that the CY 2013 payment for separately payable items without CY 2011 
claims data would be ASP+6 percent, similar to payment for other 
separately payable nonpass-through drugs and biologicals under the 
OPPS. In accordance with the ASP methodology paid in the physician's 
office setting, in the absence of ASP data, we 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 27 below.

                           Table 27--Drugs and Biologicals Without CY 2011 Claims Data
----------------------------------------------------------------------------------------------------------------
                                                             Estimated
                                                          average number                           Proposed  CY
    CY 2013  HCPCS code        CY 2013 long descriptor     of units per    Proposed  CY 2013 SI      2013 APC
                                                                day
----------------------------------------------------------------------------------------------------------------
C9367......................  Skin substitute, Endoform                55  K                                 9367
                              Dermal Template, per
                              square centimeter.
J0630......................  Injection, calcitonin                   1.5  K                                 1433
                              salmon, up to 400 units.
J2793......................  Injection, Rilonacept......             320  K                                 1291
J7196......................  Injection, antithrombin                 268  K                                 1332
                              recombinant, 50 IU.
J8562......................  Fludarabine phosphate,                    1  K                                 1339
                              oral, 10 mg.
J9065......................  Injection, cladribine, per               10  K                                 0858
                              1 mg.
J9151......................  Injection, daunorubicin                   5  K                                 0821
                              citrate, liposomal
                              formulation, 10 mg.
J0205......................  Injection, alglucerase, per             420  K                                 0900
                              10 units.
J2724......................  Injection, protein c                   1540  K                                 1139
                              concentrate, intravenous,
                              human, 10 iu.
Q0515......................  Injection, sermorelin                    70  K                                 3050
                              acetate, 1 microgram.
J2513......................  Injection, pentastarch, 10%               4  N                                  N/A
                              solution, 100 ml.
J3355......................  Injection, urofollitropin,                2  K                                 1741
                              75 IU.
90581......................  Anthrax vaccine, for                      1  K                                 1422
                              subcutaneous or
                              intramuscular use.
J2265......................  Injection, minocycline                  300  K                                 1423
                              hydrochloride, 1 mg.
J8650......................  Nabilone, oral, 1 mg.......               4  K                                 1424
----------------------------------------------------------------------------------------------------------------

    Finally, there were 19 drugs and biologicals, shown in Table 28 
below, that were payable in CY 2011, but for which we lacked CY 2011 
claims data and any other pricing information for the ASP methodology 
for this CY 2013 OPPS/ASC proposed rule. In CY 2009, for similar items 
without CY 2007 claims data and without pricing information for the ASP 
methodology, we stated that we were unable to determine their per day 
cost and we packaged these items for the year, assigning these items 
status indicator ``N.''
    For CY 2010, we finalized a policy to change the status indicator 
for drugs and biologicals previously assigned a

[[Page 45144]]

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 became available mid-year 
in CY 2010 for the ASP methodology. If pricing information became 
available, we would assign the products status indicator ``K'' and pay 
for them separately for the remainder of CY 2010. We continued this 
policy for CY 2011 and CY 2012 (75 FR 71973 and 76 FR 74334).
    For CY 2013, we are proposing to continue to assign status 
indicator ``E'' to drugs and biologicals that lack CY 2011 claims data 
and pricing information for the ASP methodology. All drugs and 
biologicals without CY 2011 hospital claims data and data based on the 
ASP methodology that are assigned status indicator ``E'' on this basis 
at the time of this proposed rule for CY 2013 are displayed in Table 28 
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 2013.

 Table 28--Drugs and Biologicals Without CY 2011 Claims Data and Without
               Pricing Information for the ASP Methodology
------------------------------------------------------------------------
  CY 2013  HCPCS  code     CY 2013 long descriptor  Proposed  CY 2013 SI
------------------------------------------------------------------------
90296...................  Diphtheria antitoxin,     E
                           equine, any route.
90393...................  Vaccina immune globulin,  E
                           human, for
                           intramuscular use.
J3305...................  Injection, trimetrexate   E
                           glucuronate, per 25 mg.
90706...................  Rubella virus vaccine,    E
                           live, for subcutaneous
                           use.
90725...................  Cholera vaccine for       E
                           injectable use.
90727...................  Plague vaccine, for       E
                           intramuscular use.
J0190...................  Injection, biperiden      E
                           lactate, per 5 mg.
J1452...................  Injection, fomivirsen     E
                           sodium, intraocular,
                           1.65 mg.
J1835...................  Injection, itraconazole,  E
                           50 mg.
J2670...................  Injection, tolazonline    E
                           hcl, up to 25 mg.
J2940...................  Injection, somatrem, 1    E
                           mg.
J3305...................  Injection, trimetrexate   E
                           glucuronate, per 25 mg.
J3320...................  Injection, spectinomycin  E
                           dihydrochloride, up to
                           2 gm.
J9165...................  Injection,                E
                           diethylstilbestrol
                           diphosphate, 250 mg.
J9212...................  Injection, interferon     E
                           alfacon-1, recombinant,
                           1 microgram.
Q4117...................  Hyalomatrix, per square   E
                           centimeter.
Q4120...................  Matristem Burn matrix,    E
                           per square centimeter.
Q4126...................  Memoderm, per square      E
                           centimeter.
Q4127...................  Talymed, per square       E
                           centimeter.
------------------------------------------------------------------------

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 not to exceed 2.0 percent of total 
program payments estimated to be made for all covered services under 
the hospital OPPS furnished for that year.
    If we estimate before the beginning of the calendar year that the 
total amount of pass-through payments in that year would exceed the 
applicable percentage, section 1833(t)(6)(E)(iii) of the Act requires a 
uniform prospective reduction in the amount of each of the transitional 
pass-through payments made in that year to ensure that the limit is not 
exceeded. We 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 
1833(t)(6)(E) of the Act.
    For devices, developing an estimate of pass-through spending in CY 
2013 entails estimating spending for two groups of items. The first 
group of items consists of device categories that were recently made 
eligible for pass-through payment and that will continue to be eligible 
for pass-through payment in CY 2013. The CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66778) describes the methodology we have 
used 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 2012 or beginning in CY 2013. The sum of the 
CY 2013 pass-through estimates for these two groups of device 
categories would equal the total CY 2013 pass-through spending estimate 
for device categories with pass-through status. We base the device 
pass-through estimated payments for each device category on the amount 
of payment as established in section 1833(t)(6)(D)(ii) of the Act, and 
as outlined in previous rules, including the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74335 through 74336). We note that, 
beginning in CY 2010, the pass-through evaluation process and pass-
through payment for implantable biologicals newly approved for pass-
through payment beginning on or after January 1, 2010, that are 
surgically inserted or implanted (through a surgical incision or a 
natural orifice), is the device pass-through process and payment 
methodology (74 FR 60476). As has been our past practice (76 FR 74335), 
we include an estimate of any implantable biologicals eligible for 
pass-through payment in our estimate of pass-through spending for 
devices.
    For drugs and nonimplantable biologicals eligible for pass-through 
payment, section 1833(t)(6)(D)(i) of the

[[Page 45145]]

Act establishes the pass-through payment amount as the amount by which 
the amount authorized under section 1842(o) of the Act (or, if the drug 
or biological is covered under a competitive acquisition contract under 
section 1847B of the Act, an amount determined by the Secretary equal 
to the average price for the drug or biological for all competitive 
acquisition areas and year established under such section as calculated 
and adjusted by the Secretary) exceeds the portion of the otherwise 
applicable fee schedule amount that the Secretary determines is 
associated with the drug or biological. We note that the Part B drug 
CAP program has been postponed since CY 2009, and such a program is not 
proposed to be reinstated for CY 2013. Because we are proposing to pay 
for most nonpass-through separately payable drugs and nonimplantable 
biologicals under the CY 2013 OPPS at ASP+6 percent, which represents 
the otherwise applicable fee schedule amount associated with most pass-
through drugs and nonimplantable biologicals, and because we are 
proposing to pay for CY 2013 pass-through drugs and nonimplantable 
biologicals at ASP+6 percent, our estimate of drug and nonimplantable 
biological pass-through payment for CY 2013 for this group of items 
would be zero, as discussed below. Furthermore, payment for certain 
drugs, specifically diagnostic radiopharmaceuticals and contrast 
agents, without pass-through status, will always be packaged into 
payment for the associated procedures because these products will never 
be separately paid. However, all pass-through diagnostic 
radiopharmaceuticals and contrast agents with pass-through status 
approved prior to CY 2013 would be paid at ASP+6 percent like other 
pass-through drugs and nonimplantable biologicals. Therefore, our 
estimate of pass-through payment for all diagnostic 
radiopharmaceuticals and contrast agents with pass-through status 
approved prior to CY 2013 is not zero. 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 or 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 
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 are proposing to 
reduce our estimate of pass-through payment for these drugs by this 
amount.
    Similar to pass-through estimates for devices, the first group of 
drugs and nonimplantable biologicals requiring a pass-through payment 
estimate consists of those products that were recently made eligible 
for pass-through payment for CY 2012 and that will continue to be 
eligible for pass-through payment in CY 2013. The second group contains 
drugs and nonimplantable biologicals that we know are newly eligible, 
or project will be newly eligible, in the remaining quarters of CY 2012 
or beginning in CY 2013. The sum of the CY 2013 pass-through estimates 
for these two groups of drugs and nonimplantable biologicals would 
equal the total CY 2013 pass-through spending estimate for drugs and 
nonimplantable 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 2013, consistent with section 1833(t)(6)(E)(ii)(II) of the Act, 
and our OPPS policy from CY 2004 through CY 2012 (76 FR 74336).
    For the first group of devices for pass-through payment estimation 
purposes, there currently are three device categories eligible for 
pass-through payment for CY 2013: C1830 (Powered bone marrow biopsy 
needle); C1840 (Lens, intraocular (telescopic)); and C1886 (Catheter, 
extravascular tissue ablation, any modality (insertable)). We estimate 
that CY 2013 pass-through expenditures related to these three eligible 
device categories will be approximately $42 million. In estimating our 
proposed CY 2013 pass-through spending for device categories in the 
second group 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 2013 (of which there are none); additional device 
categories that we estimate could be approved for pass-through status 
subsequent to the development of this proposed rule and before January 
1, 2013; and contingent projections for new device categories 
established in the second through fourth quarters of CY 2013. We 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 2013 
pass-through spending for this second group of device categories is $10 
million. Using our established methodology, we are proposing that the 
total estimated pass-through spending for device categories for CY 2013 
(spending for the first group of device categories ($42 million) plus 
spending for the second group of device categories ($10 million)) be 
$52 million.
    To estimate proposed CY 2013 pass-through spending for drugs and 
nonimplantable biologicals in the first group, specifically those drugs 
(including radiopharmaceuticals and contrast agents) and nonimplantable 
biologicals recently made eligible for pass-through payment and 
continuing on pass-through status for CY 2013, we 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 biologicals, to project the CY 2013 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 2013, we estimate the proposed 
pass-through payment amount as the difference between ASP+6 percent and 
the proposed payment rate for nonpass-through drugs and nonimplantable 
biologicals that would be separately paid at ASP+6 percent, which is 
zero for this group of drugs. 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 2013 pass-through estimate the 
difference between payment for the drug or biological at ASP+6 percent 
(or WAC+6 percent, or 95 percent of AWP, if ASP or WAC information is 
not available) and the ``policy-packaged'' drug APC offset amount, if 
we have determined that the diagnostic

[[Page 45146]]

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 CY 
2013 proposed rule, we are proposing to continue to use the above 
described methodology to calculate a proposed spending estimate for 
this first group of drugs and nonimplantable biologicals to be 
approximately $13 million.
    To estimate proposed CY 2013 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 2013, 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, 2013, and 
projections for new drugs and nonimplantable biologicals that could be 
initially eligible for pass-through payment in the second through 
fourth quarters of CY 2013), we 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 proposed CY 2013 pass-through 
payment estimate. We also are considering the most recent OPPS 
experience in approving new pass-through drugs and nonimplantable 
biologicals. Using our proposed methodology for estimating CY 2013 
pass-through payments for this second group of drugs, we calculated a 
proposed spending estimate for this second group of drugs and 
nonimplantable biologicals to be approximately $19 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 2013 
pass-through spending estimate for drugs and nonimplantable 
biologicals. Our proposed CY 2013 estimate for total pass-through 
spending for drugs and nonimplantable biologicals (spending for the 
first group of drugs and nonimplantable biologicals ($13 million) plus 
spending for the second group of drugs and nonimplantable biologicals 
($19 million)) equals $32 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 2013 and those device categories, drugs, and biologicals 
that first become eligible for pass-through payment during CY 2013 
would be approximately $84 million (approximately $52 million for 
device categories and approximately $32 million for drugs and 
nonimplantable biologicals), which represents 0.18 percent of total 
projected OPPS payments for CY 2013. We estimate that pass-through 
spending in CY 2013 would not amount to 2.0 percent of total projected 
OPPS CY 2013 program spending.

VII. Proposed OPPS Payment for Hospital Outpatient Visits

A. Background

    Currently, hospitals report HCPCS visit codes to describe three 
types of OPPS services: clinic visits, emergency department visits, and 
critical care services, including trauma team activation. For CY 2013, 
we are proposing to continue to recognize these CPT and HCPCS codes 
describing clinic visits, Type A and Type B emergency department 
visits, and critical care services, which are listed below in Table 29, 
for CY 2013. We refer readers to the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74338 through 74346) for a full discussion of our 
longstanding policy on OPPS payment for hospital outpatient visits.

   Table 29--Proposed HCPCS Codes Used To Report Clinic and Emergency
              Department Visits and Critical Care Services
------------------------------------------------------------------------
      CY 2013  HCPCS code                  CY 2013 descriptor
------------------------------------------------------------------------
                        Clinic Visit HCPCS Codes
------------------------------------------------------------------------
99201.........................  Office or other outpatient visit for the
                                 evaluation and management of a new
                                 patient (Level 1).
99202.........................  Office or other outpatient visit for the
                                 evaluation and management of a new
                                 patient (Level 2).
99203.........................  Office or other outpatient visit for the
                                 evaluation and management of a new
                                 patient (Level 3).
99204.........................  Office or other outpatient visit for the
                                 evaluation and management of a new
                                 patient (Level 4).
99205.........................  Office or other outpatient visit for the
                                 evaluation and management of a new
                                 patient (Level 5).
99211.........................  Office or other outpatient visit for the
                                 evaluation and management of an
                                 established patient (Level 1).
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).
------------------------------------------------------------------------

[[Page 45147]]

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

B. Proposed Policies for Hospital Outpatient Visits

    For CY 2013, we are proposing to continue our longstanding policies 
related to hospital outpatient visits, which includes clinic visits, 
emergency department visits, and critical care services. Specifically, 
we are proposing to continue to recognize the definitions of a new 
patient and an established patient, which are based on whether the 
patient has been registered as an inpatient or outpatient of the 
hospital within the 3 years prior to a visit. We also are proposing to 
continue to apply our policy of calculating costs for clinic visits 
under the OPPS using historical hospital claims data through five 
levels of clinic visit APCs (APCs 0604 through 0608). In addition, we 
are proposing to continue to recognize Type A emergency departments and 
Type B emergency departments for payment purposes under the OPPS, and 
to pay for Type A emergency department visits based on their costs 
through the five levels of Type A emergency department APCs (APCs 0609 
and 0613 through 0616) and to pay for Type B emergency department 
visits based on their costs through the five levels of Type B emergency 
department APCs (APCs 0626 through 0630). We refer readers to Addendum 
B to this proposed rule (which is available via the Internet on the CMS 
Web site) for the proposed APC assignments and payment rates for these 
hospital outpatient visits. Finally, we are continuing to instruct 
hospitals to report facility resources for clinic and emergency 
department hospital outpatient visits using the CPT E/M codes and to 
develop internal hospital guidelines for reporting the appropriate 
visit level. We note that our continued expectation is that hospitals' 
internal guidelines will comport with the principles listed in the CY 
2008 OPPS/ASC final rule with comment period (72 FR 66805). We 
encourage hospitals with specific questions related to the creation of 
internal guidelines to contact their servicing fiscal intermediary or 
MAC. We refer readers to the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74338 through 74346) for a full historical discussion of 
these longstanding policies.
    We also are proposing to continue the methodology established in 
the CY 2011 OPPS/ASC final rule with comment period for calculating a 
payment rate for critical care services that includes packaged payment 
of ancillary services. For CY 2010 and in prior years, the AMA CPT 
Editorial Panel defined critical care CPT codes 99291 (Critical care, 
evaluation and management of the critically ill or critically injured 
patient; first 30-74 minutes) and 99292 (Critical care, evaluation and 
management of the critically ill or critically injured patient; each 
additional 30 minutes (List separately in addition to code for primary 
service)) to include a wide range of ancillary services such as 
electrocardiograms, chest X-rays and pulse oximetry. As we have stated 
in manual instruction, we expect hospitals to report in accordance with 
CPT guidance unless we instruct otherwise. For critical care in 
particular, we instructed hospitals that any services that the CPT 
Editorial Panel indicates are included in the reporting of CPT code 
99291 (including those services that would otherwise be reported by and 
paid to hospitals using any of the CPT codes specified by the CPT 
Editorial Panel) should not be billed separately. Instead, hospitals 
were instructed to report charges for any services provided as part of 
the critical care services. In establishing payment rates for critical 
care services, and other services, CMS packages the costs of certain 
items and services separately reported by HCPCS codes into payment for 
critical care services and other services, according to the standard 
OPPS methodology for packaging costs (Medicare Claims Processing 
Manual, Pub. 100-04, Chapter 4, Section 160.1).
    For CY 2011, the AMA CPT Editorial Panel revised its guidance for 
the critical care codes to specifically state that, for hospital 
reporting purposes, critical care codes do not include the specified 
ancillary services. Beginning in CY 2011, hospitals that report in 
accordance with the CPT guidelines should report all of the ancillary 
services and their associated charges separately when they are provided 
in conjunction with critical care. Because the CY 2011 payment rate for 
critical care services was based on hospital claims data from CY 2009, 
during which time hospitals would have reported charges for any 
ancillary services provided as part of the critical care services, we 
stated in the CY 2011 OPPS/ASC final rule with comment period that we 
believed it was inappropriate to pay separately in CY 2011 for the 
ancillary services that hospitals may now report in addition to 
critical care services (75 FR 71988). Therefore, for CY 2011, we 
continued to recognize the existing CPT codes for critical care 
services and established a payment rate based on historical data, into 
which the cost of the ancillary services was intrinsically packaged. We 
also implemented claims processing edits that conditionally package 
payment for the ancillary services that are reported on the same date 
of service as critical care services in order to avoid overpayment. We 
noted in the CY 2011 OPPS/ASC final rule with comment period that the 
payment status of the ancillary services would not change when they are 
not provided in conjunction with critical care services. We assigned 
status indicator ``Q3'' (Codes That May Be Paid Through a Composite 
APC) to the ancillary services to indicate that payment for these 
services is packaged into a single payment for specific combinations of 
services and made through a separate APC payment or packaged in all 
other circumstances, in accordance with the OPPS payment status 
indicated for status indicator ``Q3'' in Addendum D1 to the CY 2011 
OPPS/ASC final rule with comment period. The ancillary services that 
were included in the definition of critical care prior to CY 2011 and 
that are conditionally packaged into the payment for critical care 
services when provided on the same date of service as critical care 
services for CY 2011 were listed in Addendum M to that final rule with 
comment period.

[[Page 45148]]

    Because the CY 2012 costs for critical care services were based 
upon CY 2010 claims data, which reflect the CPT billing guidance that 
was in effect prior to CY 2011, in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74343 through 74344), we continued the 
methodology established in the CY 2011 OPPS/ASC final rule with comment 
period of calculating a payment rate for critical care services based 
on our historical claims data, into which the cost of the ancillary 
services is intrinsically packaged for CY 2012. We also continued to 
implement claims processing edits that conditionally package payment 
for the ancillary services that are reported on the same date of 
service as critical care services in order to avoid overpayment.
    As discussed in section II.A.2.f. of this proposed rule, we are 
proposing to establish the CY 2013 relative payment weights upon which 
OPPS payment is based using geometric mean costs. The CY 2011 hospital 
claims data on which the proposed CY 2013 payment rates are based 
reflect the first year of claims billed under the revised CPT guidance 
to allow the reporting of all the ancillary services and their 
associated charges separately when they are provided in conjunction 
with critical care. Because our proposal to establish relative payment 
weights based on geometric mean cost data for CY 2013 represents a 
change from our historical practice to base payment rates on median 
costs and because we now have hospital claims data for the first time 
reflecting the revised coding guidance for critical care, we reviewed 
the CY 2011 hospital claims data available for this proposed rule and 
determined that the data show increases in both the mean and median 
line item costs as well as the mean and median line item charges for 
CPT code 99291, when compared to CY 2010 hospital claims data. 
Specifically, the mean and median line item costs increased 13 percent 
and 16 percent, respectively, and the mean and median line item charges 
increased 11 percent and 14 percent, respectively. Additionally, when 
compared to CY 2010 hospital claims data, CY 2011 hospital claims data 
show no substantial change in the ancillary services that are present 
on the same claims as critical care services, and also show continued 
low volumes of many ancillary services. Had the majority of hospitals 
changed their billing practices to separately report and charge for the 
ancillary services formerly included in the definition of critical care 
CPT codes 99291 and 99292, we would have expected to see a decrease in 
the costs and charges for these CPT codes, and a significant increase 
in ancillary services reported on the same claims. The lack of a 
substantial change in the services reported on critical care claims, 
along with the increases in the line item costs and charges for 
critical care services, strongly suggests that many hospitals did not 
change their billing practices for CPT code 99291 following the 
revision to the CPT coding guidance effective January 1, 2011.
    In light of not having claims data to support a significant change 
in hospital billing practices, we continue to believe that it is 
inappropriate to pay separately in CY 2013 for the ancillary services 
that hospitals may now report in addition to critical care services. 
Therefore, for CY 2013, we are proposing to continue our CY 2011 and CY 
2012 policy to recognize the existing CPT codes for critical care 
services and establish a payment rate based on historical claims data. 
We also 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. We will continue to monitor the hospital claims 
data for CPT code 99291 in order to determine whether revisions to this 
policy are warranted based on changes in hospitals' billing practices.

C. Transitional Care Management

    In the CY 2013 MPFS proposed rule, we discuss a multiple year 
strategy exploring the best means to encourage the provision of primary 
care and care coordination services to Medicare beneficiaries. As part 
of the strategy discussed in that proposed rule, we are proposing to 
address the non-face-to-face work involved in hospital or SNF discharge 
care coordination by creating a HCPCS G-code for care management 
involving the transition of a beneficiary from care furnished by a 
treating physician during a hospital stay (inpatient, outpatient 
observation services, or outpatient partial hospitalization), SNF stay, 
or CMHC partial hospitalization program to care furnished by the 
beneficiary's physician or qualified nonphysician practitioner in the 
community. As discussed in the CY 2013 MPFS proposed rule, care 
management involving the transition of a beneficiary from care 
furnished by a treating physician during a hospital or a SNF stay to 
the beneficiary's primary physician or qualified nonphysician 
practitioner in the community could avoid adverse events such as 
readmissions or subsequent illnesses, improve beneficiary outcomes, and 
avoid a financial burden on the health care system. Successful efforts 
to improve hospital discharge care coordination and care transitions 
could improve the quality of care while simultaneously decreasing 
costs.
    The proposed HCPCS G-code included in the CY 2013 MPFS proposed 
rule, GXXX1, specifically describes post-discharge transitional care 
management services, which include all non-face-to-face services 
related to the transitional care management, furnished by the community 
physician or nonphysician practitioner within 30 calendar days 
following the date of discharge from an inpatient acute care hospital, 
psychiatric hospital, LTCH, SNF, and IRF; discharge from hospital 
outpatient observation or partial hospitalization services; or 
discharge from a PHP at a CMHC, to the community-based care. The post-
discharge transitional care management services include non-face-to-
face care management services provided by clinical staff member(s) or 
office-based case manager(s) under the supervision of the community 
physician or qualified nonphysician practitioner.
    Transitional care management services include:
    1. Assuming responsibility for the beneficiary's care without a 
gap.
    2. Establishing or adjusting a plan of care to reflect required and 
indicated elements, particularly in light of the services furnished 
during the stay at the specified facility and to reflect the result of 
communication with beneficiary.
    3. Communication (direct contact, telephone, electronic) with the 
beneficiary and/or caregiver, including education of the patient and/or 
caregiver within 2 business days of discharge based on a review of the 
discharge summary and other available information such as diagnostic 
test results.
    While we do not pay for physician or nonpractitioner professional 
services under the OPPS (42 CFR 419.22), we recognize that certain 
elements of the transitional care coordination services described by 
proposed HCPCS code GXXX1 could be provided to a hospital outpatient as 
an ancillary or supportive service in conjunction with a primary 
diagnostic or therapeutic service that would be payable under the OPPS, 
such as a clinic visit. As described in section II.A.3. of this 
proposed rule, we package payment for services that are typically 
ancillary and supportive to a primary service. While we do not make 
separate payment for such services, their costs are included in the 
costs of other services furnished by the hospital to the beneficiary on 
the same day. Because

[[Page 45149]]

we believe that transitional care management services may be ancillary 
and supportive to a primary service provided to a hospital outpatient, 
for purposes of OPPS payment, we are proposing to assign HCPCS code 
(GXXX1), a status indicator of ``N'' (Items and Services Packaged into 
APC Rates) signifying that its payment is packaged. We refer readers to 
the CY 2013 MPFS proposed rule for a full discussion of post-discharge 
transitional care management services in particular and, more broadly, 
the multiple year strategy exploring the best means to encourage 
primary care and care coordination services.

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. Section 1861(ff)(1) of the Act defines partial hospitalization 
services as ``the items and services described in paragraph (2) 
prescribed by a physician and provided under a program described in 
paragraph (3) under the supervision of a physician pursuant to an 
individualized, written plan of treatment established and periodically 
reviewed by a physician (in consultation with appropriate staff 
participating in such program), which plan sets forth the physician's 
diagnosis, the type, amount, frequency, and duration of the items and 
services provided under the plan, and the goals for treatment under the 
plan.'' Section 1861(ff)(2) of the Act describes the items and services 
included in partial hospitalization services. Section 1861(ff)(3)(A) of 
the Act specifies that a partial hospitalization program (PHP) is a 
program furnished by a hospital to its outpatients or by a community 
mental health center (CMHC) (as defined in subparagraph (B)), and 
``which is a distinct and organized intensive ambulatory treatment 
service offering less than 24-hour-daily care other than in an 
individual's home or in an inpatient or residential setting.'' Section 
1861(ff)(3)(B) of the Act defines community mental health center.
    Section 1833(t)(1)(B)(i) of the Act provides the Secretary with the 
authority to designate the OPD services to be covered under the OPPS. 
The Medicare regulations that implement this provision specify, at 42 
CFR 419.21, that payments under the OPPS will be made for partial 
hospitalization services furnished by CMHCs as well as Medicare Part B 
services furnished to hospital outpatients designated by the Secretary, 
which include partial hospitalization services (65 FR 18444 through 
18445).
    Section 1833(t)(2)(C) of the Act, in pertinent part, requires the 
Secretary to ``establish relative payment weights for covered OPD 
services (and any groups of such services described in subparagraph 
(B)) based on median (or, at the election of the Secretary, mean) 
hospital costs'' using data on claims from 1996 and data from the most 
recent available cost reports. In pertinent part, subparagraph (B) 
provides that the Secretary may establish groups of covered OPD 
services, within a classification system developed by the Secretary for 
covered OPD services, so that services classified within each group are 
comparable clinically and with respect to the use of resources. In 
accordance with these provisions, we have developed the APCs. Section 
1833(t)(9)(A) of the Act requires the Secretary to ``review not less 
often than annually and revise the groups, the relative payment 
weights, and the wage and other adjustments described in paragraph (2) 
to take into account changes in medical practice, changes in 
technology, the addition of new services, new cost data, and other 
relevant information and factors.''
    Because a day of care is the unit that defines the structure and 
scheduling of partial hospitalization services, we established a per 
diem payment methodology for the PHP APCs, effective for services 
furnished on or after July 1, 2000 (65 FR 18452 through 18455). Under 
this methodology, the median per diem costs have been used to calculate 
the relative payment weights for PHP APCs.
    From CY 2003 through CY 2006, the median per diem costs for CMHCs 
fluctuated significantly from year to year, while the median per diem 
costs for hospital-based PHPs remained relatively constant. We were 
concerned that CMHCs may have increased and decreased their charges in 
response to Medicare payment policies. Therefore, we began efforts to 
strengthen the PHP benefit through extensive data analysis and policy 
and payment changes in the CY 2008 update (72 FR 66670 through 66676). 
We made two refinements to the methodology for computing the PHP 
median: the first remapped 10 revenue codes that are common among 
hospital-based PHP claims to the most appropriate cost centers; and the 
second refined our methodology for computing the PHP median per diem 
cost by computing a separate per diem cost for each day rather than for 
each bill. We refer readers to a complete discussion of these 
refinements in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66670 through 66676).
    In CY 2009, we implemented several regulatory, policy, and payment 
changes, including a two-tiered payment approach for PHP services under 
which we paid one amount for days with 3 services (APC 0172 (Level I 
Partial Hospitalization)) and a higher amount for days with 4 or more 
services (APC 0173 (Level II Partial Hospitalization)). We refer 
readers to section X.B. of the CY 2009 OPPS/ASC final rule with comment 
period (73 FR 68688 through 68693) for a full discussion of the two-
tiered payment system. In addition, for CY 2009, we finalized our 
policy to deny payment for any PHP claims submitted for days when fewer 
than 3 units of therapeutic services are provided (73 FR 68694).
    Furthermore, for CY 2009, we revised the regulations at 42 CFR 
410.43 to codify existing basic PHP patient eligibility criteria and to 
add a reference to current physician certification requirements at 42 
CFR 424.24 to conform our regulations to our longstanding policy (73 FR 
68694 through 68695). These changes have helped to strengthen the PHP 
benefit. We also revised the partial hospitalization benefit to include 
several coding updates. We refer readers to section X.C.3. of the CY 
2009 OPPS/ASC final rule with comment period (73 FR 68695 through 
68697) for a full discussion of these requirements.
    For CY 2010, we retained the two-tiered payment approach for PHP 
services and used only hospital-based PHP data in computing the per 
diem payment rates. We used only hospital-based PHP data because we 
were concerned about further reducing both PHP APC per diem payment 
rates without knowing the impact of the policy and payment changes we 
made in CY 2009. Because of the 2-year lag between data collection and 
rulemaking, the changes we made in CY 2009 were reflected for the first 
time in the claims data that we used to determine payment rates for the 
CY 2011 rulemaking (74 FR 60556 through 60559).
    In CY 2011, in accordance with section 1301(b) of the Health Care 
and Education Reconciliation Act of 2010 (HCERA 2010), we amended the 
description of a PHP in our regulations to specify that a PHP must be a 
distinct and organized intensive ambulatory treatment program offering 
less than 24-hour daily care ``other than in an individual's home or in 
an inpatient or residential setting.'' In addition, in accordance with 
section 1301(a) of

[[Page 45150]]

HCERA 2010, we revised the definition of a CMHC in the regulations to 
conform to the revised definition now set forth at section 
1861(ff)(3)(B) of the Act. We discussed our finalized policies for 
these two provisions of HCERA 2010 under section X.C. of the CY 2011 
OPPS/ASC final rule with comment period (75 FR 71990).
    In the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71994), we also established four separate PHP APC per diem payment 
rates, two for CMHCs (for Level I and Level II services) and two for 
hospital-based PHPs (for Level I and Level II services). In the CY 2011 
OPPS/ASC proposed rule, we proposed that CMHC APC medians would be 
based only on CMHC data and hospital-based PHP APC medians would be 
based only on hospital-based PHP data (75 FR 46300). As stated in the 
CY 2011 OPPS/ASC proposed rule (75 FR 46300) and the final rule with 
comment period (75 FR 71991), for CY 2011, using CY 2009 claims data, 
CMHC costs had significantly decreased again. We attributed the 
decrease to the lower cost structure of CMHCs compared to hospital-
based PHP providers, and not the impact of CY 2009 policies. CMHCs have 
a lower cost structure than hospital-based PHP providers, in part 
because the data showed that CMHCs provide fewer PHP services in a day 
and use less costly staff than hospital-based PHPs. Therefore, it was 
inappropriate to continue to treat CMHCs and hospital-based providers 
in the same manner regarding payment, particularly in light of such 
disparate differences in costs. We also were concerned that paying 
hospital-based PHP programs at a lower rate than their cost structure 
reflects could lead to hospital-based PHP program closures and possible 
access problems for Medicare beneficiaries, given that hospital-based 
programs offer the widest access to PHP services because they are 
located across the country. Creating the four payment rates (two for 
CMHCs and two for hospital-based PHPs) based on each provider's data 
supported continued access to the PHP benefit, while also providing 
appropriate payment based on the unique cost structures of CMHCs and 
hospital-based PHPs. In addition, separation of data by provider type 
was supported by several hospital-based PHP commenters who responded to 
the CY 2011 OPPS/ASC proposed rule (75 FR 71992).
    For CY 2011, we instituted a 2-year transition period for CMHCs to 
the CMHC APC per diem payment rates based solely on CMHC data. For CY 
2011, under the transition methodology, CMHC APC Level I and Level II 
per diem costs were calculated by taking 50 percent of the difference 
between the CY 2010 final hospital-based medians and the CY 2011 final 
CMHC medians and then adding that number to the CY 2011 final CMHC 
medians. A 2-year transition under this methodology moved us in the 
direction of our goal, which is to pay appropriately for PHP services 
based on each provider type's data, while at the same time allowing 
providers time to adjust their business operations and protect access 
to care for beneficiaries. We also stated that we would review and 
analyze the data during the CY 2012 rulemaking cycle and may, based on 
these analyses, further refine the payment mechanism. We refer readers 
to section X.B. of the CY 2011 OPPS/ASC final rule with comment period 
(75 FR 71991 through 71994) for a full discussion.
    After publication of the CY 2011 OPPS/ASC final rule with comment 
period, a CMHC and one of its patients filed an application for a 
preliminary injunction, challenging the OPPS payment rates for PHP 
services provided by CMHCs in CY 2011 as adopted in the CY 2011 OPPS/
ASC final rule with comment period (75 FR 71995). We refer readers to 
the court case, Paladin Cmty. Mental Health Ctr. v. Sebelius, No. 10-
949, 2011 WL 3102049 (W.D.Tex. 2011), aff'd, No. 11-50682, 2012 WL 
2161137 (5th Cir. June 15, 2012) (Paladin). The plaintiffs in the 
Paladin case challenged the agency's use of cost data derived from both 
hospitals and CMHCs in determining the relative payment weights for the 
OPPS payment rates for PHP services furnished by CMHCs, alleging that 
section 1833(t)(2)(C) of the Act requires that such relative payment 
weights be based on cost data derived solely from hospitals. As 
discussed above, section 1833(t)(2)(C) of the Act requires CMS to 
``establish relative payment weights for covered OPD services (and any 
groups of such services * * *) * * * based on * * * hospital costs.'' 
Numerous courts have held that ``based on'' does not mean ``based 
exclusively on.'' On July 25, 2011, the District Court dismissed the 
plaintiffs' complaint and application for preliminary injunction for 
lack of subject-matter jurisdiction, which the plaintiffs appealed to 
the United States Court of Appeals for the Fifth Circuit. On June 15, 
2012, the Court of Appeals affirmed the District Court's dismissal for 
lack of subject-matter jurisdiction and found that the Secretary's 
payment rate determinations for PHP services are not a facial violation 
of a clear statutory mandate. (Paladin at *6).
    For CY 2012, as discussed in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74348 through 74352), we determined the relative 
payment weights for PHP services provided by CMHCs based on data 
derived solely from CMHCs and the relative payment weights for 
hospital-based PHP services based exclusively on hospital data. The 
statute is reasonably interpreted to allow the relative payment weights 
for the OPPS payment rates for PHP services provided by CMHCs to be 
based solely on CMHC data and relative payment weights for hospital-
based PHP services to be based exclusively on hospital data. Section 
1833(t)(2)(C) of the Act requires the Secretary to ``establish relative 
payment weights for covered OPD services (and any groups of such 
services described in subparagraph (B)) based on * * * hospital 
costs.'' In pertinent part, subparagraph (B) provides that ``the 
Secretary may establish groups of covered OPD services * * * so that 
services classified within each group are comparable clinically and 
with respect to the use of resources.'' In accordance with subparagraph 
(B), we developed the APCs, as set forth in Sec.  419.31 of the 
regulations (65 FR 18446 and 18447; 63 FR 47559 through 47562 and 47567 
through 47569). As discussed above, PHP services are grouped into APCs.
    Based on section 1833(t)(2)(C) of the Act, we believe that the word 
``establish'' can be interpreted as applying to APCs at the inception 
of the OPPS in 2000 or whenever a new APC is added to the OPPS. In 
creating the original APC for PHP services (APC 0033), we did 
``establish'' the initial relative payment weight for PHP services, 
provided in both hospital-based and CMHC-based settings, only on the 
basis of hospital data. Subsequently, from CY 2003 through CY 2008, the 
relative payment weights for PHP services were based on a combination 
of hospital and CMHC data. Similarly, we established new APCs for PHP 
services based exclusively on hospital data. 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

[[Page 45151]]

argued in the Paladin case, the courts have consistently held that the 
phrase ``based on'' does not mean ``based exclusively on.'' Thus, the 
relative payment weights for the two APCs for PHP services provided by 
CMHCs in CY 2011 were ``based on'' hospital data, no less than the 
relative payment weights for the two APCs for hospital-based PHP 
services.
    Although we used hospital data to establish the relative payment 
weights for APCs 0033, 0172, 0173, 0175, and 0176 for PHP services, we 
believe that we have the authority to discontinue the use of hospital 
data in determining the OPPS relative payment weights for PHP services 
provided by CMHCs. Other parts of section 1833(t)(2)(C) of the Act make 
plain that the data source for the relative payment weights is subject 
to change from one period to another. Section 1833(t)(2)(C) of the Act 
provides that, in establishing the relative payment weights, ``the 
Secretary shall [ ] us[e] data on claims from 1996 and us[e] data from 
the most recent available cost reports.'' However, we used 1996 data 
(plus 1997 data) in determining only the original relative payment 
weights for 2000; in the ensuing calendar year updates, we continually 
used more recent cost report data.
    Moreover, section 1833(t)(9)(A) of the Act requires the Secretary 
to ``review not less often than annually and revise the groups, the 
relative payment weights, and the wage and other adjustments described 
in paragraph (2) to take into account changes in medical practice, 
changes in technology, the addition of new services, new cost data, and 
other relevant information and factors.'' For purposes of the CY 2012 
update, we exercised our authority under section 1833(t)(9)(A) of the 
Act to change the data source for the relative payment weights for PHP 
services provided by CMHCs based on ``new cost data, and other relevant 
information and factors.''

B. Proposed PHP APC Update for CY 2013

    As discussed in section II.A.2.g. of this proposed rule, for CY 
2013, we are proposing to develop the relative payment weights that 
underpin the OPPS using geometric means rather than the current median-
based methodology. This proposal to base the relative payment weights 
on geometric means would also apply to the per diem costs used to 
determine the relative payment weights for the four PHP APCs. For PHP 
APCs, as with all other OPPS APCs, the proposal to base the relative 
payment weights on geometric means rather than medians would not affect 
the general process to establish appropriate claims for modeling. As 
with the current median-based methodology, the PHP APC payment rates 
would continue to be calculated by computing a separate per diem cost 
for each day of PHP. When there are multiple days of PHP services 
entered on a claim, a unique cost would continue to be computed for 
each day of care. However, a geometric mean would be used to calculate 
the per diem costs rather than a median. The process would still be 
repeated separately for CMHCs and hospital-based PHPs using that 
provider's claims data for the two categories of days with 3 services 
and days with 4 or more services. The four PHP APC per diem costs would 
continue to be included in the scaling of all APCs in OPPS to the mid-
level office visit (APC 0606). Again, for a detailed discussion of the 
proposed CY 2013 OPPS weight scaler, we refer readers to section 
II.A.4. of this proposed rule.
    For CY 2013, using CY 2011 claims data, we computed proposed CMHC 
PHP APC geometric mean per diem costs for Level I (3 services per day) 
and Level II (4 or more services per day) services using only CY 2011 
CMHC claims data, and proposed hospital-based PHP APC geometric mean 
per diem costs for Level I and Level II services using only CY 2011 
hospital-based PHP claims data. These proposed geometric mean per diem 
costs are shown in Table 30 below.

  Table 30--Proposed CY 2013 Geometric Mean Per Diem Costs for CMHC and
        Hospital-Based PHP Services, Based on CY 2011 Claims Data
------------------------------------------------------------------------
                                                               Proposed
                                                              geometric
             APC                        Group title            mean per
                                                              diem costs
------------------------------------------------------------------------
0172.........................  Level I Partial                    $87.76
                                Hospitalization (3
                                services) for CMHCs.
0173.........................  Level II Partial                   111.89
                                Hospitalization (4 or more
                                services) for CMHCs.
0175.........................  Level I Partial                    182.66
                                Hospitalization (3
                                services) for hospital-
                                based PHPs.
0176.........................  Level II Partial                   232.74
                                Hospitalization (4 or more
                                services) for hospital-
                                based PHPs.
------------------------------------------------------------------------

    Under the CY 2013 proposal to base the OPPS relative payment 
weights on geometric mean costs, the proposed geometric mean per diem 
costs for CMHCs would continue to be substantially lower than the 
proposed geometric mean per diem costs for hospital-based PHPs for the 
same units of service. For CY 2013, the proposed geometric mean per 
diem costs for days with 3 services (Level I) is approximately $88 for 
CMHCs and approximately $183 for hospital-based PHPs. The proposed 
geometric mean per diem costs for days with 4 or more services (Level 
II) is approximately $112 for CMHCs and approximately $233 for 
hospital-based PHPs. This analysis indicates that there continues to be 
fundamental differences between the cost structures of CMHCs and 
hospital-based PHPs.
    The CY 2013 proposed geometric mean per diems costs for CMHCs 
calculated under the proposed CY 2013 methodology using CY 2011 claims 
data also have decreased compared to the CY 2012 final median per diem 
costs for CMHCs established in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74352), with per diem costs for Level I services 
decreasing from approximately $98 to approximately $88, and costs for 
Level II services decreasing from approximately $114 to approximately 
$112. In contrast, the CY 2013 proposed geometric mean per diem costs 
for hospital-based PHPs calculated under the proposed CY 2013 
methodology using CY 2011 claims data have increased compared to the CY 
2012 final median per diem costs for hospital-based PHPs, with per diem 
costs for Level I services increasing from approximately $161 to 
approximately $183, and per diem costs for Level II services increasing 
from approximately $191 to approximately $233.
    To provide a comparison, we also calculated PHP median per diem 
costs for CY 2013 using CY 2011 claims data. We computed median per 
diem costs for each provider type using that provider's

[[Page 45152]]

claims data for Level I services and for Level II services. These 
comparative median per diem costs are shown in Table 31 below.

 Table 31--Comparative PHP Median Per Diem Costs for CMHC and Hospital-
            Based PHP Services, Based on CY 2011 Claims Data
------------------------------------------------------------------------
                                                            Comparative
            APC                      Group title            median  per
                                                            diem costs
------------------------------------------------------------------------
0172.......................  Level I Partial                      $87.52
                              Hospitalization (3
                              services) for CMHCs.
0173.......................  Level II Partial                     121.27
                              Hospitalization (4 or more
                              services) for CMHCs.
0175.......................  Level I Partial                      163.86
                              Hospitalization (3
                              services) for hospital-
                              based PHPs.
0176.......................  Level II Partial                     224.57
                              Hospitalization (4 or more
                              services) for hospital-
                              based PHPs.
------------------------------------------------------------------------

    The proposed geometric mean per diem costs for hospital-based PHPs 
for Level I and Level II services calculated under the proposed CY 2013 
methodology using CY 2011 claims data would be higher than the median 
per diem costs calculated under the current median-based methodology, 
using CY 2011 claims data. For hospital-based PHPs, the per diem costs 
would increase from approximately $164 under the current median-based 
methodology to approximately $183 under the proposed geometric mean-
based methodology for Level I services, and from approximately $225 to 
approximately $233 for Level II services.
    The proposed geometric mean per diem costs for CMHCs for Level I 
services calculated under the proposed CY 2013 methodology using CY 
2011 claims data would be approximately the same as the median per diem 
costs calculated under the current median-based methodology, using CY 
2011 claims data. The proposed geometric mean per diem costs for CMHCs 
for Level II services calculated under the proposed CY 2013 methodology 
using CY 2011 claims data would be slightly lower than the median per 
diem costs calculated under the current median-based methodology, using 
CY 2011 claims data. For CMHCs, the per diem costs would be 
approximately $88 under both the current median-based methodology and 
the proposed geometric mean-based methodology for CMHC Level I 
services, and would decrease from approximately $121 under the current 
median-based methodology to approximately $112 under the proposed 
geometric mean-based methodology for CMHC Level II services.
    The data analysis also shows that the median per diem costs for 
CMHCs continue to be substantially lower than the median per diem costs 
for hospital-based PHPs for the same units of service provided. The 
median per diem costs for Level I services is approximately $88 for 
CMHCs and approximately $164 for hospital-based PHPs. The median per 
diem costs for Level II services is approximately $121 for CMHCs and 
approximately $225 for hospital-based PHPs. The significant difference 
in per diem costs between CMHCs and hospital-based PHPs emphasizes the 
distinct cost structures between the two provider types.
    Finally, the data analysis indicates that CMHC median per diem 
costs for Level I services would have decreased from CY 2012 final 
median per diem costs (using CY 2010 claims data) (established in the 
CY 2012 OPPS/ASC final rule with comment period (76 FR 74352)) to CY 
2013 (using CY 2011 claims data) from approximately $98 to 
approximately $88, using only CMHC claims data. The CMHC median per 
diem costs for Level II services would have slightly increased from CY 
2012 final median per diem costs (using CY 2010 claims data) to CY 2013 
(using CY 2011 claims data) from approximately $114 to approximately 
$121, using only CMHC claims data. Hospital-based PHP median per diem 
costs for Level I and Level II services would have increased from the 
CY 2012 final median per diem costs (using CY 2010 claims data) to CY 
2013 (using CY 2011 claims data) from approximately $161 to 
approximately $164 for Level I services and from approximately $191 to 
approximately $225 for Level II services, using only hospital claims 
data.
    In summary, while we have historically based the OPPS payments on 
median costs for services in the APC groups, for CY 2013, we are 
proposing to calculate the relative payment weights for the OPPS APCs 
using geometric means, including the four PHP APCs, as discussed in 
section II.A.2.g. of this proposed rule. The proposed CY 2013 geometric 
mean per diem costs for the PHP APCs are shown in Tables 32 and 33 
below. We invite public comments on these proposals. We will continue 
our efforts to explore payment reforms that will support quality and 
result in greater payment accuracy and reduction of fraud and abuse 
within the partial hospitalization program.

  Table 32--Proposed CY 2013 Geometric Mean Per Diem Costs for CMHC PHP
                                Services
------------------------------------------------------------------------
                                                           Proposed mean
            APC                      Group title             per diem
                                                               costs
------------------------------------------------------------------------
0172.......................  Level I Partial                      $87.76
                              Hospitalization (3
                              services) for CMHCs.
0173.......................  Level II Partial                     111.89
                              Hospitalization (4 or more
                              services) for CMHCs.
------------------------------------------------------------------------

 Table 33--Proposed CY 2013 Geometric Mean Per Diem Costs for Hospital-
                           Based PHP Services
------------------------------------------------------------------------
                                                           Proposed mean
            APC                      Group title          per diem costs
------------------------------------------------------------------------
0175.......................  Level I Partial                     $182.66
                              Hospitalization (3
                              services) for hospital-
                              based PHPs.

[[Page 45153]]

 
0176.......................  Level II Partial                    $232.74
                              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 charges for 
PHP services provided between hospitals and CMHCs, we did not believe 
it was appropriate to make outlier payments to CMHCs using the outlier 
percentage target amount and threshold established for hospitals. Prior 
to that time, there was a significant difference in the amount of 
outlier payments made to hospitals and CMHCs for PHP services. 
Therefore, we designated a portion of the estimated OPPS outlier target 
amount specifically for CMHCs, consistent with the percentage of 
projected payments to CMHCs under the OPPS each year, excluding outlier 
payments. In addition, further analysis indicated that using the same 
OPPS outlier threshold for both hospitals and CMHCs did not limit 
outlier payments to 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 2013. We are proposing that a portion of that 1.0 percent, an amount 
equal to 0.12 percent of outlier payments (or 0.0012 percent of total 
OPPS payments) would be allocated to CMHCs for PHP outlier payments. In 
section II.G. of this proposed rule, for hospital outpatient outlier 
payments policy, we are proposing to set a dollar threshold in addition 
to an APC multiplier threshold. 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 2013 at 3.40 times the APC payment amount and the CY 2013 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. We invite public 
comments on these proposals.

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

A. Background

    We refer readers to the CY 2012 final rule with comment period (76 
FR 74352 through 74353) for a full historical discussion of our 
longstanding policies on how we identify procedures that are typically 
provided only in an inpatient setting (referred to as the inpatient 
list) and, therefore, will not be paid by Medicare under the OPPS; and 
on the criteria that we use to review the inpatient list each year to 
determine whether or not any procedures should be removed from the 
list.

B. Proposed Changes to the Inpatient List

    For the CY 2013 OPPS, we are proposing to use the same methodology 
(described in the November 15, 2004 final rule with comment period (69 
FR 65835) of reviewing the current list of procedures on the inpatient 
list to identify any procedures that are being performed a significant 
amount of the time on an outpatient basis, and appropriately may be 
removed from the list. The established criteria upon which we make such 
a determination are as follows:
    1. Most outpatient departments are equipped to provide the services 
to the Medicare population.
    2. The simplest procedure described by the code may be performed in 
most outpatient departments.
    3. The procedure is related to codes that we have already removed 
from the inpatient list.
    4. A determination is made that the procedure is being performed in 
numerous hospitals on an outpatient basis.
    5. A determination is made that the procedure can be appropriately 
and safely performed in an ASC, and is on the list of approved ASC 
procedures or has been proposed by us for addition to the ASC list.
    Using this methodology, we identified two procedures that 
potentially could be removed from the inpatient list for CY 2013: CPT 
code 22856 (Total disc arthroplasty (artificial disc), anterior 
approach, including discectomy with end plate preparation (includes 
osteophytectomy for nerve root or spinal cord decompression and 
microdissection), single interspace, cervical); and CPT code 27447 
(Arthroplasty, knee, condyle and plateau; medical and lateral 
compartments with or without patella resurfacing (total knee 
arthroplasty)). We then reviewed the clinical characteristics and 
related evidence for these two potential procedures for possible 
removal from the inpatient list and found them to be appropriate 
candidates for removal from the inpatient list. For CY 2013, we are 
proposing to remove the procedures described by CPT codes 22856 and 
27447 from the inpatient list because we believe that the procedures 
may be appropriately provided as hospital outpatient procedures for 
some Medicare beneficiaries, based upon the evaluation criteria 
mentioned above and should thus be paid under the OPPS.
    The two procedures we are proposing to remove from the inpatient 
only list for CY 2013 and their CPT codes, long descriptors, proposed 
APC assignments, and proposed status indictors are displayed in Table 
34 below.

[[Page 45154]]

 Table 34--Procedures Proposed To Be Removed From the Inpatient Only List and Their Proposed APC Assignments for
                                                     CY 2013
----------------------------------------------------------------------------------------------------------------
                                                                     Proposed  CY
           HCPCS  Code                     Long descriptor             2013 APC       Proposed  CY 2013 status
                                                                      assignment              indicator
----------------------------------------------------------------------------------------------------------------
22856...........................  Total disc arthroplasty                     0208  T
                                   (artificial disc), anterior
                                   approach, including discectomy
                                   with end plate preparation
                                   (includes osteophytectomy for
                                   nerve root or spinal cord
                                   decompression and
                                   microdissection), single
                                   interspace, cervical.
27447...........................  Arthroplasty, knee, condyle and             0425  T
                                   plateau; medical and lateral
                                   compartments with or without
                                   patella resurfacing (total knee
                                   arthroplasty).
----------------------------------------------------------------------------------------------------------------

    The complete list of codes that we are proposing to be paid by 
Medicare in CY 2013 only as inpatient procedures is included as 
Addendum E to this proposed rule (which is available via the Internet 
on the CMS Web site).

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

A. Conditions of Payment for Physical Therapy, Speech-Language 
Pathology, and Occupational Therapy Services in Hospitals and CAHs

    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74360 
through 74371), we clarified that hospital outpatient therapeutic 
services and supplies, including those described by benefit categories 
other than the hospital outpatient ``incident to'' category under 
section 1861(s)(2)(B) of the Act, are subject to the conditions of 
payment in 42 CFR 410.27 when they are paid under the OPPS or paid to 
CAHs under section 1834(g) of the Act. We issued this clarification in 
response to inquiries regarding the application of these conditions of 
payment to radiation therapy services that are described under section 
1861(s)(4) of the Act when these services are furnished to hospital 
outpatients.
    In the CY 2012 OPPS/ASC final rule with comment period, in our 
response to public comments (76 FR 74369), we indicated that the 
supervision and other requirements of Sec.  410.27 do not apply to 
professional services or to services that are paid under other fee 
schedules such as the Clinical Laboratory Fee Schedule (CLFS). After 
the publication of the final rule with comment period, we continued to 
receive questions about the applicability of the regulations to 
physical therapy (PT), speech-language pathology (SLP), and 
occupational therapy (OT) services furnished in CAHs. Several 
stakeholders expressed concern that the rules could be applied 
differently in CAHs than in OPPS hospitals. The stakeholders were 
concerned that OPPS hospitals, which are paid for outpatient therapy 
services at the applicable amount based on the Medicare Physician Fee 
Schedule (MPFS), would not be subject to the regulations, but that 
CAHs, which are paid for outpatient therapy services on a reasonable 
cost basis, would be subject to them.
    In this proposed rule, we are clarifying that it was not our intent 
in the CY 2012 OPPS/ASC final rule with comment period to establish 
different requirements for CAHs and for OPPS hospitals for the same 
services. The supervision and other requirements of Sec.  410.27 apply 
to facility services that are paid to hospitals under the OPPS and to 
these same services when they are furnished in CAHs and paid on a 
reasonable cost basis. In OPPS hospitals, these requirements do not 
apply to professional services that are separately billed under the 
MPFS or to PT, SLP, and OT services that are billed by the hospital as 
therapy services and are paid at the applicable amount based on the 
MPFS. The payment rules under Sec.  410.27 also do not apply to these 
same services when they are furnished in CAHs.
    In OPPS hospitals, a small subset of ``sometimes therapy'' PT, SLP, 
or OT services are paid under the OPPS when they are not furnished as 
therapy, meaning not under a certified therapy plan of care. Because 
the supervision and other conditions of payment under Sec.  410.27 
apply to this subset of ``sometimes therapy'' services when they are 
furnished in OPPS hospitals as nontherapy services (because they are 
paid under the OPPS and not based on the MPFS), those conditions of 
payment also apply to this subset of ``sometimes therapy'' services 
when they are furnished as nontherapy in CAHs. When OPPS hospitals and 
CAHs furnish these services as therapy services (under a therapy plan 
of care by a qualified therapist), the conditions of payment under 
Sec.  410.27 do not apply because OPPS hospitals are paid for these 
services based on the MPFS and not under the OPPS. We are providing a 
list of the ``sometimes therapy'' services that may be paid under the 
OPPS in Table 35 below.

  Table 35--``Sometimes Therapy'' Services That Are Paid Under the OPPS
                 When Not Furnished as Therapy Services
------------------------------------------------------------------------
        HCPCS Code                           Descriptor
------------------------------------------------------------------------
97597....................  Debridement (e.g., high pressure waterjet
                            with/without suction, sharp selective
                            debridement with scissors, scalpel and
                            forceps), open wound, (e.g., fibrin,
                            devitalized epidermis and/or dermis,
                            exudate, debris, biofilm), including topical
                            application(s), wound assessment, use of a
                            whirlpool, when performed and instruction(s)
                            for ongoing care, per session, total
                            wound(s) surface area; first 20 sq cm or
                            less.
97598....................  Debridement (e.g., high pressure waterjet
                            with/without suction, sharp selective
                            debridement with scissors, scalpel and
                            forceps), open wound, (e.g., fibrin,
                            devitalized epidermis and/or dermis,
                            exudate, debris, biofilm), including topical
                            application(s), wound assessment, use of a
                            whirlpool, when performed and instruction(s)
                            for ongoing care, per session, total
                            wound(s) surface area; each additional 20 sq
                            cm, or part thereof (list separately in
                            addition to code for primary procedure).
97602....................  Removal of devitalized tissue from wound(s),
                            non-selective debridement, without
                            anesthesia (e.g., wet-to-moist dressings,
                            enzymatic, abrasion), including topical
                            application(s), wound assessment, and
                            instruction(s) for ongoing care, per
                            session.

[[Page 45155]]

 
97605....................  Negative pressure wound therapy (e.g., vacuum
                            assisted drainage collection), including
                            topical application(s), wound assessment,
                            and instruction(s) for ongoing care, per
                            session; total wound(s) surface area less
                            than or equal to 50 square centimeters.
97606....................  Negative pressure wound therapy (e.g., vacuum
                            assisted drainage collection), including
                            topical application(s), wound assessment,
                            and instruction(s) for ongoing care, per
                            session; total wound(s) surface area greater
                            than 50 square centimeters.
0183T....................  Low frequency, non-contact, non-thermal
                            ultrasound, including topical
                            application(s), when performed, wound
                            assessment, and instruction(s) for ongoing
                            care, per day.
------------------------------------------------------------------------

B. Enforcement Instruction for the Supervision of Outpatient 
Therapeutic Services in CAHs and Small Rural Hospitals

    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74371), we extended through CY 2012 the notice of nonenforcement of the 
requirement for direct supervision of outpatient therapeutic services 
furnished in CAHs and small rural hospitals having 100 or fewer beds 
(available on the CMS Web Site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html?redirect=/HospitalOutpatientPPS/01_overview.asp). We 
extended this enforcement instruction to our contractors for another 
year, through CY 2012, to allow time for the initiation of supervision 
reviews by the Advisory Panel on Hospital Outpatient Payment (the 
Panel), which began in early 2012 and are continuing in accordance with 
the provisions of the CY 2012 OPPS/ASC final rule with comment period. 
The Panel will meet again this summer to consider requests that are 
referred by CMS for a change in the minimum required supervision level 
for individual hospital outpatient therapeutic services for the CY 2013 
payment year. In this proposed rule, we are requesting that CAHs and 
small rural hospitals submit to CMS for potential evaluation by the 
Panel at the summer meeting any services for which they anticipate 
difficulty complying with the direct supervision standard in CY 2013. 
In developing evaluation requests, hospitals should refer to the 
evaluation criteria that we finalized in the CY 2012 OPPS/ASC final 
rule with comment period. We recognize that hospitals have had little 
experience in submitting evaluation requests to CMS for consideration 
by the Panel. In order to give hospitals additional opportunity this 
year to become familiar with the submission and review process at the 
summer Panel meeting, and to allow hospitals time to meet the required 
supervision levels for services that may be considered for CY 2013, we 
anticipate extending the nonenforcement instruction one additional year 
through CY 2013. We expect that this will be the final year for the 
instruction, regardless of the services reviewed by the Panel during 
its summer meeting.

XI. Outpatient Status: Solicitation of Public Comments

    Under section 402(a)(1)(A) of the Social Security Amendments of 
1967 (Pub. L. 90-248), the Secretary is permitted to engage in 
demonstration projects to determine whether changes in methods of 
payment for health care and services under the Medicare program would 
increase the efficiency and economy of those services through the 
creation of incentives to those ends without adversely affecting the 
quality of such services. Under this statutory authority, CMS has 
implemented the Medicare Part A to Part B Rebilling (AB Rebilling) 
Demonstration, which allows participating hospitals to receive 90 
percent of the allowable Part B payment for Part A short-stay claims 
that are denied on the basis that the inpatient admission was not 
reasonable and necessary. Participating hospitals can rebill these 
denied Part A claims under Part B and be paid for additional Part B 
services than would usually be payable when an inpatient admission is 
deemed not reasonable and necessary. This demonstration is slated to 
last for 3 years, from CY 2012 through CY 2014. In this proposed rule, 
we are providing an update of the status of the demonstration. In 
addition, we are soliciting public comments on a related issue: 
Potential policy changes we could make to improve clarity and consensus 
among providers, Medicare, and other stakeholders regarding the 
relationship between admission decisions and appropriate Medicare 
payment, such as when a Medicare beneficiary is appropriately admitted 
to the hospital as an inpatient and the cost to hospitals associated 
with making this decision.
    When a Medicare beneficiary presents to a hospital in need of 
medical or surgical care, the physician or other qualified practitioner 
must decide whether to admit the beneficiary for inpatient care or 
treat him or her as an outpatient. In some cases, when the physician 
admits the beneficiary and the hospital provides inpatient care, a 
Medicare claims review contractor, such as the Medicare Administrative 
Contractor (MAC), the Recovery Audit Contractor (RAC), or the 
Comprehensive Error Rate Testing (CERT) Contractor, determines that 
inpatient care was not reasonable and necessary under section 
1862(a)(1)(A) of the Act and denies the hospital inpatient claim for 
payment. In these cases, under Medicare's longstanding policy, 
hospitals may rebill a separate inpatient claim for only a limited set 
of Part B services, referred to as ``Inpatient Part B'' or ``Part B 
Only'' services (Section 10, Chapter 6 of the Medicare Benefit Policy 
Manual (Pub. 100-02)). The hospital also may bill Medicare Part B for 
any outpatient services that were provided in the 3-day payment window 
prior to the admission (Section 10.12, Chapter 4 of the Medicare Claims 
Processing Manual (Pub. 100-04)). These claims are subject to the 
timely filing restrictions.
    Once a Medicare beneficiary is discharged from the hospital, the 
hospital cannot change the beneficiary's patient status to outpatient 
and submit an outpatient claim because of the potentially significant 
impact on beneficiary liability. As we discuss below, hospital 
inpatients have significantly different Medicare benefits and 
liabilities than hospital outpatients, notably coverage of self-
administered drugs and, for patients who are admitted to the hospital 
for 3 or more consecutive calendar days, coverage of postacute SNF care 
(to the extent all other SNF coverage requirements are met). To enable 
beneficiaries to make informed financial and other decisions, Medicare 
allows the hospital to change a beneficiary's inpatient status to 
outpatient (using condition code 44 on an outpatient claim) and bill 
all medically necessary services that it provided to Part B as 
outpatient

[[Page 45156]]

services, but only if the change in patient status is made prior to 
discharge, the hospital has not submitted a Medicare claim for the 
admission, and both the practitioner responsible for the care of the 
patient and the utilization review committee concur in the decision 
(Section 50.3, Chapter 1 of the Medicare Claims Processing Manual (Pub. 
100-04); MLN Matters article SE0622, ``Clarification of Medicare 
Payment Policy When Inpatient Admission Is Determined Not To Be 
Medically Necessary, Including the Use of Condition Code 44: `Inpatient 
Admission Changed to Outpatient,' '' September 2004). Medicare 
beneficiaries are provided with similar protections that are outlined 
in the Hospital Conditions of Participation. For example, in accordance 
with 42 CFR 482.13(b), Medicare beneficiaries have the right to 
participate in the development and implementation of their plan of care 
and treatment, to make informed decisions, and to accept or refuse 
treatment. Informed discharge planning between the patient and 
physician is important for patient autonomy and for achieving efficient 
outcomes.
    While the limited scope of allowed rebilling for ``Part B Only'' 
services protects Medicare beneficiaries and provides disincentives for 
hospitals to admit patients inappropriately, hospitals have expressed 
concern that this policy provides inadequate payment for resources that 
they have expended to take care of the beneficiary in need of medically 
necessary hospital care, although not necessarily at the level of 
inpatient care. A significant proportion of the Medicare CERT error 
rate consists of short (1- or 2-day) stays where the beneficiary 
received medically necessary services that the CERT contractor 
determined should have been provided as outpatient services and not as 
inpatient services. Hospitals have indicated that often they do not 
have the necessary staff (for example, utilization review staff or case 
managers) on hand after normal business hours to confirm the 
physician's decision to admit the beneficiary. Thus, for a short stay, 
the hospital may be unable to review and change a beneficiary's patient 
status from inpatient to outpatient prior to discharge in accordance 
with the condition code 44 requirements.
    We have heard from various stakeholders that hospitals appear to be 
responding to the financial risk of admitting Medicare beneficiaries 
for inpatient stays that may later be denied upon contractor review, by 
electing to treat beneficiaries as outpatients receiving observation 
services, often for longer periods of time, rather than admit them. In 
recent years, the number of cases of Medicare beneficiaries receiving 
observation services for more than 48 hours, while still small, has 
increased from approximately 3 percent in 2006 to approximately 7.5 
percent in 2010. This trend is concerning because of its effect on 
Medicare beneficiaries. There could be significant financial 
implications for Medicare beneficiaries of being treated as outpatients 
rather than being admitted as inpatients, of which CMS has informed 
beneficiaries.\1\ For instance, if a beneficiary is admitted as an 
inpatient, the beneficiary pays a one-time deductible for all hospital 
services provided during the first 60 days in the hospital. As a 
hospital inpatient, the beneficiary would not pay for self-administered 
drugs or have any copayments for the first 60 days; whereas if the 
beneficiary is treated as an outpatient, the beneficiary has a 
copayment for each individual outpatient hospital service. While the 
Medicare copayment for a single outpatient hospital service cannot be 
more than the inpatient hospital deductible, the beneficiary's total 
copayment for all outpatient services may be more than the inpatient 
hospital deductible. In addition, usually self-administered drugs 
provided in an outpatient setting are not covered by Medicare Part B 
and hospitals may charge the beneficiary for them. Also, the time spent 
in the hospital as an outpatient is not counted towards the 3-day 
qualifying inpatient stay that the law requires for Medicare Part A 
coverage of postacute care in a SNF (section 1861(i) of the Act).
---------------------------------------------------------------------------

    \1\ CMS Pamphlets: ``Are You a Hospital Inpatient or Outpatient? 
If You Have Medicare--Ask!'', CMS Product No. 11435, Revised, 
February 2011; ``How Medicare Covers Self-Administered Drugs Given 
in Hospital Outpatient Settings,'' CMS Product No. 11333, Revised, 
February 2011.
---------------------------------------------------------------------------

    As a result of these concerns related to the impact of extended 
time as an outpatient on Medicare beneficiaries, the CERT error rate, 
and the impact on hospitals of a later inpatient denial, CMS initiated 
the 3-year AB Rebilling Demonstration for voluntary hospital 
participants. This demonstration allows the participants to rebill 
outside of the usual timely filing requirements for services relating 
to all inpatient short-stay claims that are denied for lack of medical 
necessity because, despite the provision of reasonable and necessary 
hospital care, the inpatient admission itself was denied as not 
medically necessary. Under the demonstration, hospitals may receive 90 
percent of the allowable payment for all Part B services that would 
have been medically necessary had the beneficiaries originally been 
treated as outpatients and not admitted as inpatients. (We note that 
hospitals cannot rebill for observation services, which, by definition, 
must be ordered prospectively to determine whether an inpatient 
admission is necessary). Hospitals that participate in the AB Rebilling 
Demonstration will waive any appeal rights associated with the denied 
inpatient claims eligible for rebilling. Under the demonstration, 
Medicare beneficiaries are protected from any adverse impacts of 
expanded rebilling. For example, hospitals cannot bill them for self-
administered drugs or additional cost-sharing. The demonstration will 
provide information on the impact that expanded rebilling may have on 
the Medicare Trust Funds, beneficiaries, hospitals, and the CERT error 
rate should CMS change its policy regarding the services that can be 
rebilled to Medicare Part B. The demonstration is designed to evaluate 
potential impacts of expanded rebilling on admission and utilization 
patterns, including whether expanded rebilling would reduce hospitals' 
incentive to make appropriate initial admission decisions.
    Hospitals expressed significant interest in the AB Rebilling 
Demonstration which began on January 1, 2012. The demonstration was 
approved to accept up to 380 participants. In order to participate in 
the demonstration, a facility must not be receiving periodic interim 
payments from CMS, and must be a Medicare-participating hospital as 
defined by section 1886(d) of the Act, a category that includes all 
hospitals paid under the Medicare IPPS, but excludes hospitals paid 
under the Inpatient Psychiatric Facilities (IPF) PPS, the IRF PPS, and 
the LTCH PPS, cancer hospitals, CAHs, and children's hospitals.
    The hospitals that volunteered to participate and were accepted in 
the demonstration began rebilling in the early spring of 2012. We are 
currently accepting applications to participate in the ongoing AB 
Rebilling Demonstration, and more information about the demonstration 
is available on the CMS Web site at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/CERT/Part_A_to_Part_B_Rebilling_Demonstration.html. We plan to conduct an 
evaluation of the demonstration during and after its completion. While 
we are monitoring progress and evaluating the demonstration, we also 
are soliciting public comments on other actions we

[[Page 45157]]

could potentially undertake to address concerns about this issue. For 
example, we have heard from some stakeholders who have suggested a need 
for us to clarify our current instruction regarding the circumstances 
under which Medicare will pay for an admission in order to improve 
hospitals' ability to make appropriate admission decisions. We have 
issued instructions that the need for admission is a complex medical 
judgment that depends upon multiple factors, including an expectation 
that the beneficiary will require an overnight stay in the hospital 
(Section 10, Chapter 1 of the Medicare Benefit Policy Manual (Pub. 100-
02)). We are interested in receiving public comments and suggestions 
regarding whether and how we might improve our current instructions and 
clarify the application of Medicare payment policies for both hospitals 
and physicians, keeping in mind the challenges of implementing national 
standards that are broad enough to contemplate the range of clinical 
scenarios but prescriptive enough to provide greater clarity.
    Some stakeholders also have suggested that CMS has authority to 
define whether a patient is an inpatient or an outpatient. They believe 
that it may be permissible and appropriate for us to redefine 
``inpatient'' using parameters in addition to medical necessity and a 
physician order that we currently use, such as length of stay or other 
variables. For example, currently a beneficiary's anticipated length of 
stay at the hospital may be a factor in determining whether a 
beneficiary should be admitted to the hospital, but is not the only 
factor. We have issued instructions that state that, typically, the 
decision to admit should be made within 24 to 48 hours, and that 
expectation of an overnight stay may be a factor in the admission 
decision (Section 20.6, Chapter 6 and Section 10, Chapter 1 of the 
Medicare Benefit Policy Manual (Pub. 100-02)). However, we are 
interested in hearing from stakeholders regarding whether it may be 
appropriate and useful to establish a point in time after which the 
encounter becomes an inpatient stay if the beneficiary is still 
receiving medically necessary care to treat or evaluate his or her 
condition. Such a policy could potentially limit the amount of time 
that a beneficiary is treated as an outpatient receiving observation 
services before the hospital encounter becomes inpatient, provided the 
additional time in the hospital is medically necessary. Currently, we 
do not specify a limit on the time a beneficiary may be an outpatient 
receiving observation services, although, in the past, we have limited 
payment of observation services to a specific timeframe, such as 24 or 
48 hours. Some in the hospital community have indicated that it may be 
helpful for the agency to establish more specific criteria for patient 
status in terms of how many hours the beneficiary is in the hospital, 
or to provide a limit on how long a beneficiary receives observation 
services as an outpatient. We are inviting public comments regarding 
whether there would be more clarity regarding patient status under such 
alternative approaches to defining inpatient status. We also note that 
it is important for CMS to maintain its ability to audit and otherwise 
carry out its statutory obligation to ensure that the Medicare program 
pays only for reasonable and necessary care. We are asking that 
commenters consider opportunities for inappropriately taking advantage 
of the Medicare system that time-based and other changes in criteria 
for patient status may create.
    Another option stakeholders have suggested is the establishment of 
more specific clinical criteria for admission and payment, such as 
adopting specific clinical measures or requiring prior authorization 
for payment of an admission. We are inviting public comments on this 
approach. In addition, we are asking commenters to consider how 
aligning payment rates more closely with the resources expended by a 
hospital when providing outpatient care versus inpatient care of short 
duration might reduce payment disparities and influence financial 
incentives and disincentives to admit. Finally, we are asking 
commenters to consider the responsibility of hospitals to utilize all 
of the tools necessary to make appropriate initial admission decisions. 
We believe this is important because some hospitals have indicated that 
simply having case management and utilization review staff available to 
assist in decisionmaking outside of regular business hours may improve 
the accuracy of admission decisions.
    In summary, there may be several ways of approaching the 
multifaceted issues that have been raised in recent months around a 
beneficiary's patient status and Medicare hospital payment. Given the 
complexity of this topic, we are providing an update on the rebilling 
demonstration and are seeking public perspectives on potential options 
the agency might adopt to provide more clarity and consensus regarding 
patient status for purposes of Medicare payment. We are inviting 
commenters to draw on their knowledge of these issues to offer any 
suggestions that they believe would be most helpful to them in 
addressing the current challenges, while keeping in mind the various 
impacts in terms of recently observed increases in the length of time 
for which patients receive observation services, beneficiary liability, 
Medicare spending, and the feasibility of implementation of any 
suggested changes for both the Medicare program and hospitals.

XII. Proposed CY 2013 OPPS Payment Status and Comment Indicators

A. Proposed CY 2013 OPPS Payment Status Indicator Definitions

    Payment status indicators (SIs) that we assign to HCPCS codes and 
APCs play an important role in determining payment for services under 
the OPPS. They indicate whether a service represented by a HCPCS code 
is payable under the OPPS or another payment system and also whether 
particular OPPS policies apply to the code. The proposed CY 2013 status 
indicator assignments for APCs and HCPCS codes are shown in Addendum A 
and Addendum B, respectively, on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. We note that, in the past, a majority 
of the Addenda referred to throughout the preamble of our OPPS/ASC 
proposed and final rules appeared in the printed version of the Federal 
Register as part of the annual rulemakings. However, beginning with the 
CY 2012 proposed rule, the Addenda will no longer appear in the printed 
version of the OPPS/ASC rules that are found in the Federal Register. 
Instead, these Addenda will be published and available only via the 
Internet on the CMS Web site at: http://www.cms.gov/Medicare/ Medicare-
Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    For CY 2013, we are not proposing to make any changes to the 
definitions of status indicators that were listed in Addendum D1 of the 
CY 2012 OPPS/ASC final rule with comment period. We continue to believe 
that these definitions of the OPPS status indicators continue to be 
appropriate for our CY 2013 proposal.
    The complete list of the proposed CY 2013 status indicators and 
their definitions is displayed in Addendum D1 on the CMS Web site at: 
http://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html.

[[Page 45158]]

B. Proposed CY 2013 Comment Indicator Definitions

    For the CY 2013 OPPS, we are proposing to use the same two comment 
indicators that are in effect for the CY 2012 OPPS.
     ``CH''--Active HCPCS codes in current and next calendar 
year; status indicator and/or APC assignment have changed or active 
HCPCS code that will be discontinued at the end of the current calendar 
year.
     ``NI''--New code for the next calendar year or existing 
code with substantial revision to its code descriptor in the next 
calendar year as compared to current calendar year, interim APC 
assignment; comments will be accepted on the interim APC assignment for 
the new code.
    We are proposing to use the ``CH'' comment indicator in this CY 
2013 OPPS/ASC proposed rule to indicate HCPCS codes for which the 
status indicator or APC assignment, or both, are proposed for change in 
CY 2013 compared to their assignment as of June 30, 2012. We believe 
that using the ``CH'' indicator in this CY 2013 OPPS/ASC proposed rule 
will facilitate the public's review of the changes that we are 
proposing for CY 2013. The use of the comment indicator ``CH'' in 
association with a composite APC indicates that the configuration of 
the composite APC is proposed to be changed in this CY 2013 OPPS/ASC 
proposed rule.
    We are proposing to use the ``CH'' comment indicator in the CY 2013 
OPPS/ASC final rule with comment period to indicate HCPCS codes for 
which the status indicator or APC assignment, or both, would change in 
CY 2013 compared to their assignment as of December 31, 2012.
    In addition, any existing HCPCS code numbers with substantial 
revisions to the code descriptors for CY 2013 compared to the CY 2012 
descriptors are labeled with comment indicator ``NI'' in Addendum B to 
this CY 2013 OPPS/ASC proposed rule. However, in order to receive the 
comment indicator ``NI,'' the CY 2013 revision to the code descriptor 
(compared to the CY 2012 descriptor) must be significant such that the 
new code descriptor describes a new service or procedure for which the 
OPPS treatment may change. We use comment indicator ``NI'' to indicate 
that these HCPCS codes are open to comment as part of this CY 2013 
OPPS/ASC proposed rule. Like all codes labeled with comment indicator 
``NI,'' we will respond to public comments and finalize their OPPS 
treatment in the CY 2014 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 2013 are also labeled with comment 
indicator ``NI'' in Addendum B to this CY 2013 OPPS/ASC proposed rule.
    Only HCPCS codes with comment indicator ``NI'' in this CY 2013 
OPPS/ASC proposed rule are subject to comment. HCPCS codes that do not 
appear with comment indicator ``NI'' in this CY 2013 OPPS/ASC proposed 
rule are not open to public comment, unless we specifically request 
additional comments elsewhere in this proposed rule. The CY 2013 
treatment of HCPCS codes that appear in this CY 2013 OPPS/ASC proposed 
rule to which comment indicator ``NI'' is not appended will be open for 
public comment during the comment period for the proposed rule, and we 
will respond to those comments in the CY 2013 OPPS/ASC final rule with 
comment period. We believe that the CY 2012 definitions of the OPPS 
status indicators continue to be appropriate for CY 2013, and 
therefore, we are proposing to continue to use those definitions 
without modification for CY 2013. Their proposed definitions are listed 
in Addendum D2 on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

XIII. OPPS Policy and Payment Recommendations

A. MedPAC Recommendations

    MedPAC was established under section 1805 of the Act to advise the 
Congress on issues affecting the Medicare program. As required under 
the statute, MedPAC submits reports to Congress no later than March and 
June of each year that contain its Medicare payment policy 
recommendations. In this section of our proposed rule, we note several 
recommendations regarding the Hospital outpatient prospective payment 
system in the March 2012 report (``Report to the Congress: Medicare 
Payment Policy,'' available on MedPAC's Web site at: http://www.medpac.gov/documents/Mar12_EntireReport.pdf).
    MedPAC recommended that Congress increase payment rates for the 
outpatient prospective payment system in 2013 by 1.0 percent. We 
discuss our proposal to follow the statutory requirements for the CY 
2013 OPD fee schedule increase factor in section II.B of this proposed 
rule.
    In addition, MedPAC recommended that Congress enact legislation to 
reduce payment rates for evaluation and management office visits 
provided in hospital outpatient departments to the rates paid for these 
services in physician offices. MedPAC recommended that the change be 
phased in over 3 years. During the phase-in, MedPAC stated that the 
associated payment reductions to hospitals with a disproportionate 
share patient percentage at or above the median should be limited to 2 
percent of overall Medicare payments. MedPAC also recommended that the 
Secretary of Health and Human Services conduct a study by January 2015 
to examine whether this policy change would reduce access by low-income 
patients to ambulatory physician and other services. Congress has yet 
to accept this recommendation and enact such legislation.

B. GAO Recommendations

    Congress established the U.S. Government Accountability Office 
(GAO) under the Budget and Accounting Act of 1921 (Pub. L. 67-13) as an 
independent agency that advises Congress and the heads of Executive 
agencies regarding Federal program expenditures. The GAO conducts 
audits and other analyses to ensure that Federal funds are being spent 
efficiently and effectively. Since the issuance of the CY 2012 OPPS/ASC 
final rule with comment period, the GAO has not released any reports 
regarding the Hospital OPPS.

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 Department of Health and Human Services programs and the health 
and welfare of program beneficiaries. The OIG conducts independent 
audits, inspections, and investigations to improve the efficiency of 
these programs and to identify and prevent fraud, waste and abuse. 
Since the issuance of the CY 2012 OPPS/ASC final rule with comment 
period, the OIG has not made any recommendations regarding the Hospital 
OPPS.

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

A. Background

1. Legislative History, Statutory Authority, and Prior Rulemaking for 
the ASC Payment System
    For a detailed discussion of the legislative history and statutory 
authority related to ASCs, we refer

[[Page 45159]]

readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74377 through 74378) and the June 12, 1998 proposed rule (63 FR 32291 
through 32292). For a discussion of prior rulemaking on the ASC payment 
system, we refer readers to the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74378 through 74379).
2. Policies Governing Changes to the Lists of Codes and Payment Rates 
for ASC Covered Surgical Procedures and Covered Ancillary Services
    Under Sec.  416.2 and Sec.  416.166 of the regulations, subject to 
certain exclusions, covered surgical procedures are surgical procedures 
that are separately paid under the OPPS, that would not be expected to 
pose a significant risk to beneficiary safety when performed in an ASC, 
and that would not be expected to require active medical monitoring and 
care at midnight following the procedure (``overnight stay''). We 
adopted this standard for defining which surgical procedures are 
covered under the ASC payment system as an indicator of the complexity 
of the procedure and its appropriateness for Medicare payment in ASCs. 
We use this standard only for purposes of evaluating procedures to 
determine whether or not they are appropriate for Medicare 
beneficiaries in ASCs. We define surgical procedures as those described 
by Category I CPT codes in the surgical range from 10000 through 69999, 
as well as those Category III CPT codes and Level II HCPCS codes that 
directly crosswalk or are clinically similar to ASC covered surgical 
procedures (72 FR 42478).
    In the August 2, 2007 final rule, we also established our policy to 
make separate ASC payments for the following ancillary items and 
services when they are provided integral to ASC covered surgical 
procedures: (1) Brachytherapy sources; (2) certain implantable items 
that have pass-through status under the OPPS; (3) certain items and 
services that we designate as contractor-priced, including, but not 
limited to, procurement of corneal tissue; (4) certain drugs and 
biologicals for which separate payment is allowed under the OPPS; and 
(5) certain radiology services for which separate payment is allowed 
under the OPPS. These covered ancillary services are specified in 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 XIV.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 update change requests 
(CRs) for ASC services throughout the year (January, April, July, and 
October). CMS releases new Level II codes to the public or recognizes 
the release of new CPT codes by the AMA and makes these codes effective 
(that is, the codes are recognized on Medicare claims) outside of the 
formal rulemaking process via these ASC quarterly update CRs. Thus, the 
updates are to implement newly created Level II HCPCS and Category III 
CPT codes for ASC payment and to update the payment rates for 
separately paid drugs and biologicals based on the most recently 
submitted ASP data. New Category I CPT codes, except vaccine codes, are 
released only once a year and, therefore, are implemented only through 
the January quarterly update. New Category I CPT vaccine codes are 
released twice a year and, therefore, are implemented through the 
January and July quarterly updates. We refer readers to Table 41 in the 
CY 2012 OPPS/ASC proposed rule for the process used to update the HCPCS 
and CPT codes (76 FR 42291).
    In our annual updates to the ASC list of, and payment rates for, 
covered surgical procedures and covered ancillary services, we 
undertake a review of excluded surgical procedures (including all 
procedures newly proposed for removal from the OPPS inpatient list), 
new procedures, and procedures for which there is revised coding, to 
identify any that we believe meet the criteria for designation as ASC 
covered surgical procedures or covered ancillary services. Updating the 
lists of covered surgical procedures and covered ancillary services, as 
well as their payment rates, in association with the annual OPPS 
rulemaking cycle is particularly important because the OPPS relative 
payment weights and, in some cases, payment rates, are used as the 
basis for the payment of covered surgical procedures and covered 
ancillary services under the revised ASC payment system. This joint 
update process ensures that the ASC updates occur in a 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 surgical procedures; (2) Category 
III CPT codes, which describe new and emerging technologies, services, 
and procedures; and (3) Level II HCPCS codes, which are used primarily 
to identify products, supplies, temporary procedures, and services not 
described by CPT codes.
    We finalized a policy in the August 2, 2007 final rule to evaluate 
each year all new Category I and Category III CPT codes and Level II 
HCPCS codes that describe surgical procedures, and to make preliminary 
determinations during the annual OPPS/ASC rulemaking process regarding 
whether or not they meet the criteria for payment in the ASC setting as 
covered surgical procedures and, if so, whether they are office-based 
procedures (72 FR 42533 through 42535). In addition, we identify new 
codes as ASC covered ancillary services based upon the final payment 
policies of the revised ASC payment system.
    We have separated our discussion below into two sections based on 
whether we are proposing to solicit public comments in this CY 2013 
OPPS/ASC proposed rule (and respond to those comments in the CY 2013 
OPPS/ASC final rule with comment period) or whether we will be 
soliciting public comments in the CY 2013 OPPS/ASC final rule with 
comment period (and responding to those comments in the CY 2014 OPPS/
ASC final rule with comment period).
    We note that we sought public comment in the CY 2012 OPPS/ASC final 
rule with comment period on the new CPT and Level II HCPCS codes that 
were effective January 1, 2012. We also sought public comments in the 
CY 2012 OPPS/ASC final rule with comment period on the new Level II 
HCPCS codes effective October 1, 2011. These new codes, with an 
effective date of October 1, 2011, or January 1, 2012, were flagged 
with comment indicator ``NI'' in Addenda AA and BB to the CY 2012 OPPS/
ASC final rule with comment period to indicate that we were assigning 
them an interim payment status and payment rate, if applicable,

[[Page 45160]]

which were subject to public comment following publication of the CY 
2012 OPPS/ASC final rule with comment period. We will respond to public 
comments and finalize the ASC treatment of these codes in the CY 2013 
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 2012 for Which We Are Soliciting 
Public Comments in This CY 2013 OPPS/ASC Proposed Rule
    In the April and July CRs, we made effective for April 1, 2012 or 
July 1, 2012, respectively, a total of 12 new Level II HCPCS codes and 
5 new Category III CPT codes that were not addressed in the CY 2012 
OPPS/ASC final rule with comment period. The 12 new Level II HCPCS 
codes describe covered ancillary services.
    In the April 2012 ASC quarterly update (Transmittal 2425, CR 7754, 
dated March 16, 2012), we added one new radiology Level II HCPCS code 
and four new drug and biological Level II HCPCS codes to the list of 
covered ancillary services. Specifically, as displayed in Table 36 
below, we added the following codes to the list of covered ancillary 
services:
     HCPCS code C9288 (Injection, centruroides (scorpion) 
immune f(ab)2 (equine), 1 vial);
     HCPCS code C9289 (Injection, asparaginase Erwinia 
chrysanthemi, 1,000 international units (I.U.));
     HCPCS code C9290 (Injection, bupivacaine liposome, 1 mg);
     HCPCS code C9291 (Injection, aflibercept, 2 mg vial); and
     HCPCS code C9733 (Non-ophthalmic fluorescent vascular 
angiography).
    In the July 2012 quarterly update (Transmittal 2479, Change Request 
7854, dated May 25, 2012), we added seven new drug and biological Level 
II HCPCS codes to the list of covered ancillary services. Specifically, 
as displayed in Table 37 below, we added the following codes to the 
list of covered ancillary services:
     HCPCS code C9368 (Grafix core, per square centimeter);
     HCPCS code C9369 (Grafix prime, per square centimeter);
     HCPCS code Q2034 (Influenza virus vaccine, split virus, 
for intramuscular use (Agriflu));
     HCPCS code Q2045 (Injection, human fibrinogen concentrate, 
1 mg);
     HCPCS code Q2046 (Injection, aflibercept, 1 mg);
     HCPCS code Q2048 (Injection, doxorubicin hydrochloride, 
liposomal, doxil, 10 mg); and
     HCPCS code Q2049 (Injection, doxorubicin hydrochloride, 
liposomal, imported lipodox, 10 mg).
    We note that HCPCS code Q2045 replaced code J1680, HCPCS code Q2046 
replaced code C9291, and HCPCS code Q2048 replaced code J9001 beginning 
July 1, 2012.
    We assigned payment indicator ``K2'' (Drugs and biologicals paid 
separately when provided integral to a surgical procedure on the ASC 
list; payment based on OPPS rate) to the 10 new Level II HCPCS codes 
that are separately paid when provided in ASCs. We assigned payment 
indicator ``L1'' (Influenza vaccine; pneumococcal vaccine; packaged 
item/service; no separate payment made) or payment indicator ``N1'' 
(Packaged service/item; no separate payment made) to the two new Level 
II HCPCS codes that are packaged when provided in ASCs. We are 
soliciting public comment on the proposed CY 2012 ASC payment 
indicators and payment rates for the covered ancillary services listed 
in Tables 36 and 37 below. Those HCPCS codes became payable in ASCs, 
beginning in April or July 2012, and are paid at the ASC rates posted 
for the appropriate calendar quarter on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/11_Addenda_Updates.html.
    The HCPCS codes listed in Table 36 are included in Addendum BB to 
this proposed rule (which is available via the Internet on the CMS Web 
site). We note that all ASC addenda are only available via the Internet 
on the CMS Web site. Because the payment rates associated with the new 
Level II HCPCS codes that became effective for July 2012 (listed in 
Table 37) 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 2013 OPPS/ASC 
final rule with comment period. Thus, the codes implemented by the July 
2012 ASC quarterly update CR and their proposed CY 2013 payment rates 
(based on July 2012 ASP data) that are displayed in Table 37 are not 
included in Addendum BB to this proposed rule (which is available via 
the Internet on the CMS Web site). The final list of covered ancillary 
services and the associated payment weights and payment indicators will 
be included in Addendum BB to the CY 2013 OPPS/ASC final rule with 
comment period, consistent with our annual update policy. We are 
soliciting public comment on these proposed payment indicators and the 
proposed payment rates for the new Level II HCPCS codes that were newly 
recognized as ASC covered ancillary services in April and July 2012 
through the quarterly update CRs, as listed in Tables 36 and 37 below. 
We are proposing to finalize their payment indicators and their payment 
rates in the CY 2013 OPPS/ASC final rule with comment period.

    Table 36--New Level II HCPCS Codes for Covered Ancillary Services
                        Implemented in April 2012
------------------------------------------------------------------------
                                                      Proposed CY 2013
   CY 2012 HCPCS code      CY 2012 long descriptor    payment indicator
------------------------------------------------------------------------
C9288...................  Injection, centruroides   K2
                           (scorpion) immune
                           f(ab)2 (equine), 1 vial.
C9289...................  Injection, asparaginase   K2
                           Erwinia chrysanthemi,
                           1,000 international
                           units (I.U.).
C9290...................  Injection, bupivacaine    K2
                           liposome, 1 mg.
C9291...................  Injection, aflibercept,   K2
                           2 mg vial.
C9733...................  Non-ophthalmic            N1
                           fluorescent vascular
                           angiography.
------------------------------------------------------------------------

[[Page 45161]]

           Table 37--New Level II HCPCS Codes for Covered Ancillary Services Implemented in July 2012
----------------------------------------------------------------------------------------------------------------
                                                                                                    Proposed CY
       CY 2012 HCPCS code              CY 2012 long descriptor        Proposed CY 2013 payment     2013 payment
                                                                              indicator                rate
----------------------------------------------------------------------------------------------------------------
C9368...........................  Grafix core, per square           K2                                     $7.96
                                   centimeter.
C9369...........................  Grafix prime, per square          K2                                      0.61
                                   centimeter.
Q2034...........................  Influenza virus vaccine, split    L1                                       N/A
                                   virus, for intramuscular use
                                   (Agriflu).
Q2045...........................  Injection, human fibrinogen       K2                                      0.73
                                   concentrate, 1 mg *.
Q2046...........................  Injection, aflibercept, 1 mg *..  K2                                    980.50
Q2048...........................  Injection, doxorubicin            K2                                    537.21
                                   hydrochloride, liposomal,
                                   doxil, 10 mg *.
Q2049...........................  Injection, doxorubicin            K2                                    498.26
                                   hydrochloride, liposomal,
                                   imported lipodox, 10 mg.
----------------------------------------------------------------------------------------------------------------
* HCPCS code Q2045 replaced code J1680, HCPCS code Q2046 replaced code C9291, and HCPCS code Q2048 replaced code
  J9001 beginning July 1, 2012.

    Through the July 2012 quarterly update CR, we also implemented ASC 
payment for five new Category III CPT codes as ASC covered surgical 
procedures, effective July 1, 2012. These codes are listed in Table 38 
below, along with their proposed payment indicators and proposed 
payment rates for CY 2013. Because the payment rates associated with 
the new Category III CPT codes that became effective for July are not 
available to us in time for incorporation into the Addenda to this 
OPPS/ASC proposed rule, our policy is to include the codes, their 
proposed payment indicators, and proposed payment rates in the preamble 
to the proposed rule but not in the Addenda to the proposed rule. The 
codes listed in Table 38 and their final payment indicators and rates 
will be included in Addendum AA to the CY 2013 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 three of the five new Category III CPT 
codes implemented in July 2012 and to assign payment indicator ``J8'' 
(Device-intensive procedure added to ASC list in CY 2008 or later; paid 
at adjusted rate) to the remaining two new Category III CPT codes 
implemented in July 2012. We believe that these procedures would not be 
expected to pose a significant safety risk to Medicare beneficiaries or 
would not be expected to require an overnight stay if performed in 
ASCs. We 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 
2012 through the quarterly update CR, as listed in Table 38 below. We 
are proposing to finalize their payment indicators and their payment 
rates in the CY 2013 OPPS/ASC final rule with comment period.

  Table 38--New Category III CPT Codes Implemented in July 2012 as ASC
                       Covered Surgical Procedures
------------------------------------------------------------------------
                                        Proposed CY 2013    Proposed CY
   CY 2012 CPT code      CY 2012 long        payment       2013 payment
                          descriptor        indicator          rate
------------------------------------------------------------------------
0302T................  Insertion or     J8                     $7,181.95
                        removal and
                        replacement of
                        intracardiac
                        ischemia
                        monitoring
                        system
                        including
                        imaging
                        supervision
                        and
                        interpretation
                        when performed
                        and intra-
                        operative
                        interrogation
                        and
                        programming
                        when
                        performed;
                        complete
                        system
                        (includes
                        device and
                        electrode).
0303T................  Insertion or     G2                      2,129.99
                        removal and
                        replacement of
                        intracardiac
                        ischemia
                        monitoring
                        system
                        including
                        imaging
                        supervision
                        and
                        interpretation
                        when performed
                        and intra-
                        operative
                        interrogation
                        and
                        programming
                        when
                        performed;
                        electrode only.
0304T................  Insertion or     J8                      5,816.80
                        removal and
                        replacement of
                        intracardiac
                        ischemia
                        monitoring
                        system
                        including
                        imaging
                        supervision
                        and
                        interpretation
                        when performed
                        and intra-
                        operative
                        interrogation
                        and
                        programming
                        when
                        performed;
                        device only.
0307T................  Removal of       G2                        968.15
                        intracardiac
                        ischemia
                        monitoring
                        device.
0308T................  Insertion of     G2                        940.65
                        ocular
                        telescope
                        prosthesis
                        including
                        removal of
                        crystalline
                        lens *.
------------------------------------------------------------------------
* CPT code 0308T replaced HCPCS code C9732 beginning July 1, 2012.

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 
2013 OPPS/ASC Final Rule With Comment Period
    As has been our practice in the past, we incorporate those new 
Category I and Category III CPT codes and new Level II HCPCS codes that 
are effective January 1 in the final rule with comment period updating 
the ASC payment system for the following calendar year. These codes are 
released to the public via the CMS HCPCS (for Level II HCPCS codes) and 
AMA Web sites (for CPT codes), and also through the January ASC 
quarterly update CRs. In the past, we also have released new Level II 
HCPCS codes that 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 2013. 
Specifically, for CY

[[Page 45162]]

2013, we are proposing to include in Addenda AA and BB to the CY 2013 
OPPS/ASC final rule with comment period the new Category I and III CPT 
codes effective January 1, 2013, that would be incorporated in the 
January 2013 ASC quarterly update CR and the new Level II HCPCS codes, 
effective October 1, 2012 or January 1, 2013, that would be released by 
CMS in its October 2012 and January 2013 ASC quarterly update CRs. 
These codes would be flagged with comment indicator ``NI'' in Addenda 
AA and BB to the CY 2013 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 2013 OPPS/ASC final rule with comment period 
and would be finalized in the CY 2014 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. We are proposing to update the list of ASC covered 
surgical procedures by adding 16 procedures to the list. We determined 
that these 16 procedures would not be expected to pose a significant 
safety risk to Medicare beneficiaries and would not be expected to 
require an overnight stay if performed in ASCs.
    The 16 procedures that we are proposing to add to the ASC list of 
covered surgical procedures, including their HCPCS code long 
descriptors and proposed CY 2013 payment indicators, are displayed in 
Table 39 below. We invite public comment on this proposal.

   Table 39--Proposed New ASC Covered Surgical Procedures for CY 2013
------------------------------------------------------------------------
                                                    Proposed CY 2013 ASC
   CY 2012 HCPCS code      CY 2012 long descriptor  payment indicator **
------------------------------------------------------------------------
37205...................  Transcatheter placement   G2
                           of an intravascular
                           stent(s) (except
                           coronary, carotid,
                           vertebral, iliac, and
                           lower extremity
                           arteries),
                           percutaneous; initial
                           vessel.
37206...................  Transcatheter placement   G2
                           of an intravascular
                           stent(s) (except
                           coronary, carotid,
                           vertebral, iliac, and
                           lower extremity
                           arteries),
                           percutaneous; each
                           additional vessel (list
                           separately in addition
                           to code for primary
                           procedure).
37224...................  Revascularization,        G2
                           endovascular, open or
                           percutaneous, femoral,
                           popliteal artery(s),
                           unilateral; with
                           transluminal
                           angioplasty.
37225...................  Revascularization,        G2
                           endovascular, open or
                           percutaneous, femoral,
                           popliteal artery(s),
                           unilateral; with
                           atherectomy, includes
                           angioplasty within the
                           same vessel, when
                           performed.
37226...................  Revascularization,        G2
                           endovascular, open or
                           percutaneous, femoral,
                           popliteal artery(s),
                           unilateral; with
                           transluminal stent
                           placement(s), includes
                           angioplasty within the
                           same vessel, when
                           performed.
37227...................  Revascularization,        J8
                           endovascular, open or
                           percutaneous, femoral,
                           popliteal artery(s),
                           unilateral; with
                           transluminal stent
                           placement(s) and
                           atherectomy, includes
                           angioplasty within the
                           same vessel, when
                           performed.
37228...................  Revascularization,        G2
                           endovascular, open or
                           percutaneous, tibial,
                           peroneal artery,
                           unilateral, initial
                           vessel; with
                           transluminal
                           angioplasty.
37229...................  Revascularization,        G2
                           endovascular, open or
                           percutaneous, tibial,
                           peroneal artery,
                           unilateral, initial
                           vessel; with
                           atherectomy, includes
                           angioplasty within the
                           same vessel, when
                           performed.
37230...................  Revascularization,        G2
                           endovascular, open or
                           percutaneous, tibial,
                           peroneal artery,
                           unilateral, initial
                           vessel; with
                           transluminal stent
                           placement(s), includes
                           angioplasty within the
                           same vessel, when
                           performed.
37231...................  Revascularization,        J8
                           endovascular, open or
                           percutaneous, tibial,
                           peroneal artery,
                           unilateral, initial
                           vessel; with
                           transluminal stent
                           placement(s) and
                           atherectomy, includes
                           angioplasty within the
                           same vessel, when
                           performed.
37232...................  Revascularization,        G2
                           endovascular, open or
                           percutaneous, tibial/
                           peroneal artery,
                           unilateral, each
                           additional vessel; with
                           transluminal
                           angioplasty (list
                           separately in addition
                           to code for primary
                           procedure).
37233...................  Revascularization,        G2
                           endovascular, open or
                           percutaneous, tibial/
                           peroneal artery,
                           unilateral, each
                           additional vessel; with
                           atherectomy, includes
                           angioplasty within the
                           same vessel, when
                           performed (list
                           separately in addition
                           to code for primary
                           procedure).
37234...................  Revascularization,        G2
                           endovascular, open or
                           percutaneous, tibial/
                           peroneal artery,
                           unilateral, each
                           additional vessel; with
                           transluminal stent
                           placement(s), includes
                           angioplasty within the
                           same vessel, when
                           performed (list
                           separately in addition
                           to code for primary
                           procedure).
37235...................  Revascularization,        G2
                           endovascular, open or
                           percutaneous, tibial/
                           peroneal artery,
                           unilateral, each
                           additional vessel; with
                           transluminal stent
                           placement(s) and
                           atherectomy, includes
                           angioplasty within the
                           same vessel, when
                           performed (list
                           separately in addition
                           to code for primary
                           procedure).
0299T...................  Extracorporeal shock      R2 *
                           wave for integumentary
                           wound healing, high
                           energy, including
                           topical application and
                           dressing care; initial
                           wound.
0300T...................  Extracorporeal shock      R2 *
                           wave for integumentary
                           wound healing, high
                           energy, including
                           topical application and
                           dressing care.
------------------------------------------------------------------------
* If designation is temporary.
** Proposed 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 developed
  for publication, current law authorizes a negative update to the MPFS
  payment rates for CY 2013. For a discussion of those rates, we refer
  readers to the CY 2013 MPFS proposed rule.

[[Page 45163]]

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 nonfacility 
PE RVUs; payment based on OPPS relative payment weight); ``P3'' 
(Office-based surgical procedures added to ASC list in CY 2008 or later 
with MPFS nonfacility PE RVUs; payment based on MPFS nonfacility PE 
RVUs); or ``R2'' (Office-based surgical procedure added to ASC list in 
CY 2008 or later without MPFS nonfacility PE RVUs; payment based on 
OPPS relative payment weight), depending on whether we estimated it 
would be paid according to the standard ASC payment methodology based 
on its OPPS relative payment weight or at the MPFS nonfacility PE RVU-
based amount.
    Consistent with our final policy to annually review and update the 
list of surgical procedures eligible for payment in ASCs, each year we 
identify surgical procedures as either temporarily office-based, 
permanently office-based, or non-office-based, after taking into 
account updated volume and utilization data.
(2) Proposed Changes for CY 2013 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 2011 volume and utilization data and the clinical 
characteristics for all surgical procedures that are assigned payment 
indicator ``G2'' in CY 2012, as well as for those procedures assigned 
one of the temporary office-based payment indicators, specifically 
``P2*,'' ``P3*,'' or ``R2*'' in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74400 through 74408).
    Our review of the CY 2011 volume and utilization data resulted in 
our identification of six covered surgical procedures that we believe 
meet the criteria for designation as office-based. The data indicate 
that the procedures are performed more than 50 percent of the time in 
physicians' offices, and that our medical advisors believe the services 
are of a level of complexity consistent with other procedures performed 
routinely in physicians' offices. The six CPT codes we are proposing to 
permanently designate as office-based are listed in Table 40 below. We 
invite public comment on this proposal.

      Table 40--ASC Covered Surgical Procedures Proposed for Permanent Office-Based Designation for CY 2013
----------------------------------------------------------------------------------------------------------------
                                                               CY 2012 ASC payment        Proposed CY 2013 ASC
       CY 2012 CPT code          CY 2012 long descriptor            indicator             payment indicator *
----------------------------------------------------------------------------------------------------------------
31295.........................  Nasal/sinus endoscopy,     G2                          P2
                                 surgical; with dilation
                                 of maxillary sinus
                                 ostium (eg, balloon
                                 dilation), transnasal or
                                 via canine fossa.
31296.........................  Nasal/sinus endoscopy,     G2                          P2
                                 surgical; with dilation
                                 of frontal sinus ostium
                                 (eg, balloon dilation).
31297.........................  Nasal/sinus endoscopy,     G2                          P2
                                 surgical; with dilation
                                 of sphenoid sinus ostium
                                 (eg, balloon dilation).
53860.........................  Transurethral              G2                          P2
                                 radiofrequency micro-
                                 remodeling of the female
                                 bladder neck and
                                 proximal urethra for
                                 stress urinary
                                 incontinence.
64566.........................  Posterior tibial           G2                          P3
                                 neurostimulation,
                                 percutaneous needle
                                 electrode, single
                                 treatment, includes
                                 programming.
G0365.........................  Vessel mapping of vessels  G2                          P2
                                 for hemodialysis access
                                 (services for
                                 preoperative vessel
                                 mapping prior to
                                 creation of hemodialysis
                                 access using an
                                 autogenous hemodialysis
                                 conduit, including
                                 arterial inflow and
                                 venous outflow).
----------------------------------------------------------------------------------------------------------------
* Proposed 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 developed for
  publication, current law authorizes a negative update to the MPFS payment rates for CY 2013. For a discussion
  of those rates, we refer readers to the CY 2013 MPFS proposed rule.

    We also reviewed CY 2011 volume and utilization data and other 
information for the eight procedures finalized for temporary office-
based status in the CY 2012 OPPS/ASC final rule with comment period (76 
FR 74404 through 74408). Among these eight procedures, there were very 
few claims data for six procedures: CPT code 0099T (Implantation of 
intrastromal corneal ring segments); CPT code 0124T (Conjunctival 
incision with posterior extrascleral placement of pharmacological agent 
(does not include supply of medication)); CPT code 0226T (Anoscopy, 
high resolution (HRA) (with magnification and chemical agent 
enhancement); diagnostic, including collection of specimen(s) by 
brushing or washing when performed); CPT code 0227T (Anoscopy, high 
resolution (HRA) (with magnification and chemical agent enhancement); 
with biopsy(ies)); CPT code C9800 (Dermal injection procedure(s) for 
facial lipodystrophy syndrome (LDS) and provision of Radiesse or 
Sculptra dermal filler, including all items and supplies); and CPT code 
67229 (Treatment of extensive or progressive retinopathy, one or more 
sessions; preterm infant (less than 37 weeks gestation at birth), 
performed from birth up to 1 year of age (eg, retinopathy of 
prematurity), photocoagulation or cryotherapy). Consequently, we are 
proposing to maintain their temporary office-based designations for CY 
2013.

[[Page 45164]]

    The volume and utilization data for the remaining two procedures 
that have temporary office-based designations for CY 2012 are 
sufficient to indicate that these procedures are not performed 
predominantly in physicians' offices and, therefore, should not be 
assigned an office-based payment indicator in CY 2013. Consequently, we 
are proposing to assign payment indicator ``G2'' to the following two 
covered surgical procedure codes in CY 2013:
     CPT code 37761 (Ligation of perforator vein(s), 
subfascial, open, including ultrasound guidance, when performed, 1 
leg); and
     CPT code 0232T (Injection(s), platelet rich plasma, any 
tissue, including image guidance, harvesting and preparation when 
performed).
    The proposed CY 2013 payment indicator designations for the eight 
procedures that were temporarily designated as office-based in CY 2012 
are displayed in Table 41 below. The procedures for which the proposed 
office-based designations for CY 2013 are temporary also are indicated 
by asterisks in Addendum AA to this proposed rule (which is available 
via the Internet on the CMS Web site). We invite public comment on this 
proposal.

   Table 41--Proposed CY 2013 Payment Indicators for ASC Covered Surgical Procedures Designated as Temporarily
                       Office-Based in the CY 2012 OPPS/ASC Final Rule With Comment Period
----------------------------------------------------------------------------------------------------------------
                                                               CY 2012 ASC payment        Proposed CY 2013 ASC
       CY 2012 CPT code          CY 2012 long descriptor            indicator             payment indicator **
----------------------------------------------------------------------------------------------------------------
37761.........................  Ligation of perforator     R2 *                        G2
                                 vein(s), subfascial,
                                 open, including
                                 ultrasound guidance,
                                 when performed, 1 leg.
67229.........................  Treatment of extensive or  R2 *                        R2 *
                                 progressive retinopathy,
                                 one or more sessions;
                                 preterm infant (less
                                 than 37 weeks gestation
                                 at birth), performed
                                 from birth up to 1 year
                                 of age (eg, retinopathy
                                 of prematurity),
                                 photocoagulation or
                                 cryotherapy.
0099T.........................  Implantation of            R2 *                        R2 *
                                 intrastromal corneal
                                 ring segments.
0124T.........................  Conjunctival incision      R2 *                        R2 *
                                 with posterior
                                 extrascleral placement
                                 of pharmacological agent
                                 (does not include supply
                                 of medication).
0226T.........................  Anoscopy, high resolution  R2 *                        R2 *
                                 (HRA) (with
                                 magnification and
                                 chemical agent
                                 enhancement);
                                 diagnostic, including
                                 collection of
                                 specimen(s) by brushing
                                 or washing when
                                 performed.
0227T.........................  Anoscopy, high resolution  R2 *                        R2 *
                                 (HRA) (with
                                 magnification and
                                 chemical agent
                                 enhancement); with
                                 biopsy(ies).
0232T.........................  Injection(s), platelet     R2 *                        G2
                                 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.
** Proposed 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 developed for
  publication, current law authorizes a negative update to the MPFS payment rates for CY 2013. For a discussion
  of those rates, we refer readers to the CY 2013 MPFS proposed rule.

c. ASC Covered Surgical Procedures Designated as Device-Intensive
(1) Background
    As discussed in the August 2, 2007 final rule (72 FR 42503 through 
42508), we adopted a modified payment methodology for calculating the 
ASC payment rates for covered surgical procedures that are assigned to 
the subset of OPPS device-dependent APCs with a device offset 
percentage greater than 50 percent of the APC cost under the OPPS, in 
order to ensure that payment for the procedure is adequate to provide 
packaged payment for the high-cost implantable devices used in those 
procedures.
(2) Proposed Changes to List of Covered Surgical Procedures Designated 
as Device-Intensive for CY 2013
    For CY 2013, we are proposing to update the ASC list of covered 
surgical procedures that are eligible for payment according to our 
device-intensive procedure payment methodology, consistent with the 
proposed OPPS device-dependent APC update, reflecting the proposed APC 
assignments of procedures, designation of APCs as device-dependent, and 
APC device offset percentages based on the CY 2011 OPPS claims and cost 
report data available for the proposed rule. The OPPS device-dependent 
APCs are discussed further in section II.A.2.d.(1) of this 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 2013 are listed in Table 
42 below. The CPT code, the CPT code short descriptor, the proposed CY 
2013 ASC payment indicator (PI), the proposed CY 2013 OPPS APC 
assignment, the proposed CY 2013 OPPS APC device offset percentage, and 
an indication if the full credit/partial credit (FB/FC) device 
adjustment policy would apply are also listed in Table 42 below. A 
review of the FB/FC device adjustment policy is also found below. All 
of these procedures are included in Addendum AA to this proposed rule 
(which is available via the Internet on the CMS Web site). We invite 
public comment on this proposal.
d. Proposed Adjustment to ASC Payments for No Cost/Full Credit and 
Partial Credit Devices
    We generally discuss the no cost/full credit and partial credit 
devices under the heading entitled ``Proposed ASC Payment for Covered 
Surgical Procedure.'' However, because the no cost/full credit and 
partial credit device policy applies to a subset of device-intensive 
procedures, we believe it would be clearer to discuss the device-
intensive procedure policy and the no cost/full credit and partial 
credit device policy consecutively and to consolidate the tables that 
we usually publish separately. Our ASC policy with regard to payment 
for costly devices implanted in ASCs at no cost/full credit or partial 
credit as set forth in Sec.  416.179 is consistent with the OPPS 
policy. The proposed CY 2013 OPPS APCs and devices subject to the 
adjustment policy are discussed in section IV.B.2. of this

[[Page 45165]]

proposed rule. The established ASC policy adopts the OPPS policy and 
reduces payment to ASCs when a specified device is furnished without 
cost or with full credit or partial credit for the cost of the device 
for those ASC covered surgical procedures that are assigned to APCs 
under the OPPS to which this policy applies. We refer readers to the CY 
2009 OPPS/ASC final rule with comment period for a full discussion of 
the ASC payment adjustment policy for no cost/full credit and partial 
credit devices (73 FR 68742 through 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 2013. Table 42 below displays the ASC covered device-
intensive procedures that we are proposing would be subject to the no 
cost/full credit or partial credit device adjustment policy for CY 
2013. Specifically, when a procedure that is listed in Table 42 is 
subject to the no cost/full credit or partial credit device adjustment 
policy and is performed to implant a device that is listed in Table 43 
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.
    For partial credit, we are proposing to reduce the payment for 
implantation procedures listed in Table 42 that are subject to the no 
cost/full credit or partial credit device adjustment policy by one-half 
of the device offset amount that would be applied if a device was 
provided at no cost or with full credit, if the credit to the ASC is 50 
percent or more of the cost of the new device. The ASC would append the 
HCPCS ``FC'' modifier to the HCPCS code for a surgical procedure listed 
in Table 42 that is subject to the no cost/full credit or partial 
credit device adjustment policy, when the facility receives a partial 
credit of 50 percent or more of the cost of a device listed in Table 43 
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.
    We invite public comments on these proposals.

 Table 42--ASC Covered Surgical Procedures Proposed for Device-Intensive Designation for CY 2013, Including ASC
     Covered Surgical Procedures for Which We Propose That the No Cost/Full Credit or Partial Credit Device
                                          Adjustment Policy Would Apply
----------------------------------------------------------------------------------------------------------------
                                                                                Proposed  CY
                                            Proposed  CY 2013   Proposed  CY    2013  device-    Proposing that
       CPT code          Short descriptor        ASC PI         2013 OPPS APC   dependent APC   the FB/FC policy
                                                                               offset percent     would apply
----------------------------------------------------------------------------------------------------------------
0282T.................  Periph field       J8                            0040              55  Yes.
                         stimul trial.
0283T.................  Periph field       J8                            0318              87  Yes.
                         stimul perm.
0302T.................  Icar ischm mntrng  J8                            0089              70  Yes.
                         sys compl.
0304T.................  Icar isch mntrng   J8                            0090              71  Yes.
                         sys device.
19296.................  Place po breast    J8                            0648              50  Yes.
                         cath for rad.
19297.................  Place breast cath  J8                            0648              50  Yes.
                         for rad.
19298.................  Place breast rad   J8                            0648              50  Yes.
                         tube/caths.
19325.................  Enlarge breast     J8                            0648              50  Yes.
                         with implant.
19342.................  Delayed breast     J8                            0648              50  Yes.
                         prosthesis.
19357.................  Breast             J8                            0648              50  Yes.
                         reconstruction.
24361.................  Reconstruct elbow  J8                            0425              58  Yes.
                         joint.
24363.................  Replace elbow      J8                            0425              58  Yes.
                         joint.
24366.................  Reconstruct head   J8                            0425              58  Yes.
                         of radius.
25441.................  Reconstruct wrist  J8                            0425              58  Yes.
                         joint.
25442.................  Reconstruct wrist  J8                            0425              58  Yes.
                         joint.
25446.................  Wrist replacement  J8                            0425              58  Yes.
27446.................  Revision of knee   J8                            0425              58  Yes.
                         joint.
33206.................  Insertion of       J8                            0089              70  Yes.
                         heart pacemaker.
33207.................  Insertion of       J8                            0089              70  Yes.
                         heart pacemaker.
33208.................  Insertion of       J8                            0655              73  Yes.
                         heart pacemaker.
33212.................  Insertion of       J8                            0090              71  Yes.
                         pulse generator.
33213.................  Insertion of       J8                            0654              74  Yes.
                         pulse generator.
33214.................  Upgrade of         J8                            0655              73  Yes.
                         pacemaker system.
33221.................  Insert pulse gen   J8                            0654              74  Yes.
                         mult leads.
33224.................  Insert pacing      J8                            0655              73  Yes.
                         lead & connect.
33225.................  Lventric pacing    J8                            0655              73  Yes.
                         lead add-on.
33227.................  Remove&replace pm  J8                            0090              71  Yes.
                         gen singl.
33228.................  Remv&replc pm gen  J8                            0654              74  Yes.
                         dual lead.
33229.................  Remv&replc pm gen  J8                            0654              74  Yes.
                         mult leads.

[[Page 45166]]

 
33230.................  Insrt pulse gen w/ J8                            0107              83  Yes.
                         dual leads.
33231.................  Insrt pulse gen w/ J8                            0107              83  Yes.
                         dual leads.
33240.................  Insert pulse       J8                            0107              83  Yes.
                         generator.
33249.................  Eltrd/insert pace- J8                            0108              84  Yes.
                         defib.
33262.................  Remv&replc cvd     J8                            0107              83  Yes.
                         gen sing lead.
33263.................  Remv&replc cvd     J8                            0107              83  Yes.
                         gen dual lead.
33264.................  Remv&replc cvd     J8                            0107              83  Yes.
                         gen mult lead.
33282.................  Implant pat-       J8                            0680              74  Yes.
                         active ht record.
37227.................  Fem/popl revasc    J8                            0319              53  No.
                         stnt & ather.
37231.................  Tib/per revasc     J8                            0319              53  No.
                         stent & ather.
53440.................  Male sling         J8                            0385              63  Yes.
                         procedure.
53444.................  Insert tandem      J8                            0385              63  Yes.
                         cuff.
53445.................  Insert uro/ves     J8                            0386              70  Yes.
                         nck sphincter.
53447.................  Remove/replace ur  J8                            0386              70  Yes.
                         sphincter.
54400.................  Insert semi-rigid  J8                            0385              63  Yes.
                         prosthesis.
54401.................  Insert self-contd  J8                            0386              70  Yes.
                         prosthesis.
54405.................  Insert multi-comp  J8                            0386              70  Yes.
                         penis pros.
54410.................  Remove/replace     J8                            0386              70  Yes.
                         penis prosth.
54416.................  Remv/repl penis    J8                            0386              70  Yes.
                         contain pros.
55873.................  Cryoablate         J8                            0674              54  No.
                         prostate.
61885.................  Insrt/redo         J8                            0039              86  Yes.
                         neurostim 1
                         array.
61886.................  Implant neurostim  J8                            0315              88  Yes.
                         arrays.
62361.................  Implant spine      J8                            0227              82  Yes.
                         infusion pump.
62362.................  Implant spine      J8                            0227              82  Yes.
                         infusion pump.
63650.................  Implant            J8                            0040              55  Yes.
                         neuroelectrodes.
63655.................  Implant neuro-     J8                            0061              66  Yes.
                         electrodes.
63663.................  Revise spine       J8                            0040              55  Yes.
                         eltrd perq aray.
63664.................  Revise spine       J8                            0040              55  Yes.
                         eltrd plate.
63685.................  Insrt/redo spine   J8                            0039              86  Yes.
                         n generator.
64553.................  Implant neuro-     J8                            0040              55  Yes.
                         electrodes.
64555.................  Implant neuro-     J8                            0040              55  Yes.
                         electrodes.
64561.................  Implant neuro-     J8                            0040              55  Yes.
                         electrodes.
64565.................  Implant neuro-     J8                            0040              55  Yes.
                         electrodes.
64568.................  Implant neuro-     J8                            0318              87  Yes.
                         electrodes.
64575.................  Implant neuro-     J8                            0061              66  Yes.
                         electrodes.
64580.................  Implant neuro-     J8                            0061              66  Yes.
                         electrodes.
64581.................  Implant neuro-     J8                            0061              66  Yes.
                         electrodes.
64590.................  Insrt/redo pn/     J8                            0039              86  Yes.
                         gastr stimul.
65770.................  Revise cornea      J8                            0293              65  No.
                         with implant.
69714.................  Implant temple     J8                            0425              60  Yes.
                         bone w/stimul.
69715.................  Temple bne implnt  J8                            0425              60  Yes.
                         w/stimulat.
69717.................  Temple bone        J8                            0425              60  Yes.
                         implant revision.
69718.................  Revise temple      J8                            0425              60  Yes.
                         bone implant.
69930.................  Implant cochlear   J8                            0259              84  Yes.
                         device.
G0448.................  Place perm pacing  J8                            0108              84  Yes.
                         cardiovert.
----------------------------------------------------------------------------------------------------------------

 Table 43--Proposed Devices for Which the ``Fb'' or ``Fc'' Modifier Must
Be Reported With the Procedure Code in Cy 2013 When Furnished at No Cost
                     or With Full or Partial Credit
------------------------------------------------------------------------
     CY 2012 device HCPCS Code            CY 2012 short descriptor
------------------------------------------------------------------------
C1721.............................  AICD, dual chamber.
C1722.............................  AICD, single chamber.
C1728.............................  Cath, brachytx seed adm.
C1762.............................  Conn tiss, human (inc fascia).
C1763.............................  Conn tiss, non-human.
C1764.............................  Event recorder, cardiac.
C1767.............................  Generator, neurostim, imp.
C1771.............................  Rep dev, urinary, w/sling.
C1772.............................  Infusion pump, programmable.
C1776.............................  Joint device (implantable).
C1777.............................  Stent, non-coat/cov w/o del.
C1778.............................  Lead, neurostimulator.
C1779.............................  Lead, pmkr, transvenous VDD.

[[Page 45167]]

 
C1781.............................  Mesh (implantable).
C1785.............................  Pmkr, dual, rate-resp.
C1786.............................  Pmkr, single, rate-resp.
C1789.............................  Prosthesis, breast, imp.
C1813.............................  Prosthesis, penile, inflatab.
C1815.............................  Pros, urinary sph, imp.
C1820.............................  Generator, neuro rechg bat sys.
C1881.............................  Dialysis access system.
C1882.............................  AICD, other than sing/dual.
C1891.............................  Infusion pump, non-prog, perm.
C1895.............................  Lead, AICD, endo dual coil.
C1897.............................  Lead, neurostim, test kit.
C1898.............................  Lead, pmkr, other than trans.
C1900.............................  Lead coronary venous.
C2618.............................  Probe, cryoablation.
C2619.............................  Pmkr, dual, non rate-resp.
C2620.............................  Pmkr, single, non rate-resp.
C2621.............................  Pmkr, other than sing/dual.
C2622.............................  Prosthesis, penile, non-inf.
C2626.............................  Infusion pump, non-prog, temp.
C2631.............................  Rep dev, urinary, w/o sling.
L8600.............................  Implant breast silicone/eq.
L8614.............................  Cochlear device/system.
L8680.............................  Implt neurostim elctr each.
L8685.............................  Implt nrostm pls gen sng rec.
L8686.............................  Implt nrostm pls gen sng non.
L8687.............................  Implt nrostm pls gen dua rec.
L8688.............................  Implt nrostm pls gen dua non.
L8690.............................  Aud osseo dev, int/ext comp.
------------------------------------------------------------------------

e. ASC Treatment of Surgical Procedures Proposed for Removal From the 
OPPS Inpatient List for CY 2013
    As we discussed in the CY 2009 OPPS/ASC final rule with comment 
period (73 FR 68724), we adopted a policy to include in our annual 
evaluation of the ASC list of covered surgical procedures, a review of 
the procedures that are being proposed for removal from the OPPS 
inpatient list for possible inclusion on the ASC list of covered 
surgical procedures. We evaluated each of the two procedures we are 
proposing to remove from the OPPS inpatient list for CY 2013 according 
to the criteria for exclusion from the list of covered ASC surgical 
procedures. We believe that these two procedures should continue to be 
excluded from the ASC list of covered surgical procedures for CY 2013 
because they would be expected to pose a significant risk to 
beneficiary safety or to require an overnight stay in ASCs. The CPT 
codes for these two procedures and their long descriptors are listed in 
Table 44 below.

Table 44--Procedures Proposed for Exclusion From the Asc List of Covered
  Procedures for Cy 2013 That Are Proposed for Removal From the Cy 2013
                           Opps Inpatient List
------------------------------------------------------------------------
         CPT code                         Long descriptor
------------------------------------------------------------------------
22856....................  Total disc arthroplasty (artificial disc),
                            anterior approach, including discectomy with
                            end plate preparation (includes
                            osteophytectomy for nerve root or spinal
                            cord decompression and microdissection),
                            single interspace, cervical.
27447....................  Arthroplasty, knee, condyle and plateau;
                            medical and lateral compartments with or
                            without patella resurfacing (total knee
                            arthroplasty).
------------------------------------------------------------------------

    We invite public comments 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 2013 
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 2013. For example, a covered ancillary service that was separately 
paid under the revised ASC payment system in CY 2012 may be proposed 
for packaged status under the CY 2013 OPPS and, therefore, also under 
the ASC payment system for CY 2013. Comment indicator ``CH,'' discussed 
in section XII.B. of this proposed rule, is used in Addendum BB to this 
proposed rule (which is 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 2013.
    Except for the Level II HCPCS codes listed in Table 37 of this 
proposed rule, all ASC covered ancillary services and their proposed 
payment indicators for CY 2013 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 indicators ``G2'' and ``A2.'' Payment indicator ``A2'' was 
developed to identify procedures that were included on the list of ASC 
covered surgical procedures in CY 2007 and were, therefore, subject to 
transitional payment prior to CY 2011. Although the 4-year transitional 
period has ended and payment indicator ``A2'' is no longer required to 
identify surgical procedures subject to transitional payment, we 
retained payment indicator ``A2'' because it is used to identify 
procedures that are exempted from application of the office-based 
designation.
    The rate calculation established for device-intensive procedures 
(payment indicator ``J8'') is structured so that the packaged device 
payment amount is the same as under the OPPS, and only the service 
portion of the rate is subject to the ASC standard ratesetting 
methodology. In the CY 2012 OPPS/ASC final rule with comment period (76

[[Page 45168]]

FR 74377 through 74451), we updated the CY 2011 ASC payment rates for 
ASC covered surgical procedures with payment indicators of ``A2,'' 
``G2,'' and ``J8'' using CY 2010 data, consistent with the CY 2012 OPPS 
update. Payment rates for device-intensive procedures also were updated 
to incorporate the CY 2012 OPPS device offset percentages.
    Payment rates for office-based procedures (payment indicators 
``P2,'' ``P3,'' and ``R2'') are the lower of the MPFS nonfacility PE 
RVU-based amount (we refer readers to the CY 2013 MPFS proposed rule) 
or the amount calculated using the ASC standard ratesetting methodology 
for the procedure. In the CY 2012 OPPS/ASC final rule with comment 
period, we updated the payment amounts for office-based procedures 
(payment indicators ``P2,'' ``P3,'' and ``R2'') using the most recent 
available MPFS and OPPS data. We compared the estimated CY 2012 rate 
for each of the 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 2012 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 2013
    We are proposing to update ASC payment rates for CY 2013 using the 
established rate calculation methodologies under Sec.  416.171. We note 
that, as discussed in section II.A.2.f. of this proposed rule, because 
we are proposing to base the OPPS relative payment weights on geometric 
mean costs for CY 2013, the ASC system would shift to the use of 
geometric means to determine relative payment weights under the ASC 
standard ratesetting methodology. We are proposing to continue to use 
the amount calculated under the ASC standard ratesetting methodology 
for procedures assigned payment indicators ``A2'' and ``G2.''
    We are proposing that payment rates for office-based procedures 
(payment indicators ``P2,'' ``P3,'' and ``R2'') and device-intensive 
procedures (payment indicator ``J8'') be calculated according to our 
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 2013 
OPPS proposal that reflects updated proposed OPPS device offset 
percentages, and to make payment for office-based procedures at the 
lesser of the proposed CY 2013 MPFS nonfacility PE RVU-based amount or 
the proposed CY 2013 ASC payment amount calculated according to the 
standard ratesetting methodology.
    We invite public comment on these proposals.
c. Waiver of Coinsurance and Deductible for Certain Preventive Services
    Section 1833(a)(1) and section 1833(b)(1) of the Act waive the 
coinsurance and the Part B deductible for those preventive services 
under section 1861(ddd)(3)(A) of the Act as described in section 
1861(ww)(2) of the Act (excluding electrocardiograms) that are 
recommended by the United States Preventive Services Task Force 
(USPSTF) with a grade of A or B for any indication or population and 
that are appropriate for the individual. Section 1833(b) of the Act 
also waives the Part B deductible for colorectal cancer screening tests 
that become diagnostic. In the CY 2011 OPPS/ASC final rule with comment 
period, we finalized our policies with respect to these provisions and 
identified the ASC covered surgical procedures and covered ancillary 
services that are preventive services that are recommended by the 
USPSTF with a grade of A or B for which the coinsurance and the 
deductible are waived. For a complete discussion of our policies and 
identified services, we refer readers to the CY 2011 OPPS/ASC final 
rule with comment period (75 FR 72047 through 72049). We are not 
proposing any changes to our policies or the list of services. We 
identify these services with a double asterisk in Addenda AA and BB to 
this proposed rule.
d. Payment for the Cardiac Resynchronization Therapy Composite
    Cardiac resynchronization therapy (CRT) uses electronic devices to 
sequentially pace both sides of the heart to improve its output. CRT 
utilizes a pacing electrode implanted in combination with either a 
pacemaker or an implantable cardioverter defibrillator (ICD). CRT 
performed by the implantation of an ICD along with a pacing electrode 
is referred to as ``CRT-D.'' In the CY 2012 OPPS/ASC final rule with 
comment period, we finalized our proposal to establish the CY 2012 ASC 
payment rate for CRT-D services based on the OPPS payment rate 
applicable to APC 0108 when procedures described by CPT codes 33225 and 
33249 are performed on the same date of service in an ASC. ASCs use the 
corresponding HCPCS Level II G-code (G0448) for proper reporting when 
the procedures described by CPT codes 33225 and 33249 are performed on 
the same date of service. For a complete discussion of our policy 
regarding payment for CRT-D services in ASCs, we refer readers to the 
CY 2012 OPPS/ASC final rule with comment period (76 FR 74427 through 
74428). We are not proposing any changes to our current policy 
regarding ASC payment for CRT-D services for CY 2013.
e. Proposed Payment for Low Dose Rate (LDR) Prostate Brachytherapy 
Composite
    LDR prostate brachytherapy is a treatment for prostate cancer in 
which hollow needles or catheters are inserted into the prostate, 
followed by permanent implantation of radioactive sources into the 
prostate through the needles/catheters. At least two CPT codes are used 
to report the treatment service because there are separate codes that 
describe placement of the needles/catheters and the application of the 
brachytherapy sources: CPT code 55875 (Transperineal placement of 
needles or catheters into prostate for interstitial radioelement 
application, with our without cystoscopy) and CPT code 77778 
(Interstitial radiation source application; complex). Generally, the 
component services represented by both codes are provided in the same 
operative session on the same date of services to the Medicare 
beneficiary being treated with LDR brachytherapy for prostate cancer.
    As detailed in section II.A.2.e.(2) of this proposed rule, 
beginning in CY 2008 under the OPPS, we began providing a single 
payment for LDR prostate brachytherapy when the composite service, 
reported as CPT codes 55875 and 77778, is furnished in a single 
hospital encounter. We based the payment for composite APC 8001 (LDR 
Prostate Brachytherapy Composite) on the cost derived from claims for 
the same date of service that contain both CPT codes 55875 and 77778 
and that do not contain other separately paid codes that are not on the 
bypass list. We implemented this policy in the OPPS because reliance on 
single procedure claims to set payment rates for these services 
resulted in the use of mainly incorrectly coded claims for LDR prostate 
brachytherapy because a correctly coded claim should include, for the 
same date of service, CPT codes for both needle/catheter placement and 
application of radiation sources, as well as separately coded imaging 
and

[[Page 45169]]

radiation therapy planning services (72 FR 66652 through 66655).
    Currently under the ASC payment system, ASCs receive separate 
payment for the component services that comprise the LDR Prostate 
Brachytherapy Composite when the two services are provided on the same 
date of service. Specifically, ASCs that report CPT codes 55875 and 
77778 on the same date of service receive a payment for CPT code 55875 
where the payment rate is based on the OPPS relative payment weight for 
single procedure claims, and a separate payment for CPT code 77778 
where payment is the lower of the rate based on the OPPS relative 
payment weight for single procedure claims or the MPFS non-facility PE-
RVU based amount.
    A commenter to the CY 2012 OPPS/ASC proposed rule (76 FR 74429 
through 74430) requested that CMS pay for LDR prostate brachytherapy 
services under the ASC payment system based on the composite OPPS 
payment rate rather than making two separate payments for the service 
reported by CPT codes 55875 and 77778. The commenter asserted that 
basing ASC payments for the services on the composite APC methodology 
in which one payment is made for the combination of the two services 
would result in a more accurate payment than is currently being made to 
ASCs because ASC payment is based on costs from single-service claims 
that CMS has acknowledged are mostly incorrectly coded claims. We 
responded that we would take the commenter's request into consideration 
in future rulemaking, recognizing the lead time that is necessary for 
the creation of the associated G-code that would be used to identify 
when the procedures in the LDR prostate brachytherapy composite are 
performed on the same date of service in an ASC.
    Because we agree that data from OPPS claims reporting both services 
required for LDR prostate brachytherapy provide the most accurate 
relative payment weight upon which to base ASC payment for the 
component services, we are proposing to establish an ASC payment rate 
that is based on the OPPS relative payment weight applicable to APC 
8001 when CPT codes 55875 and 77778 are performed on the same date of 
service in an ASC. We also are proposing to create a HCPCS Level II G-
code so that ASCs can properly report when the procedures described by 
CPT codes 55875 and 77778 are performed on the same date of service to 
receive the appropriate LDR Prostate Brachytherapy Composite payment. 
The payment rate associated with the LDR Prostate Brachytherapy 
Composite will be temporarily identified by G-code ``GXXX1'' in 
Addendum AA of this proposed rule. The permanent G-code that will 
identify the LDR Prostate Brahytherapy Composite for ASCs will appear 
in the CY 2013 OPPS/ASC final rule with comment period. When not 
performed on the same day as the service described by CPT code 55875, 
the service described by CPT code 77778 will continue to be assigned to 
APC 0651. When not performed on the same day as the service described 
by CPT code 77778, the service described by CPT code 55875 will 
continue to be assigned to APC 0163. We invite public comment on this 
proposal.
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 or 
conditionally packaged (status indicators ``N,'' ``Q1,'' and ``Q2'') 
under the OPPS. We want to further clarify our policy regarding the 
payment indicator assignment of codes that are conditionally packaged 
in the OPPS (status indicators ``Q1'' and ``Q2''). Under the OPPS, a 
conditionally packaged code describes a HCPCS code where the payment is 
packaged when it is provided with a significant procedure but is 
separately paid when the service appears on the claim without a 
significant procedure. Because ASC services always include a surgical 
procedure, HCPCS codes that are conditionally packaged under the OPPS 
are always packaged (payment indictor ``N1'') under the ASC payment 
system. Thus, 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 nonfacility PE RVU-based (or technical component) 
amount or the rate calculated according to the ASC standard ratesetting 
methodology (72 FR 42497). However, as finalized in the CY 2011 OPPS/
ASC final rule with comment period (75 FR 72050), payment indicators 
for all nuclear medicine procedures (defined as CPT codes in the range 
of 78000 through 78999) that are designated as radiology services that 
are paid separately when provided integral to a surgical procedure on 
the ASC list are set to ``Z2'' so that payment is made based on the ASC 
standard ratesetting methodology rather than the MPFS nonfacility PE 
RVU amount, regardless of which is lower. This modification to the ASC 
payment methodology for ancillary services was finalized in response to 
a comment on the CY 2011 OPPS/ASC proposed rule that suggested it is 
inappropriate to use the MPFS-based payment methodology for nuclear 
medicine procedures because the associated diagnostic 
radiopharmaceutical, although packaged under the ASC payment system, is 
separately paid under the MPFS. We set the payment indicator to ``Z2'' 
for these nuclear medicine procedures in the ASC setting so that 
payment for these procedures would be based on the OPPS relative 
payment weight rather than the MPFS nonfacility PE RVU-based amount to 
ensure that the ASC will be compensated for the cost associated with 
the diagnostic radiopharmaceuticals.
    In addition, because the same issue exists for radiology procedures 
that use contrast agents (the contrast agent is packaged under the ASC 
payment system but is separately paid under the MPFS), we finalized in 
the CY 2012 OPPS/ASC final rule with comment period (76 FR 74429 
through 74430) to set the payment indicator to ``Z2'' for radiology 
services that use contrast agents so that payment for these procedures 
will be based on the OPPS relative payment weight and will, therefore, 
include the cost for the contrast agent.
    ASC payment policy for brachytherapy sources mirrors the payment 
policy under the OPPS. ASCs are paid for brachytherapy sources provided 
integral to ASC covered surgical procedures at prospective rates 
adopted under the OPPS or, if OPPS rates are unavailable, at 
contractor-priced rates (72 FR 42499). Since December 31, 2009, ASCs 
have been paid for brachytherapy sources provided integral to ASC 
covered surgical

[[Page 45170]]

procedures at prospective rates adopted under the OPPS.
    Other separately paid covered ancillary services in ASCs, 
specifically corneal tissue acquisition and device categories with OPPS 
pass-through status, do not have prospectively established ASC payment 
rates according to the final policies of the revised ASC payment system 
(72 FR 42502 and 42508 through 42509; 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 four devices that are eligible for pass-through payment 
in the OPPS are described by HCPCS code C1749 (Endoscope, retrograde 
imaging/illumination colonoscope device (Implantable)), HCPCS code 
C1830 (Powered bone marrow biopsy needle), HCPCS code C1840 (Lens, 
intraocular (telescopic)), and HCPCS code C1886 (Catheter, 
extravascular tissue ablation, any modality (insertable)). Payment 
amounts for HCPCS codes C1749, C1830, C1840, and C1886 under the ASC 
payment system are contractor priced. In the CY 2012 OPPS/ASC final 
rule with comment period, we finalized the expiration of pass-through 
payment for HCPCS code C1749, which will expire after December 31, 2012 
(76 FR 74278). Therefore, after December 31, 2012, the HCPCS code C1749 
device costs will be packaged into the costs of the procedures with 
which the devices are reported in the hospital claims data used in the 
development of the OPPS relative payment weights that will be used to 
establish ASC payment rates for CY 2013.
b. Proposed Payment for Covered Ancillary Services for CY 2013
    For CY 2013, 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 
2013 OPPS and ASC payment rates. The proposed CY 2013 OPPS payment 
methodologies for brachytherapy sources and separately payable drugs 
and biologicals are discussed in section II.A. and section V.B. of this 
proposed rule, respectively, and we are proposing to set the CY 2013 
ASC payment rates for those services equal to the proposed CY 2013 OPPS 
rates.
    Consistent with established ASC payment policy (72 FR 42497), the 
proposed CY 2013 payment for separately payable covered radiology 
services is based on a comparison of the CY 2013 proposed MPFS 
nonfacility PE RVU-based amounts (we refer readers to the CY 2013 MPFS 
proposed rule) and the proposed CY 2013 ASC payment rates calculated 
according to the ASC standard ratesetting methodology and then set at 
the lower of the two amounts (except as discussed below for nuclear 
medicine procedures and radiology services that use contrast agents). 
Alternatively, payment for a radiology service may be packaged into the 
payment for the ASC covered surgical procedure if the radiology service 
is packaged or conditionally packaged under the OPPS. The payment 
indicators in Addendum BB to 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 
nonfacility PE RVU-based amount are assigned payment indicator ``Z3'' 
(Radiology service paid separately when provided integral to a surgical 
procedure on ASC list; payment based on MPFS nonfacility PE RVUs).
    As finalized in the CY 2011 OPPS/ASC final rule with comment period 
(75 FR 72050), payment indicators for all nuclear medicine procedures 
(defined as CPT codes in the range of 78000 through 78999) that are 
designated as radiology services that are paid separately when provided 
integral to a surgical procedure on the ASC list are set to ``Z2'' so 
that payment is made based on the OPPS relative payment weights rather 
than the MPFS nonfacility PE RVU-based amount, regardless of which is 
lower. 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 2013. As finalized in the CY 
2012 OPPS/ASC final rule with comment period (76 FR 74429 through 
74430), we are proposing that payment indicators for radiology services 
that use contrast agents will be set to ``Z2'' in CY 2013 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.
    Most covered ancillary services and their proposed payment 
indicators are listed in Addendum BB to this proposed rule (which is 
available via the Internet on the CMS Web site). We invite public 
comment on these proposals.

E. New Technology Intraocular Lenses (NTIOLs)

1. NTIOL Cycle and Evaluation Criteria
    In the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68176), we finalized our current process for reviewing applications to 
establish new classes of new technology intraocular lenses (NTIOLs) and 
for recognizing new candidate intraocular lenses (IOLs) inserted during 
or subsequent to cataract extraction as belonging to an NTIOL class 
that is qualified for a payment adjustment. Specifically, we 
established the following process:
     We announce annually in the proposed rule updating the ASC 
and OPPS payment rates for the following calendar year, a list of all 
requests to establish new NTIOL classes accepted for review during the 
calendar year in which the proposal is published. In accordance with 
section 141(b)(3) of 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 proposed rule.
     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 major criteria set out at 42 CFR 
416.195:
     42 CFR 416.195(a)(1): The IOL is approved by the FDA;
     42 CFR 416.195(a)(2): Claims of specific clinical benefits 
and/or lens characteristics with established clinical relevance in 
comparison with currently available IOLs are approved by the FDA for 
use in labeling and advertising;
     42 CFR 416.195(a)(3): The IOL is not described by an 
active or expired

[[Page 45171]]

NTIOL class; that is, it does not share the predominant, class-defining 
characteristic associated with the improved clinical outcome with 
designated members of an active or expired NTIOL class; and
     42 CFR 416.195(a)(4): Evidence demonstrates that use of 
the IOL results in measurable, clinically meaningful, improved outcomes 
in comparison with use of currently available IOLs. The statute 
requires us to consider the following improved outcomes:
    [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 with the associated qualifying IOL models, at the link entitled 
``NTOL Application Determination Reference document Updated 01/06/
2012,'' posted on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/NTIOLs.html.
2. NTIOL Application Process for Payment Adjustment
    For a request to be considered complete, we require submission of 
the information that is found in the guidance document entitled 
``Application Process and Information Requirements for Requests for a 
New Class of New Technology Intraocular Lens (NTIOL)'' posted on the 
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/NTIOLs.html. For each completed request for a new 
class that is received by the established deadline, a determination is 
announced annually in the final rule updating the ASC and OPPS payment 
rates for the next calendar year.
    We also summarize briefly in the final rule the evidence that we 
reviewed, the public comments we received timely, and the basis for our 
determinations in consideration of applications for establishment of a 
new NTIOL class. When a new NTIOL class is created, we identify the 
predominant characteristic of NTIOLs in that class that sets them apart 
from other IOLs (including those previously approved as members of 
other expired or active NTIOL classes) and that is associated with an 
improved clinical outcome. The date of implementation of a payment 
adjustment in the case of approval of an IOL as a member of a new NTIOL 
class would be set prospectively as of 30 days after publication of the 
ASC payment update final rule, consistent with the statutory 
requirement.
3. Requests To Establish New NTIOL Classes for CY 2013 and Deadline for 
Public Comments
    We received no requests for review to establish a new NTIOL class 
for CY 2013 by the March 2, 2012 due date (76 FR 74443).
4. Payment Adjustment
    The current payment adjustment for a 5-year period from the 
implementation date of a new NTIOL class is $50 per lens. Since 
implementation of the process for adjustment of payment amounts for 
NTIOLs in 1999, we have not revised the payment adjustment amount, and 
we are not proposing to revise the payment adjustment amount for CY 
2013.
5. Proposed Revisions to the Major NTIOL Criteria Described in 42 CFR 
416.195
    The last significant revisions to the regulations containing the 
substantive NTIOL evaluation criteria under 42 CFR 416.195 occurred in 
2007. We are proposing significant revisions to Sec.  416.195(a)(2) and 
Sec.  416.195(a)(4). We believe that revising Sec.  416.195 is 
necessary in order to improve the quality of the NTIOL applications. In 
recent years, we have received low quality NTIOL applications that may 
have been due in part to overly-broad evaluation criteria.
    We are proposing to revise Sec.  416.195(a)(2) to require that the 
IOL's FDA-approved labeling contains a claim of a specific clinical 
benefit imparted by a new lens characteristic. The IOL shall have a new 
lens characteristic in comparison to currently available IOLs. We also 
are proposing to revise Sec.  416.195(a)(4) to require that any 
specific clinical benefit referred to in Sec.  416.195(a)(2) must be 
supported by evidence that demonstrates that the IOL results in a 
measurable, clinically meaningful, improved outcome. Improved outcomes 
include: (i) Reduced risk of intraoperative or postoperative 
complication or trauma; (ii) accelerated postoperative recovery; (iii) 
reduced induced astigmatism; (iv) improved postoperative visual acuity; 
(v) more stable postoperative vision; and (vi) other comparable 
clinical advantages.
    The proposed revision to Sec.  416.195(a)(2) is necessary because 
recent NTIOL applications have not included FDA labeling claims of 
clinical benefit. Instead, the candidate IOLs have, in most cases, had 
some characteristic for which the applicant has tried to prove clinical 
relevance through various kinds of evidence that have not been 
evaluated by the FDA because the evidence is not associated with a 
labeling claim. The result has been the submission of low quality 
evidence that has been insufficient for NTIOL status. We believe that 
the quality of the evidence would improve if applicants were required 
to obtain a labeling claim for the NTIOL benefit and therefore have the 
evidence for such benefit evaluated by FDA. We believe that this 
proposed approach would better serve CMS, FDA, and the applicants 
because any ultimate grant of NTIOL status would be supported by a 
labeling claim. The manufacturer could then advertise the NTIOL benefit 
without running afoul of FDA advertising limitations. We would have the 
benefit of an FDA review of the relevant evidence, which would be 
particularly valuable because the FDA has a dedicated team of 
scientists, physicians, and engineers who are experts in evaluating 
IOLs.
    The proposed revision to Sec.  416.195(a)(4) is necessary to insure 
that the claim is clinically relevant and represents an improved 
outcome for Medicare beneficiaries. We request public comments on these 
proposed revisions to the NTIOL regulations.
6. Request for Public Comment on the ``Other Comparable Clinical 
Advantages'' Improved Outcome
    Section 416.195(a)(4)), discussed above, lists the following 
improved outcomes: (i) Reduced risk of intraoperative or postoperative 
complication or trauma; (ii) accelerated postoperative recovery; (iii) 
reduced induced astigmatism; (iv) improved postoperative visual acuity; 
(v) more stable postoperative vision; and (vi) other comparable 
clinical advantages.
    This list is from the original 1994 NTIOL statutory provision. 
Because this provision is almost 20 years old, outcomes (i) through (v) 
have only limited relevance to modern cataract surgery. For example, 
regarding outcome (i), it is unclear what, if any, type of IOL could 
reduce the risk of complication or trauma associated with cataract 
surgery, or what, if any, contemporary cataract surgery complication 
could be affected by a new type of IOL. As for outcome (ii), 
postoperative recovery is already rapid in uncomplicated cataract 
surgery; therefore, it is difficult to see how it

[[Page 45172]]

could be significantly accelerated. Also, regarding outcome (iii), 
clinically significant induced astigmatism would be reflective of poor 
surgical technique and would not depend upon IOL design. Regarding 
outcome (iv), currently available IOLs provide such high quality 
postoperative visual acuity that it would be difficult to measure 
clinically significant improved postoperative visual acuity due to a 
new type of IOL. Finally, for outcome (v), postoperative vision is 
typically stable after uncomplicated cataract surgery, so again it 
would be difficult to improve upon this outcome.
    The last of the listed improved outcomes is the nonspecific 
category described as ``other comparable clinical advantages.'' Given 
that present-day cataract surgery is such a successful procedure that 
results in significantly improved vision for almost all patients who 
undergo the procedure and who are appropriate candidates for cataract 
surgery, we are soliciting comments on what potential benefits 
associated with a new IOL could be considered to be a ``comparable 
clinical advantage'' as compared to the list of the five improved 
outcomes from the statute and regulation described above.

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 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 
2013 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 Addenda AA and BB to the CY 2012 OPPS/
ASC final rule with comment period. These addenda can be found in a 
file labeled ``January 2012 ASC Approved HCPCS Code and Payment Rates'' 
in the ASC Addenda Update section of the CMS Web site.
    The ``CH'' comment indicator is used in Addenda AA and BB to this 
CY 2013 OPPS/ASC proposed rule (which are available via the Internet on 
the CMS Web site) to indicate that the payment indicator assignment has 
changed for an active HCPCS code; an active HCPCS code is newly 
recognized as payable in ASCs; or an active HCPCS code is discontinued 
at the end of the current calendar year. The ``CH'' comment indicators 
that are published in the final rule with comment period are provided 
to alert readers that a change has been made from one calendar year to 
the next, but do not indicate that the change is subject to comment.
2. Proposed ASC Payment and Comment Indicators
    We are not proposing any changes to the definitions of the ASC 
payment and comment indicators for CY 2013. We refer readers to Addenda 
DD1 and DD2 to this proposed rule (which are available via the Internet 
on the CMS Web site) for the complete list of ASC payment and comment 
indicators proposed for the CY 2013 update.

G. ASC Policy and Payment Recommendations

    MedPAC was established under section 1805 of the Act to advise 
Congress on issues affecting the Medicare program. Subparagraphs (C) 
and (D) of section 1805(b)(1) of the Act require MedPAC to submit 
reports to Congress not later than March 15 and June 15 of each year 
that present its Medicare payment policy reviews and recommendations 
and its examination of issues affecting the Medicare program, 
respectively. The March 2012 MedPAC ``Report to the Congress: Medicare 
Payment Policy'' included the following recommendations relating 
specifically to the ASC payment system for CY 2013:
    Recommendation 5-1: ``The Congress should update the payment rates 
for ambulatory surgical centers by 0.5 percent for calendar year 2013. 
The Congress should also require ambulatory surgical centers to submit 
cost data.''
    Regarding the ASC payment update for CY 2013, MedPAC further stated 
that: ``On the basis of our payment adequacy indicators, the lack of 
ASC cost data, and our concerns about the potential effect of ASC 
growth on overall program spending, we believe a moderate update of 0.5 
percent is warranted for CY 2013.'' With regard to the collection of 
cost data, MedPAC indicated that cost data are needed to fully assess 
ASC payment adequacy under the revised ASC payment system and to 
examine whether an alternative input price index would be an 
appropriate proxy for ASC costs or whether an ASC-specific market 
basket should be developed to annually update ASC payment rates.
    CMS Response: We note that MedPAC's recommendation is for the 
Congress to increase ASC payment rates by 0.5 percent in CY 2013 and 
require ASCs to submit cost data. Congress has not acted on these 
recommendations. We are proposing to continue our current policy to 
update the ASC conversion factor using the CPI-U, and we are not 
proposing to require ASC to submit cost data in this proposed rule. 
However, as discussed in section XIV.H.2.b. of this proposed rule, the 
CPI-U may not be the best measure of inflation for the goods and 
services provided by ASCs and, therefore, we are seeking public comment 
on the type of cost information that would be feasible to collect from 
ASCs that would assist us in determining possible alternatives to using 
the CPI-U to update ASC payment rates for inflation.

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

[[Page 45173]]

payment rates under the revised ASC payment system on APC groups and 
the OPPS relative payment weights. Consistent with that policy and the 
requirement at section 1833(i)(2)(D)(ii) of the Act that the revised 
payment system be implemented so that it would be budget neutral, the 
initial ASC conversion factor (CY 2008) was calculated so that 
estimated total Medicare payments under the revised ASC payment system 
in the first year would be budget neutral to estimated total Medicare 
payments under the prior (CY 2007) ASC payment system (the ASC 
conversion factor is multiplied by the relative payment weights 
calculated for many ASC services in order to establish payment rates). 
That is, application of the ASC conversion factor was designed to 
result in aggregate Medicare expenditures under the revised ASC payment 
system in CY 2008 equal to aggregate Medicare expenditures that would 
have occurred in CY 2008 in the absence of the revised system, taking 
into consideration the cap on ASC payments in CY 2007 as required under 
section 1833(i)(2)(E) of the Act (72 FR 42522). We adopted a policy to 
make the system budget neutral in subsequent calendar years (72 FR 
42532 through 42533).
    We note that we consider the term ``expenditures'' in the context 
of the budget neutrality requirement under section 1833(i)(2)(D)(ii) of 
the Act to mean expenditures from the Medicare Part B Trust Fund. We do 
not consider expenditures to include beneficiary coinsurance and 
copayments. This distinction was important for the CY 2008 ASC budget 
neutrality model that considered payments across the OPPS, ASC, and 
MPFS payment systems. However, because coinsurance is almost always 20 
percent for ASC services, this interpretation of expenditures has 
minimal impact for subsequent budget neutrality adjustments calculated 
within the revised ASC payment system.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66857 
through 66858), we set out a step-by-step illustration of the final 
budget neutrality adjustment calculation based on the methodology 
finalized in the August 2, 2007 final rule (72 FR 42521 through 42531) 
and as applied to updated data available for the CY 2008 OPPS/ASC final 
rule with comment period. The application of that methodology to the 
data available for the CY 2008 OPPS/ASC final rule with comment period 
resulted in a budget neutrality adjustment of 0.65.
    For CY 2008, we adopted the OPPS relative payment weights as the 
ASC relative payment weights for most services and, consistent with the 
final policy, we calculated the CY 2008 ASC payment rates by 
multiplying the ASC relative payment weights by the final CY 2008 ASC 
conversion factor of $41.401. For covered office-based surgical 
procedures and covered ancillary radiology services (excluding covered 
ancillary radiology services involving certain nuclear medicine 
procedures or involving the use of contrast agents, as discussed in 
section XIV.D.2.b. of this proposed rule) the established policy is to 
set the payment rate at the lower of the MPFS unadjusted non-facility 
PE RVU-based amount or the amount calculated using the ASC standard 
ratesetting methodology. Further, as discussed in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66841 through 66843), we also 
adopted alternative ratesetting methodologies for specific types of 
services (for example, device-intensive procedures).
    As discussed in the August 2, 2007 final rule (72 FR 42517 through 
42518) and as codified at 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 period (75 FR 72058 
through 72059), we finalized our proposal to set the ASC wage index by 
calculating the average of all wage indices for urban areas in the 
State when all contiguous areas to a CBSA are rural and there is no 
IPPS hospital whose wage index data could be used to set the wage index 
for that area. In other situations, where there are no IPPS hospitals 
located in a relevant labor market area, we will continue our current 
policy of calculating an urban or rural area's wage index by 
calculating the average of the wage indices for CBSAs (or metropolitan 
divisions where applicable) that are contiguous to the area with no 
wage index.
2. Proposed Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2013 and Future 
Years
    We update the ASC relative payment weights each year using the 
national OPPS relative payment weights (and MPFS nonfacility PE RVU-
based amounts, as applicable) for that same calendar year and uniformly 
scale the ASC relative payment weights for each update year to make 
them budget neutral (72 FR 42533). We note that, as discussed in 
section II.A.2.f. of this proposed rule, because we are proposing to 
base the OPPS relative payment weights on geometric mean costs for CY 
2013, the ASC system would shift to the use of geometric means to 
determine relative payment weights under the ASC standard ratesetting 
methodology. Consistent with our established policy, we are proposing 
to scale the CY 2013 relative payment weights for ASCs according to the 
following method. Holding ASC utilization and the mix of services 
constant from CY 2011, we are proposing to compare the total payment 
using the CY 2012 ASC relative payment weights with the total payment

[[Page 45174]]

using the CY 2013 relative payment weights to take into account the 
changes in the OPPS relative payment weights between CY 2012 and CY 
2013. We would use the ratio of CY 2012 to CY 2013 total payment (the 
weight scaler) to scale the ASC relative payment weights for CY 2013. 
The proposed CY 2013 ASC scaler is 0.9331 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 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 2011 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 2011 ASC claims by ASC and by HCPCS 
code. We used the National Provider Identifier for the purpose of 
identifying unique ASCs within the CY 2011 claims data. We used the 
supplier zip code reported on the claim to associate State, county, and 
CBSA with each ASC. This file, available to the public as a supporting 
data file for the proposed rule, is posted on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Regulations-and-Notices.html.
b. Updating the ASC Conversion Factor
    Under the OPPS, we typically apply a budget neutrality adjustment 
for provider level changes, most notably a change in the wage index 
values for the upcoming year, to the conversion factor. Consistent with 
our final ASC payment policy, for the CY 2013 ASC payment system, we 
are proposing to calculate and apply a budget neutrality adjustment to 
the ASC conversion factor for supplier level changes in wage index 
values for the upcoming year, just as the OPPS wage index budget 
neutrality adjustment is calculated and applied to the OPPS conversion 
factor. For CY 2013, we calculated this proposed adjustment for the ASC 
payment system by using the most recent CY 2011 claims data available 
and estimating the difference in total payment that would be created by 
introducing the proposed CY 2013 pre-floor and pre-reclassified 
hospital wage indices. Specifically, holding CY 2011 ASC utilization 
and service-mix and the proposed CY 2013 national payment rates after 
application of the weight scaler constant, we calculated the total 
adjusted payment using the CY 2012 pre-floor and pre-reclassified 
hospital wage indices and the total adjusted payment using the proposed 
CY 2013 pre-floor and pre-reclassified hospital wage indices. We used 
the 50-percent labor-related share for both total adjusted payment 
calculations. We then compared the total adjusted payment calculated 
with the CY 2012 pre-floor and pre-reclassified hospital wage indices 
to the total adjusted payment calculated with the proposed CY 2013 pre-
floor and pre-reclassified hospital wage indices and applied the 
resulting ratio of 1.0002 (the proposed CY 2013 ASC wage index budget 
neutrality adjustment) to the CY 2012 ASC conversion factor to 
calculate the proposed CY 2013 ASC conversion factor.
    Section 1833(i)(2)(C)(i) of the Act requires that, ``if the 
Secretary has not updated amounts established'' under the revised ASC 
payment system in a calendar year, the payment amounts ``shall be 
increased by the percentage increase in the Consumer Price Index for 
all urban consumers (U.S. city average) as estimated by the Secretary 
for the 12-month period ending with the midpoint of the year 
involved.'' The statute, therefore, does not mandate the adoption of 
any particular update mechanism, but it requires the payment amounts to 
be increased by the CPI-U in the absence of any update. Because the 
Secretary updates the ASC payment amounts annually, we adopted a 
policy, which we codified at 42 CFR 416.171(a)(2)(ii), to update the 
ASC conversion factor using the CPI-U for CY 2010 and subsequent 
calendar years. Therefore, the annual update to the ASC payment system 
is the CPI-U (referred to as the CPI-U update factor).
    ASC stakeholders, as well as MedPAC, have commented throughout the 
years that the CPI-U may not adequately measure inflation for the goods 
and services provided by ASCs (see, for example, 76 FR 74444, 74448 
through 74450; 73 FR 68757; and 72 FR 66859). While we believe the CPI-
U is appropriate to apply to update the ASC payment system, the CPI-U 
is highly weighted for housing and transportation and may not best 
reflect inflation in the cost of providing ASC services. In developing 
this proposed rule, we considered possible alternatives to using the 
CPI-U to update ASC payment rates for inflation.
    ASC stakeholders have urged us to adopt the hospital market basket 
to update ASC payment rates for inflation when commenting on each 
proposed rule since the beginning of the revised ASC payment system (72 
FR 66859; 73 FR 68757; 74 FR 60628 through 60629; 75 FR 72063; 76 FR 
74449). We considered the hospital market basket as an alternative to 
the CPI-U and, while the items included in the hospital market basket 
seem reflective of the kinds of costs incurred by ASCs, as stated in 
the CY 2012 OPPS/ASC final rule with comment period, we believe that 
the hospital market basket does not align with the cost structures of 
ASCs. A much wider range of services, such as room and board and 
emergency services, are provided by hospitals but are not costs 
associated with providing services in ASCs (76 FR 74450). As other 
possible alternatives to the CPI-U update, we considered using the 
physician's practice expense (PE) component of the Medicare Economic 
Index (MEI) update, as well as using an average of the hospital market 
basket update and the PE component of the MEI update. However, until we 
have more information regarding the cost inputs of ASCs, we are not 
confident that any of these alternatives are a better proxy for ASC 
costs than the CPI-U. Therefore, we are proposing a continuation of the 
established policy of basing the ASC update on the CPI-U. In addition, 
we are seeking public comment on the type of cost information that 
would be feasible to collect from ASCs in the future in order to 
determine if one of these alternative updates or an ASC-specific market 
basket would be a better proxy for ASC cost inflation than the CPI-U.
    Section 3401(k) of the Affordable Care Act amended section 
1833(i)(2)(D) of the Act by adding a new clause (v) which requires that 
``any annual update under [the ASC payment] system for the year,

[[Page 45175]]

after application of clause (iv), shall be reduced by the productivity 
adjustment described in section 1886(b)(3)(B)(xi)(II)'' of the Act 
effective with the calendar year beginning January 1, 2011. The statute 
defines the productivity adjustment to be equal to the 10-year moving 
average of changes in annual 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''). 
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 2012 OPPS/ASC final rule with comment period (76 FR 
74516), we finalized a policy that ASCs begin submitting data on 
quality measures for services beginning on October 1, 2012 for the CY 
2014 payment determination under the ASCQR Program. Section XVI.D. of 
this proposed rule provides a discussion of the proposed payment 
reduction to the annual update for ASCs that fail to meet the ASCQR 
Program requirements. In summary, we are proposing to calculate reduced 
national unadjusted payment rates using the ASCQR Program reduced 
update conversion factor that would apply to ASCs that fail to meet 
their quality reporting requirements. The reduced rates would apply 
beginning in CY 2014. We are proposing that application of the 2.0 
percentage point reduction to the annual update factor, which currently 
is the CPI-U, may result in the update to the ASC payment system being 
less than zero for a year for ASCs that fail to meet the ASCQR Program 
requirements. We are proposing changes to Sec. Sec.  416.160(a)(1) and 
416.171 to reflect this proposal.
    In accordance with section 1833(i)(2)(C)(i) of the Act, before 
applying the MFP adjustment, the Secretary first determines the 
``percentage increase'' in the CPI-U, which we interpret cannot be a 
negative number. Thus, in the instance where the percentage change in 
the CPI-U for a year is negative, we would hold the CPI-U update factor 
for the ASC payment system to zero. For the CY 2014 payment 
determination and subsequent payment determination years, under section 
1833(i)(2)(D)(iv) of the Act, we would reduce the annual update by 2.0 
percentage points for an ASC that fails to submit quality information 
under the rules established by the Secretary in accordance with section 
1833(i)(7) of the Act. Section 1833(i)(2)(D)(v) of the Act, as added by 
section 3401(k) of the Affordable Care Act, requires that the Secretary 
reduce the annual update factor, after application of any quality 
reporting reduction by the MFP adjustment, and states that application 
of the MFP adjustment may reduce this percentage change below zero. If 
the application of the MFP adjustment to the annual update factor after 
application of any quality reporting reduction would result in an MFP-
adjusted update factor that is less than zero, the resulting update to 
the ASC payment rates would be negative and payments would decrease 
relative to the prior year. Illustrative examples of how the MFP 
adjustment would be applied to the ASC payment system update are found 
in the CY 2011 OPPS/ASC final rule with comment period (75 FR 72062 
through 72064).
    For this proposed rule, for the 12-month period ending with the 
midpoint of CY 2013, the CPI-U update is projected to be 2.2 percent. 
Because the ASCQR Program does not affect payment rates until CY 2014, 
there would be no quality reporting reduction to the CPI-U for CY 2013. 
The MFP adjustment for the period ending with the midpoint of CY 2013 
is projected to be 0.9 percent based on the methodology for calculating 
the MFP adjustment finalized in the CY 2011 MPFS final rule with 
comment period (75 FR 73394 through 73396) as revised in the CY 2012 
MPFS final rule with comment period (76 FR 73300 through 73301). We are 
proposing to reduce the CPI-U update of 2.2 percent by the MFP 
adjustment of 0.9 percent, resulting in an MFP-adjusted CPI-U update 
factor of 1.3 percent. Therefore, we are proposing to apply a 1.3 
percent MFP-adjusted CPI-U update factor to the CY 2012 ASC conversion 
factor.
    For CY 2013, we also are proposing to adjust the CY 2012 ASC 
conversion factor ($42.627) by the wage adjustment for budget 
neutrality of 1.0002 in addition to the MFP-adjusted update factor of 
1.3 percent discussed above, which results in a proposed CY 2013 ASC 
conversion factor of $43.190.
    We invite public comment on these proposals.
3. Display of Proposed CY 2013 ASC Payment Rates
    Addenda AA and BB to this proposed rule (which are available via 
the Internet on the CMS Web site) display the proposed updated ASC 
payment rates for CY 2013 for covered surgical procedures and covered 
ancillary services, respectively. These addenda contain several types 
of information related to the proposed CY 2013 payment rates. 
Specifically, in Addendum AA, a ``Y'' in the column titled ``Subject to 
Multiple Procedure Discounting'' indicates that the surgical procedure 
will be 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 2013 Payment 
Weight'' are the proposed relative payment weights for each of the 
listed services for CY 2013. The payment weights for all covered 
surgical procedures and covered ancillary services whose ASC payment 
rates are based on OPPS relative payment weights were scaled for budget 
neutrality. Thus, scaling was not applied to the device portion of the 
device-intensive procedures, services that are paid at the MPFS 
nonfacility PE RVU-based amount, separately payable covered ancillary 
services that have a predetermined national payment amount, such as 
drugs and biologicals and brachytherapy sources that are separately 
paid under the OPPS, or services that are contractor-priced or paid at 
reasonable cost in ASCs.
    To derive the proposed CY 2013 payment rate displayed in the ``CY 
2013 Payment'' column, each ASC payment weight in the ``CY 2013 Payment 
Weight'' column was multiplied by the proposed CY 2013 conversion 
factor of $43.190. The conversion factor includes a budget neutrality 
adjustment for changes in the wage index values and the annual update 
factor as reduced by

[[Page 45176]]

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 2013 Payment Weight'' column for items and services with 
predetermined national payment amounts, such as separately payable 
drugs and biologicals. The ``CY 2013 Payment'' column displays the 
proposed CY 2013 national unadjusted ASC payment rates for all items 
and services. The proposed CY 2013 ASC payment rates listed in Addendum 
BB for separately payable drugs and biologicals are based on ASP data 
used for payment in physicians' offices in April 2012.

XV. Hospital Outpatient Quality Reporting Program Updates

A. Background

1. Overview
    CMS has implemented quality measure reporting programs for multiple 
settings of care. These programs promote higher quality, more efficient 
health care for Medicare beneficiaries. The quality data reporting 
program for hospital outpatient care, known as the Hospital Outpatient 
Quality Reporting (Hospital OQR) Program, formerly known as the 
Hospital Outpatient Quality Data Reporting Program (HOP QDRP), has been 
generally modeled after the quality data reporting program for hospital 
inpatient services known as the Hospital Inpatient Quality Reporting 
(Hospital IQR) Program (formerly known as the Reporting Hospital 
Quality Data for Annual Payment Update (RHQDAPU) Program). Both of 
these quality reporting programs for hospital services have financial 
incentives for the reporting of quality data to CMS.
    CMS also has implemented quality reporting programs for long term 
care hospitals, inpatient rehabilitation hospitals, the hospice 
program, ambulatory surgical centers (the Ambulatory Surgical Center 
Quality Reporting (ASCQR) Program), as well as a program for physicians 
and other eligible professionals, known as the Physician Quality 
Reporting System (PQRS) (formerly known as the Physician Quality 
Reporting Initiative (PQRI)). CMS has recently proposed to implement 
quality reporting programs for inpatient psychiatric facilities and 
PPS-exempt cancer hospitals.
    Finally, CMS has implemented a Hospital Value-Based Purchasing 
Program and an end-stage renal disease (ESRD) Quality Incentive Program 
(76 FR 628 through 646) that link payment to performance.
    In implementing the Hospital OQR Program and other quality 
reporting programs, we have focused on measures that have high impact 
and support national priorities for improved quality and efficiency of 
care for Medicare beneficiaries as reflected in the National Quality 
Strategy, as well as conditions for which wide cost and treatment 
variations have been reported, despite established clinical guidelines. 
Our ultimate goal is to align the clinical quality measure requirements 
of the Hospital OQR Program and various other programs, such as the 
Hospital IQR Program, the ASCQR Program, and those authorized by the 
Health Information Technology for Economic and Clinical Health (HITECH) 
Act, so that the burden for reporting will be reduced. As appropriate, 
we will consider the adoption of measures with electronic 
specifications, to enable the collection of this information as part of 
care delivery. Establishing such an alignment will require 
interoperability between electronic health records (EHRs), and CMS data 
collection systems, with data being calculated and submitted via 
certified EHR technology; additional infrastructural development on the 
part of hospitals and CMS; and the adoption of standards for capturing, 
formatting, and transmitting the data elements that make up the 
measures. Once these activities are accomplished, the adoption of many 
measures that rely on data obtained directly from EHRs will enable us 
to expand the Hospital OQR Program measure set with less cost and 
burden to hospitals.
    In implementing this and other quality reporting programs, we 
generally applied the same principles for the development and the use 
of measures, with some differences:
     Our overarching goal is to support the National Quality 
Strategy's three-part aim of better health care for individuals, better 
health for populations, and lower costs for health care. The Hospital 
OQR Program will help achieve the three-part aim by creating 
transparency around the quality of care at hospital outpatient 
departments to support patient decision-making and quality improvement. 
Given the availability of well-validated measures and the need to 
balance breadth with minimizing burden, measures should take into 
account and address, as fully as possible, the six domains of 
measurement that arise from the six priorities of the National Quality 
Strategy: Clinical care; Person- and caregiver-centered experience and 
outcomes; Safety; Efficiency and cost reduction; Care coordination; and 
Community/population health. More information regarding the National 
Quality Strategy can be found at: http://www.hhs.gov/secretary/about/priorities/priorities.html and http://www.ahrq.gov/workingforquality/. 
HHS engaged a wide range of stakeholders to develop the National 
Quality Strategy, as required by the Affordable Care Act.
     Pay-for-reporting and public reporting should rely on a 
mix of standards, processes, outcomes, efficiency, and patient 
experience of care measures, including measures of care transitions and 
changes in patient functional status.
     To the extent possible and recognizing differences in 
payment system maturity and statutory authorities, measures should be 
aligned across Medicare and Medicaid public reporting and incentive 
payment systems to promote coordinated efforts to improve quality. The 
measure sets should evolve so that they include a focused set of 
measures appropriate to the specific provider category that reflects 
the level of care and the most important areas of service and measures 
for that provider category.
     We weigh the relevance and the utility of measures 
compared to the burden on hospitals in submitting data under the 
Hospital OQR Program. The collection of information burden on providers 
should be minimized to the extent possible. To this end, we are working 
toward the eventual adoption of electronically-specified measures so 
that data can be calculated and submitted via certified EHR technology 
with minimal burden. We also seek to use measures based on alternative 
sources of data that do not require chart abstraction or that utilize 
data already being reported by many hospitals, such as data that 
hospitals report to clinical data registries, or all-payer claims 
databases. In recent years we have adopted measures that do not require 
chart abstraction, including structural measures and claims-based 
measures that we can calculate using other data sources.
     To the extent practicable and feasible, and recognizing 
differences in statutory authorities, measures used by CMS should be 
endorsed by a national, multi-stakeholder organization. We take into 
account the views of the Measure Application Partnership (MAP). The MAP 
is a public-private partnership convened by the NQF for the primary 
purpose of providing input to HHS on selecting performance measures for 
quality reporting programs and pay for reporting programs. The MAP 
views

[[Page 45177]]

patient safety as a high priority area and it strongly supports the use 
of NQF-endorsed safety measures. Accordingly, we consider the MAP's 
recommendations in selecting quality and efficiency measures http://www.qualityforum.org/Setting_Priorities/Partnership/Measure_Applications_Partnership.aspx.
     Measures should be developed with the input of providers, 
purchasers/payers, consumers, and other stakeholders. Measures should 
be aligned with best practices among other payers and the needs of the 
end users of the measures. We take into account widely accepted 
criteria established in medical literature.
     HHS Strategic Plan and Initiatives. HHS is the U.S. 
government's principal agency for protecting the health of all 
Americans. HHS accomplishes its mission through programs and 
initiatives. Every 4 years HHS updates its Strategic Plan and measures 
its progress in addressing specific national problems, needs, or 
mission-related challenges. The goals of the HHS Strategic Plan for 
Fiscal Years 2010 through 2015 are to: Transform Health Care; Advance 
Scientific Knowledge and Innovation; Advance the Health, Safety, and 
Well-Being of the American People; Increase Efficiency, Transparency, 
and Accountability of HHS Programs; and Strengthen the Nation's Health 
and Human Services Infrastructure and Workforce (http://www.hhs.gov/about/FY2012budget/strategicplandetail.pdf). HHS prioritizes policy and 
program interventions to address the leading causes of death and 
disability in the United States, including heart disease, cancer, 
stroke, chronic lower respiratory diseases, unintentional injuries and 
preventable behaviors. Initiatives such as the HHS Action Plan to 
Reduce HAIs in clinical settings and the Partnership for Patients 
exemplify these programs.
     CMS Strategic Plan. We strive to ensure that measures for 
different Medicare and Medicaid programs are aligned with priority 
quality goals, that measure specifications are aligned across settings, 
that outcome measures are used whenever possible, and that quality 
measures are collected from EHRs as appropriate.
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74451 
through 74452), we responded to public comment on many of these 
principles. In this proposed rulemaking, we generally applied the same 
principals for our considerations for future measures, with some 
differences.
2. Statutory History of the Hospital Outpatient Quality Reporting 
(Hospital OQR) Program
    We refer readers to the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 72064) for a detailed discussion of the statutory history 
of the Hospital OQR Program.
3. Measure Updates and Data Publication
a. Process for Updating Quality Measures
    Technical specifications for the Hospital OQR Program measures are 
listed in the Hospital OQR Specifications Manual, which is posted on 
the CMS QualityNet Web site at: http://www.QualityNet.org. We maintain 
the technical specifications for the measures by updating this Hospital 
OQR Specifications Manual and including detailed instructions and 
calculation algorithms. In some cases where the specifications are 
available elsewhere, we may include links to Web sites hosting 
technical specifications. These resources are for hospitals to use when 
collecting and submitting data on required measures.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68766 
through 68767), we established an additional subregulatory process for 
making updates to the measures we have adopted for the Hospital OQR 
Program. This process is necessary so that the Hospital OQR measures 
are calculated based on the most up-to-date scientific and consensus 
standards. Under this process, when a national consensus building 
entity updates the specifications for a measure that we have adopted 
for the Hospital OQR Program, we update our specifications for that 
measure accordingly. For measures that are not endorsed by a national 
consensus building entity, the subregulatory process is based on 
scientific advances as determined necessary by CMS, in part, through 
our measure maintenance process involving Technical Expert Panels (73 
FR 68767). We provide notice of the updates via the QualityNet Web 
site, http://www.QualityNet.org, and in the Hospital OQR Specifications 
Manual.
    We generally release the Hospital OQR Specifications Manual every 6 
months and release addenda as necessary. This release schedule provides 
at least 3 months of advance notice for non-substantive 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 the Hospital OQR 
Program available to the public. It also states that such procedures 
must ensure that a hospital has the opportunity to review the data that 
are to be made public, with respect to the hospital prior to such data 
being made public. To meet these requirements, data that a hospital has 
submitted for the Hospital OQR Program are typically provided to 
hospitals for a preview period via QualityNet, and then displayed on 
CMS Web sites such as the Hospital Compare Web site, http://www.hospitalcompare.hhs.gov following the preview period. The Hospital 
Compare Web site is an interactive Web tool that assists beneficiaries 
by providing information on hospital quality of care. This information 
motivates beneficiaries to work with their doctors and hospitals to 
discuss the quality of care hospitals provide to patients, thus 
providing additional incentives to hospitals to improve the quality of 
care that they furnish.
    Under our current policy, we publish quality data by the 
corresponding hospital 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. Consistent with our current policy, 
we make Hospital IQR and Hospital OQR data publicly available whether 
or not the data have been validated for payment purposes. The Hospital 
Compare Web site currently displays information covering process of 
care, structural, ED throughput timing, health IT, and imaging 
efficiency measure data under the Hospital OQR Program.
    In general, we strive to display hospital quality measures on the 
Hospital Compare Web site as soon as possible, after they have been 
adopted and have been reported to CMS. However, if there are unresolved 
display issues or pending design considerations, we may make the data 
available on other, non-interactive, CMS Web sites such as http://www.cms.hhs.gov/HospitalQualityInits/. Publicly reporting the 
information in this manner, though not on the interactive Hospital 
Compare Web site, allows us to meet the requirement under section 
1833(t)(17)(E) of the Act for establishing procedures to make quality 
data submitted available to the public following a preview period. When 
we display hospital quality information on

[[Page 45178]]

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

B. Proposed Process for Retention of Hospital OQR Program Measures 
Adopted in Previous Payment Determinations

    In past rulemakings, we have proposed to retain previously adopted 
measures for each payment determination on a year-by-year basis and 
invited public comments on the proposal to retain such measures for all 
future payment determinations unless otherwise specified. For the 
purpose of streamlining the rulemaking process, beginning with this 
rulemaking, we are proposing that when we adopt measures for the 
Hospital OQR Program beginning with a payment determination and 
subsequent years, these measures are automatically adopted for all 
subsequent year payment determinations unless we propose to remove, 
suspend, or replace the measures. We invite public comment on this 
proposal.

C. Removal or Suspension of Quality Measures From the Hospital OQR 
Program Measure Set

1. Considerations in Removing Quality Measures From the Hospital OQR 
Program
    In the FY 2010 IPPS/LTCH PPS rulemaking, we finalized a process for 
immediate retirement of Hospital IQR Program measures based on evidence 
that the continued use of the measure as specified raises patient 
safety concerns (74 FR 43864 through 43865). We adopted this same 
immediate measure retirement policy for the Hospital OQR Program in the 
CY 2010 OPPS/ASC final rule with comment period (74 FR 60634). At this 
time, we have not proposed to retire any measures from the Hospital OQR 
Program.
    In previous Hospital IQR Program rulemakings, we have referred to 
the removal of measures from the Hospital IQR Program as 
``retirement.'' We have used this term to indicate that Hospital IQR 
Program measures are no longer included in the Hospital IQR Program 
measure set for one or more indicated reasons. However, we note that 
this term may imply that other payers/purchasers/programs should cease 
using these measures that are no longer required for the Hospital IQR 
Program. In order to clarify that this is not our intent, we stated in 
the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28034) that we will use 
the term ``remove'' rather than ``retire'' to refer to the action of no 
longer including a measure in the Hospital IQR Program. We are 
proposing to adopt the same terminology of ``removal'' in the Hospital 
OQR Program to indicate future action of discontinuing a measure in the 
Hospital OQR Program.
    In the future, we are proposing to apply the same Hospital IQR 
Program measure removal criteria that we finalized, based on comments 
suggested during rulemaking, in the FY 2011 IPPS/LTCH PPS final rule 
(75 FR 50185), when determining whether to remove Hospital OQR Program 
measures. These criteria are: (1) Measure performance among hospitals 
is so high and unvarying that meaningful distinctions and improvements 
in performance can no longer be made (``topped out'' measures); (2) 
availability of alternative measures with a stronger relationship to 
patient outcomes; (3) a measure does not align with current clinical 
guidelines or practice; (4) the availability of a more broadly 
applicable (across settings, populations, or conditions) measure for 
the topic; (5) the availability of a measure that is more proximal in 
time to desired patient outcomes for the particular topic; (6) the 
availability of a measure that is more strongly associated with desired 
patient outcomes for the particular topic; and (7) collection or public 
reporting of a measure leads to negative unintended consequences such 
as patient harm. These criteria were suggested by commenters during 
Hospital IQR Program rulemaking, and we agreed that these criteria are 
also applicable in evaluating Hospital OQR Program quality measures for 
removal. We are proposing to adopt these measure retirement criteria 
for the Hospital OQR Program as well, and we invite public comments on 
these proposals.
    In addition, in the evaluation of measure removal, we take into 
account the views of the Measure Application Partnership (MAP). The MAP 
is a public-private partnership convened by the NQF for the primary 
purpose of providing input to HHS on selecting performance measures for 
certain quality reporting programs and pay for performance programs. 
The MAP views patient safety as a high priority area and it strongly 
supports the use of NQF-endorsed measures. Furthermore, for efficiency 
and streamlining purposes, we strive to eliminate redundancy of similar 
measures.
2. Suspension of One Chart-Abstracted Measure for the CY 2014 and 
Subsequent Years Payment Determinations
    In the 2012 IPPS/LTCH PPS final rule (76 FR 51611), we adopted a 
policy to immediately suspend collection of a measure when there is a 
reason to believe that continued collection of the measure raises 
patient safety concerns.
    For CY 2014 and subsequent year payment determination, we are 
confirming that we have suspended the collection of OP-19: Transition 
Record with Specified Elements Received by Discharged Patients measure. 
We adopted measure OP-19 for the Hospital OQR Program for the CY 2013 
payment determination with data collection beginning with January 1, 
2012 encounters. Since data collection for this measure began, concerns 
have been raised about the current measure specifications, including 
potential privacy concerns which may lead to potential patient harm in 
the form of family violence.
    After consideration of these issues and internal review of the 
measure specifications, we decided to suspend data collection for OP-19 
effective with January 1, 2012 encounters until further notice. On 
April 2, 2012 we released a Memorandum ``Temporary Suspension of 
Hospital Outpatient Quality Reporting Measure OP-19: Transition Record 
with Specified Elements Received by Discharged Patients.'' This memo 
notified the Hospital OQR Program stakeholder community that we had 
suspended data collection for the OP-19 measure effective with January 
1, 2012 encounters and until further notice.
    On April 12, 2012, we released a Memorandum, ``Revised: Temporary 
Suspension of Hospital Outpatient Quality Reporting Measure OP-19: 
Transition Record with Specified Elements Received by Discharged 
Patients'' to make clear our intent not to use any data submitted on 
this measure for payment determinations, public reporting, or in 
validation.
    The updated memorandum is available for review at the QualityNet 
Web site (http://www.qualitynet.org)

[[Page 45179]]

under the option ``Email Notifications'' within the ``Hospitals--
Outpatient'' drop down menu found at the top of the page.
    When NQF completes its maintenance review on this measure, and we 
have incorporated the necessary changes to the measure specifications 
in our measure manual, we anticipate being able to resume data 
collection, and will notify hospitals of changes in the suspension 
status of the measure for Hospital OQR via email blast.
    Because CMS system constraints prevent immediate cessation of data 
collection, hospitals must continue to submit information for this 
measure during this temporary suspension. The data collection system 
currently requires a populated value for OP-19. During the period of 
time that the measure is suspended, hospitals may choose to populate 
their OP-19 submission field with a value that is not meaningful. 
Hospitals should not submit a null value because the lack of data for 
OP-19 will cause the submitted case to be rejected entirely from the 
data warehouse. In other words, failure to populate the OP-19 field 
could compromise reporting data for other measures for that same case 
because more than one measure can be reported within a single case.
    Some vendors may have the capability to provide a default value for 
this measure to reduce data abstraction. Hospitals are encouraged to 
work with their vendors to determine options to reduce abstraction 
burden.
    If a case is rejected from the data warehouse on the basis of a 
system error due to the current system's inability to accept a case 
without OP-19 data populated, in the event that the rejected case would 
have also fulfilled reporting requirements for one or more other 
measures, this rejection would create an unwanted consequence for a 
hospital participating in the Hospital OQR Program. Data rejection due 
to a system constraint could impact a hospital's ability to meet 
Hospital OQR Program requirements for receiving a full outpatient 
hospital annual payment update.
    Therefore, we recommend continuing to submit a value for OP-19, 
although we will not use data submitted on OP-19 for payment 
determinations, will not publicly report these data, and will not 
validate these data until all concerns are resolved and measure 
specifications refined as necessary.
    Because the developer is working to revise the measure 
specifications to address the concerns raised by affected parties, and 
the measure is undergoing NQF maintenance review this year, we are not 
proposing to remove the measure from the program at this time. After 
completion of the NQF maintenance process, we anticipate that normal 
program operations for this measure could resume once we have updated 
the Hospital OQR Specifications Manual and made any necessary changes 
to our data collection infrastructure. However, should we determine 
that these concerns cannot be addressed, we would propose to remove 
this measure in a future OPPS/ASC rule. We invite public comment on the 
suspension of OP-19 until further notice. We also invite public comment 
on whether the measure should be removed from the program at this time.
3. Deferred Data Collection of OP-24: Cardiac Rehabilitation Measure: 
Patient Referral From an Outpatient Setting for the CY 2014 Payment 
Determination
    In the CY 2012 OPPS/ASC final rule with comment period, we 
finalized OP-24: Cardiac Rehabilitation Measure: Patient Referral from 
an Outpatient Setting for CY 2014 payment determination and indicated 
that the applicable quarters for data collection for this measure would 
be 1st quarter CY 2013 and 2nd quarter CY 2013 (76 FR 74464, 74481). In 
order for us to adhere to this data collection schedule, we would need 
to publish the measure specifications in the July 2012 release of the 
Hospital OQR Specifications Manual. While there are NQF-endorsed 
specifications for this measure, in order to implement standardized 
data collection on a national scale, we must include detailed 
abstraction instructions for chart-based measures in our Specifications 
Manual. These instructions will not be completed and tested in time to 
include in the July 2012 release of the Specifications Manual, which 
includes collection instructions for measures beginning January 1, 
2013. This is an unanticipated delay in implementation that we do not 
expect to be a regularly occurring issue for the Hospital OQR program.
    Therefore, we are proposing to defer the data collection for this 
measure to January 1, 2014 encounters. We are also proposing that the 
measure would no longer be used for the CY 2014 payment determination, 
and that its first application would be for the CY 2015 payment 
determination. The data collection deferral for this measure is 
detailed in the ``Form, Manner, and Timing'' section of this proposed 
rule. We invite public comments on these proposals.

D. Quality Measures for CY 2015 Payment Determination

    We previously finalized 26 measures for the CY 2015 Hospital OQR 
Program measure set in the 2012 OPPS/ASC rulemaking (76 FR 74472 
through 74474).
    Taking into consideration the time and effort for CMS to develop, 
align, and implement the infrastructure necessary to collect data on 
the Hospital OQR Program measures and make payment determinations, as 
well as the time and effort on the part of hospital outpatient 
departments to plan and prepare for reporting additional measures, we 
are not proposing any additional quality measures for CY 2015 and 
subsequent years payment determination in this rulemaking. As discussed 
above, we have suspended measure OP-19 and deferred data collection for 
OP-24 until the measure specifications can be further refined. We also 
are clarifying that the public reporting of the claims-based imaging 
efficiency measure OP-15 has been deferred until July 2013 at the 
earliest, as discussed in the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74456).
    In summary, we are proposing no additional measures for the CY 2015 
payment determination, and we are proposing to retain the 25 measures 
previously adopted for the CY 2014 payment determination for CY 2015 
and subsequent year payment determinations. We are confirming the 
suspension of data collection for the OP-19 measure, and consequently 
its use in the Hospital OQR Program, until further notice. We also are 
proposing to defer data collection on OP-24, and to first apply this 
measure toward the CY 2015 payment determination rather than to the CY 
2014 payment determination as originally finalized. Set out below are 
the previously adopted measures which we are proposing to retain for 
the CY 2014, CY 2015, and subsequent years payment determinations under 
the Hospital OQR Program.

[[Page 45180]]

   Hospital OQR Program Measures Adopted for the CY 2014, CY 2015 and
                 Subsequent Year Payment Determinations
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
OP-1: Median Time to Fibrinolysis.
OP-2: Fibrinolytic Therapy Received Within 30 Minutes.
OP-3: Median Time to Transfer to Another Facility for Acute Coronary
 Intervention.
OP-4: Aspirin at Arrival.
OP-5: Median Time to ECG.
OP-6: Timing of Antibiotic Prophylaxis.
OP-7: Prophylactic Antibiotic Selection for Surgical Patients.
OP-8: MRI Lumbar Spine for Low Back Pain.
OP-9: Mammography Follow-up Rates.
OP-10: Abdomen CT--Use of Contrast Material.
OP-11: Thorax CT--Use of Contrast Material.
OP-12: The Ability for Providers with HIT to Receive Laboratory Data
 Electronically Directly into their Qualified/Certified EHR System as
 Discrete Searchable Data.
OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac
 Low Risk Surgery.
OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus
 Computed Tomography (CT).
OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department
 for Atraumatic Headache.*
OP-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
 ED Patients.**
OP-20: Door to Diagnostic Evaluation by a Qualified Medical
 Professional.
OP-21: ED- Median Time to Pain Management for Long Bone Fracture.
OP-22: ED Patient Left Without Being Seen.
OP-23: ED- Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic
 Stroke who Received Head CT Scan Interpretation Within 45 minutes of
 Arrival.
OP-24: Cardiac Rehabilitation Patient Referral From an Outpatient
 Setting.***
OP-25: Safe Surgery Checklist Use.
OP-26: Hospital Outpatient Volume Data on Selected Outpatient Surgical
 Procedures.
------------------------------------------------------------------------

 
      Procedure category               Corresponding HCPCS Codes
------------------------------------------------------------------------
Gastrointestinal.............  40000 through 49999, G0104, G0105, G0121,
                                C9716, C9724, C9725, 0170T.
Eye..........................  65000 through 68999, 0186, 0124T, 0099T,
                                0017T, 0016T, 0123T, 0100T, 0176T,
                                0177T, 0186T, 0190T, 0191T, 0192T,
                                76510, 0099T.
Nervous System...............  61000 through 64999, G0260, 0027T, 0213T,
                                0214T, 0215T, 0216T, 0217T, 0218T,
                                0062T.
Musculoskeletal..............  20000 through 29999, 0101T, 0102T, 0062T,
                                0200T, 0201T.
Skin.........................  10000 through 19999, G0247, 0046T, 0268T,
                                G0127, C9726, C9727.
Genitourinary................  50000 through 58999, 0193T, 58805.
Cardiovascular...............  33000 through 37999.
Respiratory..................  30000 through 32999.
------------------------------------------------------------------------
* Information for OP-15 will not be reported in Hospital Compare in
  2012. Public Reporting for this measure would occur in July 2013 at
  the earliest.
** Data collection for OP-19 was suspended effective with January 1,
  2012 encounters until further notice.
*** Data collection for OP-24 would be postponed from January 1, 2013 to
  January 1 2014, and its first application toward a payment
  determination would be for CY 2015 rather than CY 2014.

    We invite public comments on these proposals.

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

    The current measure set for the Hospital OQR Program includes 
measures that assess process of care, imaging efficiency patterns, care 
transitions, ED Throughput efficiency, the use of HIT care 
coordination, patient safety, and volume. We anticipate that as EHR 
technology evolves, and more infrastructure are put in place, we will 
have the capacity to accept electronic reporting of many clinical 
chart-abstracted measures that are currently part of the Hospital OQR 
Program using certified EHR technology. We work diligently toward this 
goal. We believe that this future progress at a future date, such as FY 
2015, would significantly reduce the administrative burden on hospitals 
under the Hospital OQR Program to report chart-abstracted measures. We 
recognize that considerable work needs to be done by measure owners and 
developers to make this possible with respect to the clinical quality 
measures targeted for e-specifications. This includes completing 
electronic specifications for measures, pilot testing, reliability and 
validity testing, and implementing such specifications into certified 
EHR technology to capture and calculate the results, and implementing 
the systems.
    We seek to develop a comprehensive set of quality measures to be 
available for widespread use for informed decision-making and quality 
improvement in the hospital outpatient setting. Therefore, through 
future rulemaking, we intend to propose new measures that help us 
further our goal of achieving better health care and improved health 
for Medicare beneficiaries who receive health care in hospital 
outpatient settings. In addition, we are considering initiating a call 
for input to assess the following measure domains: clinical quality of 
care; care coordination; patient safety; patient and caregiver 
experience of care; population/community health; and efficiency. We 
believe this approach will promote better care while bringing the 
Hospital OQR Program in line with other established quality reporting 
and pay for performance programs such as the Hospital IQR and ASCQR 
Programs.
    We invite public comment on this approach and suggestions and 
rationale for possible quality measures for future inclusion in the 
Hospital OQR Program.

[[Page 45181]]

F. Proposed Payment Reduction for Hospitals That Fail To Meet the 
Hospital OQR Program Requirements for the CY 2013 Payment Update

1. Background
    Section 1833(t)(17) of the Act, which applies to subsection (d) 
hospitals (as defined under section 1886(d)(1)(B) of the Act), states 
that hospitals that fail to report data required to be submitted on the 
measures selected by the Secretary, in the form and manner, and at a 
time, required by the Secretary will incur a 2.0 percentage point 
reduction to their 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 applicable OPD fee 
schedule increase factor for a subsequent payment year.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68769 
through 68772), we discussed how the payment reduction for failure to 
meet the administrative, data collection, and data submission 
requirements of the Hospital OQR Program affected the CY 2009 payment 
update applicable to OPPS payments for HOPD services furnished by the 
hospitals defined under section 1886(d)(1)(B) of the Act to which the 
program applies. The application of a reduced OPD fee schedule increase 
factor results in reduced national unadjusted payment rates that apply 
to certain outpatient items and services provided by hospitals that are 
required to report outpatient quality data and that fail to meet the 
Hospital OQR Program requirements. All other hospitals paid under the 
OPPS that meet the reporting requirement receive the full OPPS payment 
update without the reduction.
    The national unadjusted payment rates for many services paid under 
the OPPS equal the product of the OPPS conversion factor and the scaled 
relative weight for the APC to which the service is assigned. The OPPS 
conversion factor, which is updated annually by the OPD fee schedule 
increase factor, is used to calculate the OPPS payment rate for 
services with the following status indicators (listed in Addendum B to 
this 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 is an input into the OPPS 
conversion factor, which is used to calculate OPPS payment rates. To 
implement the requirement to reduce the OPD fee schedule increase 
factor for hospitals that fail to meet reporting requirements, we 
calculate two conversion factors: A full market basket conversion 
factor (that is, the full conversion factor), and a reduced market 
basket conversion factor (that is, the reduced conversion factor). We 
then calculate a reduction ratio by dividing the reduced conversion 
factor by the full conversion factor. We refer to this reduction ratio 
as the ``reporting ratio'' to indicate that it applies to payment for 
hospitals that fail to meet their reporting requirements. Applying this 
reporting ratio to the OPPS payment amounts results in reduced national 
unadjusted payment rates that are mathematically equivalent to the 
reduced national unadjusted payment rates that would result if we 
multiplied the scaled OPPS relative weights by the reduced conversion 
factor. To determine the reduced national unadjusted payment rates that 
applied to hospitals that failed to meet their quality reporting 
requirements for the CY 2010 OPPS, we multiply the final full national 
unadjusted payment rate 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

[[Page 45182]]

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), in the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 72099), and in the CY 2012 OPPS/ASC final rule 
with comment period (76 FR 74478). For a complete discussion of the 
OPPS outlier calculation and eligibility criteria, we refer readers to 
section II.G. of this proposed rule.
2. Proposed Reporting Ratio Application and Associated Adjustment 
Policy for CY 2013
    We are proposing to continue our established policy of applying the 
reduction of the OPD fee schedule increase factor through the use of a 
reporting ratio for those hospitals that fail to meet the Hospital OQR 
Program requirements for the full CY 2013 annual payment update factor. 
For the CY 2013 OPPS, the proposed reporting ratio is 0.980, calculated 
by dividing the proposed reduced conversion factor of $70.106 by the 
proposed full conversion factor of $71.537. We are proposing to 
continue to apply the reporting ratio to all services calculated using 
the OPPS conversion factor. For the CY 2013 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.

G. Proposed Requirements for Reporting of Hospital OQR Data for the CY 
2014 Payment Determination and Subsequent Years

1. Administrative Requirements for the CY 2014 Payment Determination 
and Subsequent Years
    In order to participate in the Hospital OQR Program, hospitals must 
meet administrative, data collection and submission, and data 
validation requirements (if applicable). Hospitals that do not meet 
Hospital OQR Program requirements, as well as hospitals not 
participating in the program and hospitals that withdraw from the 
program, will not receive the full OPPS payment rate update. Instead, 
in accordance with section 1833(t)(17)(A) of the Act, those hospitals 
will receive a reduction of 2.0 percentage points to their OPD fee 
schedule increase factor for the applicable payment year.
    We established administrative requirements for the payment 
determination requirements for the CY 2013 and subsequent years' 
payment updates in the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74479 through 74487).
    With respect to the payment determinations for CY 2014 and 
subsequent years, we are proposing one modification to these 
requirements. Under current requirements, CMS deadlines for hospitals 
to submit notice of participation forms are based on the date 
identified as a hospital's Medicare acceptance date on the CMS 
Certification and Survey Provider Enhanced Reporting (CASPER) system. 
Deadlines are based on whether a hospital's Medicare acceptance date 
falls before January 1 of the year prior to the annual payment update, 
or on or after January 1 of the year prior to the annual payment update 
(for example, 2013 would be the year prior to the affected CY 2014 
annual payment update). Currently, for a hospital whose Medicare 
acceptance date is before January 1 of the year prior to the affected 
payment update affected, the notice of participation form is due by 
March 31 of the year prior to the affected annual payment update (76 FR 
74479 through 74480). We are proposing to extend this deadline for 
hospitals, as described below.
    Hospitals with Medicare acceptance dates before January 1 of the 
year prior to the affected annual payment update: For the CY 2014 and 
subsequent years payment update, we 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, 2013 would be the 
year prior to the affected CY 2014 annual payment update) that is not 
currently participating in Hospital OQR and wishes to participate in 
the Hospital OQR Program must submit a participation form by July 31, 
rather than March 31, of the year prior to the affected annual payment 
update. We are proposing a deadline of July 31 to give hospitals the 
maximum amount of time to decide whether they wish to participate in 
the Hospital OQR Program, as well as put into place the necessary staff 
and resources to timely report chart-abstracted data for first quarter 
of the year's services which are due August 1.
    We invite public comment on this proposed modification to Hospital 
OQR Program administrative requirements for the CY 2014 and subsequent 
years' payment determinations.
2. Form, Manner, and Timing of Data Submitted for the Hospital OQR 
Program for the CY 2014 Payment Determination and Subsequent Years
a. Background
    We are not proposing any additional measures for the CY 2014 
payment determination year. We refer readers to the following OPPS/ASC 
final rules with comment periods for a history of measures adopted for 
the Hospital OQR Program, including lists of: 11 measures finalized for 
the CY 2011 payment determination (74 FR 60637); 15 measures finalized 
for the CY 2012 payment determination (75 FR 72083 through 72084); 23 
measures finalized for the CY 2013 payment determination (75 FR 72090); 
and 26 measures finalized for the CY 2014 and CY 2015 payment 
determinations (76 FR 74469 and 74473).
    We refer readers to section XV.D. of this proposed rule for a 
discussion of the OP-15: Use of Brain Computed Tomography (CT) in the 
Emergency Department for Atraumatic Headache measure. Because of the 
clarification that public reporting is not planned until July 2013 at 
the earliest, we confirm this measure will not be used in the CY 2014 
payment determination. We will confirm our intent to include or exclude 
this measure in the CY 2015 payment determination in future rulemaking.
    We refer readers to section XV.C.2. of this proposed rule for a 
discussion of the OP-19: Transition Record with Specified Elements 
Received by Discharged ED Patients measure. Because the data collection 
for this measure is currently suspended, this measure will not be used 
in the CY 2014 payment determination. We will

[[Page 45183]]

indicate whether data collection for this measure will resume in time 
for the CY 2015 payment determination in future rulemaking.
    We refer readers to section XV.C.3. of this proposed rule for a 
discussion of the OP-24: Cardiac Rehabilitation Patient Referral From 
an Outpatient Setting measure. We are proposing not to use this measure 
in the CY 2014 payment determination and to use this measure in the CY 
2015 payment determination.
b. General Requirements
    We are proposing to continue the policy that, to be eligible to 
receive the full OPD fee schedule increase factor for any payment 
determination, hospitals must comply with our submission requirements 
for chart-abstracted data, population and sampling data, claims-based 
measure data, and structural quality measure data, including all-
patient volume data. We refer readers to the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74480 through 74482) for a discussion 
of these requirements.
c. Proposed Chart-Abstracted Measure Requirements for CY 2014 and 
Subsequent Payment Determination Years
    The table in section XV.D. of this proposed rule includes measures 
that are collected by abstracting the information from the patient 
chart. The full list of these chart abstracted measures is set out 
below:
     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-16: Troponin Results for Emergency Department acute 
myocardial infarction (AMI) patients or chest pain patients (with 
Probable Cardiac Chest pain) Received Within 30 minutes of Arrival
     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: Cardiac Rehabilitation Patient Referral From an 
Outpatient Setting
    We have suspended OP-19 from the CY 2014 payment determination and 
are proposing to defer data collection for OP-24 for the CY 2014 
payment year. We invite public comment on our proposal to collect data 
for only those measures that are finalized to be included in the CY 
2014 payment determination.
    Of those measures for which we are proposing to collect data for in 
CY 2014, the form and manner for submission of one of these measures, 
OP-22: ED Patient Left Without Being Seen, is unique, and the form and 
manner for this measure is detailed in section XV.G.2.f. of this 
proposed rule.
    For the remaining chart-abstracted measures for which we are 
proposing to collect data for the CY 2014 payment determination, we are 
proposing that the applicable quarters for data collection would be as 
follows: 3rd quarter CY 2012, 4th quarter CY 2012, 1st quarter CY 2013, 
and 2nd quarter CY 2013 for hospitals that are continuing participants; 
newly participating hospitals would follow reporting requirements as 
outlined in the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74480) and in section XV.G.1. of this proposed rule.
    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 2013 (January--March, 2013) would be on or around 
August 1, 2013. The actual submission deadlines would be posted on the 
http://www.QualityNet.org Web site.
    Hospitals that did not participate in the CY 2013 Hospital OQR 
Program, but would like to participate in the CY 2014 Hospital OQR 
Program, and that have a Medicare acceptance date on the CASPER system 
before January 1, 2013, would begin data submission with respect to 1st 
quarter CY 2013 encounters using this 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, 
2013, data submission must begin with the first full quarter following 
the submission of a completed online participation form.
    For the CY 2015 payment determination, we are proposing that the 
applicable quarters for previously finalized chart-abstracted measures 
would be as follows: 3rd quarter CY 2013, 4th quarter CY 2013, 1st 
quarter CY 2014, and 2nd quarter CY 2014.
    Hospitals that did not participate in the CY 2014 Hospital OQR 
Program, but would like to participate in the CY 2015 Hospital OQR 
Program, and that have a Medicare acceptance date on the CASPER system 
before January 1, 2014, would begin data submission with respect to 1st 
quarter CY 2014 encounters using the CY 2015 measure set that we 
finalized in the CY 2012 OPPS/ASC final rule with comment period. For 
those hospitals with Medicare acceptance dates on or after January 1, 
2014, data submission must begin with the first full quarter following 
the submission of a completed online participation form. We invite 
public comments on these proposals.
d. Proposed Claims-Based Measure Data Requirements for the CY 2014 and 
CY 2015 Payment Determinations
    The table in section XV.D. of this proposed rule includes measures 
that the Hospital OQR Program collects by accessing electronic claims 
data submitted by hospitals for reimbursement. The full list of these 
claims-based measures is set out below:
     OP-8: MRI Lumbar Spine for Low Back Pain
     OP-9: Mammography Follow-up Rates
     OP-10: Abdomen CT--Use of Contrast Material
     OP-11: Thorax CT--Use of Contrast Material
     OP-13: Cardiac Imaging for Preoperative Risk Assessment 
for Non Cardiac Low Risk Surgery
     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-15 has not been implemented for public reporting through 
rulemaking, and it is not required for the CY 2014 payment 
determination.
    Therefore, for the CY 2014 payment determination, the 6 remaining 
claims-based measures (OP-8 to OP-11, OP-13 and OP-14) from the list 
above will be used (76 FR 74469).
    We will continue our policy of calculating the measures using the 
hospital's Medicare claims data as specified in the Hospital OQR 
Specifications Manual; no additional

[[Page 45184]]

data submission is required for hospitals. In the CY 2012 OPPS/ASC 
final rule with comment period (76 FR 74483), we stated that for the CY 
2013 and CY 2014 payment updates, we will use paid Medicare FFS claims 
for services furnished from January 1, 2010 to December 31, 2010 and 
January 1, 2011 to December 31, 2011, respectively.
    For the CY 2015 Hospital OQR payment determination, we are 
proposing to use Medicare FFS claims for services from a 12-month 
period from July 1, 2012 through June 30, 2013 for the calculation of 
the claims-based measures. While this would be a departure from the 
traditional 12 month calendar year period we have used for these 
measures, we are proposing this period in order to align the data 
period for inpatient and outpatient claims based measures reported on 
the Hospital Compare Web site, and also to be able to post more recent 
data for the outpatient imaging efficiency on the Web site. We invite 
public comment on this proposal.
e. Proposed Structural Measure Data Requirements for the CY 2014 
Payment Determination and Subsequent Years
    A summary of the previously finalized structural measures that we 
require for the CY 2014 and subsequent years payment determinations is 
set out below:
     OP-12: The Ability for Providers with HIT to Receive 
Laboratory Data Electronically Directly into their Qualified/Certified 
EHR System as Discrete Searchable Data
     OP-17: Tracking Clinical Results Between Visits
     OP 25--Safe Surgical Check List Use
     OP 26--Hospital Outpatient Volume for Selected Outpatient 
Surgical Procedures
    We previously finalized that for the CY 2014 payment determination, 
hospitals will be required to submit data on all structural measures 
between July 1, 2013 and August 15, 2013 with respect to the time 
period from January 1, 2012 to December 31, 2012. We are proposing to 
extend this submission deadline. Under this proposed change, for the CY 
2014 payment determination, hospitals would be required to submit data 
on all structural measures between July 1, 2013 and November 1, 2013 
with respect to the time period from January 1, 2012 to December 31, 
2012. In section XV.G.2.f. of this proposed rule, we describe how this 
proposal would likewise extend the deadline to submit data for OP-22: 
ED Patient Left without Being Seen. We are proposing to continue this 
schedule so that, for the FY 2015 payment determination, hospitals 
would be required to submit data on all structural measures between 
July 1, 2014 and November 1, 2014 with respect to the time period from 
January 1, 2013 to December 31, 2013. We invite public comments on 
these proposals.
f. Proposed Data Submission Requirements for OP-22: ED-Patient Left 
Without Being Seen for the CY 2015 Payment Determination
    OP-22: ED-Patient Left Without Being Seen is a chart-abstracted 
measure for which aggregate data is collected via a Web-based tool, as 
previously finalized. In other words, for purposes of data collection, 
this measure is treated like a structural measure. For this reason, it 
is collected on the same schedule as the structural measures described 
above, and we are proposing to extend the submission window for all 
structural measures, including OP-22. In the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74485), with respect to OP-22, we 
stated that hospitals would be required to submit data once for the CY 
2014 payment determinations via a Web-based tool located on the 
QualityNet Web site. For the CY 2014 payment determination, we are 
proposing that hospitals would be required to submit data, including 
numerator and denominator counts, between July 1, 2013 and November 1, 
2013 (comparable to the submission window that we are proposing for the 
structural measures data collection in the section above) with respect 
to the time period of January 1, 2012 to December 31, 2012.
    For the CY 2015 payment determination, we are proposing to continue 
this policy. Hospitals would be required to submit data between July 1, 
2014 and November 1, 2014 with respect to the time period of January 1, 
2013 to December 31, 2013. We invite public comment on these proposals.
g. Proposed Population and Sampling Data Requirements for the CY 2014 
Payment Determination and Subsequent Years
    For the CY 2014 payment determination and subsequent years, we are 
proposing to continue our policy that hospitals may submit voluntarily 
on a quarterly basis, aggregate population and sample size counts for 
Medicare and non-Medicare encounters for the measure populations for 
which chart-abstracted data must be submitted, but they will not be 
required to do so. Where hospitals do choose to submit this data, the 
deadlines for submission are the same as those for reporting data for 
chart-abstracted measures, and hospitals may also choose to submit data 
prior to these deadlines. The deadline schedule is available on the 
QualityNet Web site. We refer readers to the CY 2011 OPPS/ASC final 
rule with comment period (75 FR 72101 through 72103) and the CY 2012 
OPPS/ASC final rule with comment period (76 FR 74482 through 74483) for 
discussions of these policies. We invite public comments on these 
proposals.
3. Proposed Hospital OQR Program Validation Requirements for Chart-
Abstracted Measure Data Submitted Directly to CMS for the CY 2014 
Payment Determination and Subsequent Years
a. Random Selection of Hospitals for Data Validation of Chart-
Abstracted Measures for the CY 2014 Payment Determination and 
Subsequent Years
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74484 
through 74485), similar to our approach for the CY 2012 payment 
determination (75 FR 72103 through 72106), we adopted a policy to 
validate chart-abstracted patient-level data submitted directly to CMS 
from randomly selected hospitals for the CY 2013 payment determination.
    For the CY 2013 payment determination, we reduced the number of 
randomly selected hospitals from 800 to 450.
    We are proposing to continue this policy for the CY 2014 payment 
determination and for subsequent years. We refer readers to the CY 2012 
OPPS/ASC final rule with comment period (FR 76 74484) for a discussion 
of sample size, eligibility for validation selection, and encounter 
minimums for chart abstracted data submitted directly to CMS from 
randomly selected hospitals. We invite public comment on this proposal.
b. Targeting and Proposed Targeting Criteria for Data Validation 
Selection for the CY 2014 Payment Determination and Subsequent Years
    In the CY 2011 OPPS/ASC proposed rule (75 FR 46380) we discussed 
applying, to CY 2013 and subsequent year's data submission, criteria to 
determine whether a hospital would be included in our validation 
selection based on abnormal data patterns or a specific situation. At 
that time we provided, for public comment, specific examples of what we 
thought could be appropriate criteria.
    In the CY 2011 OPPS/ASC final rule with comment period (75 FR 
72106) we stated our belief that the targeting

[[Page 45185]]

criteria we shared for comment were reasonable. We considered one 
commenter's concern that we should use targeting criteria to ensure we 
do not over-select a hospital for validation. We reiterated our intent 
to propose the specific targeting criteria in the upcoming CY 2012 
OPPS/ASC proposed rule (76 FR 42332), in order to finalize and apply it 
to 2012 encounter data collected for the CY 2013 validation process 
year. We did so, and finalized our proposal without modification in the 
CY 2012 OPPS/ASC final rule with comment period (76 FR 74485).
    In summary, we finalized our intent to select a random sample of 
hospitals for validation purposes, and to select an additional 50 
hospitals selected based on specific criteria designed to measure 
whether the data these hospitals have reported raises a concern 
regarding data accuracy.
    For the CY 2014 payment determination and subsequent years, we are 
proposing to continue these policies and to continue to use the 
targeting criteria finalized previously. Specifically, a hospital will 
be preliminarily selected for validation based on targeting criteria if 
it:
     Fails the validation requirement that applies to the CY 
2012 payment determination; or
     Has an outlier value for a measure based on the data it 
submits.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42333) and CY 2012 
OPPS/ASC final rule with comment period (76 FR 74486) we describe 
additional data validation conditions under consideration for the CY 
2014 payment determination and subsequent years. We thank those who 
commented on the CY 2012 proposed additional data validation targeting 
conditions and will take their views under consideration as we develop 
any future proposals on these issues. At this time, we are not 
proposing any additional targeting criteria to use in selecting the 
additional 50 hospitals we include in the validation process for CY 
2014 payment determination or in subsequent years. We invite public 
comment on this proposal.
c. Proposed Methodology for Encounter Selection for the CY 2014 Payment 
Determination and Subsequent Years
    For each selected hospital (random or targeted), we are proposing 
to continue the approach we adopted in the CY 2012 OPPS/ASC final rule 
with comment period (76 FR 74485 through 74486) for the CY 2014 payment 
determination and subsequent years. For the CY 2014 payment 
determination, for each selected hospital (random or targeted), we 
would continue to validate up to 48 randomly selected patient 
encounters (12 per quarter; 48 per year) from the total number of 
encounters that the hospital successfully submitted to the OPPS 
Clinical Warehouse. If a selected hospital has submitted less than 12 
encounters in one or more quarters, only those encounters available 
would be validated. For each selected encounter, a designated CMS 
contractor would request that the hospital submit the complete 
supporting medical record documentation that corresponds to the 
encounter. We refer readers to 42 CFR 482.24(c) for a definition of 
what is expected in a medical record submitted for validation. The 
validation process requires full supporting medical documentation, 
including ECG tapes and/or other pieces of a medical record that may 
not be stored in a single location. The hospital must ensure a full 
medical record goes to the contractor for accurate validation.
    We continue to believe that validating a larger number of 
encounters per hospital for fewer hospitals at the measure level has 
several benefits. We believe that this approach is suitable for the 
Hospital OQR Program because it will: (1) produce a more reliable 
estimate of whether a hospital's submitted data have been abstracted 
accurately; (2) provide more statistically reliable estimates of the 
quality of care delivered in each measured hospital as well as at a 
national level; and (3) reduce overall burden, for example, in 
submitting validation documentation, because hospitals most likely will 
not be selected to undergo validation each year, and a smaller number 
of hospitals per year will be selected.
    For all selected hospitals, we would not be selecting cases 
stratified by measure or topic; our interest is whether the data 
submitted by hospitals accurately reflects the care delivered and 
documented in the medical record, not what the accuracy is by measure 
or whether there are differences by measure or topic. We would be 
validating data from April 1 to March 31 of the year preceding the 
payment determination year. This provides validation results data in 
time to use to make the payment determination. For example, encounter 
data from April 1, 2012 to March 31, 2013 provides a full year of the 
most recent data possible to validate in time to make the CY 2014 
payment determination. We invite public comment on our proposal to 
continue to use our established methodology for encounter selection and 
our proposed annual schedule for encounters to be validated and used in 
payment determinations.
d. Validation Score Calculation for the CY 2014 Payment Determination 
and Subsequent Years
    We are proposing to retain the medical record return policy that we 
finalized in the CY 2011 OPPS/ASC final rule with comment period (75 FR 
72104) for the CY 2014 payment determination and subsequent years. For 
the CY 2014 payment determination, we are proposing to continue the 
validation score policies we adopted in the CY 2012 OPPS/ASC final rule 
with comment period (76 FR 74486), for the CY 2013 payment 
determination. We are proposing to use the validation calculation 
approach finalized for the CY 2012 and CY 2013 payment determinations 
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.
    For the CY 2014 payment determination and subsequent years, we are 
proposing to use the medical record validation procedure we finalized 
in the CY 2011 OPPS/ASC final rule with comment period (75 FR 72105). A 
designated CMS contractor would, for each quarter that applies to the 
validation, ask each of the selected hospitals to submit medical 
documentation for up to 12 randomly selected cases submitted to and 
accepted by the OPPS Clinical Warehouse. The CMS contractor would 
request paper copies of medical documentation corresponding to selected 
cases from each hospital via certified mail or another trackable method 
that requires a hospital representative to sign for the request letter. 
A trackable method would be used so that we would be assured that the 
hospital received the request. The hospital would have 45 calendar days 
from the date of the request as documented in the request letter to 
submit the requested documentation and have the documentation received 
by the CMS contractor. If the hospital does not comply within 30 
calendar days of receipt of the initial medical documentation request, 
the CMS contractor would send a second letter by

[[Page 45186]]

certified mail or other trackable method to the hospital, reminding the 
hospital that paper copies of the requested documentation must be 
submitted and received within 45 calendar days following the date of 
the initial CMS contractor request. If the hospital does not submit the 
requested documentation and the documentation is not received by the 
CMS contractor within the 45 calendar days, then the CMS contractor 
would assign a ``zero'' score to each data element for each selected 
case and the case would fail for all measures in the same topic (for 
example, OP-6 and OP-7 measures for a Surgical Care case).
    We are proposing that the letter from the designated CMS contractor 
would be addressed to the hospital's medical record staff identified by 
the hospital for the submission of records under the Hospital IQR 
Program (that is, the hospital's medical records staff identified by 
the hospital to its State QIO). If CMS has evidence that the hospital 
received both letters requesting medical records, the hospital would be 
deemed responsible for not returning the requested medical record 
documentation and the hospital would not be allowed to submit such 
medical documentation as part of its reconsideration request so that 
information not utilized in making a payment determination is not 
included in any reconsideration request.
    Once the CMS contractor receives the requested medical 
documentation, the contractor would independently reabstract the same 
quality measure data elements that the hospital previously abstracted 
and submitted, and the CMS contractor would then compare the two sets 
of data to determine whether the two sets of data match. Specifically, 
the CMS contractor would conduct a measures level validation by 
calculating each measure within a submitted case using the 
independently reabstracted data and then comparing this to the measure 
reported by the hospital; a percent agreement would then be calculated. 
The validation score for a hospital would equal the total number of 
measure matches divided by the total number of measures multiplied by 
100 percent.
    We invite public comment on our proposals regarding the medical 
record request policy for CY 2014 payment determination and subsequent 
payment determination years.
    To receive the full OPPS OPD fee schedule increase factor for CY 
2014, 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 and CY 2013 payment 
determinations (75 FR 72105 and 76 FR 74486). We also are proposing to 
use the same medical record documentation submission procedures that we 
also finalized for the CY 2012 and CY 2013 payment determinations (75 
FR 72104 and 76 FR 74486). We invite public comments on these 
proposals.

H. Proposed Hospital OQR Reconsideration and Appeals Procedures for the 
CY 2014 Payment Determination and Subsequent Years

    When the Hospital IQR Program was initially implemented, it did not 
include a reconsideration process for hospitals. Subsequently, we 
received many requests for reconsideration of those payment decisions 
and, as a result, established a process by which participating 
hospitals 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. This process 
required that a hospital's CEO sign any request for a reconsideration.
    In the CY 2011 and CY 2012 OPPS/ASC final rules with comment 
periods (75 FR 72106 through 72108 and 76 FR 74486 through 75587), we 
continued this process for the CY 2012 and CY 2013 payment updates with 
some modification. In the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 72107), we finalized that the CEO was not required to 
sign the reconsideration request form.
    We are proposing to continue this process, with additional 
modifications, for the CY 2014 payment determination and subsequent 
years payment determinations. We have now realized that, in eliminating 
the requirement that a CEO sign a request form, we did not include any 
requirement for a signature on the reconsideration request form. To 
increase accountability, we are proposing for the CY 2014 payment 
determination and subsequent years payment determinations, that the 
hospital designate a contact on its reconsideration request form, who 
may or may not be the CEO. We would communicate with this designee. We 
also are proposing the hospital's designee must sign its 
reconsideration request form. This process is consistent with our 
recent proposals for reconsideration requests under the ASCQR Program 
(77 FR 28105).
    Under this process, a hospital seeking reconsideration must--
     Submit to CMS, via QualityNet, a Reconsideration Request 
form that will be made available on the QualityNet Web site; this form 
must be submitted by February 3 of the affected payment year (for 
example, for the CY 2014 payment determination, the request must be 
submitted by February 3, 2014) and must contain the following 
information:
    [cir] Hospital CCN.
    [cir] Hospital Name.
    [cir] 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.
    [cir] 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.
    [cir] Designated hospital personnel contact information, including 
name, email address, telephone number, and mailing address (must 
include physical address, not just a post office box). We are proposing 
that the designee, who may or may not be the hospital's CEO, must sign 
the form submitted to request reconsideration.
    [cir] A copy of all materials that the hospital submitted to comply 
with the requirements of the affected year's Hospital OQR Program. Such 
material might include, but does not need to be limited to, the 
applicable Notice of Participation form or completed online 
registration form, and measure data that the hospital submitted via 
QualityNet.

[[Page 45187]]

     Paper copies of all the medical record documentation that 
it submitted for the initial validation (if applicable). Hospitals 
submit this documentation to a designated CMS contractor which has 
authority to review patient level information. We post the address 
where hospitals are to send this documentation on the QualityNet Web 
site.
     To the extent that the hospital is requesting 
reconsideration on the basis that CMS has determined it did not meet an 
affected year's validation requirement, the hospital must provide a 
written justification for each appealed data element classified during 
the validation process as a mismatch. Only data elements that affect a 
hospital's validation score would be eligible to be reconsidered. We 
review the data elements that were labeled as mismatched as well as the 
written justifications provided by the hospital, and make a decision on 
the reconsideration request.
    We are proposing these requirements for the CY 2014 payment 
determination year program and for subsequent years. We invite public 
comment on these proposed changes.
    Following receipt of a request for reconsideration, CMS--
     Provides an email acknowledgement, using the contact 
information provided in the reconsideration request, to the designated 
hospital personnel notifying them that the hospital's request has been 
received.
     Provides a formal response to the hospital-designated 
personnel, using the contact information provided in the 
reconsideration request, notifying the hospital of the outcome of the 
reconsideration process.
     Applies policies that we finalized for the CY 2012 and CY 
2013 payment determinations regarding the scope of our review when a 
hospital requests reconsideration because it failed our validation 
requirement.
    These policies are as follows:
     If a hospital requests reconsideration on the basis that 
it disagrees with a determination that one or more data elements were 
classified as mismatches, we only consider the hospital's request if 
the hospital timely submitted all requested medical record 
documentation to the CMS contractor each quarter under the validation 
process.
     If a hospital requests reconsideration on the basis that 
it disagrees with a determination that one or more of the complete 
medical records it submitted during the quarterly validation process 
was classified as an invalid record selection (that is, the CMS 
contractor determined that one or more of the complete medical records 
submitted by the hospital did not match what was requested, thus 
resulting in a zero validation score for the encounter(s), our review 
is initially limited to determining whether the medical documentation 
submitted in response to the designated CMS contractor's request was 
the correct and complete documentation. If we determine that the 
hospital did submit the correct and complete medical documentation, we 
abstract the data elements and compute a new validation score for the 
encounter. If we conclude that the hospital did not submit the correct 
and complete medical record documentation, we do not further consider 
the hospital's request.
     If a hospital requests reconsideration on the basis that 
it disagrees with a determination that it did not submit the requested 
medical record documentation to the CMS contractor within the proposed 
45 calendar day timeframe, our review is initially limited to 
determining whether the CMS contractor received the requested medical 
record documentation within 45 calendar days, and whether the hospital 
received the initial medical record request and reminder notice. If we 
determine that the CMS contractor timely received paper copies of the 
requested medical record documentation, we abstract data elements from 
the medical record documentation submitted by the hospital and compute 
a validation score for the hospital. If we determine that the hospital 
received two letters requesting medical documentation but did not 
submit the requested documentation within the 45 calendar day period, 
we do not further consider the hospital's request.
    If a hospital is dissatisfied with the result of a Hospital OQR 
reconsideration decision, the hospital is able to file an appeal under 
42 CFR Part 405, Subpart R (PRRB appeal).
    We invite public comment on the modifications we have proposed to 
the Hospital OQR Program reconsideration and appeals procedures.

I. Proposed Extraordinary Circumstances Extension or Waiver for the CY 
2013 Payment Determination and Subsequent Years

    In our experience, there have been times when hospitals have been 
unable to submit required quality data due to extraordinary 
circumstances that are not within their control. It is our goal to not 
penalize hospitals for such circumstances and we do not want to unduly 
increase their burden during these times. Therefore, in the CY 2010 
OPPS/ASC final rule with comment period (74 FR 60046 through 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 a modification to 
eliminate redundancy in the information a hospital must provide in the 
request. In the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74478 through 74479), for CY 2012 and subsequent years, we retained 
these procedures with one modification. The CY 2012 modification 
allowed that the original procedures for requesting an extension or 
waiver of quality data submission would thereafter also extend to 
include medical record documentation submission for purposes of 
complying with our validation requirement for the Hospital OQR Program. 
We are proposing to retain these procedures with a modification for CY 
2013 and subsequent years.
    We are proposing to modify one element of the information required 
on the CMS request form. Under the procedures set out in the CY 2012 
OPPS/ASC final rule with comment period (76 FR 74479), hospitals were 
required to submit ``CEO and any other designated personnel contact 
information'' (emphasis added), the CEO was required to sign the form, 
and CMS was required to respond to the CEO and additional designated 
hospital personnel. The information required in CY 2013 and subsequent 
years would include ``CEO or other hospital-designated personnel 
contact information'' (emphasis added). This proposed change would 
allow the hospital to designate an appropriate, non-CEO, contact at its 
discretion. This individual would be responsible for the submission, 
and would be the one signing the form. Therefore, the hospital's 
designated-contact may or may not hold the title of CEO. We invite 
public comment on this proposed modification to the process for 
granting extraordinary circumstances extensions or waivers for the 
Hospital OQR Program.
    Thus, we are proposing that, in the event of extraordinary 
circumstances, such as a natural disaster, not within the control of 
the hospital, for the hospital to receive consideration for an 
extension or waiver of the requirement to submit quality data or 
medical record documentation for one or more quarters, a hospital would 
submit to CMS a

[[Page 45188]]

request form that would be made available on the QualityNet Web site. 
The following information should be noted on the form:
     Hospital CCN;
     Hospital Name;
     CEO or other hospital-designated personnel contact 
information, including name, email 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 designated 
contact, whether or not that individual is the CEO. A request form 
would be required to be submitted within 45 days of the date that the 
extraordinary circumstance occurred.
    Following receipt of such a request, CMS would--
    (1) Provide a written acknowledgement using the contact information 
provided in the request notifying the designated contact that the 
hospital's request has been received;
    (2) Provide a formal response to the hospital's designated contact 
using the contact information provided in the request notifying them of 
our decision; and
    (3) Complete our review of any CY 2013 request and communicate our 
response within 90 days following our receipt of such a request.
    We note that we might also decide to grant waivers or extensions to 
hospitals that have not requested them when we determine that an 
extraordinary circumstance, such as an act of nature (for example, 
hurricane) affects an entire region or locale. If we make the 
determination to grant a waiver or extension to hospitals in a region 
or locale, we would communicate this decision to hospitals and vendors 
through routine communication channels, including but not limited to 
emails and notices on the QualityNet Web site. We invite public 
comments on these proposals.

J. Electronic Health Records (EHRs)

    Starting with the FY 2006 IPPS final rule, we have encouraged 
hospitals to take steps toward the adoption of EHRs (also referred to 
in previous rulemaking documents as electronic medical records) that 
will allow for reporting of clinical quality data from EHRs to a CMS 
data repository (70 FR 47420 through 47421). We sought to prepare for 
future EHR submission of quality measures by sponsoring the creation of 
electronic specifications for quality measures under consideration for 
the Hospital IQR Program. Through the Medicare and Medicaid EHR 
Incentive Programs, we expect that the submission of quality data 
through EHRs will provide a foundation for establishing the capacity of 
hospitals to send, and for CMS, in the future, to receive, quality 
measures via hospital EHRs for Hospital IQR Program and Hospital OQR 
Program measures. We expect the Hospital IQR and Hospital OQR Programs 
to transition to the use of 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 for the Hospital IQR 
Program. We also anticipate such a transition for hospital outpatient 
measures, although likely somewhat after the transition for hospital 
inpatient measures. This is because we hope to first align the clinical 
quality measures in the Medicare EHR Incentive Program with the 
Hospital IQR Program measures. Our goals are to align the hospital 
quality reporting programs, to seek to avoid redundant and duplicative 
reporting of quality measures for hospitals, and to rely largely on EHR 
submission for many measures based on clinical record data.
    As noted below, the Stage 2 Medicare EHR Incentive Program proposed 
rule would require electronic reporting of clinical quality measures 
beginning in 2014 for eligible hospitals and CAHs that are beyond the 
first year of Stage 1 of meaningful use. Under our timeline for EHR-
based submission under the Hospital OQR Program, some eligible 
hospitals would be in their second year of Stage 2 reporting and these 
eligible hospitals could be using two methods to report similar 
information for the Medicare and Medicaid EHR Incentive Programs and 
the Hospital OQR Program. We considered allowing, but not requiring, 
EHR-based submission at the earliest possible date, so as to reduce the 
burden of hospitals. We are not proposing this approach because we 
believe that it would not be consistent with our goal that measure 
results that must be publicly reported should be based on consistent, 
comparable results among reporting hospitals and because our first 
priority is to align EHR-based submissions under the Hospital IQR 
Program. We invite public comment on this issue.

K. Proposed 2013 Medicare EHR Incentive Program Electronic Reporting 
Pilot for Eligible Hospitals and CAHs

    In the 2012 OPPS/ASC final rule with comment period we finalized 
the voluntary 2012 Electronic Reporting Pilot for eligible hospitals 
and CAHs participating in the Medicare EHR Incentive Program for the 
2012 payment year and also revised our regulations at Sec.  495.8(b)(2) 
accordingly. We refer readers to the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74489 through 74492) for detailed discussion of 
the Electronic Reporting Pilot.
    We are proposing to continue the Electronic Reporting Pilot for the 
2013 payment year as finalized for the 2012 payment year. We are 
proposing to revise our regulations at Sec.  495.8(b)(2)(vi) to reflect 
the continuation of the Electronic Reporting Pilot for 2013, and also 
to remove the reference to Sec.  495.6(f)(9) in order to conform with 
the proposed changes to Sec.  495.6(f) that were included in the EHR 
Incentive Program--Stage 2 proposed rule (77 FR 13817). We invite 
public comments on these proposals.
    We note that we finalized reporting clinical quality measures for 
the Medicare EHR Incentive Program by attestation of clinical quality 
measure results in the CY 2012 OPPS/ASC final rule with comment period 
for 2012 and subsequent years, such as 2013 (76 FR 74489). Thus, 
eligible hospitals and CAHs may continue to report clinical quality 
measure results as calculated by certified EHR technology by 
attestation for 2013, as they did for 2011 and 2012. We also note the 
intent of CMS to move to electronic reporting. In the Stage 2 Medicare 
EHR Incentive Program proposed rule, we proposed that the Medicare EHR 
Incentive Program would require electronic reporting of clinical 
quality measures beginning in 2014 for eligible hospitals and CAHs that 
are beyond the first year of Stage 1 of meaningful use (77 FR 13764).

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

A. Background

1. Overview
    We refer readers to section XV.A.1. of this proposed rule for a 
general

[[Page 45189]]

overview of our quality reporting programs.
2. Statutory History of the ASC Quality Reporting (ASCQR) Program
    We refer readers to section XIV.K.1. of the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74492 through 74493) for a detailed 
discussion of the statutory history of the ASCQR Program.
3. History of the ASCQR Program
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66875), the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68780), the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60656), and the CY 2011 OPPS/ASC final rule with comment period (75 FR 
72109), we did not implement a quality data reporting program for ASCs. 
We determined that it would be more appropriate to allow ASCs to 
acquire some experience with the revised ASC payment system, which was 
implemented for CY 2008, before implementing new quality reporting 
requirements. However, in these rules, we indicated that we intended to 
implement a quality reporting program for ASCs in the future.
    In preparation for proposing a quality reporting program for ASCs, 
in the CY 2011 OPPS/ASC proposed rule (75 FR 46383), we solicited 
public comments on 10 measures. In addition to preparing to propose 
implementation of a quality reporting program for ASCs, HHS developed a 
plan to implement a value-based purchasing (VBP) program for payments 
under title XVIII of the Act for ASCs as required by section 3006(f) of 
the Affordable Care Act, as added by section 10301(a) of the Affordable 
Care Act. We also submitted a report to Congress, as required by 
section 3006(f)(4) of the Affordable Care Act, entitled ``Medicare 
Ambulatory Surgical Center Value-Based Purchasing Implementation Plan'' 
that details this plan. This report is found on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/Downloads/C_ASC_RTC-2011.pdf. Currently, we do not have 
express statutory authority to implement an ASC VBP program. If and 
when legislation is enacted that authorizes CMS to implement an ASC VBP 
program, we will develop the program and propose it through rulemaking.
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74492 
through 74517), we finalized our proposal to implement the ASCQR 
Program beginning with the CY 2014 payment determination. We adopted 
quality measures for the CY 2014, CY 2015, and CY 2016 payment 
determination years and finalized some data collection and reporting 
timeframes for these measures. We also adopted policies with respect to 
the maintenance of technical specifications and updating of measures, 
publication of ASCQR Program data, and, for the CY 2014 payment 
determination, data collection and submission requirements for the 
claims-based measures. For a discussion of these final policies, we 
refer readers to the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74492 through 74517).
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74515), we indicated our intent to issue proposals for administrative 
requirements, data validation and completeness requirements, and 
reconsideration and appeals processes in the FY 2013 IPPS/LTCH PPS 
proposed rule, rather than in the CY 2013 OPPS/ASC proposed rule, 
because the FY 2013 IPPS/LTCH PPS proposed rule is scheduled to be 
finalized earlier and prior to data collection for the CY 2014 payment 
determination, which is to begin with services furnished on October 1, 
2012. In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28101 through 
28105), we issued proposals for administrative requirements, data 
completeness requirements, extraordinary circumstances waiver or 
extension requests, and a reconsideration process. For a complete 
discussion of these proposals, we refer readers to the FY 2013 IPPS/
LTCH PPS proposed rule (77 FR 28101 through 28105).
    Because we have included proposals in the FY 2013 IPPS/LTCH PPS 
proposed rule for the ASCQR Program, we are limiting the number of 
proposals in this proposed rule. In addition, in an effort to prevent 
confusion regarding what we are proposing in this proposed rule and 
what we have proposed in the FY 2013 IPPS/LTCH PPS proposed rule, in 
this proposed rule, we are limiting our discussion of the proposals 
contained in the FY 2013 IPPS/LTCH PPS proposed rule primarily to 
background related to the proposals being made in this proposed rule.

B. ASCQR Program Quality Measures

1. Proposed Considerations in the Selection of ASCQR Program Quality 
Measures
    Section 1833(i)(7)(B) of the Act states that section 1833(t)(17)(C) 
of the Act shall apply with respect to ASC services in a similar manner 
in which they apply to hospitals for the Hospital OQR Program, ``except 
as the Secretary may otherwise provide.'' The requirements under 
section 1833(t)(17)(C)(i) of the Act state that measures developed 
shall ``be appropriate for the measurement of quality of care 
(including medication errors) furnished by hospitals in outpatient 
settings and that reflect consensus among affected parties and, to the 
extent feasible and practicable, shall include measures set forth by 
one or more national consensus building entities.''
    In addition to following the statutory requirements, in selecting 
measures for the ASCQR Program and other quality reporting programs, we 
have focused on measures that have a high impact on and support HHS and 
CMS priorities for improved health care outcomes, quality, safety, 
efficiency, and satisfaction for patients. Our goal for the future is 
to expand any measure set adopted for the ASCQR Program to address 
these priorities more fully and to align ASC quality measure 
requirements with those of other reporting programs as appropriate, 
including the Hospital OQR Program, so that the burden for reporting 
will be reduced.
    In general, we prefer to adopt measures that have been endorsed by 
the NQF because it is a national multi-stakeholder organization with a 
well-documented and rigorous approach to consensus development. 
However, as discussed above, the Hospital OQR Program statute only 
requires that we adopt measures that are appropriate for the 
measurement of the quality of care furnished by hospitals in outpatient 
settings, reflect consensus among affected parties, and, to the extent 
feasible and practicable, include measures set forth by one or more 
national consensus building entities. Therefore, measures are not 
required to be endorsed by the NQF or any other national consensus 
building entity and, as we have noted in a previous rulemaking for the 
Hospital OQR Program (75 FR 72065), the requirement that measures 
reflect consensus among affected parties can be achieved in other ways, 
including through the measure development process, through broad 
acceptance and use of the measure(s), and through public comment. 
Further, the Secretary has broader authority under the ASCQR Program 
statute, as discussed above, to adopt nonendorsed measures or measures 
that do not reflect consensus for the ASCQR Program because, under the 
ASCQR Program statute, these Hospital OQR Program provisions apply 
``except as the Secretary may otherwise provide.''
    In developing the ASCQR Program, we applied the principles set 
forth in the CY 2011 OPPS/ASC proposed rule

[[Page 45190]]

and final rule with comment period (76 FR 42337 through 42338 and 74494 
through 74495, respectively). Although we are not proposing any new 
measures for the ASCQR Program in this proposed rule as discussed 
below, we plan to apply the following principles in future measure 
selection and development for the ASCQR Program. These principles were 
applied in developing other quality reporting programs and many are the 
same principles applied in developing the ASCQR Program last year.
     Our overarching goal is to support the National Quality 
Strategy's three-part aim of better health care for individuals, better 
health for populations, and lower costs for health care. The ASCQR 
Program will help achieve this three-part aim by creating transparency 
around the quality of care at ASCs to support patient decisionmaking 
and quality improvement. More information regarding the National 
Quality Strategy can be found at: http://www.hhs.gov/secretary/about/priorities/priorities.html and http://www.ahrq.gov/workingforquality/. 
HHS engaged a wide range of stakeholders to develop the National 
Quality Strategy, as required by the Affordable Care Act.
     Pay-for-reporting and public reporting programs should 
rely on a mix of standards, process, outcomes, and patient experience 
of care measures. Across all programs, we seek to move as quickly as 
possible to the use of primarily outcome and patient experience 
measures. To the extent practicable and appropriate, outcome and 
patient experience measures should be adjusted for risk or other 
appropriate patient population or provider/supplier characteristics.
     To the extent possible and recognizing 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.
     We weigh the relevance and the utility of measures 
compared to the burden on ASCs in submitting data under the ASCQR 
Program. The collection of information burden on providers and 
suppliers should be minimized to the extent possible. To this end, we 
continuously seek to adopt electronic-specified measures so that data 
can be calculated and submitted via certified EHR technology with 
minimal burden. We also seek to use measures based on alternative 
sources of data that do not require chart abstraction or that use data 
already being reported by ASCs.
     We take into account the views of the Measure Application 
Partnership (MAP). The MAP is a public-private partnership convened by 
the NQF for the primary purpose of providing input to HHS on selecting 
performance measures for quality reporting programs and pay-for-
reporting programs. The MAP views patient safety as a high priority 
area and it strongly supports the use of NQF-endorsed safety measures. 
Accordingly, we consider the MAP's recommendations in selecting quality 
and efficiency measures (we refer readers to the Web sites at: http://www.qualityforum.org/Setting_Priorities/Partnership/Measure_Applications_Partnership.aspx, and http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=69885).
     Measures should be developed with the input of providers/
suppliers, purchasers/payers and other stakeholders. Measures should be 
aligned with best practices among other payers and the needs of the end 
users of the measures. We take into account widely accepted criteria 
established in medical literature.
     HHS Strategic Plan and Initiatives. HHS is the U.S. 
Government's principal agency for protecting the health of all 
Americans. HHS accomplishes its mission through programs and 
initiatives. Every 4 years HHS updates its Strategic Plan and measures 
its progress in addressing specific national problems, needs, or 
mission-related challenges. The current goals of the HHS Strategic Plan 
can be located at http://www.hhs.gov/about/FY2012budget/strategicplandetail.pdf.
     CMS Strategic Plan. We strive to ensure that measures for 
different Medicare and Medicaid programs are aligned with priority 
quality goals, that measure specifications are aligned across settings, 
that outcome measures are used whenever possible, and that quality 
measures are collected from EHRs as appropriate.
    We believe that ASCs are similar to HOPDs, insofar as the delivery 
of surgical and related nonsurgical services. Similar standards and 
guidelines can be applied between HOPDs and ASCs with respect to 
surgical care improvement, because many of the same surgical procedures 
are provided in both settings. Measure harmonization assures that 
comparable care in these settings can be evaluated in similar ways, 
which further assures that quality measurement can focus more on the 
needs of a patient with a particular condition rather than on the 
specific program or policy attributes of the setting in which the care 
is provided.
    We invite public comment on this approach in future measure 
selection and development for the ASCQR Program.
2. ASCQR Program Quality Measures
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74492 
through 74517), we finalized our proposal to implement the ASCQR 
Program beginning with the CY 2014 payment determination and adopted 
measures for the CY 2014, CY 2015, and CY 2016 payment determinations. 
We also finalized our policy to retain measures from one calendar year 
payment determination to the next so that measures adopted for a 
previous payment determination year would be retained for subsequent 
payment determination years (76 FR 74504, 74509, and 74510).
    We adopted the following five claims-based measures for the CY 2014 
payment determination for services furnished between October 1, 2012 
and December 31, 2012: (1) Patient Burns (NQF 0263); (2) 
Patient Fall (NQF 0266); (3) Wrong Site, Wrong Side, Wrong 
Patient, Wrong Procedure, Wrong Implant (NQF 0267); (4) 
Hospital Transfer/Admission (NQF 0265); and (5) Prophylactic 
Intravenous (IV) Antibiotic Timing (NQF 0264).
    For the CY 2015 payment determination, we retained the five claims-
based measures we adopted for the CY 2014 payment determination and 
adopted the following two structural measures: (1) Safe Surgery 
Checklist Use; and (2) ASC Facility Volume Data on Selected ASC 
Surgical Procedures. We specified that reporting for the structural 
measures would be between July 1, 2013 and August 15, 2013, for 
services furnished between January 1, 2012 and December 31, 2012, using 
an online measure submission Web page available at: https://www.QualityNet.org. We did not specify the data collection period for 
the five claims-based measures for the CY 2015 payment determination.
    For the CY 2016 payment determination, we finalized the retention 
of the seven measures from the CY 2015 payment determination (five 
claims-based measures and two structural measures) and adopted 
Influenza Vaccination Coverage Among

[[Page 45191]]

Healthcare Personnel (NQF 0431), a process of care, 
healthcare-associated infection measure. We specified that data 
collection for the influenza vaccination measure would be via the 
National Healthcare Safety Network from October 1, 2014 through March 
31, 2015. We did not specify the data collection period for the claims-
based or structural measures.
    We stated that, to the extent we finalize some or all of the 
measures for future payment determination years, we would not be 
precluded from adopting additional measures or changing the list of 
measures for future payment determination years through annual 
rulemaking cycles so that we may address changes in program needs 
arising from new legislation or from changes in HHS and CMS priorities.
    Considering the time and effort required for us to develop, align, 
and implement the infrastructure necessary to collect data on the ASCQR 
Program measures and make payment determinations, and likewise the time 
and effort required on the part of ASCs to plan and prepare for quality 
reporting, at this time we are not proposing to delete or add any 
quality measures for the ASCQR Program for the CY 2014, CY 2015, and CY 
2016 payment determination years or to adopt quality measures for 
subsequent payment determination years. For readers' reference, the 
following table lists the ASCQR Program quality measures we previously 
finalized in the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74504 through 74511).

       ASC Program Measurement Set Adopted in Previous Rulemaking
------------------------------------------------------------------------
 
------------------------------------------------------------------------
ASC-1: Patient Burn.*
ASC-2: Patient Fall.*
ASC-3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong
 Implant.*
ASC-4: Hospital Transfer/Admission.*
ASC-5: Prophylactic Intravenous (IV) Antibiotic Timing.*
ASC-6: Safe Surgery Checklist Use.**
ASC-7: ASC Facility Volume Data on Selected ASC Surgical Procedures.**
------------------------------------------------------------------------
           Procedure category               Corresponding HCPCS Codes.
------------------------------------------------------------------------
Gastrointestinal.......................  40000 through 49999, G0104,
                                          G0105, G0121, C9716, C9724,
                                          C9725, and 0170T.
Eye....................................  65000 through 68999, G0186,
                                          0124T, 0099T, 0017T, 0016T,
                                          0123T, 0100T, 0176T, 0177T,
                                          0186T, 0190T, 0191T, 0192T,
                                          76510, and 0099T.
Nervous System.........................  61000 through 64999, G0260,
                                          0027T, 0213T, 0214T, 0215T,
                                          0216T, 0217T, 0218T, and
                                          0062T.
Musculoskeletal........................  20000 through 29999, 0101T,
                                          0102T, 0062T, 0200T, and
                                          0201T.
Skin...................................  10000 through 19999, G0247,
                                          0046T, 0268T, G0127, C9726,
                                          and C9727.
Genitourinary..........................  50000 through 58999, 0193T, and
                                          58805.
------------------------------------------------------------------------
  ASC-8: Influenza Vaccination Coverage among Healthcare Personnel.***
------------------------------------------------------------------------
* New measure for the CY 2014 payment determination.
** New measure for the CY 2015 payment determination.
*** New measure for the CY 2016 payment determination.

3. ASC Measure Topics for Future Consideration
    We seek to develop a comprehensive set of quality measures to be 
available for widespread use for informed decision-making and quality 
improvement in the ASC setting. Therefore, through future rulemaking, 
we intend to propose new measures consistent with the principles 
discussed in section XVI.B.1. of this proposed rule, in order to select 
measures that address clinical quality of care, patient safety, and 
patient and caregiver experience of care. We invite public comment 
specifically on the inclusion of procedure-specific measures for 
cataract surgery, colonoscopy, endoscopy, and for anesthesia-related 
complications in the ASCQR Program measure set.
4. Clarification Regarding the Process for Updating ASCQR Program 
Quality Measures
    In the CY 2012 OPPS/ASC final rule with comment period, we 
finalized our proposal to follow the same process for updating the 
ASCQR Program measures that we adopted for the Hospital OQR Program 
measures (76 FR 74513 through 74514). This process includes the same 
subregulatory process for the ASCQR Program as used for the Hospital 
OQR Program for updating measures, including issuing regular manual 
releases at 6-month intervals, providing addenda as necessary, and 
providing at least 3 months of advance notice for nonsubstantive 
changes such as changes to ICD-9-CM, CPT, NUBC, and HCPCS codes, and at 
least 6 months' notice for substantive changes to data elements that 
would require significant systems changes. We provided a citation to 
the CY 2009 OPPS/ASC final rule with comment period where the final 
Hospital OQR Program policies are discussed (73 FR 68766 through 
68767).
    In examining last year's finalized policy for the ASCQR Program, we 
recognize that we may need to provide additional clarification of the 
ASCQR Program policy in the context of the previously finalized 
Hospital OQR Program policy in the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68766 through 68767). Therefore, in this proposed 
rule, we seek to more clearly articulate the policy that we adopted for 
the ASCQR Program, which is the same policy that has been adopted for 
the Hospital OQR Program.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68766 
through 68767), we established a subregulatory process for making 
updates to the measures we have adopted for the Hospital OQR Program. 
This process is necessary so that the Hospital OQR measures are 
calculated based on the most up-to-date scientific evidence and 
consensus standards. Under this process, when a national consensus 
building entity updates the specifications for a measure that we have 
adopted for the Hospital OQR Program, we update our specifications for 
that measure accordingly and provide notice as described above and in 
the CY 2012 OPPS/ASC final rule with comment period (76 FR 74514). An 
example of such an entity is the NQF. For measures that are not 
endorsed by a national consensus building entity, the subregulatory 
process is based on scientific advances as determined necessary by CMS, 
in part, through our measure maintenance process involving Technical 
Expert Panels (73 FR 68767). We invite public comment on this 
clarification of the finalized ASCQR Program policy of using a 
subregulatory process to update measures.

C. Proposed Requirements for Reporting of ASC Quality Data

1. Form, Manner, and Timing for Claims-Based Measures for the CY 2014 
Payment Determination and Subsequent Payment Determination Years
a. Background
    In the CY 2012 OPPS/ASC final rule with comment period, we adopted 
claims-based measures for the CY 2014, CY 2015, and CY 2016 payment 
determination years (76 FR 74504 through 74511). We also finalized 
that, to be eligible for the full CY 2014 ASC annual payment update, an 
ASC must submit complete data on individual quality measures through a 
claims-based

[[Page 45192]]

reporting mechanism by submitting the appropriate QDCs on the ASC's 
Medicare claims (76 FR 74515 through 74516). As stated in the CY 2012 
OPPS/ASC final rule with comment period (76 FR 74516), ASCs will add 
the appropriate QDCs on their Medicare Part B claims forms, the Form 
CMS-1500s submitted for payment, to submit the applicable quality data. 
A listing of the QDCs with long and short descriptors is available in 
Transmittal 2425, Change Request 7754 released March 16, 2012 (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Transmittals-Items/ASC-CR7754-R2425CP.html). Details on how to use 
these codes for submitting numerators and denominator information are 
available in the ASCQR Program Specifications Manual located on the 
QualityNet Web site (https://www.QualityNet.org). We also finalized the 
data collection period for the CY 2014 payment determination, as the 
Medicare fee-for-service ASC claims submitted for services furnished 
between October 1, 2012 and December 31, 2012. We did not finalize a 
date by which claims would be processed to be considered for the CY 
2014 payment determination.
    In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28104), we 
proposed that claims for services furnished between October 1, 2012 and 
December 31, 2012, would have to be paid by the administrative 
contractor by April 30, 2013 to be included in the data used for the CY 
2014 payment determination. We believe that this claim paid date would 
allow ASCs sufficient time to submit claims while allowing sufficient 
time for CMS to complete required data analysis and processing to make 
payment determinations and to supply this information to administrative 
contractors. We did not finalize a data collection and processing 
period for the CY 2015 payment determination, but stated our intention 
to do so in this proposed rule (77 FR 28104).
b. Proposals Regarding Form, Manner, and Timing for Claims-Based 
Measures for the CY 2015 Payment Determination and Subsequent Payment 
Determination Years
    We are proposing that, for the CY 2015 payment determination and 
subsequent payment determination years, an ASC must submit complete 
data on individual quality claims-based measures through a claims-based 
reporting mechanism by submitting the appropriate QDCs on the ASC's 
Medicare claims. We are proposing that the data collection period for 
such claims-based measures will be for the calendar year 2 years prior 
to a payment determination. We also are proposing that the claims for 
services furnished in each calendar year would have to be paid by the 
administrative contractor by April 30 of the following year of the 
ending data collection time period to be included in the data used for 
the payment determination. Thus, for example, for the CY 2015 payment 
determination, we are proposing the data collection period to be claims 
for services furnished in CY 2013 (January 1, 2013 through December 31, 
2013) which are paid by the administrative contractor by April 30, 
2014. We believe that this claim paid date would allow ASCs sufficient 
time to submit claims while allowing sufficient time for CMS to 
complete required data analysis and processing to make payment 
determinations and to supply this information to administrative 
contractors. We invite public comment on these proposals.
2. Data Completeness and Minimum Threshold for Claims-Based Measures 
Using QDCs
a. Background
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74516), we finalized our proposal that data completeness for claims-
based measures for the CY 2014 payment determination be determined by 
comparing the number of claims meeting measure specifications that 
contain the appropriate QDCs with the number of claims that would meet 
measure specifications but did not have the appropriate QDCs on the 
submitted claims. In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 
28104), we proposed, for the CY 2014 and CY 2015 payment determination 
years, that the minimum threshold for successful reporting be that at 
least 50 percent of claims meeting measure specifications contain QDCs. 
We believe 50 percent is a reasonable minimum threshold based upon the 
considerations discussed above for the initial implementation years of 
the ASCQR Program. We stated in the proposed rule that we intend to 
propose to increase this percentage for subsequent payment 
determination years as ASCs become more familiar with reporting 
requirements for this quality data reporting program.
b. Proposed Data Completeness Requirements for the CY 2015 Payment 
Determination and Subsequent Payment Determination Years
    After publication of the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 
28101 through 28105), we realized that we did not propose a methodology 
for determining data completeness for the CY 2015 payment determination 
and subsequent payment determination years. Therefore, we are proposing 
that data completeness for claims-based measures for the CY 2015 
payment determination and subsequent payment determination years be 
determined by comparing the number of Medicare claims (where Medicare 
is the primary or secondary payer) meeting measure specifications that 
contain the appropriate QDCs with the number of Medicare claims (where 
Medicare is the primary or secondary payer) that would meet measure 
specifications, but did not have the appropriate QDCs on the submitted 
claims for the CY 2015 payment determination and subsequent payment 
determination years. This is the same method for determining data 
completeness for claims-based measures that was finalized in the CY 
2012 OPPS/ASC final rule with comment period (76 FR 74516) for the CY 
2014 payment determination. We note that the claims we use include 
claims where Medicare is either the primary or secondary payor. We 
invite public comment on this proposal.

D. Proposed Payment Reduction for ASCs That Fail To Meet the ASCQR 
Program Requirements

1. Statutory Background
    Section 1833(i)(2)(D)(iv) of the Act states that the Secretary may 
implement the revised ASC payment system ``in a manner so as to provide 
for a reduction in any annual update for failure to report on quality 
measures in accordance with paragraph (7).'' Paragraph (7) contains 
subparagraphs (A) and (B). Subparagraph (A) of paragraph (7) states the 
Secretary may provide that an ASC that does not submit ``data required 
to be submitted on measures selected under this paragraph with respect 
to a year'' to the Secretary in accordance with this paragraph will 
incur a 2.0 percentage point reduction to any annual increase provided 
under the revised ASC payment system for such year. It also specifies 
that this reduction applies only with respect to the year involved and 
will not be taken into account in computing any annual increase factor 
for a subsequent year. Subparagraph (B) of paragraph (7) makes many of 
the

[[Page 45193]]

provisions of the Hospital OQR Program applicable to the ASCQR Program 
``[e]xcept as the Secretary may otherwise provide.'' Finally, section 
1833(i)(2)(D)(v) of the Act states that, in implementing the revised 
ASC payment system for 2011 and each subsequent year, ``any annual 
update under such system for the year, after application of clause (iv) 
[regarding the reduction in the annual update for failure to report on 
quality measures] shall be reduced by the productivity adjustment 
described in section 1886(b)(3)(B)(xi)(II).'' Section 1833(i)(2)(D)(v) 
of the Act also states that the ``application of the preceding sentence 
may result in such update being less than 0.0 for a year, and may 
result in payment rates under the [revised ASC payment system] for a 
year being less than such payment rates for the preceding year.''
2. Proposed Reduction to the ASC Payment Rates for ASCs That Fail To 
Meet the ASCQR Program Requirements for the CY 2014 Payment 
Determination and Subsequent Payment Determination Years
    The national unadjusted payment rates for many services paid under 
the ASC payment system equal the product of the ASC conversion factor 
and the scaled relative payment weight for the APC to which the service 
is assigned. Currently, the ASC conversion factor is equal to the 
conversion factor calculated for the previous year updated by the MFP-
adjusted CPI-U update factor, which is the adjustment set forth in 
section 1833(i)(2)(D)(v) of the Act. The MFP-adjusted CPI-U update 
factor is the Consumer Price Index for all urban consumers (CPI-U), 
which currently is the annual update for the ASC payment system, minus 
the MFP adjustment. As discussed in the CY 2011 MPFS final rule with 
comment period (75 FR 73397), if the CPI-U is a negative number, the 
CPI-U would be held to zero. Under the ASCQR Program, any annual update 
would be reduced by 2.0 percentage points for ASCs that fail to meet 
the reporting requirements of the ASCQR Program. This reduction would 
apply beginning with the CY 2014 payment rates. For a complete 
discussion of the calculation of the ASC conversion factor, we refer 
readers to section XIV.H. of this proposed rule.
    To implement the requirement to reduce the annual update for ASCs 
that fail to meet the ASCQR Program requirements, we are proposing that 
we would calculate two conversion factors: A full update conversion 
factor and an ASCQR Program reduced update conversion factor. We are 
proposing to calculate the reduced national unadjusted payment rates 
using the ASCQR Program reduced update conversion factor that would 
apply to ASCs that fail to meet their quality reporting requirements 
for that calendar year payment determination. We are proposing that 
application of the 2.0 percentage point reduction to the annual update 
may result in the update to the ASC payment system being less than zero 
prior to the application of the MFP adjustment.
    The ASC conversion factor is used to calculate the ASC payment rate 
for services with the following payment indicators (listed in Addenda 
AA and BB to this proposed rule, which are available via the Internet 
on the CMS Web site): ``A2,'' ``G2,'' ``P2,'' ``R2,'' ``Z2,'' as well 
as the service portion of device intensive procedures identified by 
``J8.'' We are proposing that payment for all services assigned the 
payment indicators listed above would be subject to the reduction of 
the national unadjusted payment rates for applicable ASCs using the 
ASCQR Program reduced update conversion factor.
    The conversion factor is not used to calculate the ASC payment 
rates for separately payable services that are assigned status 
indicators other than payment indicators ``A2,'' ``G2,'' ``J8,'' 
``P2,'' ``R2,'' and ``Z2.'' These services include separately payable 
drugs and biologicals, pass-through devices that are contractor-priced, 
brachytherapy sources that are paid based on the OPPS payment rates, 
and certain office-based procedures and radiology services where 
payment is based on the MPFS PE RVU amount and a few other specific 
services that receive cost-based payment. As a result, we also are 
proposing that the ASC payment rates for these services would not be 
reduced for failure to meet the ASCQR Program requirements because the 
payment rates for these services are not calculated using the ASC 
conversion factor and, therefore, not affected by reductions to the 
annual update.
    Office-based surgical procedures (performed more than 50 percent of 
the time in physicians' offices) and separately paid radiology services 
(excluding covered ancillary radiology services involving certain 
nuclear medicine procedures or involving the use of contrast agents, as 
discussed in section XIV.D.2.b. of this proposed rule) are paid at the 
lesser of the MPFS non-facility PE RVU-based amounts and the standard 
ASC ratesetting methodology. We are proposing that the standard ASC 
ratesetting methodology for this comparison would use the ASC 
conversion factor that has been calculated using the full ASC update 
adjusted for productivity. This is necessary so that the resulting ASC 
payment indicator, based on the comparison, assigned to an office-based 
or radiology procedure is consistent for each HCPCS code regardless of 
whether payment is based on the full update conversion factor or the 
reduced update conversion factor.
    For ASCs that receive the reduced ASC payment for failure to meet 
the ASCQR Program requirements, we believe that it is both equitable 
and appropriate that a reduction in the payment for a service should 
result in proportionately reduced copayment liability for 
beneficiaries. Therefore, we are proposing that the Medicare 
beneficiary's national unadjusted copayment for a service to which a 
reduced national unadjusted payment rate applies would be based on the 
reduced national unadjusted payment rate.
    We are proposing that all other applicable adjustments to the ASC 
national unadjusted payment rates would apply in those cases when the 
annual update is reduced for ASCs that fail to meet the requirements of 
the ASCQR Program. For example, the following standard adjustments 
would apply to the reduced national unadjusted payment rates: The wage 
index adjustment, the multiple procedure adjustment, the interrupted 
procedure adjustment, and the adjustment for devices furnished with 
full or partial credit or without cost. We believe that these 
adjustments continue to be equally applicable to payment for ASCs that 
do not meet the ASCQR Program requirements.
    We invite public comment on these proposals.

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

A. Overview

    In accordance with section 1886(j)(7) of the Act, as added by 
section 3004 of the Affordable Care Act, the Secretary established a 
quality reporting program (QRP) for Inpatient Rehabilitation Facilities 
(IRFs). The IRF Quality Reporting Program (IRF QRP) was implemented in 
the FY 2012 IRF PPS final rule (76 FR 47836). We refer readers to the 
FY 2012 IRF PPS final rule (76 FR 47873 through 47883) for a detailed 
discussion on the background and statutory authority for the IRF QRP.
    In this proposed rule, we are proposing to: (1) Adopt updates on a 
previously adopted measure for the IRF QRP that will affect annual 
prospective

[[Page 45194]]

payment amounts in FY 2014; (2) adopt a policy that would provide that 
any measure that has been adopted for use in the IRF QRP will remain in 
effect until the measure is actively removed, suspended, or replaced; 
and (3) adopt policies regarding when notice-and-comment rulemaking 
will be used to update existing IRF QRP measures.
    While we generally would expect to publish IRF QRP proposals in the 
annual IRF Prospective Payment System (PPS) rule, there are no 
proposals for substantive changes to the IRF PPS this year, so we are 
only publishing an update notice. Because full notice-and-comment 
rulemaking is required for what we are proposing for the IRF QRP, we 
needed to identify an appropriate rulemaking process in which we could 
insert our IRF QRP proposals. As this proposed rule was already 
scheduled to include additional pay-for-reporting proposals for the 
Hospital OQR Program and quality reporting requirements for the ASCQR 
Program, it offered an opportunity to allow the public to review all 
three quality programs' proposals in concert with one another in a 
timeframe that would be appropriate for implementing these IRF QRP 
proposals in time for the FY 2014 IRF PPS payment cycle. Therefore, we 
elected to include the IRF QRP proposals in this CY 2013 OPPS/ASC 
proposed rule.

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

    Section 1886(j)(7) of the Act generally requires the Secretary to 
adopt measures that have been endorsed by the entity with a contract 
under section 1890(a) of the Act. This contract is currently held by 
the NQF. The NQF is a voluntary consensus standard-setting organization 
with a diverse representation of consumer, purchaser, provider, 
academic, clinical, and other health care stakeholder organizations. 
The NQF was established to standardize health care quality measurement 
and reporting through its consensus development process.\2\
---------------------------------------------------------------------------

    \2\ For more information about the NQF Consensus Development 
Process, we refer readers to the Web site at: http://www.qualityforum.org/Measuring_Performance/Maintenance_of_NQF-Endorsed%C2%AE_Performance_Measures.aspx).
---------------------------------------------------------------------------

    The NQF undertakes to: (1) Review new quality measures and national 
consensus standards for measuring and publicly reporting on 
performance; (2) provide for annual measure maintenance updates to be 
submitted by the measure steward for endorsed quality measures; (3) 
provide for measure maintenance endorsement on a 3-year cycle;(4) 
conduct a required follow-up review of measures with time limited 
endorsement for consideration of full endorsement; and (5) conduct ad 
hoc review of endorsed quality measures, practices, consensus 
standards, or events when there is adequate justification for a 
review.\3\ In the normal course of measure maintenance, the NQF 
solicits information from measure stewards for annual reviews and in 
order to review measures for continued endorsement in a specific 3-year 
cycle. In this measure maintenance process, the measure steward is 
responsible for updating and maintaining the currency and relevance of 
the measure and for confirming existing specifications to the NQF on an 
annual basis.\4\ As part of the ad hoc review process, the ad hoc 
review requester and the measure steward are responsible for submitting 
evidence for review by a NQF Technical Expert panel which, in turn, 
provides input to the Consensus Standards Approval Committee which then 
makes a decision on endorsement status and/or specification changes for 
the measure, practice, or event.
---------------------------------------------------------------------------

    \3\ For more information about the NFQ Ad Hoc Review process, we 
refer readers to the Web site at: http://www.qualityforum.org/Projects/ab/Ad_Hoc_Reviews/CMS/Ad_Hoc_Reviews-CMS.aspx).
    \4\ For more information about the NQF Measure Maintenance 
process, we refer readers to the NQF Web site at: http://www.qualityforum.org/Measuring_Performance/Improving_NQF_Process/Process_Assessment_Measure_Maintenance.aspx.
---------------------------------------------------------------------------

    Through the NQF's measure maintenance process, the NQF-endorsed 
measures are sometimes updated to incorporate changes that we believe 
do not substantially change the nature of the measure. Examples of such 
changes could be updated diagnosis or procedure codes, changes to 
exclusions to the patient population, definitions, or extension of the 
measure endorsement to apply to other settings. We believe these types 
of maintenance changes are distinct from more substantive changes to 
measures that result in what can be considered new or different 
measures, and that they do not trigger the same agency obligations 
under the Administrative Procedure Act.
    We are proposing that, if the NQF updates an endorsed measure that 
we have adopted for the IRF QRP in a manner that we consider to not 
substantially change the nature of the measure, we would use a 
subregulatory process to incorporate those updates to the measure 
specifications that apply to the program. Specifically, we would revise 
the information that is posted on the CMS IRF QRP Web site at: http://www.cms.gov/IRF-Quality-Reporting/ so that it clearly identifies the 
updates and provides links to where additional information on the 
updates can be found. In addition, we would refer IRFs to the NQF Web 
site for the most up-to-date information about the quality measures 
(http://www.qualityforum.org/ org/). We would provide sufficient lead time 
for IRFs to implement the changes where changes to the data collection 
systems would be necessary.
    We would continue to use the rulemaking process to adopt changes to 
measures that we consider to substantially change the nature of the 
measure. We believe that our proposal adequately balances our need to 
incorporate NQF updates to NQF-endorsed IRF QRP measures in the most 
expeditious manner possible, while preserving the public's ability to 
comment on updates to measures that so fundamentally change an endorsed 
measure that it is no longer the same measure that we originally 
adopted. We note that, in the FY 2013 IPPS/LTCH PPS proposed rule (77 
FR 27870), we proposed a similar policy for the Hospital IQR Program, 
the PPS Cancer Exempt Hospital (PCH) Quality Reporting Program; the 
Long-Term Care Hospital Quality Reporting (LTCHQR) Program, and the 
Inpatient Psychiatric Facility (IPF) Quality Reporting Program.

C. Proposed Process for Retention of IRF Quality Measures Adopted in 
Previous Fiscal Year Rulemaking Cycles

    We expect that the measures that we adopt for purposes of the IRF 
QRP will remain current and useful for a number of years after their 
initial adoption. While we could elect to adopt measures for each 
fiscal year's payment determinations, we believe that it would be 
easier for all concerned if we adopt the measures in perpetuity with an 
expectation that we will propose to remove, suspend or replace them 
through future rulemaking if necessary. Therefore, for the purpose of 
streamlining the rulemaking process, we are proposing that when we 
initially adopt a measure for the IRF QRP for a payment determination, 
this measure will be automatically adopted for all subsequent fiscal 
year payment determinations or until such time as we might propose and 
finalize its removal, suspension, or replacement.
    Quality measures may be considered for removal by CMS if: (1) 
Measure performance among IRFs is so high and unvarying that meaningful 
distinctions in improvements in performance can no longer be made; (2) 
performance or improvement on a measure does not

[[Page 45195]]

result in better patient outcomes; (3) a measure does not align with 
current clinical guidelines or practice; (4) a more broadly applicable 
measure (across settings, populations, or conditions) for the 
particular topic is available; (5) a measure that is more proximal in 
time to desired patient outcomes for the particular topic is available; 
(6) if a measure that is more strongly associated with desired patient 
outcomes for the particular topic becomes available; or (7) collection 
or public reporting of a measure leads to negative unintended 
consequences.
    For any such removal, the public will generally be given an 
opportunity to comment through the annual rulemaking process. However, 
if there is reason to believe continued data collection of a measure 
raises potential safety concerns, we will take immediate action to 
remove the measure from IRF QRP and not wait for the annual rulemaking 
cycle. Such measures will be promptly removed with IRFs and the public 
being immediately notified of such a decision through the usual IRF QRP 
communication channels, including listening session, memos, email 
notification, and Web postings. In such instances, the removal of a 
measure will also be formally announced in the next annual rulemaking 
cycle. We are inviting public comment on our proposal that once a 
quality measure is adopted, it is retained for use in the subsequent 
fiscal year payment determinations unless otherwise stated.
    We are proposing to apply this principle to the two measures that 
were selected for use in the IRF QRP beginning on October 1, 2012. 
These adopted measures are: (1) Catheter-Associated Urinary Tract 
Infection (CAUTI) Outcome Measure (NQF 0138),\5\ and (2) 
Percent of Residents with Pressure Ulcers that Are New or Worsened (NQF 
0678).
---------------------------------------------------------------------------

    \5\ The CAUTI measure that was adopted in the FY 2012 IRF PPS 
final rule dated August 5, 2011 was titled ``Urinary Catheter-
Associated Urinary Tract Infection [CAUTI] Rate Per 1,000 Urinary 
Catheter Days for ICU patients.'' However, this measure was 
submitted by the CDC (measure steward) to the NQF for a measure 
maintenance review. As part of their NQF submission, the CDC asked 
for changes to the measure, including expansion of the scope of the 
measure to non-ICU settings, including IRFs. The NQF approved the 
CDC's request on January 12, 2012. Due to the changes that were made 
to the measure, the CDC believed that it was appropriate that the 
measure title be changed. This measure is now titled ``National 
Health Safety Network (NHSN) Catheter Associated Urinary Tract 
Infection (CAUTI) Outcome Measure.''
---------------------------------------------------------------------------

    We invite public comment on our proposal to apply the principle of 
retention of the two above-stated quality measures that were adopted 
for use in the IRF QRP in the FY 2012 IRF PPS final rule (76 FR 47874 
through 47878). Likewise, we invite public comment on our proposed use 
of the process, as stated above, for retention of future IRF QRP 
quality measures after adoption into the IRF QRP.

D. Adopted Measures for the FY 2014 Payment Determination

    We have previously identified the measurement of pressure ulcers 
and the prevalence of urinary tract infections (UTI) as two critical 
areas for quality measurement under the IRF QRP. While section 
1886(j)(7) of the Act generally requires the adoption of endorsed 
measures, there were no NQF-endorsed measures for the two desired areas 
in the IRF context at the time CMS was conducting its rulemaking. As 
section 1886(j)(7)(D)(ii) of the Act authorizes the use of measures 
that are not endorsed when there are no feasible and practicable 
endorsed options, in the FY 2012 IRF PPS final rule (76 FR 47874 
through 47876), we adopted applications of an NQF-endorsed pressure 
ulcer measure that had been endorsed for use in skilled nursing 
facilities (NQF 678) and a CDC measure, the CDC's Urinary 
Catheter Associated Urinary Tract Infection [CAUTI] rate per 1, 000 
urinary catheter days, for Intensive Care Unit [ICU] Patients (NQF 
0138), that had NQF endorsement for use in intensive care 
settings of hospitals.
1. Clarification Regarding Existing IRF Quality Measures That Have 
Undergone Changes During NQF Measure Maintenance Processes
    In the FY 2012 IRF PPS final rule (76 FR 47874 through 47876), we 
used the endorsement exception authority under section 
1886(j)(7)(D)(ii) of the Act. This authority permitted us to adopt the 
Urinary Catheter-Associated Urinary Tract Infection [CAUTI] rate per 1, 
000 urinary catheter days, for Intensive Care Unit [ICU] Patients 
measure (NQF 0138). We chose to adopt this measure because 
there was no NQF-endorsed CAUTI measure available to assess the 
prevalence of urinary catheter-associated urinary tract infection 
[CAUTI] rates in the IRF setting.
    As stated in section XVII.C. of this proposed rule, the CAUTI 
measure steward, the CDC, submitted the CAUTI Measure to NQF for a 
scheduled measure maintenance review in late 2011. At that time the CDC 
also filed a request to expand the CAUTI measure to non-ICU settings, 
including IRFs. The NQF granted the CDC's request for an expansion of 
the scope of endorsement of the CAUTI measure to additional non-ICU 
care settings, including ``rehabilitation hospitals.'' The NQF defined 
the term ``rehabilitation hospitals'' as including both freestanding 
IRFs as well as IRF units that are located within an acute care 
facility. Despite the expansion in the scope of endorsement of the 
CAUTI measure, the original NQF endorsement number was retained. 
However, the measure was re-titled ``National Health Safety Network 
(NHSN) Catheter Associated Urinary Tract Infection (CAUTI) Outcome 
Measure.'' \6\
---------------------------------------------------------------------------

    \6\ http://www.qualityforum.org/MeasureDetails.aspx?actid=0&SubmissionId=1121#k=0138&e=0&st=&sd=&s=n&so=a&p=1&mt=&cs=&ss=.
---------------------------------------------------------------------------

    As amended, the expanded CAUTI measure also uses a different data 
calculation method, which is referred to as the standardized infection 
ratio (SIR).7 8 9 10 The change in the data calculation 
method does not, however, change the way in which IRFs will submit 
CAUTI data to the CDC. IRFs will still be required to submit their 
CAUTI data to the CDC via the National Healthcare Safety Network (NHSN) 
online system.
---------------------------------------------------------------------------

    \7\ Centers for Disease Control and Prevention (2012, January), 
Central Line-Associated Bloodstream Infection (CLABSI) Event. 
Retrieved from http://www.cdc.gov/nhsn/PDFs/pscManual/4PSC_CLABScurrent.pdf.
    \8\ National Quality Forum (2012), National Healthcare Safety 
Network (NHSN) Central line-associated Bloodstream Infection 
(CLABSI) Outcome Measure. Retrieved from http://www.qualityforum.org/QPS/0139.
    \9\ Centers for Disease Control and Prevention (2012, January), 
Catheter Associated Urinary Tract Infection Event. Retrieved from: 
http://www.cdc.gov/nhsn/PDFs/pscManual/7pscCAUTIcurrent.pdf.
    \10\ National Quality Forum (2012), National Healthcare Safety 
Network (NHSN) Catheter Associated Urinary Tract Infection (CAUTI) 
Outcome Measure. Retrieved from http://www.qualityforum.org/QPS/0138.
---------------------------------------------------------------------------

    Under the originally endorsed version of the CAUTI measure the CDC 
calculated an infection rate per 1,000 urinary catheter days. Under the 
new method, CDC will use a SIR calculation method, which is comprised 
of the actual rate of infection over the expected rate of 
infection.\11\ We believe that the SIR calculation method is a more 
accurate way to calculate the CAUTI measure results for comparative

[[Page 45196]]

purposes because it takes into account an IRF's case mix. In addition, 
use of the SIR calculation does not require any change to the type of 
data required to be submitted by IRFs or method of data submission that 
IRFs must use in order to comply with the CAUTI measure reporting 
requirements.
---------------------------------------------------------------------------

    \11\ The SIR calculation requires the establishment of 
``expected'' rates of infection. We understand that CDC will need to 
collect the CAUTI data that will be submitted under the IRF QRP for 
a period of time (at least 12 months) in order to establish an 
``expected'' rate for each IRF location type prior to being able to 
calculate a SIR. As required by Section 3004 of the Affordable Care 
Act, we will, at a later date, establish public reporting policies 
in a separate rulemaking. However, we do not intend to publicly 
report IRF QRP CAUTI measure data until sometime after CDC has 
established the expected rate and is capable of generating SIR 
values.
---------------------------------------------------------------------------

    We are making the following proposals in regards to the CAUTI 
measure: (1) We are proposing to adopt changes made to the NQF 
0138 CAUTI measure which will apply to the FY 2014 annual 
payment update determination; (2) we are proposing to adopt the CAUTI 
measure, as revised by the NQF on January 12, 2012, for the FY 2015 
payment determination and all subsequent fiscal year payment 
determinations; and (3) we are proposing to incorporate, for use in the 
IRF QRP, any future changes to the CAUTI measure to the extent these 
changes are consistent with our proposal in section XVII.B. of this 
proposed rule to update measures. We welcome comments on these 
proposals.
2. Proposed Updates to the ``Percent of Residents Who Have Pressure 
Ulcers That Are New or Worsened'' Measure
    In the FY 2012 IRF PPS final rule (76 FR 47876 through 47878), we 
again used the endorsement exception authority under section 
1886(j)(7)(D)(ii) of the Act to adopt an application of the ``Percent 
of Residents with Pressure Ulcers that Are New or Worsened'' measure 
(NQF 0678). We selected this measure because there was no 
other NQF-endorsed measure available to assess the percentage of 
patients with pressure ulcers that are new or worsened in the IRF 
setting at that time. We recognized that the NQF endorsement of this 
measure was, at that time, limited to short-stay nursing home patients, 
but we noted our belief that this measure was highly relevant to 
patients in any setting who are at risk of pressure ulcer development 
and a high priority quality issue in the care of IRF patients. 
Therefore, in the FY 2012 IRF PPS final rule, we finalized the adoption 
of an application of the NQF-endorsed 0678 pressure ulcer 
measure. We also said that we would request that the NQF extend its 
endorsement of this short-stay nursing home pressure ulcer measure to 
the IRF setting (76 FR 47876 through 47878).
    In April 2012, CMS filed an ad hoc request for review of the NQF 
0678 short-stay pressure ulcer measure with the NQF. In 
addition, we also requested an expansion of this measure to other care 
settings. As noted in the FY 2012 IRF PPS final rule discussion of our 
adoption of an application of this measure in the IRF context, we 
believe this measure is highly applicable to all post acute care 
settings, including IRFs (76 FR 47876). If the pressure ulcer measure 
is revised by the NQF, we anticipate that it will be re-titled 
``Percent of Patients or Residents with Pressure Ulcers That Are New Or 
Worsened'' (NQF 0678) so as to reflect the expansion in the 
scope of the applicable patient population.
    As of the publication of this proposed rule, the NQF review process 
for the NQF 0678 pressure ulcer measure expansion request is 
still in progress. If the NQF expands the scope of endorsement for this 
measure to the IRF setting, without any substantive changes, we are 
proposing to adopt and use the revised pressure ulcer measure in the 
IRF QRP, in accordance with the policy set forth above in XVII.B. of 
this proposed rule. We believe that, in this anticipated scenario, the 
pressure ulcer measure, as revised, will be substantively the same 
measure, although broader in scope, as the current NQF-endorsed 
0678 pressure ulcer measure. We invite public comments on our 
proposed use of this policy.
    In the meantime, we are proposing to proceed with our plan, as 
finalized in the FY 2012 IRF PPS final rule, to use an application of 
the Percent of Residents With Pressure Ulcers that Are New or Worsened 
(NQF 0678) measure for the FY 2014 payment determination and 
all subsequent fiscal year payment determinations.

XVIII. Proposed Revisions to the Quality Improvement Organization (QIO) 
Regulations (42 CFR Parts 476, 478, and 480)

A. Summary of Proposed Changes

    The Utilization and Quality Control Peer Review Program was 
originally established by sections 142 and 143 of the Tax Equity and 
Fiscal Responsibility Act (TEFRA) of 1982 (Pub. L. 97-248). The name of 
the individual organizations covered under the program was previously 
changed from ``Peer Review Organizations'' to ``Quality Improvement 
Organizations'' through rulemaking (67 FR 36539). We have identified 
several changes that we are proposing because they are essential to 
remedying longstanding problematic aspects of the QIOs' review 
activities. These proposed changes would enable us to improve the QIO 
program by ensuring that QIOs are better able to meet the needs of 
Medicare beneficiaries.
    Several of the proposed changes are specific to the QIOs' 
processing of quality of care reviews, which includes beneficiary 
complaint reviews. Although references are made to QIO sanction 
activities, the proposed changes do not impact QIO sanction activities 
or the regulations located in 42 CFR Part 1004.
    In addition, as part of our review of our regulations in light of 
the President's Executive Order on Regulatory Reform, Executive Order 
13563 (January 18, 2011), we have identified several technical 
corrections that would improve the readability and use of the QIO 
regulations.
    Below, in this proposed rule, we are setting forth our proposals 
for revising our regulations under 42 CFR Parts 476, 478, and 480 
relating to the QIO Program.

B. Quality of Care Reviews

    Section 9353(c) of Public Law 99-509 amended section 1154(a) of the 
Act (adding a new paragraph (14)) to require QIOs (then PROs), 
effective August 1, 1987, to conduct an appropriate review of all 
written complaints from beneficiaries or their representatives about 
the quality of services (for which payment may otherwise be made under 
Medicare) not meeting professionally recognized standards of health 
care. This authority was in addition to the QIOs' already existing 
authority under section 1154(a)(1)(B) of the Act to perform quality of 
care reviews. In order to provide more clarity regarding the QIOs' 
roles, in this proposed rule, we are proposing to add a definition of 
``quality of care review'' under Sec.  476.1 to make clear that this 
review type refers to both beneficiary complaint reviews (written or 
oral) and general quality of care reviews. We also are proposing to add 
under Sec.  476.1 definitions for ``beneficiary complaint'' to mean a 
complaint by a beneficiary or a beneficiary's representative alleging 
that the quality of services received by the beneficiary did not meet 
professionally recognized standards of care and may consist of one or 
more quality of care concerns; ``beneficiary complaint review'' to mean 
a review conducted by a QIO in response to the receipt of a written 
beneficiary complaint to determine whether the quality of Medicare 
covered services provided to beneficiaries was consistent with 
professionally recognized standards of health care; and ``general 
quality of care review'' to mean a review conducted by a QIO to 
determine whether the quality of services provided to a beneficiary(s) 
was consistent with professionally recognized standards of health care. 
We are proposing that a general quality of care review may be carried 
out as a

[[Page 45197]]

result of a referral to the QIO or a QIO's identification of a 
potential concern during the course of another review activity or 
through the analysis of data. In addition, we are proposing to revise 
the language under Sec.  476.71(a)(2) to make clear that the scope of a 
QIO's review includes the right to conduct quality of care reviews, 
including beneficiary complaint reviews and general quality of care 
reviews, as well as a new review process that QIOs can offer Medicare 
beneficiaries called ``immediate advocacy,'' which is described more 
fully in section XVIII.B.1. of this proposed rule.
    We are proposing additional changes to the QIO regulations related 
to the following issues:
1. Beneficiary Complaint Reviews
    At the time QIOs assumed the authority under section 9353(c) of 
Public Law 99-509 to conduct reviews of written beneficiary complaints, 
we made a decision to rely upon the existing regulations for certain 
requirements (for example, the timeframes for requesting medical 
records and the practitioner's right to consent to the release of 
specific findings to beneficiaries), and to subsequently establish 
other remaining procedural requirements through manual instructions. 
While this approach has provided QIOs with a basic framework for 
completing the reviews, we have become aware of other issues that need 
to be addressed through the promulgation of new regulations as well as 
revisions to existing regulations. In 2003, the United States Court of 
Appeals for the District of Columbia Circuit issued a decision in the 
case of Public Citizen, Inc. v. U.S. Department of Health and Human 
Services (332 F.3d 654, June 20, 2003) (referred to below as Public 
Citizen) in which the court determined that QIOs must, at a minimum, 
notify a complainant of the results of its review. We recently 
completed a comprehensive revision to the manual instructions governing 
both beneficiary complaints and quality of care reviews, which, in 
part, was designed to ensure compliance with this court decision 
(Transmittal 17, April 6, 2012, CMS Manual System, Pub. 100-10 Medicare 
Quality Improvement Organizations, Chapter 5, Quality of Care Review) 
(available at http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R17QIO.pdf). These new instructions were 
effective May 7, 2012. While these manual revisions were necessary, we 
believe that additional regulatory changes are needed in order to 
improve QIO operations. In order to subject these additional changes to 
the processing of beneficiary complaint reviews and general quality of 
care reviews to notice-and-comment rulemaking, in this proposed rule, 
we are proposing to add new Sec. Sec.  476.110, 476.120, 476.130, 
476.140, 476.150, 476.160, and 476.170 as described below in this 
section. We also are proposing to add new definitions of ``authorized 
representative'', ``appointed representative; ``beneficiary 
representative'' and ``quality improvement initiative,'' and revise the 
definition of ``preadmission certification'' in Sec.  476.1. In 
addition, to ensure consistency with the proposed revisions to or 
additional sections under Part 476, we are proposing to revise 
Sec. Sec.  480.107, 480.132, and 480.133, as discussed more fully 
below.
    The proposed revisions to the regulations under Part 476 include 
several changes that would improve the beneficiary's experience when 
contacting a QIO about the quality of health care he or she has 
received and also shorten key timeframes so that beneficiaries can 
achieve resolution of their health care concerns in less time. We are 
proposing regulations under new proposed Sec.  476.110 regarding a new 
alternative dispute resolution process called ``immediate advocacy.'' 
We are proposing to add a definition of ``immediate advocacy'' under 
Sec.  476.1, and to make clear that this process is specific to oral 
complaints. We are proposing to define ``immediate advocacy'' as an 
informal alternative dispute resolution process used to quickly resolve 
an oral complaint that a beneficiary or his or her representative has 
regarding the quality of health care received, and that this process 
involves a QIO representative's direct contact with the provider and/or 
practitioner. Historically, the only option available to beneficiaries, 
regardless of the severity or type of issue, is the right to file a 
written complaint. Once a written complaint is received, the QIO is 
then obligated to conduct a formal peer review of the complaint, which 
includes a review of the beneficiary's medical information. Although 
this peer review process is effective, it can be quite lengthy and 
burdensome on providers and practitioners, given the various steps that 
must be completed by the QIO prior to the QIO rendering its final 
decision, with providers and practitioners cooperating with the QIO 
throughout this process. These steps include the time needed by the QIO 
to follow up with beneficiaries to ensure receipt of the complaint in 
writing, request and receive the medical information from the provider 
and/or practitioner, discuss the QIO's interim decision with the 
practitioner and/or provider, respond to a practitioner's and/or 
provider's request that a QIO conduct a re-review of the initial peer 
reviewer's decision, and obtain the practitioner's consent to the 
release of specific findings in the final letter to the beneficiary. By 
regulation, QIOs must disclose to patients or their representatives 
information they have requested within 30 calendar days (42 CFR 
480.132); it is possible that obtaining a practitioner's consent alone 
could take 30 calendar days. Even if there are no delays at any point 
in the current peer review process, it can take over 150 calendar days 
for a QIO to complete its review of a beneficiary's written complaint.
    At times, the length of the current peer review process can render 
the beneficiary's original concern moot, particularly where the 
beneficiary's concern relates to a communication issue between his or 
her providers and/or practitioners, the prescribing of medications, or 
the failure to receive a necessary medical item, such as a wheelchair. 
For these types of concerns, we believe that requiring a beneficiary to 
submit the complaint in writing and waiting more than 150 calendar days 
so that the QIO can complete its review does not provide prompt and 
customer friendly service to Medicare beneficiaries. Moreover, at 
times, certain issues raised by a Medicare beneficiary in a complaint 
may not even be documented in the beneficiary's medical information. 
This is particularly true for complaints related to communication or 
coordination issues surrounding the beneficiary's care. Thus, a QIO may 
actually know at the outset of a review that the peer review process 
will not divulge any information related to the beneficiary's 
complaint.
    We believe that, by proposing to establish an informal process such 
as ``immediate advocacy,'' the QIO would be able to offer an 
alternative to a Medicare beneficiary in those situations where a 
resolution is needed more quickly than the current traditional peer 
review process. We believe that this proposed new informal process 
would also be beneficial in those instances where information relevant 
to a complaint would most likely not be contained in the medical 
information or where the Medicare beneficiary may simply be put off by 
the formality of the traditional peer review process. In proposing this 
new informal process, we are specifying in proposed Sec.  476.110(a) 
that the process is available for oral

[[Page 45198]]

complaints so that there is a clear distinction from the process 
requiring a written complaint under section 1154(a)(14) of the Act. 
Again, the proposed definition of ``immediate advocacy'' under Sec.  
476.1 also would make this clear.
    We also are proposing that the use of ``immediate advocacy'' would 
not be available if the QIO makes a preliminary determination that the 
complaint includes concerns that could be deemed significant, 
substantial, or gross and flagrant violations of the standard of care 
to which a beneficiary is entitled (proposed Sec.  476.110(a)(2)(ii)). 
In addition, we are proposing to add definitions of ``quality of care 
concern'' and ``significant quality of care concern'' under Sec.  
476.1, and to incorporate the definitions of ``gross and flagrant 
violation'' and ``substantial violation in a substantial number of 
cases'' as these two terms are used in 42 CFR 1004.1. We are proposing 
to define ``quality of care concern'' to mean a concern that care 
provided did not meet a professionally recognized standard of health 
care, and that a general quality of care review or a beneficiary 
complaint review may cover a single concern or multiple concerns. 
``Significant quality of care concern'' would mean a determination by 
the QIO that the quality of care provided to a beneficiary(s) did not 
meet the standard of care and while not a gross and flagrant or 
substantial violation of the standard, represents a noticeable 
departure from the standard that could reasonably be expected to have a 
negative impact on the health of a beneficiary. ``Gross and flagrant 
violation'' would mean that a violation of an obligation specified in 
section 1156(a) of the Act has occurred in one or more instances which 
presents an imminent danger to the health, safety, or well-being of a 
program patient or places the program patient unnecessarily in high-
risk situations (as specified in 42 CFR 1004.1). ``Substantial 
violation in a substantial number of cases'' would mean a pattern of 
providing care that is inappropriate, unnecessary, or does not meet 
recognized professional standards of care, or is not supported by the 
necessary documentation of care as required by the QIO (as specified in 
42 CFR 1004.1). We believe that the proposed definitions would give 
improved clarity to the distinctions made among concerns that do not 
meet the standard of care and demonstrate that QIOs are responsible for 
identifying all instances where care could have been improved and not 
just the most significant or flagrant failures to meet a standard of 
care. With regard to ``immediate advocacy,'' we believe that this 
informal process is not appropriate for those situations where a QIO 
preliminarily determines that a complaint could involve a ``gross and 
flagrant'' or ``substantial'' concern. In these circumstances, the QIO 
would not offer the immediate advocacy process, but instead would 
inform the beneficiary of the right to file a written complaint. 
Moreover, while we are proposing to exclude the use of the immediate 
advocacy process for those instances where ``significant quality of 
care concerns'' might be present, we are requesting public comments 
regarding whether the immediate advocacy process should be made 
available for these concerns as well. In addition, while we are 
proposing to restrict the use of the immediate advocacy process to a 
period of 6 months after a beneficiary has received the care at issue 
(proposed Sec.  476.110(a)(1)), we also are requesting public comments 
on whether this time period should be extended beyond 6 months, whether 
based on the proposed structure or in order to accommodate the 
potential broadening of its use for ``significant quality of care 
concerns.''
    In proposed Sec.  476.110(a)(2), we are specifying that the 
immediate advocacy process can be used for issues that are not directly 
related to the clinical quality of health care itself or that accompany 
or are incidental to the medical care received. This includes, but is 
not limited to, issues such as delays in obtaining much needed medical 
items (for example, wheelchairs). In addition, in Sec.  476.110(a)(3), 
we are proposing that the Medicare beneficiary must agree to the 
disclosure of his or her name in order for the immediate advocacy 
process to be used. We believe that it is important for the Medicare 
beneficiary to disclose his or her name because the immediate advocacy 
process is based on the need for open discussions to quickly resolve a 
beneficiary's concerns. Moreover, we also are proposing that all 
parties orally consent to the use of immediate advocacy (proposed Sec.  
476.110(a)(4)). Because our goal is to work with the providers and 
practitioners to resolve a beneficiary's concerns, we believe that 
consent is necessary. The use of oral consent, and not written consent, 
is in keeping with the cost-saving attributes of alternative dispute 
resolution processes.
    Although we believe that the immediate advocacy process will be of 
great value to Medicare beneficiaries, providers, practitioners, and 
the QIOs, we recognize that, for some, the process may not provide the 
desired resolution. In addition, there could be situations where a QIO 
determines, after the immediate advocacy process has begun, that more 
serious concerns are evident. Therefore, we are proposing under Sec.  
476.110(b) that the QIO and either party can discontinue participation 
in immediate advocacy at any time and the steps a QIO will take when 
this occurs. This includes informing the beneficiary of his or her 
right to submit a written complaint.
    In proposed Sec.  476.110(c), we are conveying the need to maintain 
the confidentiality of the immediate advocacy proceedings by 
specifically referencing the redisclosure restrictions under Sec.  
480.107. We are proposing to make a corresponding change to Sec.  
480.107 by adding new paragraph (l), which will specify that the 
redisclosure of confidential information related to immediate advocacy 
proceedings can occur when there is consent of all parties. In proposed 
Sec.  476.110(d), we are proposing to include procedures that QIOs 
would follow in those instances where a party fails to participate or 
otherwise comply with the immediate advocacy procedures. This includes 
making a beneficiary aware of his or her right to submit a written 
complaint.
    We believe that the use of the immediate advocacy process will 
greatly reduce the burden on practitioners and providers by avoiding 
the formality of the traditional peer review process in appropriate 
situations and quickly identifying resolutions and improvements in the 
provision of health care. In fact, the immediate advocacy process has 
already been introduced through the recently completed manual 
instructions, and preliminary feedback indicates that it is being 
received positively by providers, practitioners, and Medicare 
beneficiaries. Medicare beneficiaries have indicated their appreciation 
of the quicker and more appropriate resolution of their concerns. Many 
times, Medicare beneficiaries would wait months for the resolution of a 
formal written complaint, only to be disappointed in what the QIO 
actually found or frustrated that the concern initially raised was 
rendered obsolete by more recent events. Under the immediate advocacy 
process, the QIO has a mechanism to resolve beneficiaries' concerns, 
sometimes the same day the beneficiary calls. Moreover, providers and 
practitioners have responded positively to being given the opportunity 
to immediately address beneficiary's concerns and improve care, 
particularly where communication is one of the

[[Page 45199]]

beneficiary's primary concerns. In addition, the provider's or 
practitioner's ability to avoid receiving and processing a formal 
complaint letter from the QIO and the related time and costs related to 
forwarding of medical records and engaging in the lengthy review 
process also have been positively received. The decreased burden on 
Medicare beneficiaries, providers, and practitioners and the time and 
cost savings are cornerstones of alternative dispute resolution 
processes. We are confident the positive responses to this new option 
will continue.
    While we believe that the immediate advocacy process represents a 
significant step forward in ensuring the timely, appropriate, and cost-
efficient resolution of Medicare beneficiaries' concerns, we recognize 
that additional changes are needed to improve the QIOs' review process 
in general. Therefore, we are proposing regulations governing written 
beneficiary complaint reviews as well as general quality of care 
reviews. We are proposing to add a new Sec.  476.120 that would govern 
a Medicare beneficiary's submission of a written complaint, and are 
proposing under proposed Sec.  476.120(a), language limiting the time 
period for submitting a written complaint to 3 years from the date on 
which the care giving rise to the complaint occurred. We believe this 
is necessary because the ability of a QIO to thoroughly review a 
complaint becomes more problematic the longer the period of time is 
between the circumstances giving rise to a complaint and the actual 
filing of the complaint. An individual's memory can fade, and we are 
aware of some instances where Medicare beneficiaries have submitted 
complaints about issues that have occurred decades ago. In these 
situations, the QIOs' ability to obtain the necessary information, let 
alone render a valid decision, has been severely compromised. As such, 
we believe that a 3-year look back period should be sufficient to 
ensure that a QIO can effectively complete its review.
    We are specifying in proposed Sec.  476.120(a)(1) that a complaint 
submitted electronically to the QIO meets the requirement for the 
submission of a written complaint. We are specifying in proposed Sec.  
476.120(a)(2) that if a beneficiary contacts a QIO about a potential 
complaint, but decides not to submit it in writing (and the QIO did not 
offer immediate advocacy), the QIO may use its authority under section 
1154(a)(1)(B) of the Act to complete a general quality of care review 
in accordance with new proposed procedures at proposed Sec.  476.160. 
We note that, in these situations, the beneficiary would not receive 
any results of the QIO's review. We also are proposing to limit the 
QIO's authority to conduct a general quality of care review in response 
to an oral complaint to those situations where the QIO makes a 
preliminary determination that the complaint contains a potential gross 
and flagrant, substantial, or significant quality of care concern.
    In proposed Sec.  476.120(b), we are proposing instructions for 
QIOs when a beneficiary submits additional concerns after the initial 
submission of a written complaint. We believe that the focus on an 
episode of care, which we are proposing in Sec.  476.130(a)(1), gives 
the QIO adequate flexibility to consider all related concerns 
surrounding a complaint, but for those rare instances where a 
beneficiary does convey a new concern, the QIO would now have specific 
instructions regarding the right to consider the additional concerns 
either during the same complaint review or as a separate complaint.
    In proposed Sec.  476.130(a), we are proposing to convey the QIO's 
obligation to consider any information submitted by the beneficiary or 
his/her representative and by the provider and/or practitioner, along 
with the QIO's obligation to maintain the information received as 
confidential information, if that information falls within the 
definition of ``confidential information'' under existing Sec.  
480.101. Moreover, proposed Sec.  476.130(a)(1) also would convey that 
the focus of the QIO's review will be on the episode of care from which 
the complaint arose and that in completing its review, the QIO will 
respond to the specific concerns raised by the beneficiary along with 
any additional concerns the QIO identifies while processing the 
complaint. We believe that the focus on the episode of care will 
significantly reduce the burden on providers and practitioners and 
reduce timeframes for completing reviews. Historically, QIOs would 
closely track the complaint as originally conveyed by a Medicare 
beneficiary. Often, however, Medicare beneficiaries would become 
dissatisfied with the focus and/or results of the QIO's review, and the 
QIO would be forced to reexamine the complaint in light of these new 
issues. On occasion, this could even require the submission of an 
entirely new complaint for issues that were related to, but not 
reviewed in, the original complaint. These situations also added to the 
burden on providers and practitioners because they would be required to 
participate in the review of the additional concerns and even provide 
additional medical documentation that may not have originally been 
requested.
    In addition, proposed Sec.  476.130(a)(1) would specify the details 
of the QIO's authority to separate a beneficiary's concerns into 
separate complaints if the QIO determines that the concerns relate to 
different episodes of care. We believe that focusing on the episode of 
care will put QIOs in a better position to identify all potential 
concerns at the onset and help alleviate any potential back and forth 
based on the specter of new or different concerns arising after the 
review has begun.
    Proposed Sec.  476.130(a)(2) would set forth the QIO's use of 
evidence-based standards of care to the maximum extent practicable, and 
specify the method that the QIO must use to establish standards if no 
standard exists. Moreover, this paragraph (a)(2) also conveys the 
finality of a QIO's determination regarding the standard to be used for 
a particular concern, in that the QIO's determination regarding the 
standard used is not subject to appeal. We believe that the focus on 
evidence-based standards of care is vital to the improvement of health 
care nationally.
    In proposed Sec.  476.130(b), we are proposing to specify the 
timeframes that practitioners and providers must follow when a QIO 
requests medical information in response to a written beneficiary 
complaint. We are proposing a 10 calendar day timeframe for responding 
to these requests. While this timeframe is significantly shorter than 
the 21 and 30 calendar day timeframes specified in existing Sec.  
476.78, we believe that it is warranted in light of the need to give 
Medicare beneficiaries a more timely resolution to their complaints. We 
believe providers and practitioners would also benefit from the faster 
resolution of complaints and would shift the focus from being available 
during the lengthy review process to moving forward with improvements 
to the health care given to Medicare beneficiaries. In addition, where, 
for other review activities, a QIO may be requesting multiple medical 
records, most often a single medical record will be requested in 
response to a written beneficiary complaint. Thus, the ability to 
respond within the shorter 10 calendar day timeframe should be much 
easier and less burdensome. Moreover, we also considered that an 
increasing number of providers and practitioners are using vendors to 
respond to requests for medical information, and this timeframe is 
comparable to models typically used by these vendors in responding to 
requests. In fact, even shorter timeframes can exist for larger 
providers and/or

[[Page 45200]]

practitioner groups. In addition, QIOs have historically employed a 
different, shorter timeframe for reviews where a Medicare beneficiary 
is still receiving care (concurrent review), compared to those 
situations where a Medicare beneficiary has already been discharged 
(retrospective review). For concurrent reviews, QIOs request that 
medical information be received within 1 calendar day, and typically 
this timeframe has been adhered to by providers and practitioners. 
Although we are not proposing the continued use of the concurrent and 
retrospective review framework for responding to written complaints, we 
recognize that there could be circumstances in which an even shorter 
timeframe for receiving medical information is warranted, and we are 
proposing to include language detailing a QIO's right to earlier 
receipt of medical information. We are proposing that this right to 
earlier receipt of medical information be related to potential gross 
and flagrant or substantial quality of care concerns. However, we are 
requesting public comments on whether there are other circumstances, 
involving less serious kinds of concerns, for which this authority to 
employ a shorter timeframe should be used. In addition, in the FY 2013 
IPPS/LTCH PPS proposed rule (77 FR 28119 through 28120), we included 
proposed changes to Sec.  476.78 to add references to ``practitioners'' 
in parts of this section, which currently refer only to ``providers,'' 
in order to equalize the 30-day and 21-day timeframes for submitting 
records. We also proposed changes to Sec.  476.90 to equalize the 
ramifications for not submitting records on time because we see no 
reason to differentiate between a provider's and a practitioner's 
records. While these proposed changes in the FY 2013 IPPS/LTCH PPS 
proposed rule have not been finalized, in this proposed rule, we are 
requesting public comment on whether changes similar to those we are 
proposing for beneficiary complaints, including shortening of the 30-
day and 21-day timeframes, should be incorporated into Sec.  476.78(b) 
for requests for medical information in general, for any kind of QIO 
reviews, including nonquality related reviews. We are proposing to 
apply a shorter timeframe for all of a QIO's requests for records, 
without limiting this application to quality reviews in just one 
instance: Where secure transmissions of electronic versions of medical 
information are available. Our proposal regarding secure transmissions 
of electronic versions of medical information is discussed more fully 
later in this section.
    In proposed Sec.  476.130(c), we are proposing to include a 
requirement for beneficiary complaints that the QIO issue its interim 
initial determination within 7 calendar days after receiving all 
medical information. We believe that this timeframe is sufficient to 
evaluate a complaint and identify the key aspects of the care provided. 
Proposed Sec.  476.130(c)(1) would specify the provider's and/or 
practitioner's right to discuss the QIO's determination before it is 
finalized, and would specify that the QIO's initial notification will 
be made by telephone. We are proposing a 7-calendar day timeframe for 
completion of the discussion. In addition, we are proposing that the 
QIO's interim initial determination would become the QIO's final 
determination if the discussion is not completed timely because the 
provider and/or practitioner has failed to respond (proposed Sec.  
476.130(c)(2)). Again, our focus is on obtaining resolutions to 
complaints within reasonable timeframes, and the completion of the 
discussion is an area where improved instructions may benefit the 
timeliness of complaint processing because we have experienced 
significant delays in completing this particular step. The term ``final 
initial determination'' should not be confused with the term used in 42 
CFR Part 405, because Part 405 relates to whether a beneficiary is 
entitled to services or the amount of those services, while this 
regulation covers only the quality of services as specified in the QIO 
statute. At the same time, we are proposing under proposed Sec.  
476.130(c)(3) the provider's or practitioner's right to submit a 
written statement in lieu of a discussion, with the requirement that 
the written statement be received within the same 7-calendar day 
timeframe from the date of the initial offer. We believe that allowing 
the submission of a written statement would benefit practitioners or 
providers that may have trouble being available at a specific time 
within the 7-calendar day timeframe. Moreover, in proposed Sec.  
476.130(c)(4), we have included the QIO's right to extend the timeframe 
for holding the discussion or submission of a written statement in lieu 
of a discussion in those rare instances where a practitioner or 
provider is unavailable, whether because of military tours of duty, 
travel or other unforeseen circumstances.
    In addition, we are considering restricting a provider's or 
practitioner's right to submit new or additional medical evidence in 
the form of test results, x-rays, and other evidence, as part of this 
discussion. We believe that doing so would emphasize the need for 
providers and practitioners to supply all relevant evidence when first 
requested by the QIO and also would maintain the focus on the 
discussion a physician or provider is due in accordance with section 
1154(a)(14) of the Act. Allowing the submission of additional or new 
evidence could also substantially raise the possibility that the 
discussion will become, in effect, an entirely new review by the QIO. 
Moreover, providers and practitioners will still be able to submit 
information as part of a request for a reconsideration review. We are 
requesting public comments on whether providers and/or practitioners 
should be prohibited from submitting new or additional medical evidence 
in response to the offer of a discussion.
    In proposed Sec.  476.130(d), we are specifying the QIO's 
obligation to issue a written final initial determination, regardless 
of whether care did or did not meet standards for all concerns, and 
that this determination must be issued within 72 hours after completion 
of the QIO's review or, in cases where the standard was not met, the 
QIO's discussion or receipt of the provider's and/or practitioner's 
written statement. In addition, proposed Sec.  476.130(d)(1) would 
specify that the notice of the final initial determination will be 
forwarded to all parties, and paragraph (d)(2) lists the actual content 
of the notice. We are specifying that the QIO would not forward the 
notice if either party requests a reconsideration of the final initial 
determination.
    These proposed changes represent significant departures from the 
process QIOs have historically used when resolving beneficiary 
complaints and are necessary to improve the fairness of the review 
process and increase the transparency of the QIO review process. When 
the process was originally established, CMS determined that physicians, 
providers, or Medicare beneficiaries would not be afforded the right to 
request a reconsideration of these determinations under section 1155 of 
the Act. However, providers and practitioners were afforded an 
administratively created option, referred to as a ``re-review,'' if the 
provider or practitioner disagreed with the QIO's initial decision. 
Medicare beneficiaries were not provided this re-review opportunity 
and, in fact, were not given any response until after completion of the 
re-review. Moreover, the actual information a beneficiary received in 
response to the submission of a complaint was further limited by 
certain other provisions in the existing regulations. Section 480.132 
covers the

[[Page 45201]]

general requirements that a QIO must meet in disclosing information to 
a beneficiary when that beneficiary has requested information about him 
or herself. Section 480.132(a)(1)(iii) states that this information 
cannot include any practitioner-specific information. We have read this 
provision in conjunction with Sec.  480.133(a)(2)(iii), which 
authorizes a QIO to disclose practitioner-specific information when the 
practitioner has consented to the disclosure. In the past, we have 
interpreted these provisions as applying in the context of beneficiary 
complaints. This limitation greatly reduced a beneficiary's access to 
information related to the QIO's specific findings. In fact, Sec.  
480.132 also gave attending practitioners the authority to direct that 
a QIO not provide results directly to a Medicare beneficiary should 
that practitioner determine that the released information could ``harm 
the patient.'' This same provision gave QIOs a full 30 calendar days 
before they had to respond to a beneficiary's request for information, 
which would apply even in the context of a complaint. Thus, the QIO was 
required to obtain a practitioner's consent to disclose information 
within this 30-calendar day timeframe before the QIO could disclose the 
specific results of its complaint review to the beneficiary.
    As a result of the current provisions in the regulation, the QIO 
was often delayed in its ability to respond to the beneficiary, and was 
sometimes forced to identify a representative and then give the results 
to the representative even if the Medicare beneficiary believed he or 
she was able to represent himself or herself and legally had not been 
deemed otherwise. Clearly, this scenario has frustrated Medicare 
beneficiaries over time and placed QIOs in difficult situations. 
Furthermore, if a practitioner did not consent to any disclosures or to 
limited disclosures of information that would identify the 
practitioner, a QIO's decision typically contained a conclusory 
statement about the results of the QIO's review but no information 
about the standards of care the QIO used, the evidence the QIO 
considered, or the rationale for how the QIO arrived at its conclusion. 
The limitations on what information Medicare beneficiaries received and 
broad authority given to attending practitioners have been particularly 
troubling in those instances in which the beneficiary's complaint 
relates to care that an attending physician provided. In fact, the lack 
of information given to Medicare beneficiaries in response to a 
complaint was the precise issue addressed in the Public Citizen 
decision.
    We believe that the proposed changes to Sec.  476.130(d), including 
paragraphs (d)(1) and (d)(2), are necessary to ensure beneficiaries are 
given the same information and rights as practitioners and providers. 
The proposed changes make clear that the timeframe given to QIOs for 
issuing the final initial determination in response to a complaint is 
separate and distinct from the timeframe given to QIOs when responding 
to a beneficiary's request for information. Any requests for 
information, including requests for information pertaining to 
beneficiary complaint reviews that are unrelated to a QIO's issuance of 
its final initial determination, would continue to be governed by Sec.  
480.132. Moreover, while the proposed 72-hour timeframe in Sec.  
476.130 appears short in comparison to the 30-calendar day timeframe in 
Sec.  480.132 that has historically been used, we believe that the 72-
hour timeframe represents a more appropriate and reasonable period of 
time in which to issue these decisions. In most cases, the QIO's final 
initial determination may not change significantly from the interim 
initial determination. Thus, QIOs would be able to rely heavily upon 
the interim initial determination in most instances, with only minor 
adjustments being made in light of information received in response to 
the opportunity for discussion. In addition, paragraph (d)(2) proposes 
the content of the written decision to be given to the beneficiary, 
provider, and/or practitioner. We are proposing that the content 
include a statement for each concern that the care did or did not meet 
the standard of care, the standard identified by the QIO for each of 
the concerns, and a summary of the specific facts that the QIO 
determines are pertinent to its findings. This list makes clear that 
Sec.  480.132 will no longer govern what information a QIO may provide 
to a beneficiary in resolving a complaint. We believe this approach 
more fully supports the Court's decision in the Public Citizen case.
    In addition, we believe that the language under section 1155 of the 
Act supports the decision to give all parties the right to request that 
the QIO reconsider its initial decision, and we are proposing to offer 
providers, practitioners, and beneficiaries the right to request a 
reconsideration in proposed Sec.  476.140(a) for complaints filed after 
July 31, 2014. This includes proposed specific requirements regarding 
the manner in which these requests are to be submitted and the 
obligations of beneficiaries, providers, and practitioners to 
participate in the reconsideration process in proposed Sec.  
476.140(a)(1) through (a)(3). We are delaying implementation of this 
new proposed right to ensure all processing requirements are fully 
developed for QIOs to follow in reviewing these reconsideration 
requests.
    In addition to proposing the specific content of the notice at 
proposed Sec.  476.130(d)(2) when a final initial determination is 
issued and under proposed Sec.  476.140(b) when a reconsideration final 
decision is issued, we are proposing to make corresponding changes to 
existing Sec. Sec.  480.132(a) and (b) and 480.133(a) (proposed new 
paragraph (a)(2)(iv)). In order to make clear that Sec.  480.132 
relates solely to a beneficiary's request for information, but not to a 
beneficiary's receipt of information from a QIO in resolution of a 
complaint review, we are proposing the inclusion of a cross-reference 
to Sec. Sec.  476.130(d) and 476.140(b) in paragraph (a). Similarly, we 
are proposing to include language in Sec.  480.132 (a)(1)(iii) to 
denote that the removal of all other patient and practitioner 
identifiers does not apply to disclosures described in Sec.  480.132 
(b). We also are proposing clarifications to Sec.  480.132(b) to 
improve the link between paragraph (b) and the provisions of Sec.  
478.24, which are cross-referenced in paragraph (b). We note that Sec.  
478.24 does not require seeking the advice or consent of the 
practitioner that treated the patient, nor does it prohibit the QIO 
from disclosing practitioner identifiers. We have made this clear by 
proposing the deletion of paragraph (b)(1)(i) and added language to the 
end of current paragraph (b)(1)(ii) to indicate that the information 
provided under Sec.  478.24 includes relevant practitioner identifiers. 
With the deletion of paragraph (b)(1)(i), there is no longer a need for 
multiple paragraphs in (b)(1). Therefore, we are proposing to eliminate 
the current designation for paragraph (b)(1)(ii), with the provision 
being included as part of paragraph (b)(1). We also are proposing a 
corresponding change to Sec.  480.133(a)(2)(iv) that makes clear a 
practitioner's or provider's consent is not required prior to releasing 
information to a beneficiary in connection with an initial denial 
determination or in providing a beneficiary with the results of the 
QIO's findings related to a beneficiary complaint review as described 
in Sec. Sec.  476.130(d) and 476.140(b).
    We also are proposing to remove from existing Sec.  480.132(a)(2) 
and (c)(1) the right of an attending practitioner to direct a QIO to 
withhold information

[[Page 45202]]

based on a ``harm'' determination. This includes the proposed removal 
of the requirement from existing Sec.  480.132(c)(2) that a QIO release 
results to a beneficiary's representative if a ``harm'' determination 
has been made by the attending practitioner. This also includes our 
proposed decrease in the timeframe that QIOs must follow in responding 
to a beneficiary's request for information (in any situation, as well 
as in the context of a beneficiary complaint) in Sec.  480.132(a)(2) 
from 30 calendar days to 14 calendar days. This timeframe is strictly 
related to those situations where a beneficiary is making a request for 
information and will no longer be associated with obtaining responses 
to beneficiary complaints, which are detailed in proposed Sec. Sec.  
476.130(d) and 476.140(b). We believe the decrease from 30 calendar 
days to 14 calendar days is warranted in light of the improved ability 
to maintain data, including in electronic formats, so that less time is 
needed when responding to requests. The proposed changes would ensure 
that Medicare beneficiaries have more control over the designation of 
their representatives and also give a QIO more appropriate steps to 
follow in identifying a representative when one is actually needed. As 
an example, the existing regulations at Sec.  480.132(c)(3) direct a 
QIO to ``first'' look to the medical record to identify a 
representative but then direct the QIO to ``rely on the attending 
practitioner'' if no information is contained in the medical record. 
The changes we are proposing to Sec.  480.132(c) place more emphasis on 
the obligation of the QIO to follow the requirements under State law 
regarding the designation of health care representatives or agents, 
rather than focusing on ``where'' the information might be contained.
    Lastly, at proposed Sec.  476.140(b), we are specifying that the 
QIO must notify the beneficiary and the practitioner and/or provider of 
its final, reconsidered, decision within 72 hours after receipt of the 
request for a reconsideration or, if later, 72 hours after receipt of 
any medical or other records needed for such a reconsideration. The QIO 
may do so orally, by telephone, in order to meet this timeframe. 
Proposed Sec.  476.140(b)(1) also would specify that a written notice 
must be mailed by noon of the next calendar day and specifies the 
content of the notice. In addition, proposed Sec.  476.140(b)(2) 
describes the QIO's authority to provide information in its final 
decision to beneficiaries, providers and/or practitioners regarding 
improvement opportunities. The information QIOs provide regarding 
potential improvements could include specific opportunities related to 
the practitioner's or the provider's delivery of care and/or even 
broader improvements focusing on the community served by the 
practitioners and/or the providers. Some QIOs have, in fact, been 
providing this information to beneficiaries since it can offer the 
beneficiaries assurance that their complaints and any underlying 
problems are being addressed.
    We are proposing to include under proposed new Sec.  476.150 
specific requirements for QIOs to follow in response to abandoned 
complaints. We believe that these instructions are necessary in light 
of a QIO's experience when handling complaints where a Medicare 
beneficiary initially submits a complaint but then all attempts by the 
QIO to contact the beneficiary are unsuccessful. Historically, QIOs 
have been responsible for continual follow-up with beneficiaries, even 
if months later the beneficiary still had not responded. We believe 
that giving QIOs the discretion to close these cases will eliminate 
this unnecessary follow-up and reduce costs. Moreover, it will 
alleviate provider's and/or practitioner's concern in those situations 
where the QIO may have already reached out to them about a potential 
complaint. We also are proposing to add under proposed Sec.  476.150(b) 
instructions for QIOs to follow in those situations, which we believe 
will be rare, where a QIO must reopen a beneficiary complaint review. 
We would have QIOs apply the same procedures that appear in the already 
existing regulations at Sec.  476.96 for the reopening of cases 
involving initial denial determinations and changes as a result of DRG 
validation, simply using those same procedures for a different purpose. 
We are proposing to do this by placing a reference in Sec.  476.150(b) 
to the procedures in Sec.  476.96.
2. Completion of General Quality of Care Reviews
    Although the QIO's responsibility for completing quality of care 
reviews is already set forth in the QIO program regulations at existing 
Sec.  476.71(a)(2), the procedures that QIOs use in completing these 
reviews are not. Again, the precise steps that QIOs use in completing 
these reviews were established through manual instructions. However, we 
believe that the proposed changes discussed below are necessary to the 
processing of these reviews in light of the knowledge we have gained 
since the program began. We believe that these proposed changes can 
bring about necessary improvements as quickly as possible and also 
support our efforts to thoroughly evaluate how the program should be 
structured moving forward.
    First, in proposed new Sec.  476.160(a)(1), we are proposing to 
specify those circumstances in which a QIO may conduct a general 
quality of care review. These circumstances would include those 
situations where a potential quality of care issue is referred to the 
QIO by another source, such as by another CMS contractor, an individual 
submitting a request anonymously, or another Federal or State entity. 
In addition, we recognize that more frequently the QIOs are working to 
use the substantial data available to them to identify potential areas 
where improvements in the quality of health care could be attained, and 
we believe these instances should be accounted for as we move forward. 
We also are aware that QIOs frequently identify potential quality of 
care issues when conducting other case review activities, including 
medical necessity reviews, expedited discharge appeals, among others; 
therefore, we have included this as an instance where a general quality 
of care review can be initiated.
    In proposed new Sec.  476.160(a)(2), we are specifying that the 
QIO's review will focus on all concerns raised by the source of a 
referral or report and/or identified by the QIO. While the episode of 
care should still be considered, it may be less significant for these 
reviews than those in response to a complaint submitted by a 
beneficiary, because the main goal of complaint reviews is to address a 
beneficiary's particular experiences with receiving certain services at 
a particular time. However, we again are proposing under proposed Sec.  
476.160(a)(3) that the QIO will use evidence-based standards of care to 
the maximum extent practicable in completing these reviews, and that 
the QIO's determination regarding the standard used in completing the 
review is not subject to appeal.
    In proposed new Sec.  476.160(b), we are proposing to specify the 
responsibility of providers and practitioners to supply requested 
medical information. This language is identical to the language in 
proposed new Sec.  476.130(b) applicable to written beneficiary 
complaints, including the same 10-calendar day timeframe for 
practitioners and providers to respond to requests for medical 
information and the QIO's right to request even earlier receipt when 
the QIO preliminarily determines that a concern may be serious enough 
to qualify as a gross and flagrant or substantial quality of care 
concern. Although the decreased timeframe is not related to the goal of 
providing

[[Page 45203]]

beneficiaries with more timely resolution of their complaints (because 
beneficiaries will not be getting results of these reviews), we still 
believe there is ample justification to warrant the reduced timeframe. 
Providers and practitioners will benefit from the faster resolution of 
these reviews and the increased focus on identifying and resolving 
impediments to improved health care (particularly in cases involving 
potential serious concerns). These improvements will ultimately benefit 
patients. Additionally, as with written beneficiary complaints, the 
timeframes are comparable to models typically used by vendors. We also 
considered that, as with written beneficiary complaints, the QIOs 
currently use shorter timeframes where the beneficiaries impacted by 
the general quality of care review are still receiving care (concurrent 
review), compared to those situations where a beneficiary has already 
been discharged (retrospective review). Again, while we are not 
proposing the continued use of the concurrent and retrospective 
designations, we recognize that there are circumstances, even with 
general quality of care reviews, where decreased timeframes are 
necessary, including the 10-calendar day, or even shorter, timeframe.
    As mentioned previously, in the FY 2013 IPPS/LTCH PPS proposed rule 
(77 FR 28119 through 28120), we included proposed changes to Sec.  
476.78 to add references to ``practitioners'' in parts of this section, 
which currently refer only to ``providers,'' in order to equalize the 
30-day and 21-day timeframes for submitting records. We also proposed 
changes to Sec.  476.90 to equalize the ramifications for not 
submitting records on time because we see no reason to differentiate 
between a provider's and a practitioner's records. While these proposed 
changes in the FY 2013 IPPS/LTCH PPS proposed rule have not been 
finalized, we are proposing here to modify the current general 30-day 
and 21-day timeframes in Sec.  476.78(b) to reflect the new timeframes 
in Sec. Sec.  476.130(b) and 476.160(b), which apply only to records 
submitted for purposes of beneficiary complaint and general quality 
reviews. We also are requesting public comment on whether changes 
similar to those we are proposing for beneficiary complaints and 
general quality of care reviews, including shortening of the 30-day and 
21-day timeframes, should be incorporated more broadly into Sec.  
476.78(b) for requests for medical information in general, for any kind 
of QIO reviews, including nonquality related reviews. We are proposing 
to apply a shorter timeframe for all of a QIO's requests for records, 
without limiting this application to beneficiary complaints or general 
quality reviews in just one instance: Where secure transmissions of 
electronic versions of medical information are available. Our proposal 
regarding secure transmissions of electronic versions of medical 
information is discussed more fully later in this section.
    We also are proposing new Sec.  476.160(c), which would specify 
that the QIO peer reviewer will render the initial determination within 
7 calendar days of the receipt of all medical information; this 
paragraph is substantially different from the proposed beneficiary 
complaint review procedures in proposed new Sec.  476.130 in two areas. 
First, beneficiaries would not be provided any information regarding 
these reviews. Although we recognize that, at times, potential quality 
concerns a QIO identifies could impact a specific beneficiary, we 
believe that this type of review does not warrant any communication 
directly to the beneficiary. In fact, we believe that giving feedback 
of potentially poor care to an unknowing beneficiary could cause more 
anxiety than is warranted by the circumstances, and that is not our 
goal. We also recognize that, in many situations, the reviews could 
relate to or involve numerous beneficiaries. However, those 
beneficiaries may only be a sample of the beneficiaries potentially 
impacted. This is particularly true in those circumstances where the 
QIO is reviewing system-related aspects of care, and it will be 
incumbent upon the QIO to determine what medical information--and by 
extension the sample of beneficiaries receiving care--to be analyzed in 
completing these reviews.
    Second, we are proposing that practitioners and providers not be 
given an opportunity to discuss the QIO's initial determination before 
it becomes final. The QIO's obligation to provide an opportunity for 
discussion is specific to the QIO's responsibility to review 
beneficiary complaints under section 1154(a)(14) of the Act. This same 
obligation is not dictated by section 1154(a)(1)(B) of the Act on which 
the QIO's authority to conduct general quality of care reviews is 
based. We believe that giving such an opportunity is not necessary, 
particularly because these discussions frequently become, in effect, an 
entirely new review by the QIO and not merely a discussion, and because 
we are already proposing at proposed new Sec.  476.170(a) that the 
practitioner and/or provider be given the right to request a 
reconsideration of the QIO's initial determination. As with beneficiary 
complaint reviews, we are proposing that this right not be available 
until after July 31, 2014, to give us time to fully establish the 
process requirements and ensure that this right is meaningful for 
providers and practitioners.
    In addition, under proposed new Sec.  476.170(a)(1) through (a)(3), 
we are proposing requirements similar to those in Sec.  476.140 
regarding the timeframe for submitting a request for a reconsideration, 
the obligation of a practitioner and/or provider to be available to 
answer questions or supply information, as well as the QIO's obligation 
to offer the provider the opportunity to provide information as part of 
the reconsideration request. We also proposed provisions under proposed 
new Sec.  476.170(b) concerning the QIO's issuance of its final 
decision. This includes the requirement that the QIO's decision be 
issued within 72 hours after receipt of the request for a 
reconsideration, or, if later, 72 hours after receiving any medical 
information or other records needed for such a reconsideration, the 
specific content of the final decision, and the right of the QIO to 
provide information to the provider or practitioner regarding 
opportunities for improving care given to beneficiaries based on the 
specific findings of its review. The information QIOs provide regarding 
potential improvements could include specific opportunities related to 
the practitioner's or provider's delivery of care and/or even broader 
improvements focusing on the community served by the practitioners and/
or providers.

C. Use of Confidential Information That Explicitly or Implicitly 
Identifies Patients

    The QIO regulations at Sec.  480.101(b) define any information that 
explicitly or implicitly identifies an individual patient as 
confidential information. Although provisions are included in 42 CFR 
Part 480 governing a practitioner's and/or provider's right to allow a 
QIO to use or disclose confidential information about the named 
practitioner or provider (Sec. Sec.  480.105(b), 480.133(a)(2)(iii), 
and 480.140(d)), a similar right is not conveyed for beneficiaries. 
Thus, QIOs are prohibited from obtaining a beneficiary's authorization 
to use or disclose the beneficiary's confidential information, even in 
situations where a use or disclosure could be helpful to the 
beneficiary and his or her health care or even where the beneficiary 
specifically

[[Page 45204]]

asks the QIO to disclose the information.
    One of the key challenges for the QIOs is identifying improvements 
in health care delivery systems. In fact, the ``patient-centeredness'' 
aim of the QIO's current scope of work requires more patient 
involvement, and the goal of many patient and family engagement efforts 
is to incorporate ``real-world person's'' experiences to demonstrate 
the compelling and urgent need for healthcare delivery reform. 
Additionally, beneficiaries have asked to participate in the QIO's work 
in a meaningful way. Unfortunately, we are often unable to accommodate 
these requests in light of the current regulatory restriction. We 
believe that this restriction, which was developed many years ago, is 
outdated, and that beneficiaries should be given the right to make 
choices regarding the use and disclosure of their confidential 
information.
    As such, we are proposing new Sec.  480.145 that will govern a 
beneficiary's right to authorize a QIO's use or disclosure of the 
beneficiary's confidential information. Under proposed Sec.  
480.145(a), we are proposing that a QIO may not use or disclose a 
beneficiary's confidential information without an authorization from 
the beneficiary and that the QIO's use or disclosure must be consistent 
with the authorization. In proposed Sec.  480.145(b)(1) through (b)(6), 
we have listed those aspects of an authorization necessary to make the 
authorization valid. This includes the requirements that a specific and 
meaningful description of the confidential information be included, the 
name(s) of the QIO and QIO point of contact making the request to use 
or disclose the information, the name or other specific identification 
of the person, or class of persons to whom the QIO may make the 
requested use or disclosure, a description of the purpose(s) of the use 
or disclosure, the date or event upon which the authorization will 
expire, and the signature and date of the beneficiary authorizing the 
use and/or disclosure of the information. We also are proposing in 
Sec.  480.145(c)(1) and (c)(2) that the authorization must contain a 
statement that the beneficiary maintains the right to revoke his or her 
authorization in writing and that the QIO must specify any exceptions 
to the right to revoke, as well as the process a beneficiary must use 
to revoke the authorization. In addition, at Sec.  480.145(c)(3), we 
are proposing the requirement that the QIO convey to the beneficiary 
its inability to condition the review or other activities it is 
responsible for (such as beneficiary complaint reviews, medical 
necessity of a beneficiary's services, or discharge appeals) on the 
beneficiary's authorization. We also are proposing under Sec.  
480.145(c)(4) to make clear the consequences of authorizing the use or 
disclosure of information, and the fact that the QIO may be unable to 
protect the information from redisclosure. In Sec.  480.145(d), we are 
proposing that an authorization must be written in plain language, and 
in Sec.  480.145(e) that a QIO must provide the beneficiary with a copy 
of the signed authorization. Lastly, although we make reference to a 
beneficiary's right to revoke authorization in proposed Sec.  
480.145(c)(1), in paragraph (f) we are proposing a specific provision 
that will make clear that a beneficiary may revoke, in writing, an 
authorization at any time, except when the QIO has taken action in 
reliance upon the authorization.
    We believe that these proposed changes appropriately relax some of 
the historical restraints on the QIO's use of a beneficiary's 
confidential information, enable QIOs to better meet the needs of 
Medicare beneficiaries, and give beneficiaries the opportunity to 
participate in efforts to improve the quality of their health care.

D. Secure Transmissions of Electronic Versions of Medical Information

    When the QIO program regulations were first written in 1985, 
computers, along with digitally or electronically stored information, 
were still in their infancy. Thus, the QIO program regulations were 
written based on the perspective that most information sharing would be 
through the exchange of paper copies of medical records and other 
information. Since that time, we have seen great advances in the 
ability to electronically share data, whether through the use of mass 
storage devices (flash drives), the sending and receipt of electronic 
facsimiles, and even the use of email. At the same time, several laws, 
including HIPAA and the Federal Information Security and Management Act 
(FISMA), have been established to protect sensitive information. 
However, because the QIO program regulations have not undergone 
significant modification since they were originally adopted, the 
regulations do not account for electronic sharing of information and 
the QIOs' work is carried out within the context of exchanging paper 
copies of documents and information. At times, this creates additional 
work and costs because those providers and practitioners who have the 
ability to securely share electronic versions of medical records must 
actually print out the records and pay to have the paper copies mailed 
to the QIOs. To address these issues, we are proposing to revise 
existing Sec.  476.78(b)(2) to add a new paragraph (iii) to make clear 
the QIOs' right to exchange secure transmissions of electronic versions 
of medical information, subject to a QIO's ability to support the 
exchange of the electronic version. We believe that this proposal would 
enable QIOs to receive and send medical information in a variety of 
formats, including through secure electronic faxes, and would reduce 
costs for providers and practitioners because they would no longer have 
to print and mail paper copies. In addition, to fully take advantage of 
the ability to receive and send electronic versions of medical 
information, we believe that a reduced timeframe is warranted for those 
instances where electronic versions are to be forwarded in response to 
requests from a QIO. Therefore, we are proposing under proposed Sec.  
476.78(b)(2)(iii) to require providers and practitioners to deliver 
electronic versions of medical information within 10 calendar days of 
the request from the QIO. As we noted previously, changes to existing 
Sec.  476.78(b) have already been proposed in the FY 2013 IPPS/LTCH PPS 
proposed rule (77 FR 28119). As discussed earlier in this preamble, we 
are now proposing in this CY 2013 OPPS/ASC proposed rule additional 
changes to Sec.  476.78 to take into account the different, more 
expedited timeframes we are proposing for medical records related to 
beneficiary complaint and general quality of care reviews. We also are 
requesting public comments in this proposed rule on whether additional 
changes should be made to Sec.  476.78(b) to expand the different 
timeframes to cover medical records for all kinds of reviews. We also 
are requesting public comments on whether any modifications should be 
made to the reimbursement methodologies for paper copies described in 
Sec.  476.78(c). We note that we are carrying forth in this proposed 
rule the proposed change to the section heading for Sec.  476.78 that 
was included in the FY 2013 IPPS/LTCH PPS proposed rule, that is, the 
proposed change from ``Responsibilities of health care facilities'' to 
``Responsibilities of providers and practitioners''.

E. Active Staff Privileges

    In our efforts to ensure the QIO program is able to meet the needs 
of Medicare beneficiaries and improve the quality of health care moving 
forward, we have identified an aspect of the QIO program regulations 
that has become increasingly problematic for the QIOs.

[[Page 45205]]

Under existing Sec.  476.98(a)(1), QIOs are required to use an 
individual with ``active staff privileges in one or more hospitals'' in 
making initial denial determinations. However, there is an accelerating 
trend toward generalist (family physicians/internists) physicians who 
provide care solely in the inpatient or outpatient care settings and a 
corresponding decline in the number of family practice physicians who 
provide any care in hospitals. In fact, many of these individuals do 
not provide any inpatient care and either have no hospital privileges 
or only ``courtesy'' privileges, which do not meet the definition in 
existing Sec.  476.1 of ``active staff privileges.'' While we believe 
that the continued use of peer reviewers is necessary and vital to the 
success of the QIO program, the need to use physicians with ``active 
staff privileges'' is not. We believe that proposing to remove this 
requirement would increase the number of peer reviewers available for 
use by the QIOs, which, at times, has become particularly problematic 
for the QIOs. Therefore, in this proposed rule, we are proposing to 
remove the definition of ``active staff privileges'' under Sec.  476.1 
and to remove the phrase referring to using individuals ``with active 
staff privileges in one or more hospitals in the QIO area'' in making 
initial denial determinations under Sec.  476.98(a)(1).

F. Proposed Technical Corrections

    In addition to the proposed changes discussed above, we are 
proposing to make the following technical corrections to the QIO 
regulations:
     In 1989, several sections in 42 CFR Part 405 were 
redesignated to 42 CFR part 411 (54 FR 41746), but the cross-references 
to these sections in the QIO regulations was never made. Therefore, we 
are proposing to make the following reference changes:
    +- Changing the reference ``Sec.  405.330(b)'' in existing Sec.  
476.71(b) to ``Sec.  411.400(b)'';
    +- Changing the reference ``Sec.  405.332'' in Sec.  476.74 to 
``Sec.  411.402'';
    + Changing the references ``Sec.  405.310(g) or Sec.  405.310(k)'' 
in Sec.  476.86 to ``Sec.  411.15(g) or Sec.  411.15(k)''.
     In 1999, 42 CFR parts 466, 473, and 476 were redesignated 
as 42 CFR parts 476, 478, and 480, respectively (64 FR 66236). 
Therefore, we are proposing to make changes to correct several cross-
references to sections in these Parts:
    + Changing the reference ``Sec.  466.73(b)(3)'' in Sec.  476.73 to 
``Sec.  476.78(b)(3)''.
    + Changing the reference ``part 473'' in Sec.  476.78(f) to ``part 
478''.
    + Changing the reference ``part 473'' in Sec.  476.94(c)(3) to 
``part 478''.
    + Changing the reference ``Sec.  473.24'' in Sec. Sec.  480.132 and 
480.133 to ``Sec.  478.24''.
    + Changing the reference ``Sec.  466.98'' in Sec.  478.28 to 
``Sec.  476.98''.
    + Changing the reference to ``Part 478'' in Sec. Sec.  478.15, 
478.16, 478.20, 478.38, 478.42, and 478.48 to ``Part 473''.
    + Changing the reference ``Sec.  473.24'' in Sec.  480.132 to 
``Sec.  478.24''.
    + Changing the references ``Part 466'' and ``Sec.  473.24'' in 
Sec.  480.133(b) to ``Part 476'' and ``Sec.  478.24'', respectively.
     We are proposing the deletion of several provisions in 
Part 476 regarding risk-basis contracts because risk-basis contracts 
previously under section 1876 of the Act no longer exist. As such, 
these provisions are obsolete and no longer used under the QIO program. 
Specifically, we are deleting the following sentence from Sec.  
476.70(a): ``Section 1154(a)(4) of the Act requires QIOs, or, in 
certain circumstances, non-QIO entities, to perform quality of care 
reviews of services furnished under risk-basis contracts by health 
maintenance organizations (HMOs) and competitive medical plans (CMPs) 
that are covered under subpart C of part 417 of this chapter.'' We are 
proposing to delete the following sentence from Sec.  476.70(b): 
``Section 466.72 of this part also applies, for purposes of quality of 
care review under section 1154(a)(4) of the Act, to non-QIO entities 
that enter into contracts to perform reviews of services furnished 
under risk basis contracts by HMOs and CMPs under subpart C of part 417 
of this chapter.'' We are proposing to delete Sec.  476.72--Review of 
the quality of care of risk-basis health maintenance organizations and 
competitive medical plans, in its entirety for the same reason.
     In Sec.  476.70(a), we are proposing to change the word 
``basis'' to ``bases'' to match the title of this section and to 
correctly denote that there is more than one statutory basis described 
in paragraph (a).
     We are proposing technical corrections to sections in Part 
476 and 480 to accurately reflect the transition to Medicare 
administrative contractors (MACs) to process Medicare claims and 
conduct other actions. This transition is ongoing, and fiscal 
intermediaries and carriers still exist. However, we believe that the 
presence of MACs should be accounted for to accurately reflect current 
contractual relationships. As such, we are proposing to incorporate 
references to ``Medicare administrator contractors'' in the following 
sections, where appropriate:
    + Sec.  476.1, in the definition of ``Preadmission Certification'';
    + Sec.  476.71(c)(1);
    + Sec.  476.73(a);
    + Sec.  476.74(b) and (c)(1);
    + Sec.  476.80 section heading, and Sec. Sec.  476.80(a), (a)(1), 
(a)(2), (b)(1), (c), (c)(3)(ii), (d)(1), (d)(2), (e) paragraph heading, 
(e)(1), and (e)(2);
    + Sec.  476.86(a)(2), (c) introductory text, (c)(1), and (d);
    + Sec.  476.94(a)(1)(iv) and (d);
    + Sec.  476.104(a); and
    + Sec.  480.105(a).
     We are proposing a technical correction to Sec.  480.139 
by adding a paragraph ``(a)'' in front of ``(1)'' to the beginning of 
the text of the section to correct an inadvertent coding error.
     We are proposing to correct the statutory citation in 
Sec.  480.132(b) by changing ``section 1154(a)(3)'' to ``section 
1154(a)(2)''.

XIX. Files Available to the Public via the Internet

    The Addenda of the proposed rules and the final rules with comment 
period will be published and available only via the Internet on the CMS 
Web site. To view the Addenda of this proposed rule pertaining to the 
proposed CY 2013 payments under the OPPS, go to the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html 
and select ``1589-P'' from the list of regulations. All Addenda for 
this proposed rule are contained in the zipped folder entitled ``2013 
OPPS 1589-P Addenda'' at the bottom of the page.
    To view the Addenda of this proposed rule pertaining to the 
proposed CY 2013 payments under the ASC payment system, go to the CMS 
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Regulations-and-Notices.html and select ``1589-
P'' from the list of regulations. All Addenda for this proposed rule 
are contained in the zipped folder entitled ``Addenda AA, BB, DD1 and 
DD2'', and ``Addendum EE'' at the bottom of the page.

XX. Collection of Information Requirements

A. Legislative Requirements for Solicitation of Comments

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 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

[[Page 45206]]

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. Proposed Requirements in Regulation Text

1. Proposed 2013 Medicare EHR Incentive Program Electronic Reporting 
Pilot for Hospitals and CAHs (Sec.  495.8)
    Under 42 CFR 495.6(f)(9), we require eligible hospitals and CAHs 
participating in the Medicare EHR Incentive Program (which would 
include those participating in the proposed 2013 Medicare EHR Incentive 
Program Electronic Reporting Pilot) to successfully report hospital 
clinical quality measures (CQMs) to CMS in the manner specified by CMS. 
As discussed in section XV.K. of this proposed rule, although we are 
proposing that eligible hospitals and CAHs may continue to attest CQMs 
in 2013, they may also choose to participate in the proposed 2013 
Medicare EHR Incentive Program Electronic Reporting Pilot for Hospitals 
and CAHs. We are proposing that eligible hospitals and CAHs 
participating in the 2013 Medicare EHR Incentive Program Electronic 
Reporting Pilot must submit CQM data on all 15 CQMs (listed in Table 10 
of the final rule (75 FR 44418 through 44420) for the Medicare and 
Medicaid EHR Incentive Program) to CMS, via a secure transmission based 
on data obtained from the eligible hospital or CAH's certified EHR 
technology.
    Eligible hospitals and CAHs are required to report on core and menu 
set criteria for Stage 1 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 2013 Medicare EHR Incentive Program 
Electronic Reporting Pilot. Therefore, the estimated total burden for 
all 4,922 Medicare eligible hospitals and CAHs participating in the 
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 manager to submit the CQM information on its 
behalf. We estimate the cost burden for an eligible hospital or CAH to 
submit to the CQMs and hospital quality requirements is $30.21 (0.5 
hour x $60.41 mean hourly rate for a computer and information systems 
manager based on the 2011 Bureau of Labor Statistics) and the total 
estimated annual cost burden for all eligible hospitals and CAHs to 
submit the required CQMs is $148,694 ($30.21 x 4,922 hospitals and 
CAHs). We are soliciting public comments on the estimated numbers of 
eligible hospitals and CAHs that may register for the Medicare EHR 
Incentive Program Electronic Reporting Pilot that would submit the CQM 
information via the proposed Electronic Reporting Pilot in FY 2013. We 
also are inviting comments on the type of personnel or staff that would 
most likely submit on behalf of eligible hospitals and CAHs.

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 proposed rule. The following is a 
discussion of those requirements.
1. Hospital OQR Program
    As previously stated in section XIV. of the CY 2012 OPPS/ASC final 
rule with comment period, the Hospital OQR Program has been generally 
modeled after the quality data reporting program for the Hospital IQR 
Program. We refer readers to the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 72064 through 72110 and 72111 through 72114) and 
the CY 2012 OPPS/ASC final rule with comment period (76 FR 74549 
through 74554) for detailed discussions of the Hospital OQR Program 
information collection requirements we have previously finalized.
2. Hospital OQR Program Measures for the CY 2012, CY 2013, CY 2014, and 
CY 2015 Payment Determinations
a. Previously Adopted Hospital OQR Program Measures for the CY 2012, CY 
2013, and CY 2014 Payment Determinations
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68766), we retained the 7 chart-abstracted measures we used in CY 2009 
and adopted 4 new claims-based imaging measures for the CY 2010 payment 
determination, bringing the total number of quality measures for which 
hospitals had to submit data to 11 measures. In the CY 2010 OPPS/ASC 
final rule with comment period (74 FR 60637), we required hospitals to 
continue to submit data on the same 11 measures for the CY 2011 payment 
determination. The burden associated with the aforementioned data 
submission requirements is currently approved under OCN: 0938-1109. 
This approval expires on October 31, 2013.
    In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72071 
through 72094), we adopted measures for the CY 2012, CY 2013, and CY 
2014 payment determinations.
    For the CY 2012 payment determination, we retained the 7 chart-
abstracted measures and the 4 claims-based imaging measures we used for 
the CY 2011 payment determination. We also adopted 1 structural HIT 
measure that tracks HOPDs' ability to receive laboratory results 
electronically, and 3 claims-based imaging efficiency measures. These 
actions bring the total number of measures for the CY 2012 payment 
determination for which hospitals must submit data to 15 measures. In 
the CY 2011 OPPS/ASC final rule with comment period (75 FR 72112 
through 72113), we discussed the burden associated with these 
information collection requirements.
    For the CY 2013 payment determination, we required that hospitals 
continue to submit data for all of the quality measures that we adopted 
for the CY 2012 payment determination. We also adopted 1 structural HIT 
measure assessing the ability to track clinical results between visits, 
6 new chart-abstracted measures on the topics of HOPD 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

[[Page 45207]]

these information collection requirements.
b. Hospital OQR Program Measures for the CY 2014 Payment Determination
    In the CY 2011 OPPS/ASC final rule with comment period, we did not 
adopt any new measures for the CY 2014 payment determination. In the CY 
2012 OPPS/ASC final rule with comment period, we added, for the CY 2014 
payment determination, 1 chart-abstracted measure and 2 structural 
measures (including hospital outpatient volume data for selected 
outpatient surgical procedures). However, as discussed at 76 FR 74456, 
we did not implement public reporting of the claims-based OP: 15 Use of 
Brain Computed Tomography (CT) in the ED for Atraumatic Headache. 
Because this is a claims-based measure, hospitals continue to submit 
relevant claims to be paid, but these administrative data and any 
measure calculations from them are not being made publicly available as 
specified for required hospital outpatient hospital quality of care 
measure data under section 1833(t)(17)(E) of the Act. In addition, in 
section XV.C. of this proposed rule, we are confirming that, using a 
subregulatory process, we have suspended indefinitely data collection 
for one measure, OP-19: Transition Record with Specified Elements 
Received by Discharged Patients, and we are proposing to defer data 
collection for another, OP-24: Cardiac Rehabilitation Patient Referral 
From an Outpatient Setting. Thus, if this proposal is finalized, for 
the CY 2014 and subsequent years payment determinations, there would be 
a total of 26 measures, with hospitals reporting data on only 23 of 
them. The complete measure set for the CY 2014 and subsequent years 
payment determinations would include the measures shown below; all 
measures were previously adopted.

 Measures Required for Hospital OQR Program CY 2014 and Subsequent Years
                         Payment Determinations
------------------------------------------------------------------------
 
------------------------------------------------------------------------
OP-1: Median Time to Fibrinolysis
OP-2: Fibrinolytic Therapy Received Within 30 Minutes
OP-3: Median Time to Transfer to Another Facility for Acute Coronary
 Intervention
OP-4: Aspirin at Arrival
OP-5: Median Time to ECG
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
 ED Patients **
OP-20: Door to Diagnostic Evaluation by a Qualified Medical Professional
OP-21: ED--Median Time to Pain Management for Long Bone Fracture
OP-22: ED--Patient Left Without Being Seen
OP-23: ED--Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic
 Stroke who Received Head CT Scan Interpretation Within 45 minutes of
 Arrival
OP-24: Cardiac Rehabilitation Patient Referral from an Outpatient
 Setting ***
OP-25: Safety Surgery Checklist
OP-26: Hospital Outpatient Volume Data on Selected Outpatient Surgical
 Procedures
------------------------------------------------------------------------
            Procedure category                Corresponding HCPCS Codes
------------------------------------------------------------------------
Gastrointestinal..........................  40000 through 49999, G0104,
                                             G0105, G0121, C9716, C9724,
                                             C9725, and 0170T
Eye.......................................  65000 through 68999, G0186,
                                             0124T, 0099T, 0017T, 0016T,
                                             0123T, 0100T, 0176T, 0177T,
                                             0186T, 0190T, 0191T, 0192T,
                                             76510, and 0099T
Nervous System............................  61000 through 64999, G0260,
                                             0027T, 0213T, 0214T, 0215T,
                                             0216T, 0217T, 0218T, and
                                             0062T
Musculoskeletal...........................  20000 through 29999, 0101T,
                                             0102T, 0062T, 0200T, and
                                             0201T
Skin......................................  10000 through 19999, G0247,
                                             0046T, 0268T, G0127, C9726,
                                             and C9727
Genitourinary.............................  50000 through 58999, 0193T,
                                             and 58805
Cardiovascular............................  33000 through 37999
Respiratory...............................  30000 through 32999
------------------------------------------------------------------------
* Information for OP-15 will not be reported in Hospital Compare in
  2012. Public reporting for this measure would occur in July 2013 at
  the earliest.
** Data collection for OP-19 was suspended effective with January 1,
  2012 encounters until further notice.
*** Data collection for OP-24 would be deferred from January 1, 2013 to
  January 1, 2014, and its first application toward a payment
  determination would be for CY 2015 rather than CY 2014.

    We will calculate the seven claims-based measures using Medicare 
FFS claims data and do not require additional hospital data 
submissions. With the exception of OP-22, we are using the same data 
submission requirements related to the chart-abstracted quality 
measures that are submitted directly to CMS that we used for the CY 
2011 and CY 2012 payment determinations. For the four structural 
measures, including the collection of data for all-patient volume for 
selected outpatient procedures, hospitals will enter data into a Web-
based collection

[[Page 45208]]

tool during a specified collection period once annually. Under the 
Hospital OQR Program requirements, hospitals must complete and submit a 
notice of participation form for the Hospital OQR Program if they have 
not already done so or have withdrawn from participation. By submitting 
this document, hospitals agree that they will allow CMS to publicly 
report the measures for which they have submitted data under the 
Hospital OQR Program.
    For the CY 2014 payment determination, the burden associated with 
these requirements is the time and effort associated with completing 
the notice of participation form, and collecting and submitting the 
data on the 23 measures. For the 12 chart-abstracted measures 
(including those measures for which data are submitted directly to CMS, 
as well as the OP-22 measure for which data will be submitted via a 
Web-based tool rather than via an electronic file), we estimate that 
there will be approximately 3,200 respondents per year. For hospitals 
to collect and submit the information on the chart-abstracted measures 
we estimate it will take 35 minutes per sampled case. Based upon the 
data submitted for the CY 2011 and CY 2012 payment determinations, we 
estimate there will be a total of 1,628,800 cases per year, 
approximately 509 cases per year per respondent. The estimated annual 
burden associated with the submission requirements for these chart-
abstracted measures is 949,590 hours (1,628,800 cases per year x 0.583 
hours per case).
    For the chart-abstracted OP-22 measure plus the structural 
measures, excluding the 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 these measures 1,603 
hours (3,200 hospitals x 0.167 hours per measure x 3 measures per 
hospital).
    For the 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 
requirement is 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 53 hours (3,200 hospitals x 0.167 hours 
per measure x 1 all-patient volume measure per hospital).
c. Hospital OQR Program Measures for CY 2015
    In the CY 2012 OPPS/ASC final rule with comment period, for the CY 
2015 payment determination, we retained the requirement that hospitals 
must complete and submit a notice of participation form in order to 
participate in the Hospital OQR Program. For the CY 2015 payment 
determination, we also retained the measures used for CY 2014 payment 
determination (including the measures adopted in the CY 2012 final rule 
with comment period) and did not add any additional measures.
    For the CY 2015 payment determination, the burden associated with 
these requirements is the time and effort associated with completing 
the notice of participation form, collecting and submitting the data on 
the measures, and collecting and submitting all-patient volume data for 
selected outpatient surgical procedures. For the chart-abstracted 
measures, we estimate that there will be approximately 3,200 
respondents per year. For hospitals to collect and submit the 
information on the 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 and CY 2012 payment 
determinations, we estimate there will be a total of 1,628,800 cases 
per year, approximately 509 cases per year per respondent. The 
estimated annual burden associated with the aforementioned submission 
requirements for the chart-abstracted data is 949,590 hours (1,628,800 
cases per year x 0.583 hours per case). For the 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 these measures 1,603 hours (3,200 hospitals x 0.167 
hours per hospital x 3 structural measures per hospital).
    For the collection of all-patient volume data for selected 
outpatient surgical procedures, because hospitals must determine their 
populations for data reporting purposes and most hospitals are 
voluntarily reporting population and sampling data for Hospital OQR 
purposes, we believe the only additional burden associated with this 
requirement will be the reporting of the data using the Web-based tool. 
We 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 53 hours (3,200 hospitals x 0.167 hours 
per hospital).
    We invite public comment on the burden associated with the 
information collection requirements.
3. Proposed Hospital OQR Program Validation Requirements for CY 2014
    In this proposed rule, we are proposing to retain the requirements 
related to data validation for CY 2014 that we adopted in the CY 2011 
OPPS/ASC final rule with comment period (76 FR 74486) for CY 2013, and 
that we revised in the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74553). While these requirements are subject to the PRA, they 
are currently approved under OCN: 0938-1109. This approval expires on 
October 31, 2013.
    Similar to our approach for the CY 2013 Hospital OQR Program 
payment determination (76 FR 74484 through 74485), we are proposing to 
continue to validate data from randomly selected hospitals for the CY 
2014 payment determination, selecting 450 hospitals. We note that, 
because hospitals would be selected randomly, every hospital 
participating in the Hospital OQR Program would be eligible each year 
for validation selection.
    In the CY 2011 OPPS/ASC proposed rule and final rule with comment 
period (75 FR 46381 and 75 FR 72106, respectively), we discussed 
additional data validation conditions under consideration for CY 2013 
and subsequent years. In the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74485 and 76 FR 74553), we finalized a policy under which 
we will select for validation up to 50 additional hospitals based upon 
targeting criteria.
    For each selected hospital (random or targeted), generally we will 
randomly select up to 48 patient encounters per year (12 per quarter) 
for validation purposes from the total number of cases that the 
hospital successfully submitted to the OPPS Clinical Warehouse during 
the applicable time period. However, if a selected hospital submitted 
less than 12 cases in one or more quarters, only those cases available 
would be validated.
    The burden associated with the CY 2014 requirement is the time and 
effort necessary to submit validation data to a CMS contractor. We 
estimate that it would take each of the sampled hospitals approximately 
12 hours to comply with these data submission requirements. To comply 
with the requirements, we estimate each hospital must submit up to 48 
cases for the affected year for review. All selected hospitals must 
comply with these requirements each year, which would

[[Page 45209]]

result in a total of up to 24,000 charts being submitted by the sampled 
hospitals. The estimated annual burden associated with the data 
validation process for CY 2014 is approximately 6,000 hours.
    We are proposing to maintain the deadline of 45 days for hospitals 
to submit requested medical record documentation to a CMS contractor to 
support our validation process.
    We invite public comment on the burden associated with these 
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. In the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74487 and 74488 and 76 FR 74553 and 74554), we specified that we 
were continuing this process for the CY 2013 and subsequent years' 
payment determinations. In this CY 2013 OPPS/ASC proposed rule, we are 
proposing to make one change to this process--to add a requirement that 
the CEO or designated personnel must sign the reconsideration request. 
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. ASCQR Program Requirements
a. Claims-Based Outcome Measures for the CY 2014 Payment Determination
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74496 
through 74504), we adopted five claims-based measures (four outcome and 
one process) to be used for the CY 2014 payment determination. We will 
collect quality measure data for the five claims-based measures by 
using QDCs placed on submitted claims beginning with services furnished 
from October 1, 2012 through December 31, 2012. The five outcome 
measures are:
     Patient Burns (NQF 0263)
     Patient Falls (NQF 0266)
     Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, 
Wrong Implant (NQF 0267)
     Hospital Transfer/Admission (NQF 0265)
     Prophylactic Intravenous (IV) Antibiotic Timing (NQF 
0264)
    The first four measures listed above are outcome measures and the 
fifth measure is a process measure.
    Approximately 71 percent of ASCs participate in Medical Event 
Reporting, which includes reporting on the first four claims-based 
measures listed above. Between January 1995 and December 2007, ASCs 
reported 126 events, an average of 8.4 events per year (Florida Medical 
Quality Assurance, Inc. and Health Services Advisory Group: 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, 
or about 11.8 events per year).
    For the remaining claims-based measure, Prophylactic IV Antibiotic 
Timing, we estimate the burden associated with submitting QDCs to be 
nominal, as few procedures performed by ASCs will require prophylactic 
antibiotic administration.
b. Claims-Based Process, Structural, and Volume Measures for the CY 
2015 and CY 2016 Payment Determinations
    For the CY 2015 payment determination, we finalized the retention 
of the five measures we adopted for the CY 2014 payment determination, 
and we added two structural measures: Safe Surgery Checklist Use and 
ASC Facility Volume Data on Selected ASC Surgical Procedures (76 FR 
74504 through 74509). For the CY 2015 payment determination, we are 
proposing that the data collection period for claims-based measures 
would be for services furnished from January 1, 2013, through December 
31, 2013, that are paid by the administrative contractor by April 30, 
2014.
    For the CY 2016 payment determination, we finalized the retention 
of the seven measures for the CY 2015 payment determination and added 
Influenza Vaccination Coverage among Healthcare Personnel (NQF 
0431) (76 FR 74509). For the CY 2016 payment determination, we 
are proposing that the data collection period for claims-based measures 
would be for services furnished from January 1, 2014, through December 
31, 2014, that are paid by the administrative contractor by April 30, 
2015.
    Based on our data for CY 2014 payment determinations above, 
extrapolating to 100 percent of ASCs reporting, there would be an 
average of 11.8 events per year. Thus, we 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 (approximately 
one case per month per ASC) for the CYs 2015 and CY 2016 payment 
determinations. We estimate the burden associated with submitting QDCs 
for the fifth measure to be nominal as well, as discussed above.
    For the CY 2015 payment determination, for the structural measures, 
ASCs will enter required information using a Web-based collection tool 
between July 1, 2013 and August 15, 2013. For the Safe Surgery 
Checklist Use structural measure, we 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 1 measure 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 1 measure x 0.167 hours per ASC).
6. IRF QRP
    In the FY 2012 IRF PPS final rule (76 FR 47873 through 47883), we 
finalized the initial reporting requirements of the IRF QRP, including 
two quality measures for CY 2012 reporting. These two quality measures 
are: (1) Percent of Residents with Pressure Ulcers that are New or 
Worsened (NQF  0678); and (2) Urinary Catheter Associated 
Urinary Tract Infection (CAUTI) rate per 1,000 urinary catheter days, 
for Intensive Care Unit (ICU) Patients (NQF0138).
    We also established reporting mechanisms for these two measures in 
the FY 2012 IRF PPS final rule. IRFs were instructed to use the 
Inpatient Rehabilitation Facility-Patient Assessment Instrument (IRF-
PAI) (approved under OCN: 0938-0842) to collect pressure ulcer measure 
data on Medicare Part A, Part B, and Medicare Advantage beneficiaries, 
and they were to collect CAUTI measure data on all

[[Page 45210]]

patients and report that data to CDC's National Healthcare Safety 
Network (NHSN). The burden associated with this collection of 
information for IRFs was included in the FY 2012 IRF PPS final rule (76 
FR 47884 through 47885).
    Section XVII. of this proposed rule includes three proposals for 
the IRF QRP, which are: (1) A proposal to implement updates made by the 
NQF to the CAUTI measure which will affect the annual payment update in 
FY 2014; (2) a proposal that any measure selected for use in the IRF 
QRP would remain in effect until actively removed, suspended, or 
replaced; and (3) a proposal to implement policies regarding when 
notice-and-comment rulemaking will be used to update existing IRF QRP 
measures.
    The first proposal, if finalized, would allow us to incorporate 
recent updates that were made to the CAUTI measure (NQF0138) 
by the NQF. However, these changes will not affect the type or amount 
of data that IRFs will be required to collect and submit.
    The second proposal involves the implementation of a policy that 
IRF quality measures will remain in effect until a measure is actively 
removed, suspended, or replaced. This policy, if implemented, would not 
add any additional information collection requirements for CY 2013 and 
beyond as discussed below.
    The third proposal involves implementing a policy regarding when 
notice-and-comment rulemaking would be used to update existing IRF QRP 
measures that have been updated by the NQF. This proposal would 
likewise not cause any increased information collection requirements to 
IRFs.
a. Pressure Ulcer Measure
    In this proposed rule, we are not proposing to make any changes in 
the way the pressure ulcer data are to be collected and submitted to 
CMS using the current version of the IRF-PAI. Therefore, the 
information collection burden that IRFs will incur for the reporting of 
pressure ulcer data will not differ from that which was stated in the 
FY 2012 IRF PPS final rule (76 FR 47884 through 47885). Likewise, the 
information collection burden will not differ from the burden estimate 
that is currently approved for the IRF-PAI under OCN: 0938-0842. It is 
important to note that, while the FY 2012 IRF PPS final rule mainly 
discusses the reporting requirement that will be incurred by IRFs for 
the FY 2014 payment determination, we do not anticipate that our 
proposals will cause an increase in the information collection 
requirements for subsequent fiscal years.
b. CAUTI Measure
    As discussed above, the FY 2012 IRF PPS final rule adopted the 
``Urinary Catheter Associated Urinary Tract Infection (CAUTI) rate per 
1,000 urinary catheter days, for Intensive Care Unit (ICU) Patients'' 
(NQF 0138) measure for the IRF QRP. However, subsequent to the 
publication of the FY 2012 IRF PPS final rule, this measure was 
expanded to several non-ICU settings, including IRFs. The CDC also 
changed the way the CAUTI measure is calculated from an infection rate 
per 1,000 days to a standardized infection ratio (``SIR''). The SIR 
calculation is comprised of the actual rate of infection over the 
expected rate of infection.
    These changes will not impact the type or amount of data that IRFs 
will be required to collect and submit. Therefore, the information 
collection estimates that are stated in the FY 2012 IRF PPS final rule 
(76 FR 47884 through 47885) for reporting CAUTI data remain unchanged 
for the FY 2014 payment determination as well as for subsequent years 
payment determinations.

XXI. 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.

XXII. 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 Contract with America Advancement 
Act of 1996 (Pub. L. 104-121) (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 and a 
major rule under the Contract with America Advancement Act of 1996 
(Pub. L. 104-121). Accordingly, the rule has been reviewed by the 
Office of Management and Budget. We have prepared a regulatory impact 
analysis that, to the best of our ability, presents the costs and 
benefits of this proposed rule. In this proposed rule, we are 
soliciting public comments on the regulatory impact analysis provided.
2. Statement of Need
    This proposed rule is necessary to update the Medicare hospital 
outpatient prospective payment rates and the ASC payment rates for CY 
2013. The proposed rule is necessary to propose changes to payment 
policies and rates for outpatient services furnished by hospitals and 
CMHCs for CY 2013. We are required under section 1833(t)(3)(C)(ii) of 
the Act to update annually the OPPS conversion factor used to determine 
the 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. We must review 
the clinical integrity of payment groups and relative payment weights 
at least annually. We are proposing to revise the relative APC payment 
weights using claims data for services furnished on and after January 
1, 2011, through and including December 31, 2011, and updated cost 
report information.
    We are proposing to continue the current payment adjustment for 
rural SCHs, including EACHs. In addition, section 10324 of the 
Affordable Care Act, as amended by HCERA, authorizes a wage index of 
1.00 for certain frontier States. Section 1833(t)(17) of the Act 
requires that subsection (d) hospitals that fail to meet quality 
reporting requirements under the Hospital OQR Program incur a reduction 
of 2.0 percentage points to their OPD fee schedule increase factor. In 
this proposed rule, we are implementing these payment provisions. Also, 
we list the 23 drugs and biologicals in Table 22 of this proposed rule 
that we are

[[Page 45211]]

proposing to remove from pass-through payment status for CY 2013.
    This proposed rule is also necessary to update the ASC payment 
rates for CY 2013, enabling CMS to propose changes to payment policies 
and payment rates for covered surgical procedures and covered ancillary 
services that are performed in an ASC for CY 2013. Because the ASC 
payment rates are based on the OPPS relative payment weights for the 
majority of the procedures performed in ASCs, the ASC payment rates are 
updated annually to reflect annual changes to the OPPS relative payment 
weights. In addition, because the services provided in ASCs are 
identified by HCPCS codes that are reviewed and revised either 
quarterly or annually, depending on the type of code, it is necessary 
to update the ASC payment rates annually to reflect these changes to 
HCPCS codes. In addition, we are required under section 1833(i)(1) of 
the Act to review and update the list of surgical procedures that can 
be performed in an ASC not less frequently than every 2 years. Sections 
1833(i)(2)(D)(iv) and 1833(i)(7) of the Act authorize the Secretary to 
implement a quality reporting system for ASCs in a manner so as to 
provide for a reduction of 2.0 percentage points in any annual update 
with respect to the year involved for ASCs that fail to meet the 
quality reporting requirements. For CY 2013, there are no impacts 
associated with this payment reduction because it will not be applied 
until CY 2014.
3. Overall Impacts for OPPS and ASC Provisions
    We estimate that the effects of the proposed OPPS payment 
provisions will result in expenditures exceeding $100 million in any 1 
year. We estimate that the total increase from the proposed changes in 
this proposed rule in expenditures under the OPPS for CY 2013 compared 
to CY 2012 would be approximately $700 million. Taking into account our 
estimated changes in enrollment, utilization, and case-mix, we estimate 
that the OPPS expenditures for CY 2013 would be approximately $4.571 
billion relative to CY 2012. Because this proposed rule for the OPPS is 
``economically significant'' as measured by the $100 million threshold, 
we have prepared this regulatory impact analysis that, to the best of 
our ability, presents the costs and benefits of this proposed 
rulemaking. Table 45 of this proposed rule displays the 
redistributional impact of the proposed CY 2013 changes in OPPS payment 
to various groups of hospitals and for CMHCs.
    We estimate that the proposed update change to the conversion 
factor and other proposed adjustments (but not including the effects of 
outlier payments, the pass-through estimates, and the application of 
the frontier State wage adjustment for CY 2013) would increase total 
OPPS payments by 2.1 percent in CY 2013. The proposed changes to the 
APC weights, the proposed changes to the wage indices, the proposed 
continuation of a payment adjustment for rural SCHs, including EACHs, 
and the proposed payment adjustment for cancer hospitals would not 
increase OPPS payments because these changes to the OPPS would be 
budget neutral. However, these proposed updates would change the 
distribution of payments within the budget neutral system. We estimate 
that the total proposed change in payments between CY 2012 and CY 2013, 
considering all payments, including changes in estimated total outlier 
payments, pass-through payments, and the application of the frontier 
State wage adjustment outside of budget neutrality, in addition to the 
application of the OPD fee schedule increase factor after all 
adjustments required by sections 1833(t)(3)(F), 1833(t)(3)(G) and 
1833(t)(17) of the Act, would increase total estimated OPPS payments by 
2.1 percent.
    We estimate that the effects of the proposed ASC provisions in this 
proposed rule for the ASC payment system 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 ASC 
payment system for CY 2013 compared to CY 2012 to be approximately $211 
million. Because this proposed rule for the ASC payment system is 
``economically significant'' as measured by the $100 million threshold, 
we have prepared a regulatory impact analysis of the proposed changes 
to the ASC payment system that, to the best of our ability, presents 
the costs and benefits of this proposed rulemaking. Tables 46 and Table 
47 of this proposed rule display the redistributional impact of the 
proposed CY 2013 changes on ASC payment, grouped by specialty area and 
then grouped by procedures with the greatest ASC expenditures, 
respectively.
4. Detailed Economic Analyses
a. Estimated Effects of Proposed OPPS Changes
(1) Limitations of Our Analysis
    The distributional impacts presented here are the projected effects 
of the proposed CY 2013 policy changes on various hospital groups. We 
post on the CMS Web site our proposed hospital-specific estimated 
payments for CY 2013 with the other supporting documentation for this 
proposed rule. To view the proposed hospital-specific estimates, we 
refer readers to the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. At 
the Web site, select ``regulations and notices'' from the left side of 
the page and then select ``CMS-1589-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 45 
below. We do not show hospital-specific impacts for hospitals whose 
claims we were unable to use. We refer readers to section II.A. of this 
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 individual proposed policy changes 
by estimating payments per service, while holding all other payment 
policies constant. We use the best data available, but do not attempt 
to predict behavioral responses to our policy changes. In addition, we 
do not make adjustments for future changes in variables such as service 
volume, service-mix, or number of encounters. In this proposed rule, as 
we have done in previous proposed rules, we are soliciting public 
comment and information about the anticipated effects of our proposed 
changes on providers and our methodology for estimating them. Any 
public comments that we receive will be addressed in the applicable 
sections of the final rule with comment period that discuss the 
specific policies.
(2) Estimated Effects of Proposed OPPS Changes on Hospitals
    Table 45 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

[[Page 45212]]

includes all providers because we include CMHCs in our weight scalar 
estimate. We now include a second line for all hospitals, excluding 
permanently held harmless hospitals and CMHCs.
    We present separate impacts for CMHCs in Table 45 and we discuss 
them separately below, because CMHCs are paid only for partial 
hospitalization services under the OPPS and are a different provider 
type from hospitals. In CY 2012, we are paying CMHCs under APC 0172 
(Level I Partial Hospitalization (3 services) for CMHCs) and APC 0173 
(Level II Partial Hospitalization (4 or more services) for CMHCs), and 
we are paying hospitals for partial hospitalization services under APC 
0175 (Level I Partial Hospitalization (3 services) for hospital-based 
PHPs) and APC 0176 (Level II Partial Hospitalization (4 or more 
services) for hospital-based PHPs). For CY 2013, we are proposing to 
continue this APC payment structure and are basing payment fully on the 
geometric mean costs calculated using data for the type of provider for 
which rates are being set, that is, hospital or CMHC. We display 
separately the impact of this proposed policy on CMHCs, and we discuss 
its impact on hospitals as part of our discussion of the hospital 
impacts.
    The estimated increase in the proposed total payments made under 
the OPPS is determined largely by the increase to the conversion factor 
under the statutory methodology. The distributional impacts presented 
do not include assumptions about changes in volume and service-mix. The 
conversion factor is updated annually by the OPD fee schedule increase 
factor as discussed in detail in section II.B of this proposed rule. 
Section 1833(t)(3)(C)(iv) of the Act provides that the OPD fee schedule 
increase factor is equal to the market basket percentage increase 
applicable under section 1886(b)(3)(B)(iii) of the Act, which we refer 
to as the IPPS market basket percentage increase. The estimated IPPS 
market basket increase for FY 2013 is 3.0 percent (77 FR 27870). 
Section 1833(t)(3)(F)(i) of the Act reduces that 3.0 percent by the 
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of 
the Act, which is 0.8 percentage points (which is also the proposed MFP 
adjustment for FY 2013 in the FY 2013 IPPS/LTCH PPS proposed rule (77 
FR 27870); and sections 1833(t)(3)(F)(ii) and 1833(t)(3)(G)(ii) of the 
Act further reduce the market basket percentage increase by 0.1 
percentage point, resulting in the OPD fee schedule increase factor of 
2.1 percent, which we are using in the calculation of the proposed CY 
2013 OPPS conversion factor. Section 10324 of the Affordable Care Act, 
as amended by HCERA, further authorized additional expenditures outside 
budget neutrality for hospitals in certain frontier States that have a 
wage index of 1.00. The amounts attributable to this frontier State 
wage index adjustment are incorporated in the proposed CY 2013 
estimates in Table 45.
    To illustrate the impact of the proposed CY 2013 changes, our 
analysis begins with a baseline simulation model that uses the CY 2012 
relative payment weights, the FY 2012 final IPPS wage indices that 
include reclassifications, and the final CY 2012 conversion factor. 
Table 45 shows the estimated redistribution of the increase in payments 
for CY 2013 over CY 2012 payments to hospitals and CMHCs as a result of 
the following factors: APC reconfiguration and recalibration based on 
our historical methodology using median costs (Column 2); the marginal 
impact of basing the APC relative payment weights on geometric mean 
costs over basing them on median costs (Column 3); APC recalibration 
based on geometric mean costs (Column 4, the combined effect of Columns 
2 and 3); the wage indices and the rural adjustment (Column 5); the 
combined impact of APC recalibration based on geometric mean costs, the 
wage indices and rural adjustment, and the OPD fee schedule increase 
factor update to the conversion factor (Column 6); the combined impact 
of APC recalibration based on geometric mean costs, the wage indices 
and rural adjustment, the conversion factor update, and the frontier 
State wage index adjustment (Column 7); and the estimated 
redistribution taking into account all payments for CY 2013 relative to 
all payments for CY 2012 (Column 8), including the impact of proposed 
changes in estimated outlier payments and proposed 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 2013. Because the updates to the 
conversion factor (including the update of the OPD fee schedule 
increase factor), the estimated cost of the rural adjustment, and the 
estimated cost of projected pass-through payment for CY 2012 are 
applied uniformly across services, observed redistributions of payments 
in the impact table for hospitals largely depend on the mix of services 
furnished by a hospital (for example, how the APCs for the hospital's 
most frequently furnished services 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 
2012 and CY 2013 by various groups of hospitals, which CMS cannot 
forecast.
    Overall, we estimate that the proposed OPPS rates for CY 2013 would 
have a positive effect for providers paid under the OPPS, resulting in 
a 2.1 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 
still result in a 2.1 percent estimated increase in Medicare payments 
to all other hospitals. Those estimated payments would not 
significantly impact other providers.

Column 1: Total Number of Hospitals

    The first line in Column 1 in Table 45 shows the total number of 
facilities (4,070), including designated cancer and children's 
hospitals and CMHCs, for which we were able to use CY 2011 hospital 
outpatient and CMHC claims data to model CY 2012 and proposed CY 2013 
payments, by classes of hospitals, for CMHCs and for dedicated cancer 
hospitals. We excluded all hospitals and CMHCs for which we could not 
accurately estimate CY 2012 or proposed CY 2013 payment and entities 
that are not paid under the OPPS. The latter entities include CAHs, 
all-inclusive hospitals, and hospitals located in Guam, the U.S. Virgin 
Islands, Northern Mariana Islands, American Samoa, and the State of 
Maryland. This process is discussed in greater detail in section II.A. 
of this 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 (3,853) 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

[[Page 45213]]

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 154 CMHCs at the bottom of the impact table and 
discuss that impact separately below.

Columns 2, 3, and 4: APC Recalibration

    These columns show the combined effects of the proposed 
reconfiguration, recalibration, and other policies (such as setting 
payment for separately payable drugs and biologicals at ASP+6 under our 
CY 2013 proposal to apply the statutory default). Column 2 shows the 
reclassification effects if we were to base the relative payment 
weights on the median costs of services. Column 3 shows the marginal 
effects of using the geometric mean costs compared to the effects if we 
were to base the relative payment weights on the median costs of 
services, in other words the effects of our proposed policy change from 
medians to geometric means. Column 4 shows the combined effect of 
Columns 2 and 3, in other words the effect of our proposal to base the 
relative payment weights on geometric mean costs. It reflects the 
impacts of the proposed reclassification of services among APC groups 
and the proposed recalibration of APC relative payment weights, based 
on 12 months of CY 2011 OPPS hospital claims data and the most recent 
cost report data, and determining relative payment weights using the 
geometric mean costs of services. We modeled the effect of the proposed 
APC recalibration changes by varying only the relative payment weights 
(the final CY 2012 relative weights versus the proposed CY 2013 
relative weights calculated using the service-mix and volume in the CY 
2011 claims used for this proposed rule) and calculating the percent 
difference in the relative weight. Column 4 also reflects any proposed 
changes in multiple procedure discount patterns or conditional 
packaging that occur as a result of the changes in the relative 
magnitude of payment weights.
    Overall, we estimate that proposed changes in APC reassignment and 
recalibration across all services paid under the OPPS would slightly 
decrease payments to urban hospitals by 0.1 percent. However, the 
smallest urban hospitals would receive slight payment increases of 0.6 
percent (hospitals with 0-99 beds), attributable to increased payments 
for partial hospitalization, group psychotherapy and cardiac 
rehabilitation monitoring services furnished in the hospital. Due to 
recalibration, we estimate that low volume urban hospitals billing 
fewer than 21,000 lines for OPPS services would experience increases 
ranging from 0.8 percent to 4.0 percent. The increase of 4.0 percent 
for urban hospitals billing fewer than 5,000 lines per year is 
similarly attributable to an increase in payment for partial 
hospitalization and group psychotherapy services furnished in the 
hospital.
    Overall, we estimate that rural hospitals would experience a small 
increase of 0.3 percent as a result of proposed changes to the APC 
structure, with the largest increases going to the smallest hospitals 
both by number of beds (0.9 percent to those with less than 50 beds) 
and volume (2.5 percent to those with fewer than 5,000 lines). As a 
result of the recalibration, we estimate that rural hospitals that 
report 5,000 or more lines for OPPS services would experience payment 
increases ranging from 0.2 percent to 1.0 percent.
    Classifying hospitals according to teaching status, we estimate 
that the APC recalibration would lead to small payment decreases of 0.1 
to 0.2 percent for major and minor teaching hospitals, respectively. We 
estimate that nonteaching hospitals would experience an increase of 0.1 
percent. Classifying hospitals by type of ownership suggests that 
voluntary, proprietary, and governmental hospitals would experience 
changes ranging from a decrease of 0.1 percent to an increase of 0.2 
percent as a result of the proposed APC recalibration.
    For most hospitals, we estimate insignificant impacts of our 
proposal to use geometric mean-based relative payment weights. Most 
providers would receive small increases in payments of up to 2.5 
percent. We estimate that hospitals for which DSH payments are not 
available (mostly urban hospitals) would experience an increase of 6.1 
percent. Hospitals for which DSH data are not available (non-IPPS 
hospitals) furnish a large number of psychiatric services and we 
believe that the estimated increase in payment is due to increased 
payment for partial hospitalization and group psychotherapy services, 
as well as for hemodialysis services furnished in the hospital.

Column 5: Proposed New Wage Indices and the Effect of the Proposed 
Rural and Cancer Hospital Adjustments

    Column 5 demonstrates the combined budget neutral impact of APC 
recalibration using geometric means; the wage index update; the rural 
adjustment; and the cancer hospital adjustment. We modeled the 
independent effect of the budget neutrality adjustments and the OPD fee 
schedule increase factor by using the relative payment weights and wage 
indices for each year, and using a CY 2012 conversion factor that 
included the OPD fee schedule increase and a budget neutrality 
adjustment for differences in wage indices.
    Column 5 reflects the independent effects of the updated wage 
indices, including the application of budget neutrality for the rural 
floor policy on a nationwide basis. This column excludes the effects of 
the frontier State wage index adjustment, which is not budget neutral 
and is included in Column 7. We did not model a budget neutrality 
adjustment for the rural adjustment for SCHs because we are not 
proposing to make any changes to the policy for CY 2013. Similarly, the 
differential impact between the CY 2012 cancer hospital payment 
adjustment and the proposed CY 2013 cancer hospital payment adjustment 
had no effect on the budget neutral adjustment to the conversion 
factor. We modeled the independent effect of updating the wage indices 
by varying only the wage indices, holding APC relative payment weights, 
service-mix, and the rural adjustment constant and using the proposed 
CY 2013 scaled weights and a CY 2012 conversion factor that included a 
budget neutrality adjustment for the effect of changing the wage 
indices between CY 2012 and CY 2013. This column estimates the impact 
of applying the proposed FY 2013 IPPS wage indices for the CY 2013 OPPS 
without the influence of the frontier State wage index adjustment, 
which is not budget neutral. The frontier State wage index adjustment 
is reflected in the combined impact shown in Column 7. We are proposing 
to continue the rural payment adjustment of 7.1 percent to rural SCHs 
for CY 2013, 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 adjustments.
    Overall, we estimate that as a result of the proposed updated wage 
indices and the rural adjustment, urban hospitals would experience no 
change from CY 2012 to CY 2013, although urban hospitals would 
experience small changes ranging from increases of 0.2 percent (for 
large urban hospitals) to decreases of 0.2 percent (for other urban 
hospitals). Sole community hospitals would not be affected, but other 
rural hospitals would experience decreases of 0.3 percent. Urban 
hospitals in the New England and Pacific regions would experience the 
most significant payment

[[Page 45214]]

changes with a decrease of 1.2 percent in New England and an increase 
of 1.6 percent in the Pacific region. Overall, we estimate that rural 
hospitals would experience a decrease of 0.2 percent as a result of 
changes to the proposed wage index for CY 2013. Regionally, the changes 
would range from a decrease of 0.9 in rural Pacific States to an 
increase of 0.4 in rural New England States.

Column 6: All Proposed Budget Neutrality Changes Combined With the 
Proposed OPD Fee Schedule Increase

    Column 6 demonstrates the cumulative impact of the budget neutral 
adjustments from Column 5 and the proposed OPD fee schedule increase 
factor of 2.1 percent. We estimate that for most hospitals, the 
addition of the proposed OPD fee schedule increase factor of 2.1 
percent would mitigate the negative impacts created by the budget 
neutrality adjustments made in Column 5.
    While most classes of hospitals would receive an increase that is 
more in line with the 2.1 percent overall increase after the proposed 
update is applied to the budget neutrality adjustments, urban hospitals 
that bill fewer than 11,000 lines, rural hospitals that bill fewer than 
5,000 lines, and hospitals for which DSH information is not available 
would experience larger increases ranging from 4.1 percent to 8.3 
percent. In particular, urban hospitals that report fewer than 5,000 
lines would experience a cumulative increase, after application of the 
proposed OPD fee schedule increase factor and the budget neutrality 
adjustments, of 6.4 percent, largely as a result of proposed increases 
in payments to partial hospitalization and group psychotherapy services 
furnished in the hospital. Similarly, urban hospitals for which DSH 
data are not available would experience an increase of 8.1 percent, 
also largely as a result of proposed increases in payment for partial 
hospitalization, group psychotherapy and hemodialysis services 
furnished in hospitals.
    Overall, we estimate that these proposed changes would increase 
payments to urban hospitals by 2.1 percent. We estimate that large 
urban hospitals and ``other'' urban hospitals would also experience 
increases of 2.3 and 1.9 percent, respectively. Urban hospitals in the 
Pacific region would experience an increase of 3.6 percent, largely as 
a result of the proposed change in wage index shown under column 3 and 
discussed above. We estimate that rural hospitals would experience a 
2.3 percent increase as a result of the proposed OPD fee schedule 
increase factor and other budget neutrality adjustments.
    Classifying hospitals by teaching status suggests that the proposed 
OPD fee schedule increase factor and the proposed budget neutrality 
adjustments would result in an increase of 2.1 percent for major 
teaching hospitals, 1.9 percent for minor teaching hospitals and 2.3 
percent for nonteaching hospitals.
    Classifying hospitals by type of ownership suggests that 
proprietary hospitals would experience an estimated increase of 2.3 
percent, while voluntary hospitals would experience an estimated 
increase of 2.1 percent and government hospitals would experience an 
estimated increase of 2.1 percent.

Column 7: All Proposed Adjustments With the Proposed Frontier State 
Wage Index Adjustment

    This column shows the impact of all proposed budget neutrality 
adjustments, application of the proposed 2.1 percent 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 proposed changes reflected 
in Column 6). This column differs from Column 6 solely based on 
application of the non-budget neutral frontier State wage index 
adjustment.
    In general, we estimate that all facilities and all hospitals would 
experience a combined increase of 0.1 percent due to the frontier wage 
index. The index would only affect hospitals in the West North Central 
and Mountain regions. Urban hospitals in those regions would experience 
increases of 0.9 percent (West North Central) and 0.4 percent 
(Mountain) that are attributable to the frontier wage index, and rural 
hospitals would experience increases of 1.1 percent (West North 
Central) and 2.2 percent (Mountain) that are attributable to the 
frontier State wage index.

Column 8: All Proposed Changes for CY 2013

    Column 8 depicts the full impact of the proposed CY 2013 policies 
on each hospital group by including the effect of all the proposed 
changes for CY 2013 and comparing them to all estimated payments in CY 
2012. Column 8 shows the combined budget neutral effects of Columns 2 
through 5; the proposed OPD fee schedule increase; the impact of the 
frontier State wage index adjustment; the proposed change in the fixed-
dollar outlier threshold from $2,025 to $2,400 as discussed in section 
II.G. of this proposed rule; the proposed change in the Hospital OQR 
Program payment reduction for the small number of hospitals in our 
impact model that failed to meet the reporting requirements (discussed 
in section XV. of this proposed rule); and the impact of increasing the 
estimate of the percentage of total OPPS payments dedicated to 
transitional pass-through payments. Of the 101 hospitals that failed to 
meet the Hospital OQR Program reporting requirements for the full CY 
2012 update (and assumed, for modeling purposes, to be the same number 
for CY 2013), we included 9 hospitals in our model because they had 
both CY 2011 claims data and recent cost report data. We estimate that 
the cumulative effect of all proposed changes for CY 2013 would 
increase payments to all providers by 2.1 percent for CY 2013. We 
modeled the independent effect of all proposed changes in Column 8 
using the final relative payment weights for CY 2012 and the proposed 
relative payment weights for CY 2013. We used the final conversion 
factor for CY 2012 of $70.016 and the proposed CY 2013 conversion 
factor of $71.537 discussed in section II.B. of this proposed rule in 
this model.
    Column 8 contains simulated outlier payments for each year. We used 
the one year charge inflation factor used in the FY 2013 IPPS/LTCH PPS 
proposed rule of 6.80 percent (1.0680) to increase individual costs on 
the CY 2011 claims, and we used the most recent overall CCR in the 
April 2012 Outpatient Provider-Specific File (OPSF) to estimate outlier 
payments for CY 2012. Using the CY 2011 claims and a 6.80 percent 
charge inflation factor, we currently estimate that outlier payments 
for CY 2012, using a multiple threshold of 1.75 and a proposed fixed-
dollar threshold of $2,025 should be approximately 1.03 percent of 
total payments. The estimated current outlier payments of 1.03 percent 
are incorporated in the CY 2013 comparison in Column 8. We used the 
same set of claims and a charge inflation factor of 14.06 percent 
(1.1406) and the CCRs in the April 2012 OPSF, with an adjustment of 
0.9790, to reflect relative changes in cost and charge inflation 
between CY 2011 and CY 2013, to model the proposed CY 2013 outliers at 
1.0 percent of estimated total payments using a multiple threshold of 
1.75 and a proposed fixed-dollar threshold of $2,400.
    We estimate that the anticipated change in payment between CY 2012 
and CY 2013 for the hospitals failing to meet the Hospital OQR Program 
requirements would be negligible. Overall, we estimate that facilities 
would experience an increase of 2.1 percent under this proposed rule in 
CY

[[Page 45215]]

2013 relative to total spending in CY 2012. This projected increase 
(shown in Column 8) of Table 45 reflects the proposed 2.1 percent OPD 
fee schedule increase factor, with proposed 0.04 percent for the change 
in the pass-through estimate between CY 2012 and CY 2013, less 0.03 
percent for the difference in estimated outlier payments between CY 
2012 (1.03 percent) and CY 2013 (1.0 percent), less 0.04 percent due to 
the section 508 wage adjustment, less 0.1 percent due to the frontier 
adjustment in CY 2012, plus 0.1 percent due to the proposed 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 continues to be 2.1 percent after rounding. We 
estimate that the combined effect of all proposed changes for CY 2013 
would increase payments to urban hospitals by 2.1 percent, with large 
urban hospitals experiencing an estimated 2.2 percent increase and 
``other'' urban hospitals experiencing an estimated 1.9 percent 
increase. We estimate that urban hospitals that bill less than 5,000 
lines of OPPS services would experience an increase of 6.0 percent, 
largely attributable to the proposed increase in payment for partial 
hospitalization and group psychotherapy services furnished in the 
hospital. We estimate that urban hospitals that bill 11,000 or more 
lines of OPPS services would experience increases between 1.9 percent 
and 3.0 percent, while urban hospitals that report between 5,000 and 
10,999 lines would experience an increase of 4.2 percent.
    Overall, we estimate that rural hospitals would experience a 2.2 
percent increase as a result of the combined effects of all proposed 
changes for CY 2013. We estimate that rural hospitals that bill less 
than 5,000 lines of OPPS services would experience an increase of 4.2 
percent and that rural hospitals that bill 5,000 or more lines of OPPS 
services would experience increases ranging from 2.2 to 2.8 percent.
    Among teaching hospitals, we estimate that the impacts resulting 
from the combined effects of all proposed changes would include an 
increase of 2.0 percent for major teaching hospitals and 2.3 percent 
for nonteaching hospitals. Minor teaching hospitals would experience an 
increase of 1.9 percent.
    In our analysis, we also have stratified hospitals by type of 
ownership. Based on this analysis, we estimate that voluntary hospitals 
would experience an increase of 2.0 percent, proprietary hospitals 
would experience an increase of 2.3 percent, and governmental hospitals 
would experience an increase of 2.1 percent.

                   Table 45--Estimated Impact of the Proposed CY 2013 Changes for the Hospital Outpatient Prospective Payments System
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           Impact of
                                                                            basing                       New wage      Combine      Column 6
                                             Number of         APC          weights         APC          index and   (cols 4, 5)      with        All
                                             hospitals    recalibration      using     recalibration     provider    with market    frontier    changes
                                                             (median)      geometric     (Geo mean)     adjustments     basket     wage index
                                                                             mean                                       update     adjustment
                                                    (1)              (2)         (3)              (4)           (5)          (6)          (7)        (8)
--------------------------------------------------------------------------------------------------------------------------------------------------------
ALL FACILITIES *..........................        4,070              0.0         0.0              0.0           0.0          2.1          2.2        2.1
ALL HOSPITALS (excludes hospitals                 3,853              0.0         0.0              0.0           0.0          2.1          2.2        2.1
 permanently held harmless and CMHCs).....
URBAN HOSPITALS...........................        2,907             -0.1         0.0             -0.1           0.0          2.1          2.2        2.1
    LARGE URBAN (GT 1 MILL.)..............        1,592              0.0         0.0              0.0           0.2          2.3          2.3        2.2
    OTHER URBAN (LE 1 MILL.)..............        1,315             -0.1         0.0             -0.1          -0.2          1.9          2.1        1.9
RURAL HOSPITALS...........................          946              0.2         0.1              0.3          -0.2          2.3          2.5        2.2
    SOLE COMMUNITY........................          384              0.3         0.1              0.4           0.0          2.5          3.0        2.5
    OTHER RURAL...........................          562              0.1         0.2              0.3          -0.3          2.1          2.1        2.0
BEDS (URBAN)
    0-99 BEDS.............................        1,000              0.4         0.2              0.6           0.0          2.7          2.8        2.8
    100-199 BEDS..........................          831              0.1         0.1              0.2           0.1          2.3          2.4        2.3
    200-299 BEDS..........................          457             -0.1         0.0             -0.1           0.1          2.0          2.2        2.0
    300-499 BEDS..........................          415             -0.2         0.0             -0.2           0.1          2.0          2.1        2.0
    500 + BEDS............................          204             -0.1        -0.1             -0.2          -0.1          1.8          1.8        1.8
BEDS (RURAL)
    0-49 BEDS.............................          353              0.5         0.4              0.9          -0.2          2.8          3.1        2.8
    50-100 BEDS...........................          352              0.4         0.1              0.5          -0.1          2.5          2.7        2.4
    101-149 BEDS..........................          138              0.0         0.1              0.1          -0.5          1.7          1.9        1.8
    150-199 BEDS..........................           55              0.1         0.1              0.2          -0.3          2.1          2.7        2.2
    200 + BEDS............................           48             -0.2         0.0             -0.1           0.3          2.2          2.2        2.1
VOLUME (URBAN)
    LT 5,000 Lines........................          573              1.9         2.1              4.0           0.2          6.4          6.5        6.0
    5,000-10,999 Lines....................          135              1.2         1.1              2.4          -0.3          4.1          4.5        4.2
    11,000-20,999 Lines...................          213              0.5         0.3              0.8           0.1          3.0          3.0        3.0
    21,000-42,999 Lines...................          474              0.2         0.1              0.3           0.2          2.6          2.7        2.6
    42,999-89,999 Lines...................          698             -0.1         0.0              0.0           0.1          2.2          2.2        2.1
    GT 89,999 Lines.......................          814             -0.1         0.0             -0.2           0.0          2.0          2.1        1.9
VOLUME (RURAL)
    LT 5,000 Lines........................           63              1.4         1.1              2.5          -0.3          4.3          7.2        4.2
    5,000-10,999 Lines....................           69              0.2         0.7              1.0          -0.9          2.2          2.4        2.2
    11,000-20,999 Lines...................          157              0.3         0.6              0.9          -0.2          2.8          3.1        2.8
    21,000-42,999 Lines...................          292              0.4         0.2              0.6          -0.3          2.4          2.7        2.4
    GT 42,999 Lines.......................          365              0.1         0.1              0.2          -0.1          2.2          2.4        2.2
REGION (URBAN)
    NEW ENGLAND...........................          148              0.2         0.0              0.2          -1.2          1.1          1.1        1.1
    MIDDLE ATLANTIC.......................          345             -0.1        -0.1             -0.2          -0.2          1.8          1.8        1.6
    SOUTH ATLANTIC........................          450             -0.1        -0.1             -0.1          -0.4          1.5          1.5        1.6
    EAST NORTH CENT.......................          469             -0.1         0.0             -0.1           0.3          2.3          2.3        2.2
    EAST SOUTH CENT.......................          173             -0.2        -0.1             -0.3          -0.7          1.1          1.1        1.1
    WEST NORTH CENT.......................          185              0.0         0.0              0.1           0.5          2.7          3.6        2.8
    WEST SOUTH CENT.......................          494             -0.1         0.1              0.0          -0.2          1.9          1.9        2.0

[[Page 45216]]

 
    MOUNTAIN..............................          203              0.1         0.0              0.1          -0.1          2.1          2.5        2.1
    PACIFIC...............................          393             -0.2         0.1              0.0           1.6          3.6          3.6        3.5
    PUERTO RICO...........................           47              0.3         0.1              0.3           0.3          2.7          2.7        2.8
REGION (RURAL)
    NEW ENGLAND...........................           25              0.4         0.0              0.4           0.4          2.9          2.9        2.8
    MIDDLE ATLANTIC.......................           67              0.3         0.0              0.3           0.2          2.6          2.6        2.4
    SOUTH ATLANTIC........................          161              0.0         0.1              0.2          -0.4          1.9          1.9        1.9
    EAST NORTH CENT.......................          126              0.2         0.1              0.3           0.3          2.7          2.7        2.5
    EAST SOUTH CENT.......................          174             -0.1         0.1              0.0          -0.3          1.7          1.7        1.8
    WEST NORTH CENT.......................           99              0.4         0.1              0.5          -0.3          2.3          3.4        2.3
    WEST SOUTH CENT.......................          200              0.3         0.4              0.8          -0.3          2.6          2.6        2.6
    MOUNTAIN..............................           65              0.4         0.0              0.4           0.1          2.6          4.8        2.9
    PACIFIC...............................           29              0.4         0.1              0.5          -0.9          1.7          1.7        1.6
TEACHING STATUS
    NON-TEACHING..........................        2,878              0.0         0.1              0.1           0.0          2.3          2.4        2.3
    MINOR.................................          687             -0.1         0.0             -0.2          -0.1          1.9          2.1        1.9
    MAJOR.................................          288              0.0        -0.1             -0.1           0.1          2.1          2.1        2.0
DSH PATIENT PERCENT
    0.....................................           17              0.9        -0.1              0.8          -0.1          2.8          2.8        2.9
    GT 0-0.10.............................          365              0.1        -0.1              0.0           0.0          2.1          2.2        2.1
    0.10-0.16.............................          375              0.1         0.0              0.0          -0.1          2.0          2.1        1.9
    0.16-0.23.............................          742              0.0         0.0              0.0           0.0          2.1          2.3        2.0
    0.23-0.35.............................        1,018             -0.1         0.0             -0.1           0.0          2.0          2.1        2.0
    GE 0.35...............................          748             -0.1         0.1              0.0           0.1          2.2          2.2        2.1
    DSH NOT AVAILABLE **..................          588              2.1         4.0              6.1           0.0          8.3          8.3        8.2
URBAN TEACHING/DSH
    TEACHING & DSH........................          886             -0.1        -0.1             -0.1           0.0          1.9          2.0        1.9
    NO TEACHING/DSH.......................        1,453              0.0         0.0              0.0           0.1          2.2          2.3        2.2
    NO TEACHING/NO DSH....................           17              0.9        -0.1              0.8          -0.1          2.8          2.8        2.9
    DSH NOT AVAILABLE **..................          551              2.1         3.7              5.9           0.1          8.1          8.1        8.0
TYPE OF OWNERSHIP
    VOLUNTARY.............................        2,042              0.0         0.0             -0.1           0.0          2.1          2.2        2.0
    PROPRIETARY...........................        1,254              0.0         0.2              0.2           0.0          2.3          2.4        2.3
    GOVERNMENT............................          557              0.0         0.0              0.1          -0.1          2.1          2.1        2.1
CMHCs.....................................          154              0.8        -6.9             -6.2          -0.4         -4.4         -4.4       -4.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Column (1) shows total hospitals and/or CMHCs.
Column (2) shows the impact of changes resulting from the reclassification of HCPCS codes among APC groups, the use of median costs in developing
  relative payment weights, and the proposed recalibration of APC weights based on CY 2011 hospital claims data.
Column (3) shows the estimated impact of basing the CY 2013 OPPS proposed payments on geometric mean costs, by comparing estimated CY 2013 payments
  under the proposal for a geometric mean cost based system to those under a median based OPPS.
Column (4) shows the impact of changes resulting from the reclassification of HCPCS codes among APC groups, the use of geometric mean costs in
  developing the CY 2013 proposed OPPS relative payment weights, and the proposed recalibration of APC weights based on CY 2011 hospital claims data.
Column (5) shows the budget neutral impact of updating the wage index by applying the FY 2013 hospital inpatient wage index. The rural adjustment is 7.1
  percent in both years so its budget neutrality factor is 1. Similarly, the differential in estimated cancer hospital payments for the proposed
  adjustment is minimal and thus results in a budget neutrality factor of 1.
Column (6) shows the impact of all budget neutrality adjustments and the proposed addition of the 2.1 percent OPD fee schedule increase factor (3.0
  percent reduced by 0.8 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 (7) shows the non-budget neutral impact of applying the frontier State wage adjustment in CY 2013, after application of the CY 2013 proposed OPD
  fee schedule increase factor.
Column (8) shows the additional adjustments to the conversion factor resulting from a change in the pass-through estimate and adds estimated outlier
  payments. This column also shows the expiration of section 508 wages on March 30, 2012, and the application of the frontier State wage adjustment for
  CY 2012 and 2013.
* These 4,070 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.

(3) Estimated Effects of Proposed OPPS Changes on CMHCs
    The last line of Table 45 demonstrates the isolated impact on 
CMHCs, which furnish only partial hospitalization services under the 
OPPS. In CY 2012, CMHCs are paid under two APCs for these services: APC 
0172 (Level I Partial Hospitalization (3 services) for CMHCs) and APC 
0173 (Level II Partial Hospitalization (4 or more services) for CMHCs). 
In contrast, hospitals are paid for partial hospitalization services 
under APC 0175 (Level I Partial Hospitalization (3 services) for 
hospital-based PHPs) and APC 0176 (Level II Partial Hospitalization (4 
or more services) for hospital-based PHPs). We first implemented these 
four APCs for CY 2011. 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 2013, we are proposing to continue the provider-specific APC 
structure that we adopted for CY 2011 and to base payment fully on the 
data for the type of provider furnishing the service. We modeled the 
impact of this APC policy assuming that CMHCs will continue to provide 
the same number of days of PHP care, with each day having either 3 
services or 4 or more services, as seen in the CY 2011 claims data used 
for this proposed rule. We excluded days with 1 or 2 services because 
our policy only pays a per diem rate for partial hospitalization when 3 
or more qualifying services are provided to the

[[Page 45217]]

beneficiary. Because the relative payment weights for APC 0173 (Level 
II Partial Hospitalization (4 or more services) for CMHCs) decline in 
CY 2013 using geometric mean-based relative payment weights as opposed 
to median-based relative payment weights, we estimate that there would 
be a 4.4 percent decrease in payments to CMHCs (shown in Columns 3 and 
4).
    Column 5 shows that the estimated impact of adopting the proposed 
CY 2013 wage index values would result in a small decrease of 0.4 
percent to CMHCs. We note that all providers paid under the OPPS, 
including CMHCs, would receive a proposed 2.1 percent OPD fee schedule 
increase factor. Column 6 shows that combining this proposed OPD fee 
schedule increase factor, along with proposed changes in APC policy for 
CY 2013 and the proposed CY 2013 wage index updates, results in an 
estimated decrease of 4.4 percent. Column 7 shows that adding the 
proposed frontier State wage adjustment would result in no change to 
the cumulative 4.4 percent decrease. Column 8 shows that adding the 
proposed changes in outlier and pass-through payments would result in 
no change to the 4.4 percent decrease in payment for CMHCs. This 
reflects all proposed changes to CMHCs for CY 2013.
(4) Estimated Effect of Proposed OPPS Changes on Beneficiaries
    For services for which the beneficiary pays a copayment of 20 
percent of the payment rate, the beneficiary share of payment 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 2012 OPPS, the national 
unadjusted copayment is $227.35, and the minimum unadjusted copayment 
is $215.00, 20 percent of the national unadjusted payment rate of 
$1,074.99. For CY 2013, the proposed national unadjusted copayment for 
APC 0037 is $227.35, the same amount as the national unadjusted 
copayment in effect for CY 2012. The proposed minimum unadjusted 
copayment for APC 0037 is $224.34 or 20 percent of the proposed CY 2013 
national unadjusted payment rate for APC 0037 of $1,121.70. The minimum 
unadjusted copayment would increase for CY 2013 compared to CY 2012 
because the payment rate for APC 0037 would increase for CY 2013. For 
further discussion on the calculation of the national unadjusted 
copayments and minimum unadjusted copayments, we refer readers to 
section II.H. of this proposed rule. In all cases, the statute limits 
beneficiary liability for copayment for a procedure to the hospital 
inpatient deductible for the applicable year. The CY 2012 hospital 
inpatient deductible is $1,156. The amount of the CY 2013 hospital 
inpatient deductible is not available at the time of publication of 
this proposed rule.
    In order to better understand the impact of proposed changes in 
copayment on beneficiaries, we modeled the percent change in total 
copayment liability using CY 2011 claims. We estimate, using the claims 
of the 4,070 hospitals and CMHCs on which our modeling is based, that 
total beneficiary liability for copayments would decrease as an overall 
percentage of total payments, from 22.1 percent in CY 2012 to 21.6 
percent in CY 2013 due largely to changes in service-mix.
(5) Estimated Effects of Proposed OPPS Changes on Other Providers
    The relative payment weights and payment amounts established under 
the OPPS affect the payments made to ASCs as discussed in section XIV. 
of this proposed rule. No types of providers or suppliers other than 
hospitals, CMHCs and ASCs would be affected by the proposed changes in 
this proposed rule.
(6) Estimated Effects of Proposed OPPS Changes on the Medicare and 
Medicaid Programs
    The effect on the Medicare program is expected to be $700 million 
in additional program payments for OPPS services furnished in CY 2013. 
The effect on the Medicaid program is expected to be limited to 
increased copayments that Medicaid may make on behalf of Medicaid 
recipients who are also Medicare beneficiaries. We refer readers to our 
discussion of the impact on beneficiaries in section XXII.A. of this 
proposed rule.
(7) Alternative OPPS Policies Considered
    Alternatives to the OPPS changes we are proposing to make and the 
reasons for our selected alternatives are discussed throughout this 
proposed rule. In this section, we discuss some of the major issues and 
the alternatives considered.
 Alternatives Considered for Our Proposal To Base the APC 
Relative Payment Weights on Geometric Mean Costs Rather Than Median 
Costs
    As described in section II.A.2.f. of this proposed rule, we are 
proposing to base the CY 2013 relative payment weights on which OPPS 
payments are calculated using geometric mean costs rather than median 
costs. We are proposing to establish this policy based on public 
stakeholder comments, the improvements we have made to the data process 
to obtain more data and additional accuracy in estimating cost, and the 
other reasons described in the geometric mean based relative payment 
weights section.
    In developing this proposal, we considered another alternative, 
which was to continue basing the relative payment weights based on 
median costs. As discussed in the geometric mean based weights section, 
medians have historically served as a good measure of central tendency 
and continue to do so. In the initial establishment of the OPPS, we 
selected medians as the measure of central tendency on which to base 
the weights for a number of reasons. Those included statistical bases 
such as medians' resistance to outlier observations and their impact as 
well as reasons surrounding the practical implementation of the OPPS as 
a new payment system. While some of those reasons for selecting medians 
continue to apply, others are now less relevant because of changes we 
have made in our data process, or no longer apply because of factors 
such as actual development of a working payment system. We have made a 
number of changes to the OPPS to address some of the challenges in 
arriving at better estimates of service cost, including trims, more 
specific application of cost to charge ratios in estimating cost, 
modeling changes to better simulate payment mechanisms, and methods of 
obtaining additional claims data through what is already available such 
as the bypass list.
    We believe that those changes have helped to improve the relative 
costs on which the payment system is based. We also believe that 
geometric mean costs would better incorporate the range of costs 
associated with providing a service, and thus would represent one such 
additional improvement. Therefore, in order to improve the accuracy at 
which we arrive at service costs used to set relative payment weights, 
to be responsive to stakeholder concerns regarding the degree to which 
OPPS payment appropriately reflects service cost, and the other reasons 
described in section II.A.2.f of this proposed rule, we are proposing 
to establish the CY 2013 OPPS relative payment weights based on 
geometric means rather than continuing our historical practice of 
modeling costs using median costs.

[[Page 45218]]

 Alternatives Considered for Payment of Drugs and Biologicals 
That Do Not Have Pass-Through Status
    We are proposing to pay for separately payable drugs and 
biologicals at ASP+6 percent, based on section 1833(t)(14)(A)(iii)(II) 
of the Act, also referred to as the statutory default. As detailed in 
greater depth in section V.B.3 of this proposed rule, this payment will 
represent the combined payment for both the acquisition and pharmacy 
overhead costs of separately payable drugs and biologicals.
    We considered three alternatives for payment for drugs and 
biologicals that do not have pass-through status for CY 2013 
(separately payable drugs and biologicals). The first alternative we 
considered was to use the standard methodology, as described in the CY 
2006 OPPS/ASC final rule with comment period (70 FR 68642). We compared 
the estimated aggregate cost of separately payable drugs and 
biologicals in our claims data to the estimated aggregate ASP dollars 
for separately payable drugs and biologicals, using the ASP as a proxy 
for average acquisition cost, to calculate the estimated percent of ASP 
that would serve as the best proxy for the combined acquisition and 
pharmacy overhead costs of separately payable drugs and biologicals, 
but without redistribution of estimated pharmacy overhead costs. Under 
this methodology, without a redistribution of overhead costs from 
packaged drugs to separately payable drugs, using April 2012 ASP 
information and costs derived from CY 2011 OPPS claims data, we 
estimated the combined acquisition and overhead costs of separately 
payable drugs and biologicals to be ASP+0 percent. 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 311 
percent of ASP.
    We did not choose this alternative because we believe that this 
analysis indicates that hospital charging practices reflected in our 
standard drug payment methodology have the potential to ``compress'' 
the calculated costs of separately payable drugs and biologicals to 
some degree when there is no redistribution of estimated pharmacy 
overhead costs. Further, we recognize that the attribution of pharmacy 
overhead costs to packaged or separately payable drugs and biologicals 
through our standard drug payment methodology of a combined payment for 
acquisition and pharmacy overhead costs depends, in part, on the 
treatment of all drugs and biologicals each year under our annual drug 
packaging threshold. Changes to the packaging threshold may result in 
changes to payment for the overhead cost of drugs and biologicals that 
do not reflect actual changes in hospital pharmacy overhead cost for 
those products.
    The second alternative we considered was to propose to continue our 
overhead adjustment methodology for CY 2013 and redistribute $270 
million in overhead costs from packaged coded and uncoded drugs and 
biologicals to separately payable drugs and biologicals. Using this 
approach, we adjusted the CY 2011 pharmacy overhead redistribution 
amount of $200 million using the PPI for Pharmaceuticals for Human Use, 
resulting in a redistribution amount of $270 million and a payment rate 
for separately payable drugs of ASP+6 percent. We did not choose this 
alternative because of the reasons discussed below and in further 
detail in section V.B.3 of this proposed rule.
    The third option that we considered, and the one that we are 
proposing for CY 2013, is to pay for separately payable drugs and 
biologicals administered in the hospital outpatient department, at 
ASP+6 percent based on the statutory default described in section 
1833(t)(14)(A)(iii)(II) of the Act, which requires an alternative 
methodology for determining payment rates for SCODs wherein, if 
hospital acquisition cost data are not available, payment shall be 
equal (subject to any adjustment for overhead costs) to payment rates 
established under the methodology described in section 1842(o), section 
1847A, or section 1847B of the Act, as calculated and adjusted by the 
Secretary as necessary. We are proposing that this ASP+6 percent 
payment amount for separately payable drugs and biologicals represents 
the combined acquisition and pharmacy overhead payment for drugs and 
biologicals for CY 2013.
    As described in further detail in section V.B.3 of this proposed 
rule, we chose this alternative because we are uncertain about the full 
cost of pharmacy overhead and acquisition cost, due to the limitations 
of the submitted hospital charge and claims data for drugs. We believe 
that the continued use of our current drug payment methodologies may 
not appropriately account for average acquisition and pharmacy overhead 
cost and therefore could result in future payment rates that are not 
appropriate.
    Therefore, we are proposing to pay for separately payable drugs and 
biologicals based on the statutory default at the physician's office 
Part B payment rates, as established in 1842(o) and 1847A of the Act, 
at ASP+6 percent. We believe that paying for separately payable drugs 
and biologicals at ASP+6 percent based on the statutory default is 
appropriate at this time as it yields increased predictability in 
payment for drugs and biologicals under the OPPS while appropriately 
paying for drugs at a level consistent with payment amounts yielded by 
our methodology of the past 7 years.
b. Estimated Effects of ASC Payment System Proposals
    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 Public Law 108-173; established that the 
OPPS relative payment weights would be the basis for payment and that 
we would update the system annually as part of the OPPS rulemaking 
cycle; and provided that the revised ASC payment rates would be phased 
in over 4 years.
    ASC payment rates are calculated by multiplying the ASC conversion 
factor by the ASC relative payment weight. As discussed fully in 
section XIV. of this proposed rule, we set the proposed CY 2013 ASC 
relative payment weights by scaling the proposed CY 2013 OPPS relative 
payment weights by the proposed ASC scaler of 0.9331. The estimated 
effects of the proposed updated relative payment weights on payment 
rates are varied and are reflected in the estimated payments displayed 
in Tables 46 and 47 below.
    Beginning in CY 2011, section 3401 of the Affordable Care Act 
requires that the annual update to the ASC payment system (which 
currently is the CPI-U) after application of any quality reporting 
reduction be reduced by a productivity adjustment. The Affordable Care 
Act defines the productivity adjustment to be equal to the 10-year 
moving average of changes in annual economy-wide private nonfarm 
business multifactor productivity (MFP) (as projected by the Secretary 
for the 10-year period ending with the applicable fiscal year, year, 
cost reporting period, or other annual period). Because the ASCQR 
Program would not affect payment rates until CY 2014, there would be no 
reduction to the CPI-U for failure to meet the requirements of the 
ASCQR Program for CY 2013. We calculated the proposed CY 2013 ASC 
conversion factor by adjusting the CY 2012 ASC conversion

[[Page 45219]]

factor by 1.0002 to account for changes in the proposed pre-floor and 
pre-reclassified hospital wage indices between CY 2012 and CY 2013 and 
by applying the proposed CY 2013 MFP-adjusted CPI-U update factor of 
1.3 percent (projected CPI-U update of 2.2 percent minus a projected 
productivity adjustment of 0.9 percent). The proposed CY 2013 ASC 
conversion factor is $43.190.
(1) Limitations of Our Analysis
    Presented here are the projected effects of the proposed changes 
for CY 2013 on Medicare payment to ASCs. A key limitation of our 
analysis is our inability to predict changes in ASC service-mix between 
CY 2011 and CY 2013 with precision. We believe that the net effect on 
Medicare expenditures resulting from the proposed CY 2013 changes would 
be small in the aggregate for all ASCs. However, such changes may have 
differential effects across surgical specialty groups as ASCs continue 
to adjust to the payment rates based on the policies of the revised ASC 
payment system. We are unable to accurately project such changes at a 
disaggregated level. Clearly, individual ASCs would experience changes 
in payment that differ from the aggregated estimated impacts presented 
below.
(2) Estimated Effects of ASC Payment System Proposals on ASCs
    Some ASCs are multispecialty facilities that perform the gamut of 
surgical procedures from excision of lesions to hernia repair to 
cataract extraction; others focus on a single specialty and perform 
only a limited range of surgical procedures, such as eye, digestive 
system, or orthopedic procedures. The combined effect on an individual 
ASC of the proposed update to the CY 2013 payments would depend on a 
number of factors, including, but not limited to, the mix of services 
the ASC provides, the volume of specific services provided by the ASC, 
the percentage of its patients who are Medicare beneficiaries, and the 
extent to which an ASC provides different services in the coming year. 
The following discussion presents tables that display estimates of the 
impact of the proposed CY 2013 updates to the ASC payment system on 
Medicare payments to ASCs, assuming the same mix of services as 
reflected in our CY 2011 claims data. Table 46 depicts the estimated 
aggregate percent change in payment by surgical specialty or ancillary 
items and services group by comparing estimated CY 2012 payments to 
estimated CY 2013 payments, and Table 47 shows a comparison of 
estimated CY 2012 payments to estimated CY 2013 payments for procedures 
that we estimate would receive the most Medicare payment in CY 2012.
    Table 46 shows the estimated effects on aggregate Medicare payments 
under the ASC payment system by surgical specialty or ancillary items 
and services group. We have aggregated the surgical HCPCS codes by 
specialty group, grouped all HCPCS codes for covered ancillary items 
and services into a single group, and then estimated the effect on 
aggregated payment for surgical specialty and ancillary items and 
services groups. The groups are sorted for display in descending order 
by estimated Medicare program payment to ASCs. The following is an 
explanation of the information presented in Table 46.
     Column 1--Surgical Specialty or Ancillary Items and 
Services Group indicates the surgical specialty into which ASC 
procedures are grouped and the ancillary items and services group which 
includes all HCPCS codes for covered ancillary items and services. To 
group surgical procedures by surgical specialty, we used the CPT code 
range definitions and Level II HCPCS codes and Category III CPT codes 
as appropriate, to account for all surgical procedures to which the 
Medicare program payments are attributed.
     Column 2--Estimated CY 2012 ASC Payments were calculated 
using CY 2011 ASC utilization (the most recent full year of ASC 
utilization) and CY 2012 ASC payment rates. The surgical specialty and 
ancillary items and services groups are displayed in descending order 
based on estimated CY 2012 ASC payments.
     Column 3--Estimated CY 2013 Percent Change is the 
aggregate percentage increase or decrease in Medicare program payment 
to ASCs for each surgical specialty or ancillary items and services 
group that would be attributable to proposed updates to ASC payment 
rates for CY 2013 compared to CY 2012.
    As seen in Table 46, we estimate that the proposed update to ASC 
rates for CY 2013 would result in a 1 percent increase in aggregate 
payment amounts for eye and ocular adnexa procedures, a 3 percent 
increase in aggregate payment amounts for digestive system procedures, 
and a 5 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 proposed CY 2013 update are variable. For instance, we estimate 
that, in the aggregate, payment for integumentary system procedures, 
respiratory system procedures, and cardiovascular systems procedures 
would decrease by 2 percent, whereas auditory system procedures would 
increase by 1 percent under the proposed CY 2013 rates.
    An estimated increase in aggregate payment for the specialty group 
does not mean that all procedures in the group would experience 
increased payment rates. For example, the proposed estimated increase 
for CY 2013 for nervous system procedures is likely due to an increase 
in the proposed ASC payment weight for some of the high volume 
procedures, such as CPT code 63685 (Insrt/redo spine n generator) where 
estimated payment would increase by 10 percent for CY 2013.
    Also displayed in Table 46 is a separate estimate of Medicare ASC 
payments for the group of separately payable covered ancillary items 
and services. The payment estimates for the covered surgical procedures 
include the costs of packaged ancillary items and services. We estimate 
that aggregate payments for these items and services would remain 
unchanged for CY 2013.

  Table 46--Estimated Impact of the Proposed CY 2013 Update to the ASC
    Payment System on Aggregate CY 2013 Medicare Program Payments by
        Surgical Specialty or Ancillary Items and Services Group
------------------------------------------------------------------------
                                           Estimated  CY
                                             2012  ASC     Estimated CY
        Surgical specialty group           payments (in    2013 percent
                                             millions)        change
(1)                                                  (2)             (3)
------------------------------------------------------------------------
Total...................................          $3,430               1
Eye and ocular adnexa...................           1,448               1

[[Page 45220]]

 
Digestive system........................             715               3
Nervous system..........................             436               5
Musculoskeletal system..................             430              -1
Genitourinary system....................             159               0
Integumentary system....................             129              -2
Respiratory system......................              45              -2
Cardiovascular system...................              31              -2
Ancillary items and services............              21               0
Auditory system.........................              11               1
Hematologic & lymphatic systems.........               5               0
------------------------------------------------------------------------

    Table 47 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 2013. The table displays 30 of 
the procedures receiving the greatest estimated CY 2012 aggregate 
Medicare payments to ASCs. The HCPCS codes are sorted in descending 
order by estimated CY 2012 program payment.
     Column 1--CPT/HCPCS code.
     Column 2--Short Descriptor of the HCPCS code.
     Column 3--Estimated CY 2012 ASC Payments were calculated 
using CY 2011 ASC utilization (the most recent full year of ASC 
utilization) and the CY 2012 ASC payment rates. The estimated CY 2012 
payments are expressed in millions of dollars.
     Column 4--Estimated CY 2013 Percent Change reflects the 
percent differences between the estimated ASC payment for CY 2012 and 
the estimated payment for CY 2013 based on the proposed update.

  Table 47--Estimated Impact of the Proposed CY 2013 Update to the ASC Payment System on Aggregate Payments for
                                               Selected Procedures
----------------------------------------------------------------------------------------------------------------
                                                                                   Estimated  CY
                                                                                     2012  ASC     Estimated  CY
            CPT/HCPCS code *                         Short descriptor              payments  (in   2013 percent
                                                                                     millions)        change
(1)                                      (2)....................................             (3)             (4)
----------------------------------------------------------------------------------------------------------------
66984..................................  Cataract surg w/iol, 1 stage...........          $1,076               1
43239..................................  Upper GI endoscopy, biopsy.............             156               3
45380..................................  Colonoscopy and biopsy.................             144               3
45385..................................  Lesion removal colonoscopy.............              92               3
45378..................................  Diagnostic colonoscopy.................              89               3
66982..................................  Cataract surgery, complex..............              83               1
64483..................................  Inj foramen epidural l/s...............              72               6
62311..................................  Inject spine l/s (cd)..................              68               6
66821..................................  After cataract laser surgery...........              55               6
63650..................................  Implant neuroelectrodes................              39              -1
15823..................................  Revision of upper eyelid...............              39              -1
G0105..................................  Colorectal scrn; hi risk ind...........              38               3
64493..................................  Inj paravert f jnt l/s 1 lev...........              35               6
29827..................................  Arthroscop rotator cuff repr...........              32              -6
64721..................................  Carpal tunnel surgery..................              31               0
G0121..................................  Colon ca scrn not hi rsk ind...........              30               3
29881..................................  Knee arthroscopy/surgery...............              30               0
63685..................................  Insrt/redo spine n generator...........              28              10
64590..................................  Insrt/redo pn/gastr stimul.............              25              10
29880..................................  Knee arthroscopy/surgery...............              24               0
45384..................................  Lesion remove colonoscopy..............              23               3
43235..................................  Uppr gi endoscopy diagnosis............              23               3
52000..................................  Cystoscopy.............................              19               6
28285..................................  Repair of hammertoe....................              19               0
62310..................................  Inject spine c/t.......................              18               6
26055..................................  Incise finger tendon sheath............              17              -4
29826..................................  Shoulder arthroscopy/surgery...........              17               0
67042..................................  Vit for macular hole...................              17              -1
67904..................................  Repair eyelid defect...................              17              -3
50590..................................  Fragmenting of kidney stone............              17              -4
----------------------------------------------------------------------------------------------------------------
* Note that HCPCS codes we are proposing to delete for CY 2013 are not displayed in this table.

[[Page 45221]]

(3) Estimated Effects of ASC Payment System Proposals on Beneficiaries
    We estimate that the proposed CY 2013 update to the ASC payment 
system would be generally positive for beneficiaries with respect to 
the new procedures that we are proposing to add to the ASC list of 
covered surgical procedures and for those that we are proposing to 
designate as office-based for CY 2013. First, other than certain 
preventive services where coinsurance and the Part B deductible is 
waived to comply with sections 1833(a)(1) and (b) of the Act, the ASC 
coinsurance rate for all procedures is 20 percent. This contrasts with 
procedures performed in HOPDs, where the beneficiary is responsible for 
copayments that range from 20 percent to 40 percent of the procedure 
payment. Second, in almost all cases, the ASC payment rates under the 
ASC payment system are lower than payment rates for the same procedures 
under the OPPS. Therefore, the beneficiary coinsurance amount under the 
ASC payment system will almost always be less than the OPPS copayment 
amount for the same services. (The only exceptions would be if the ASC 
coinsurance amount exceeds the inpatient deductible. The statute 
requires that copayment amounts under the OPPS not exceed the inpatient 
deductible.) Furthermore, the additions to the ASC list of covered 
surgical procedures will provide beneficiaries access to more surgical 
procedures in ASCs. Beneficiary coinsurance for services migrating from 
physicians' offices to ASCs may decrease or increase under the revised 
ASC payment system, depending on the particular service and the 
relative payment amounts for that service in the physician's office 
compared to the ASC. However, for those additional procedures that we 
are proposing to designate as office-based in CY 2013, the beneficiary 
coinsurance amount would be no greater than the beneficiary coinsurance 
in the physician's office because the coinsurance in both settings is 
20 percent (except for certain preventive services where the 
coinsurance is waived in both settings).
(4) Alternative ASC Payment Policies Considered
    Alternatives to the changes we are proposing to make to the ASC 
payment system 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 the Annual Update to ASC Payments 
for Inflation
    Section 1833(i)(2)(C)(i) of the Act requires that, ``if the 
Secretary has not updated amounts established'' under the revised ASC 
payment system in a calendar year, the payment amounts ``shall be 
increased by the percentage increase in the Consumer Price Index for 
all urban consumers (U.S. city average) as estimated by the Secretary 
for the 12-month period ending with the midpoint of the year 
involved.'' The statute, therefore, does not mandate the adoption of 
any particular update mechanism, but it requires the payment amounts to 
be increased by the CPI-U in the absence of any update. Because the 
Secretary updates the ASC payment amounts annually under the revised 
payment system, we are not compelled to increase the ASC payment 
amounts by the CPI-U. Nonetheless, we adopted a policy, which we 
codified at Sec.  416.171(a)(2)(ii), to update the ASC conversion 
factor using the CPI-U for CY 2010 and subsequent calendar years. While 
we believe the CPI-U is appropriate to apply to update the ASC payment 
system, the CPI-U is highly weighted for housing and transportation and 
may not best reflect inflation in the cost of providing ASC services. 
Therefore, as alternatives to using the CPI-U to update ASC payment 
rates for inflation, in developing this proposed rule, we considered 
using: (1) The hospital market basket, which is used to update OPPS 
rates for inflation; (2) the PE component of the MEI update, which is 
used to update the MPFS payment rates for inflation; or (3) the average 
of the hospital market basket update and the PE component of the MEI 
update.
    We did not select the use of any of the above alternatives to using 
the CPI-U to update ASC payments for inflation because, until we have 
more information regarding the cost inputs of ASCs, we are not 
confident that any of the alternatives are a better proxy for ASC cost 
inputs than the CPI-U.
 Alternatives Considered for Office-Based Procedures
    According to our existing policy for the ASC payment system, we 
designate as office-based those procedures that are added to the ASC 
list of covered surgical procedures in CY 2008 or later years and that 
we determine are predominantly performed in physicians' offices based 
on consideration of the most recent available volume and utilization 
data for each individual procedure HCPCS code and/or, if appropriate, 
the clinical characteristics, utilization, and volume of related HCPCS 
codes. We establish payment for procedures designated as office-based 
at the lesser of the MPFS nonfacility practice expense payment amount 
or the ASC rate developed according to the standard methodology of the 
ASC payment system.
    In developing this proposed rule, we reviewed CY 2011 utilization 
data for all surgical procedures added to the ASC list of covered 
surgical procedures in CY 2008 or later years and for those procedures 
for which the office-based designation is temporary in the CY 2012 
OPPS/ASC final rule with comment period (76 FR 74406 through 74408). 
Based on that review and as discussed in section XIV.C.1.b. of this 
proposed rule, we are proposing to newly designate 6 surgical 
procedures as permanently office-based, to make temporary office-based 
designations for 6 procedures in CY 2013 that were designated as 
temporarily office-based for CY 2012, and to make temporary office-
based designations for 2 procedures that are proposed as new ASC 
covered surgical procedures for CY 2013. We considered two alternatives 
in developing this policy.
    The first alternative we considered was to make no change to the 
procedure payment designations. This would mean that we would pay for 
the 6 procedures we proposed to designate as permanently office-based 
and the 8 procedures we proposed to designate as temporarily office-
based at an ASC payment rate calculated according to the standard 
ratesetting methodology of the ASC payment system. We did not select 
this alternative because our analysis of the data and our clinical 
review indicated that all 6 procedures we proposed to designate as 
permanently office-based, as well as the 8 procedures that we proposed 
to designate temporarily as office-based, are considered to be 
predominantly performed in physicians' offices. Consistent with our 
final policy adopted in the August 2, 2007 final rule (72 FR 42509 
through 42513), we were concerned that making payments at the standard 
ASC payment rate for the 6 procedures we proposed to designate as 
permanently office-based and the 8 procedures we proposed to designate 
as temporarily office-based could create financial incentives for the 
procedures to shift from physicians' offices to ASCs for reasons 
unrelated to clinical decisions regarding the most appropriate setting 
for surgical care. Further, consistent with our policy, we believe that 
when adequate data become available to make permanent determinations 
about procedures with

[[Page 45222]]

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 2013 is to designate 6 additional procedures as permanently 
office-based for CY 2013 and to designate 8 procedures as temporarily 
office-based in CY 2013. We chose this alternative because our claims 
data and clinical review indicate that these procedures would be 
considered to be predominantly performed in physicians' offices. We 
believe that designating these procedures as office-based, which 
results in the CY 2013 ASC payment rate for these procedures 
potentially being capped at the CY 2013 physicians' office rate (that 
is, the MPFS nonfacility practice expense payment amount), if 
applicable, is an appropriate step to ensure that Medicare payment 
policy does not create financial incentives for such procedures to 
shift unnecessarily from physicians' offices to ASCs, consistent with 
our final policy adopted in the August 2, 2007 final rule.
c. Effects of the Proposed Revisions to the QIO Regulations
    In section XVIII. of this proposed rule, we discuss our proposed 
changes to the QIO program regulations, including: Adding provisions 
for processing beneficiary complaints that will give beneficiaries more 
information about the QIO's review process, which includes a new 
alternative dispute resolution option (immediate advocacy); giving QIOs 
the authority to send and receive secure transmissions of electronic 
versions of health information; conveying beneficiaries the right to 
authorize the QIOs' use and disclosure of confidential information; and 
removing outdated regulatory provisions that will enable QIOs to give 
more information regarding the results of reviews. We believe the 
proposed changes will improve the QIO program, give beneficiaries 
better information regarding review activities and reduce burden for 
both providers and practitioners.
    The QIO program requests approximately 62,400 medical records each 
year for the Hospital IQR and Hospital OQR Programs combined (38,400 
for inpatient and 24,000 for outpatient). For the Hospital IQR Program, 
the average number of pages per medical record is 289 pages, and for 
the Hospital OQR Program, the average number of pages is 74. 
Reimbursement is made at a rate of $0.12 per page for PPS hospitals, 
which includes the costs of toner, paper, and labor associated with the 
copying of paper medical records. We also note that the labor 
associated with copying the medical records can be considerable. In 
fact, many providers and practitioners store health information 
electronically, and these same providers and practitioners are forced 
to print hard copies of the information for shipment to the QIOs. 
Sometimes this may entail using the ``print screen'' function to create 
the record to be shipped. On average, the cost of shipping the records 
is approximately $32.35 per shipment, with approximately 5,200 
shipments being made. The shipping amount takes into consideration 
that, for some QIO review activities, multiple records are shipped at 
one time, which can involve the use of several boxes.
    Under our proposal, by example, assuming all hospitals operate 
under a PPS, should all hospitals transfer health information on a 
digital versatile device (DVD), the costs associated with the toner and 
paper would be replaced by the costs of a DVD. In fact, numerous 
medical records could be copied to a single DVD. Moreover, the labor in 
copying the records would be substantially reduced because, for 
example, rather than copying the average 289 pages related to a 
Hospital IQR Program review, the file could be electronically 
transferred to a DVD for shipping. We estimate that the $0.12 per page 
rate could be reduced by as much as $0.07 per page. Based on the 
overall average number of pages for the Hospital IQR Program and 
Hospital OQR Program, respectively, reducing the per page rate to $0.05 
per page would save $901,152 ((11,097,600 pages x $0.12 = $1,331,712) + 
(1,776,000 pages x $0.12 = $213,120) - (11,097,600 pages x $0.05 = 
$554,880) - (1,776,000 pages x $0.05 = $88,800)).
    The proposed changes also would reduce the costs associated with 
mailing the records. For the Hospital IQR Program, hospitals sometimes 
need to ship as many as four or five large boxes of medical records. By 
comparison, a single DVD can house multiple medical records and even if 
multiple DVDs were required, all the DVDs could be mailed in a single 
envelope at a significantly lower costs. Potentially, the per envelope 
mailing cost could be as low as $5 compared to the per shipment average 
cost of $32.35. Thus, if all records were shipped on DVDs, the program 
would save $142,220 ($168,220-$26,000).
    The proposed changes allowing the sending and receiving of 
electronic versions of health information also would reduce costs for 
other QIO review activities. QIOs request approximately 100,000 medical 
records in completing other review activities, including but not 
limited to requests related to the processing of general quality of 
care reviews, written beneficiary complaint reviews, medical necessity 
reviews, and expedited discharge appeal reviews. The average number of 
pages associated with each of these reviews varies greatly, and we have 
estimated an overall average of approximately 175 pages per request. 
The reimbursement rate for requests associated with these activities is 
$0.12 per page for PPS providers and $0.15 per page for practitioners 
and non-PPS providers. Assuming an overall average number of 175 pages 
for each record, we estimate that the total number of pages requested 
is approximately 17,500,000. Assuming that approximately 75 percent 
(13,125,000) of the pages are from practitioners and non-PPS providers, 
with the remaining 25 percent (4,375,000) from PPS providers, based on 
the $0.12 or $0.15 per page reimbursement rate, we estimate that the 
total costs would be approximately $1,968,750 and $525,000, 
respectively. If all these requests were fulfilled using a DVD or other 
electronic means, we estimate that the cost per page could be reduced 
to approximately $0.05 per page for PPS providers and $0.06 per page 
for practitioners and non-PPS providers. Thus, the estimated savings 
related to PPS providers would be approximately $306,250 ($525,000-
$218,750) and the estimated savings related to practitioners and non-
PPS providers would be approximately $1,181,250 ($1,968,750-$787,500).
    With regard to mailing, we also believe the proposed changes would 
significantly reduce the costs for other QIO review activities. 
Moreover, unlike the Hospital IQR and Hospital OQR Programs, the number 
of medical records requested for these other QIO review activities more 
closely mirrors the actual number of shipments made. For example, on 
average, the QIOs request 100,000 medical records related to these 
other activities, and we estimate that this equates to approximately 
82,000 shipments. We estimate that there is a corresponding decrease in 
the cost per shipment ($7 per shipment compared to $32.35 per shipment 
for the Hospital IQR and OQR Programs). If DVDs were used instead of 
paper copies of the medical records, we estimate saving of $164,000 
(82,000 x $7 - 82,000 x $5).
    Beginning with the QIOs' most recent scope of work, which began 
August 1, 2011, QIOs began offering immediate advocacy to Medicare 
beneficiaries for the resolution of certain types of oral complaints. 
We believe that cost savings

[[Page 45223]]

will be realized as a result. In developing this new proposed process, 
we had several goals. One of these goals was to create a way for 
Medicare beneficiaries to obtain resolutions of complaints much faster 
than the traditional peer review process, which usually take over 158 
days to complete because, inevitably, various timeframes throughout the 
review process are not met (for example, providers and practitioners 
sometimes take more time that allowed to respond to medical record 
requests or the opportunity for discussion). By comparison, we believe 
that immediate advocacy normally can be completed within 2 calendar 
days. However, this proposed process could result in reductions of more 
than merely a reduction in days. Because immediate advocacy is 
completed without reviewing a beneficiary's medical record, QIOs would 
save the costs associated with requesting the records, which includes 
the labor, supplies (toner and paper), and mailing of the records. 
Moreover, although there may be some variation among QIOs, immediate 
advocacy would typically be carried out by a nurse or social worker, 
and, thus, the QIO can avoid the more expensive costs associated with 
the use of a physician reviewer.
    In addition, for a traditional complaint review, the QIO's peer 
reviewer completes three separate and distinct reviews (the interim 
initial determination, the final initial determination, and the 
reconsideration determination), each time reviewing the medical 
information and providing his/her conclusion about the quality of care 
provided. Moreover, the provider and/or practitioner who is the subject 
of the complaint will be brought into the complaint process each time 
to respond to the conclusions. With immediate advocacy, the nurse or 
social work would be involved once, early in the process, with the 
primary role being to listen to the beneficiary's concerns and then 
coordinate a resolution with the provider or practitioner, instead of 
merely reviewing information contained in the beneficiary's medical 
information. Not only would this process enable beneficiaries to obtain 
resolution of complaints quicker, but it would decrease the amount of 
time and energy practitioners and providers would devote to responding 
to the complaints. This is especially true for certain types of 
complaints where the issues involved are not even documented in the 
medical information the physician reviewers would review in the 
traditional complaint process. Typically, we have estimated a total 
cost per case of $960 for each case processed using the traditional 
peer review process. We estimate that, for those instances where 
immediate advocacy is used, the average cost per case would be 
approximately $87. On average, QIOs complete approximately 3,500 
complaint reviews each year, and we estimate that approximately 10 
percent of these reviews (350) would be resolved using immediate 
advocacy instead of the traditional peer review process. This would 
result in savings of $305,550 each year (($960 x 350 = $336,000) - ($87 
x 350 = $30,450)).
    The technical changes to the QIO regulations under section XVIII.F. 
of this proposed rule that we are proposing to improve the regulations 
reflect CMS' commitment to the general principles of the President's 
Executive Order on Regulatory Reform, Executive Order 13563 (January 
18, 2011).
    Below is a table summarizing the savings associated with both of 
these provisions.

------------------------------------------------------------------------
               Provision                         Savings per year
------------------------------------------------------------------------
Authority to transmit information        $2,388,622 total per year.
 electronically.
Quality Reporting Information (Copying)  901,152.
Quality Reporting Information (Mailing)  142,220.
Other QIO Activities (Copying).........  1,181,250.
Other QIO Activities (Mailing).........  164,000.
Immediate Advocacy.....................  305,550 total per year.
                                        --------------------------------
    Total Savings......................  2,694,172 per year.
------------------------------------------------------------------------

d. Accounting Statements and Tables
    As required by OMB Circular A-4 (available on the Office of 
Management and Budget Web Site at: http://www.whitehouse.gov/sites/default/files/omb/assets/regulatory_matters_pdf/a-4.pdf, we have 
prepared three accounting statements to illustrate the impacts of this 
proposed rule. The first accounting statement, Table 48 below, 
illustrates the classification of expenditures for the CY 2013 
estimated hospital OPPS incurred benefit impacts associated with the 
proposed CY 2013 OPD fee schedule increase, based on the FY 2013 
President's Budget. The second accounting statement, Table 49 below, 
illustrates the classification of expenditures associated with the 
proposed 1.3 percent CY 2013 update to the ASC payment system, based on 
the provisions of this proposed rule and the baseline spending 
estimates for ASCs in the FY 2013 President's Budget. The third 
accounting statement, Table 50 below, illustrates the estimated impact 
based on the proposed provisions allowing QIOs to securely send and 
receive electronic versions of health information as well as the use of 
alternative dispute resolution process called immediate advocacy. 
Lastly, the three tables classify all estimated impacts as transfers.

     Table 48--Accounting Statement: CY 2013 Estimated Hospital OPPS
 Transfers From CY 2012 to CY 2013 Associated With the Proposed CY 2013
              Hospital Outpatient OPD Fee Schedule Increase
------------------------------------------------------------------------
             Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers....  $700 million.
From Whom to Whom.................  Federal Government to outpatient
                                     hospitals and other providers who
                                     received payment under the hospital
                                     OPPS.
                                   -------------------------------------
    Total.........................  $700 million.
------------------------------------------------------------------------

[[Page 45224]]

  Table 49--Accounting Statement: Classification of Estimated Transfers
  From CY 2012 to CY 2013 as a Result of the Proposed CY 2013 Update to
                     the Revised Asc Payment System
------------------------------------------------------------------------
             Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers....  $40 million.
From Whom to Whom.................  Federal Government to Medicare
                                     Providers and Suppliers.
                                   -------------------------------------
    Total.........................  $40 million.
------------------------------------------------------------------------

  Table 50--Accounting Statement: CY 2013 Estimated Savings to Medicare
           From the Proposed Revisions of the QIO Regulations
------------------------------------------------------------------------
             Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers....  -$2.7 million.
From whom to Whom.................  Federal Government to Medicare
                                     Providers.
                                   -------------------------------------
    Total.........................  -$2.7 million.
------------------------------------------------------------------------

e. Effects of Proposed Requirements for the Hospital OQR Program
    In section XVI. of the CY 2009 OPPS/ASC final rule with comment 
period (73 FR 68758 through 68781), section XVI. of the CY 2010 OPPS/
ASC final rule with comment period (74 FR 60629 through 60655), section 
XVI. of the CY 2011 OPPS/ASC final rule with comment period (75 FR 
72064 through 72110), and section XVI. of the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74451 through 74492), we discussed the 
requirements for subsection (d) hospitals to report quality data under 
the Hospital OQR Program in order to receive the full OPD fee schedule 
increase factor for CY 2010, CY 2011, and CYs 2012 through 2014, 
respectively. In section XV. of this proposed rule, we are proposing to 
adopt additional policies affecting the Hospital OQR Program.
    We determined that 114 hospitals did not meet the requirements to 
receive the full OPD fee schedule increase factor for CY 2012. Most of 
these hospitals (106 of the 114) received little or no OPPS payment on 
an annual basis and did not participate in the Hospital OQR Program. We 
estimate that 106 hospitals may not receive the full OPD fee schedule 
increase factor in CY 2014. We are unable at this time to estimate the 
number of hospitals that may not receive the full OPD fee schedule 
increase factor in CY 2015.
    In section XVI.E.3.a. of the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60647 through 60650), for the CY 2011 payment 
update, as part of the validation process, we required hospitals to 
submit paper copies of requested medical records to a designated 
contractor within the required timeframe. Failure to submit requested 
documentation could result in a 2.0 percentage point reduction to a 
hospital's CY 2011 OPD fee schedule increase factor, but the failure to 
attain a validation score threshold would not.
    In section XVI.D.3.b of the CY 2011 OPPS/ASC final rule with 
comment period, we finalized our proposal to validate data submitted by 
800 hospitals of the approximately 3,200 participating hospitals for 
purposes of the CY 2012 Hospital OQR Program payment determination. We 
stated our belief that this approach was suitable for the CY 2012 
Hospital OQR Program because it would: Produce a more reliable estimate 
of whether a hospital's submitted data have been abstracted accurately; 
provide more statistically reliable estimates of the quality of care 
delivered in each selected hospital as well as at the national level; 
and reduce overall hospital burden because most hospitals would not be 
selected to undergo validation each year. We adopted a threshold of 75 
percent as the threshold for the validation score because we believed 
this level was reasonable for hospitals to achieve while still ensuring 
accuracy of the data. Additionally, this level is consistent with what 
we adopted in the Hospital Inpatient Quality Reporting (IQR) Program 
(formerly referred to as the Reporting Hospital Quality Data for Annual 
Payment Update (RHQDAPU) program)) (75 FR 50225 through 50229). As a 
result, we believed that the effect of our validation process for CY 
2012 would be minimal in terms of the number of hospitals that would 
not meet all program requirements.
    In the CY 2012 OPPS/ASC final rule with comment period, we 
finalized our proposal to validate data submitted by up to 500 of the 
approximately 3,200 participating hospitals for purposes of the CY 2013 
Hospital OQR Program payment determination. Under our policy for CY 
2011, CY 2012, and CY 2013, we stated that we would conduct a measure 
level validation by assessing whether the measure data submitted by the 
hospital matches the independently reabstracted measure data.
    In this proposed rule, for CY 2014 and subsequent years payment 
determinations, we are proposing some modifications to administrative 
requirements in extending a deadline to submit a Notice of 
Participation as well as to extraordinary circumstance waiver or 
extension and reconsideration processes to broaden the scope of 
personnel who can sign these requests. However, we are not proposing 
any modifications to our validation requirements. We expect these 
proposals to have minimal impact on the program.
    As stated above, we are unable to estimate the number of hospitals 
that may not receive the full OPD fee schedule increase factor in CY 
2015. We also are unable to estimate the number of hospitals that would 
fail the validation documentation submission requirement for the 
proposed CY 2015 payment update.
    The validation requirements for CY 2014 would result in medical 
record documentation for approximately 6,000 cases per quarter for CY 
2014, being submitted to a designated CMS contractor. We will pay for 
the cost of sending this medical record documentation to the designated 
CMS contractor at the rate of 12 cents per page for copying and 
approximately $1.00 per case for postage. We have found that an 
outpatient medical chart is generally up to 10 pages. Thus, as a result 
of validation requirements effective for CY 2014, we estimate that we 
will have expenditures of approximately $13,200 per quarter for CY 
2014. Because we will pay for the

[[Page 45225]]

data collection effort, we believe that a requirement for medical 
record documentation for 7,300 total cases for up to 500 hospitals for 
CY 2014 represents a minimal burden to Hospital OQR Program 
participating hospitals.
    We are proposing to maintain a 45-day timeframe for hospitals to 
submit requested medical record documentation to meet our validation 
requirement. The total burden would be a maximum of 12 charts for each 
of the four quarters that must be copied and mailed within a 45-day 
period after the end of each quarter.
f. Effects of the Proposed EHR Electronic Reporting Pilot
    Under section XV.K. 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 2013 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 and CAHs to take steps toward the adoption of EHRs 
that will allow for reporting of clinical quality data from EHRs to a 
CMS data repository. We expect that the submission of quality data 
through EHRs will provide a foundation for establishing the capacity of 
hospitals to send, and for CMS, in the future, to receive, quality 
measures via hospital EHRs for the Hospital IQR Program's measures. 
Hospitals that choose to participate in the EHR Incentive Program by 
means of this pilot for the purpose of meeting the CQM reporting 
requirement of Meaningful Use will be taking those first steps toward 
reporting clinical quality data in such a way.
    There are no changes to the costs or impact in the 2012 OPPS/ASC 
final rule for the proposed 2013 Medicare EHR Incentive Program 
Electronic Reporting Pilot for Hospitals and CAHs.
g. Effects of Proposals for the ASCQR Program
    In section XVI. of this proposed rule, for the ASCQR Program, we 
are seeking public comment on our approach for future measures 
selection and development as well as proposing certain measures for 
future inclusion in the ASCQR Program measure set. For the CY 2015 
payment determination and subsequent year payment determinations, we 
are proposing requirements regarding the dates for submission, payment, 
and completeness for claims-based measures. We also are proposing how 
the payment rates would be reduced for ASCs that fail to meet program 
requirements beginning in CY 2014 and are clarifying our policy on 
updating measures.
    We are unable at this time to estimate the number of ASCs that may 
not receive the full ASC annual payment update in CYs 2014, 2015, and 
2016. However, we do not expect our proposals to significantly affect 
the number of facilities that do not receive a full annual payment 
update.
h. Effects of Proposed Updates to the IRF QRP
    In section XVII. of this proposed rule, we discuss our proposals to 
retain the measures that were finalized for the IRF QRP for the 
previous annual payment determination year, for all subsequent annual 
payment determination years, unless we propose otherwise. Specifically, 
we are proposing to apply this policy to the two quality measures that 
were previously finalized in the FY 2012 IRF PPS final rule. We are 
proposing to use the CAUTI measure that was previously finalized in the 
FY 2012 IRF PPS final rule with revisions which were made by the NQF 
after publication of the FY 2012 IRF PPS final rule. We are proposing 
to apply the revised CAUTI measure to the 2012 reporting period and 
each subsequent reporting period thereafter.
    These proposed changes would not impose any additional burden on 
IRFs, nor would they result in any increase in costs.

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 ``Table of Small Business Size 
Standards'' at http://www.sba.gov/content/table-small-business-size-standards.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 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 100 or fewer beds. We estimate that this 
proposed rule may have a significant impact on approximately 705 small 
rural hospitals.
    The analysis above, together with the remainder of this preamble, 
provides a regulatory flexibility analysis and a regulatory impact 
analysis.

C. Unfunded Mandates Reform Act Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. That threshold 
level is currently approximately $139 million. This proposed rule does 
not mandate any requirements for State, local, or tribal governments, 
nor will it affect private sector costs.

D. Conclusion

    The changes we are proposing will affect all classes of hospitals 
paid under the OPPS and will affect both CMHCs and ASCs. We estimate 
that most classes of hospitals paid under the OPPS will experience a 
modest increase or a minimal decrease in payment for services furnished 
under the OPPS in CY 2013. Table 45 demonstrates the estimated 
distributional impact of the OPPS budget neutrality requirements that 
would result in a 2.1 percent increase in payments for all services 
paid under the OPPS in CY 2013, after considering all proposed changes 
to APC reconfiguration and recalibration, as well as the proposed OPD 
fee schedule increase factor, proposed wage index changes, including 
the proposed frontier State wage index adjustment, estimated payment 
for outliers, and proposed changes to the pass-through payment 
estimate. However, some classes of providers that are paid under the 
OPPS would experience more significant gains and others would 
experience modest losses in OPPS payments in CY 2013. We estimate that 
hospitals for whom DSH data are not available (non-IPPS, largely urban 
hospitals) would experience an increase of 8.2 percent due to increased 
payments for partial hospitalization, group psychotherapy and 
hemodialysis

[[Page 45226]]

services. CMHCs would see an overall decrease in payment of 4.4 percent 
as a result of a decrease in their estimated costs.
    The proposed updates to the ASC payment system for CY 2013 would 
affect each of the approximately 5,300 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 who are Medicare beneficiaries, the degree to which the 
payments for the procedures offered by the ASC are changed under the 
ASC payment system, and the extent to which the ASC provides a 
different set of procedures in the coming year. Table 46 demonstrates 
the estimated distributional impact among ASC surgical specialties of 
the MFP-adjusted CPI-U update factor of 1.3 percent for CY 2013.

XXIII. Federalism Analysis

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct costs on State and local 
governments, preempts State law, or otherwise has Federalism 
implications.
    We have examined the OPPS and ASC provisions included in this 
proposed rule in accordance with Executive Order 13132, Federalism, and 
have determined that they will not have a substantial direct effect on 
State, local or tribal governments, preempt State law, or otherwise 
have a Federalism implication. As reflected in Table 45 of this 
proposed rule, we estimate that OPPS payments to governmental hospitals 
(including State and local governmental hospitals) would increase by 
2.1 percent under this proposed rule. While we do not know the number 
of ASCs or CMHCs with government ownership, we anticipate that it is 
small. The analyses we have provided in this section of this proposed 
rule, in conjunction with the remainder of this document, demonstrate 
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, CMHCs, and ASCs, and 
some effects may be significant.

List of Subjects

42 CFR Part 416

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

42 CFR Part 419

    Hospitals, Medicare, Reporting and recordkeeping requirements.

42 CFR Part 476

    Health care, Health professional, Health record, Peer Review 
Organization (PRO), Penalties, Privacy, Reporting and recordkeeping 
requirements.

42 CFR Part 478

    Administrative practice and procedure, Health care, Health 
professions, Peer Review Organizations (PRO), Reporting and 
recordkeeping requirements.

42 CFR Part 480

    Health care, Health professions, Health records, Peer Review 
Organizations (PRO), Privacy, Reporting and recordkeeping requirements.

42 CFR Part 495

    Computer technology, Electronic health records, Electronic 
transactions, Health, Health care. Health information technology, 
Health insurance, Health records, Hospitals, Laboratories, Medicaid, 
Medicare, Privacy, Reporting and recordkeeping requirements, Public 
health, Security.

    For reasons stated in the preamble of this document, the Centers 
for Medicare & Medicaid Services is proposing to amend 42 CFR chapter 
IV as set forth below:

PART 416--AMBULATORY SURGICAL SERVICES

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

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

    2. Section 416.160 is amended by revising paragraph (a)(1) to read 
as follows:

Sec.  416.160  Basis and scope.

    (a) * * *
    (1) Section 1833(i)(2)(D) of the Act requires the Secretary to 
implement a revised payment system for payment of surgical services 
furnished in ASCs. The statute requires that, in the year such system 
is implemented, the system shall be designed to result in the same 
amount of aggregate expenditures for such services as would be made if 
there was no requirement for a revised payment system. The revised 
payment system shall be implemented no earlier than January 1, 2006, 
and no later than January 1, 2008. The statute provides that the 
Secretary may implement a reduction in any annual update for failure to 
report on quality measures as specified by the Secretary. The statute 
also requires that, for CY 2011 and each subsequent year, any annual 
update to the ASC payment system, after application of any reduction in 
the annual update for failure to report on quality measures as 
specified by the Secretary, be reduced by a productivity adjustment. 
There shall be no administrative or judicial review under section 1869 
of the Act, section 1878 of the Act, or otherwise of the classification 
system, the relative weights, payment amounts, and the geographic 
adjustment factor, if any, of the revised payment system.
* * * * *
    3. Section 416.171 is amended by--
    a. Redesignating paragraph (a)(2)(iii) as paragraph (a)(2)(iv) and 
revising the redesignated paragraph (a)(2)(iv).
    b. Adding paragraph (a)(2)(iii).
    The revision and addition read as follows:

Sec.  416.171  Determination of payment rates for ASC services.

    (a) * * *
    (2) * * *
    (iii) For CY 2014 and subsequent calendar years, the Consumer Price 
Index for All Urban Consumers update determined under paragraph 
(a)(2)(ii) of this section is reduced by 2.0 percentage points for an 
ASC that fails to meet the standards for reporting of ASC quality 
measures as established by the Secretary for the corresponding calendar 
year.
    (iv) Productivity adjustment. (A) For calendar year 2011 and 
subsequent years, the Consumer Price Index for All Urban Consumers 
determined under paragraph (a)(2)(ii) of this section, after 
application of any reduction under paragraph (a)(2)(iii) of this 
section, is reduced by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act.
    (B) The application of the provisions of paragraph (a)(2)(iv)(A) of 
this section may result in the update being less than zero percent for 
a year, and may result in payment rates for a year being less than the 
payment rates for the preceding year.
* * * * *
    4. Section 416.195 is amended by revising paragraphs (a)(2) and 
(a)(4) introductory text, to read as follows:

[[Page 45227]]

Sec.  416.195  Determination of membership in new classes of new 
technology IOLs.

    (a) * * *
    (2) The IOL shall have a new lens characteristic in comparison to 
currently available IOLs. The FDA-approved labeling shall contain a 
claim of a specific clinical benefit imparted by the new lens 
characteristic.
* * * * *
    (4) Any specific clinical benefit referred to in paragraph (a)(2) 
of this section must be supported by evidence that demonstrates that 
the IOL results in a measurable, clinically meaningful, improved 
outcome. Improved outcomes include:
* * * * *

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

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

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

    6. Section 419.2 is amended by revising paragraph (b) heading and 
introductory text to read as follows:

Sec.  419.2  Basis of payment.

* * * * *
    (b) Determination of hospital outpatient prospective payment rates: 
Packaged costs. The prospective payment system establishes a national 
payment rate, standardized for geographic wage differences, that 
includes operating and capital-related costs that are directly related 
and integral to performing a procedure or furnishing a service on an 
outpatient basis. In general, these packaged costs include, but are not 
limited to, the following items and services, the payments for which 
are packaged into the payments for the related procedures or services.
* * * * *
    7. Section 419.31 is amended by revising paragraphs (a)(1), (b), 
and (c)(2) to read as follows:

Sec.  419.31  Ambulatory payment classification (APC) system and 
payment weights.

    (a) * * *
    (1) CMS classifies outpatient services and procedures that are 
comparable clinically and in terms of resource use into APC groups. 
Except as specified in paragraph (a)(2) of this section, items and 
services within a group are not comparable with respect to the use of 
resources if the highest geometric mean cost for an item or service 
within the group is more than 2 times greater than the lowest geometric 
mean cost for an item or service within the group.
* * * * *
    (b) APC weighting factors. (1) Using hospital outpatient claims 
data from calendar year 1996 and data from the most recent available 
hospital cost reports, CMS determines the geometric mean costs for the 
services and procedures within each APC group.
    (2) CMS assigns to each APC group an appropriate weighting factor 
to reflect the relative geometric mean costs for the services within 
the APC group compared to the geometric mean costs for the services in 
all APC groups.
    (c) * * *
    (2) CMS standardizes the geometric mean costs determined in 
paragraph (b)(1) of this section by adjusting for variations in 
hospital labor costs across geographic areas.
    8. Section 419.32 is amended by:
    a. Revising paragraph (b)(1)(iv)(A).
    b. Removing ``and'' from the end of paragraph (b)(1)(iv)(B)(2).
    c. Removing the period from the end of paragraph (b)(1)(iv)(B)(3) 
and adding ``; and'' in its place.
    d. Adding paragraph (b)(1)(iv)(B)(4).
    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 OPD fee 
schedule increase factor, which, subject to the adjustments specified 
in paragraph (b)(1)(iv)(B) of this section and Sec. Sec.  419.43(h)(1) 
and (h)(2), if applicable, is the hospital inpatient market basket 
percentage increase applicable under section 1886(b)(3)(B)(iii) of the 
Act.
    (B) * * *
    (4) For calendar year 2013, a multifactor productivity adjustment 
(as determined by CMS) and 0.1 percentage point.
* * * * *
    9. Section 419.70 is amended by--
    a. Revising paragraph (d)(2) introductory text.
    b. Adding paragraph (d)(7).
    The revision and addition 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, 2012, for 
which the prospective payment system amount is less than the pre-BBA 
amount, the amount of payment under this part is increased by 95 
percent of that difference for services furnished during CY 2006, 90 
percent of that difference for services furnished during CY 2007, and 
85 percent of that difference for services furnished during CYs 2008, 
2009, 2010, 2011, and 2012 if the hospital--
* * * * *
    (7) Temporary treatment of sole community hospitals on or after 
January 1, 2012 through December 31, 2012. (i) For covered hospital 
outpatient services furnished on or after January 1, 2012 through 
December 31, 2012, for which the prospective payment system amount is 
less than the pre-BBA amount, the amount of payment under this part is 
increased by 85 percent of that difference if the hospital--
    (A) Is a sole community hospital as defined in Sec.  412.92 of this 
chapter or is an essential access community hospital as described under 
Sec.  412.109 of this chapter; and
    (B) Has 100 or fewer beds as defined in Sec.  412.105(b) of this 
chapter, except as provided in paragraph (d)(7)(ii) of this section.
    (ii) For covered hospital outpatient services furnished on or after 
January 1, 2012 through February 29, 2012, the bed size limitation 
under paragraph (d)(7)(i)(B) of this section does not apply.
* * * * *

PART 476--UTILIZATION AND QUALITY CONTROL REVIEW

    10. The authority citation for Part 476 continues to read as 
follows:

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

    11. Section 476.1 is amended by--
    a. Removing the definition of ``Active staff privileges''.
    b. Adding definitions of ``Appointed representative'', ``Authorized 
representative'', ``Beneficiary complaint'', ``Beneficiary complaint 
review'', ``Beneficiary representative'', ``General quality of care 
review'', ``Gross and flagrant violation'', ``Immediate advocacy'', 
``Quality improvement initiative'', ``Quality of care concern'', 
``Quality of care review'', ``Significant quality of care concern'', 
and ``Substantial violation in a substantial number of cases''.
    c. Revising the definition of ``Preadmission certification''.

[[Page 45228]]

    The additions and revisions read as follows:

Sec.  476.1  Definitions.

* * * * *
    Appointed representative means an individual appointed by a 
Medicare beneficiary to represent the beneficiary in the beneficiary 
complaint review process.
    Authorized representative means an individual authorized, under 
State or other applicable law, to act on behalf of a Medicare 
beneficiary. An authorized representative has all of the rights and 
responsibilities of a Medicare beneficiary throughout the processing of 
a beneficiary complaint.
    Beneficiary complaint means a complaint by a Medicare beneficiary 
or a Medicare beneficiary's representative alleging that the quality of 
Medicare covered services received by the beneficiary did not meet 
professionally recognized standards of care. A complaint may consist of 
one or more quality of care concerns.
    Beneficiary complaint review means a review conducted by a QIO in 
response to the receipt of a written beneficiary complaint to determine 
whether the quality of Medicare covered services provided to the 
beneficiary was consistent with professionally recognized standards of 
health care.
    Beneficiary representative means an individual identified as an 
authorized or appointed representative of a Medicare beneficiary.
* * * * *
    General quality of care review means a review conducted by a QIO to 
determine whether the quality of Medicare covered services provided to 
a Medicare beneficiary was consistent with professionally recognized 
standards of health care. A general quality of care review may be 
carried out as a result of a referral to the QIO or a QIO's 
identification of a potential concern during the course of another 
review activity or through the analysis of data.
    Gross and flagrant violation means a violation of an obligation 
resulting from inappropriate or unnecessary services, services that do 
not meet recognized professional standards of care, or services that 
are not supported by evidence of medical necessity or quality as 
required by the QIO. The violation must have occurred in one or more 
instances that present an imminent danger to the health, safety, or 
well-being of a program patient or places the program patient 
unnecessarily in high-risk situations.
* * * * *
    Immediate advocacy means an informal alternative dispute resolution 
process used to quickly resolve an oral complaint a Medicare 
beneficiary or his or her representation has regarding the quality of 
Medicare covered health care received. This process involves a QIO 
representative's direct contact with the provider and/or practitioner.
* * * * *
    Preadmission certification means a favorable determination, 
transmitted to the hospital and the fiscal intermediary or the Medicare 
administrative contractor, approving the patient's admission for 
payment purposes.
* * * * *
    Quality improvement initiative means any formal activity designed 
to serve as a catalyst and support for quality improvement that uses 
proven methodologies to achieve these improvements. The improvements 
may relate to safety, health care, health and value and involve 
providers, practitioners, beneficiaries, and/or communities.
    Quality of care concern means a concern that care provided did not 
meet a professionally recognized standard of health care. A general 
quality of care review or a beneficiary complaint review may cover a 
single or multiple concerns.
    Quality of care review means a review conducted by a QIO to 
determine whether the quality of Medicare covered services provided to 
beneficiaries was consistent with professionally recognized standards 
of health care. A quality of care review can either be a beneficiary 
complaint review or a general quality of care review.
* * * * *
    Significant quality of care concern means a determination by the 
QIO that the quality of care provided to a Medicare beneficiary did not 
meet the standard of care and, while not a gross and flagrant or 
substantial violation of the standard, represents a noticeable 
departure from the standard that could reasonably be expected to have a 
negative impact on the health of a beneficiary.
    Substantial violation in a substantial number of cases means a 
pattern of providing care that is inappropriate, unnecessary, or does 
not meet recognized professional standards of care, or is not supported 
by the necessary documentation of care as required by the QIO.
* * * * *
    12. Section 476.70 is revised to read as follows:

Sec.  476.70  Statutory bases and applicability.

    (a) Statutory bases. Sections 1154, 1866(a)(1)(F), and 1886(f)(2) 
of the Act require that a QIO review those services furnished by 
physicians, other health care professionals, providers and suppliers as 
specified in its contract with the Secretary.
    (b) Applicability. The regulations in this subpart apply to review 
conducted by a QIO and its subcontractors.
    13. Section 476.71 is amended by--
    a. Revising paragraph (a)(2).
    b. In paragraph (b), removing the reference ``Sec.  405.330(b)'' 
and adding in its place the reference ``Sec.  411.400(b) of this 
chapter''.
    c. Revising paragraph (c)(1).
    The revisions read as follows:

Sec.  476.71  QIO review requirements.

    (a) * * *
    (2) Whether the quality of the services meets professionally 
recognized standards of health care, as determined through the 
resolution of oral beneficiary complaints as specified in Sec.  
476.110, written beneficiary complaints as specified in Sec.  476.120, 
or the completion of general quality of care reviews as specified in 
Sec.  476.160.
* * * * *
    (c) * * *
    (1) The QIO must review at least a random sample of hospital 
discharges each quarter and submit new diagnostic and procedural 
information to the Medicare administrative contractor, fiscal 
intermediary, or carrier if it determines that the information 
submitted by the hospital was incorrect.
* * * * *

Sec.  476.72  [Removed]

    14. Section 476.72 is removed.

Sec.  476.73  [Amended]

    15. In Sec.  476.73--
    a. In paragraph (a), the phrase ``and Medicare fiscal 
intermediaries and carriers.'' is removed and the phrase ``, Medicare 
administrative contractors, fiscal intermediaries, and carriers.'' is 
added in its place.
    b. In paragraph (b)(1), the reference ``Sec.  466.78(b)(3) of this 
part'' is removed and the reference ``Sec.  476.78(b)(3)'' is added in 
its place.

Sec.  476.74  [Amended]

    16. In Sec.  476.74--
    a. In paragraph (b), the phrase ``appropriate Medicare fiscal 
intermediary or carrier'' is removed and the phrase ``appropriate 
Medicare administrative contractor, fiscal intermediary, or carrier'' 
is added in its place.
    b. In paragraph (c)(1), the phrase ``Medicare fiscal intermediaries 
and

[[Page 45229]]

carriers'' is removed, and the phrase ``Medicare administrative 
contractors, fiscal intermediaries, and carriers'' is added in its 
place.
    c. In paragraph (e), the reference ``Sec.  405.332'' is removed and 
the reference ``Sec.  411.402'' is added in its place.
    17. Section 476.78 is amended by--
    a. Revising the section heading.
    b. Revising paragraphs (b)(2)(i) and (b)(2)(ii).
    c. Adding paragraph (b)(2)(iii).
    The revisions and addition read as follows:

Sec.  476.78  Responsibilities of providers and practitioners.

* * * * *
    (b) * * *
    (2) * * *
    (i) Except as provided under Sec. Sec.  476.130(b) and 476.160(b), 
relating to beneficiary complaint reviews and general quality of care 
reviews, photocopy and deliver to the QIO all required information 
within 30 calendar days of a request.
    (ii) Except as provided under Sec. Sec.  476.130(b) and 476.160(b), 
relating to beneficiary complaint reviews and general quality of care 
reviews, deliver all required medical information to the QIO within 21 
calendar days from the date of the request in those situations where a 
potential ``serious reportable event'' has been identified or where 
other circumstances as deemed by the QIO warrant earlier receipt of all 
required medical information. For purposes of this paragraph 
(b)(2)(iii), a ``serious reportable event'' is defined as a 
preventable, serious and unambiguous adverse event that should never 
occur.
    (iii) Secure transmission of an electronic version of medical 
information, subject to the QIO's ability to support receipt and 
transmission of the electronic version. Providers and practitioners 
must deliver electronic versions of medical information within 10 
calendar days of the request.
* * * * *
    18. In Sec.  476.80--
    a. The section heading is revised to read as set forth below.
    b. In paragraphs (b)(1) introductory text and (c)(1) (two places), 
the phrase ``Medicare fiscal intermediaries and carriers'' is removed 
and the phrase ``Medicare administrative contractors, fiscal 
intermediaries, and carriers'' is added in its place.
    c. In paragraph (a) introductory text, the phrase ``Medicare fiscal 
intermediary or carrier'' is removed and the phrase ``Medicare 
administrative contractor, fiscal intermediary, or carrier'' is added 
in its place.
    d. In paragraphs (a)(1), (a)(2) introductory text (two places), 
(c)(3)(ii), (d)(1), and (d)(2), the phrase ``fiscal intermediary or 
carrier'' is removed and the phrase ``Medicare administrative 
contractor, fiscal intermediary, or carrier'' is added in its place.
    e. In paragraph (e), in the paragraph heading and in paragraphs 
(e)(1) and (e)(2), the phrase ``fiscal intermediary'' is removed and 
the phrase ``Medicare administrative contractor or fiscal 
intermediary'' is added in its place.
    The revision reads as follows:

Sec.  476.80  Coordination with Medicare administrative contractors, 
fiscal intermediaries, and carriers.

* * * * *

Sec.  476.86  [Amended]

    19. In Sec.  476.86--
    a. In paragraph (a)(1)(iii), the reference ``Sec.  405.310(g) or 
Sec.  405.310(k)'' is removed and the reference ``Sec.  411.15(g) or 
Sec.  411.15(k)'' is added in its place.
    b. In paragraph (a)(2), the phrase ``Medicare fiscal intermediaries 
or carriers'' is removed and the phrase ``Medicare administrative 
contractors, fiscal intermediaries, or carriers'' is added in its 
place.
    c. In paragraph (c) introductory text, the phrase ``Medicare fiscal 
intermediary or carrier'' is removed and the phrase ``Medicare 
administrative contractor, fiscal intermediary, or carrier'' is added 
in its place.
    d. In paragraph (c)(1), the phrase ``fiscal intermediary or 
carrier'' is removed and the phrase ``Medicare administrative 
contractor, fiscal intermediary, or carrier'' is added in its place.
    e. In paragraph (d), the phrase ``Medicare fiscal intermediaries 
and carriers'' is removed and the phrase ``Medicare administrative 
contractors, fiscal intermediaries, and carriers'' is added in its 
place.
    f. In paragraph (e), the phrase ``intermediaries and carriers'' is 
removed and the phrase ``Medicare administrative contractors, fiscal 
intermediaries, and carriers'' is added in its place.
    g. In paragraph (f), the reference ``part 473'' is removed and the 
reference ``part 478'' is added in its place.

Sec.  476.94  [Amended]

    20. In Sec.  476.94--
    a. In paragraph (a)(1)(iv), the phrase ``fiscal intermediary or 
carrier'' is removed and the phrase ``Medicare administrative 
contractor, fiscal intermediary, or carrier'' is added in its place.
    b. In paragraph (d), the phrase ``Medicare fiscal intermediary or 
carrier'' is removed and the phrase ``Medicare administrative 
contractor, fiscal intermediary, or carrier'' is added in its place.
    c. In paragraph (c)(3) introductory text, the reference ``part 
473'' is removed and the reference ``part 478'' is added in its place.

Sec.  476.98  [Amended]

    21. In Sec.  476.98, in paragraph (a)(1), the phrase ``with active 
staff privileges in one or more hospitals in the QIO area'' is removed.
    22. Section 476.104 is amended by revising paragraph (a) to read as 
follows:

Sec.  476.104  Coordination of activities.

* * * * *
    (a) Medicare administrative contractors, fiscal intermediaries, and 
carriers.
* * * * *
    23. New Sec. Sec.  476.110, 476.120, 476.130, 476.140, 476.150, 
476.160, 476.170 are added to subpart C to read as follows:

Subpart C--Review Responsibilities of Utilization and Quality 
Control Quality Improvement Organizations (QIOs)

Sec.
* * * * *
476.110 Use of immediate advocacy to resolve oral beneficiary 
complaints.
476.120 Submission of written beneficiary complaints.
476.130 Beneficiary complaint review procedures.
476.140 Beneficiary complaint reconsideration procedures.
476.150 Abandoned complaints and reopening rights.
476.160 General quality of care review procedures.
476.170 General quality of care reconsideration procedures.
* * * * *

Sec.  476.110  Use of immediate advocacy to resolve oral beneficiary 
complaints.

    (a) Immediate advocacy. A QIO may offer the option of resolving an 
oral complaint through the use of immediate advocacy if:
    (1) The complaint is received not later than 6 months from the date 
on which the care giving rise to the complaint occurred.
    (2) After initial screening of the complaint, the QIO makes a 
preliminary determination that--
    (i) The complaint is unrelated to the clinical quality of health 
care itself but relates to items or services that accompany or are 
incidental to the medical care and are provided by a practitioner and/
or provider; or

[[Page 45230]]

    (ii) The complaint, while related to the clinical quality of health 
care received by the beneficiary, does not rise to the level of being a 
gross and flagrant, substantial, or significant quality of care 
concern.
    (3) The beneficiary agrees to the disclosure of his or her name to 
the involved provider and/or practitioner.
    (4) All parties orally consent to the use of immediate advocacy.
    (5) All parties agree to the limitations on redisclosure set forth 
in Sec.  480.107 of this subchapter.
    (b) Discontinuation of immediate advocacy. The QIO or either party 
may discontinue participation in immediate advocacy at any time.
    (1) The QIO must inform the parties that immediate advocacy will be 
discontinued; and
    (2) The beneficiary must be informed of his or her right to submit 
a written complaint in accordance with the procedures in Sec.  476.120.
    (c) Confidentiality requirements. All communications, written and 
oral, exchanged during the immediate advocacy process must not be 
redisclosed without the written consent of all parties.
    (d) Abandoned complaints. If any party fails to participate or 
otherwise comply with the requirements of the immediate advocacy 
process, the QIO may determine that the complaint has been abandoned 
and--
    (1) Inform the parties that immediate advocacy will be 
discontinued; and
    (2) Inform the Medicare beneficiary of his or her right to submit a 
written complaint in accordance with the procedures in Sec.  476.120.

Sec.  476.120  Submission of written beneficiary complaints.

    (a) Timeframe for submission of written complaints. A QIO shall be 
responsible for conducting a review of any written complaint received 
from a Medicare beneficiary or a Medicare beneficiary's representative 
about the quality of health care if the complaint is received not later 
than 3 years from the date on which the care giving rise to the 
complaint occurred.
    (1) A written complaint includes a complaint submitted 
electronically to the QIO.
    (2) In those instances where a Medicare beneficiary contacts the 
QIO regarding a complaint but declines to submit the complaint in 
writing and immediate advocacy has not been offered, the QIO may 
complete a general quality of care review in accordance with Sec.  
476.160 if the QIO makes a preliminary determination that the complaint 
involves a potential gross and flagrant, substantial or significant 
quality of care concern.
    (b) New concerns raised by a Medicare beneficiary. If a Medicare 
beneficiary raises new concerns relating to the same complaint after 
the completion of the interim initial determination in Sec.  
476.130(c), the concerns will be processed as a new complaint. The QIO 
may process new concerns raised after the receipt of the written 
complaint as part of the same complaint, provided they are received 
prior to the completion of the interim initial determination. Even if a 
concern is received before the interim initial determination, the QIO 
can address it as a separate complaint if the QIO determines that this 
is warranted by the circumstances.

Sec.  476.130  Beneficiary complaint review procedures.

    (a) Scope of the QIO review. In completing its review, the QIO 
shall consider any information and materials submitted by the Medicare 
beneficiary or his or her representative and any information submitted 
by the provider and/or practitioner. All information obtained by the 
QIO that fits within the definition of ``confidential information'' 
under Sec.  480.101 of this chapter, will be held by the QIO as 
confidential.
    (1) The QIO's review will focus on the episode of care from which 
the complaint arose and address the specific concerns identified by the 
beneficiary and any additional concerns identified by the QIO. The QIO 
may separate concerns into different complaints if the QIO determine 
that the concerns relate to different episodes of care.
    (2) The QIO will use evidence-based standards of care to the 
maximum extent practicable. If no standard of care exists, the QIO will 
use available norms, best practices and established guidelines to 
establish the standard that will be used in completing the review. The 
QIO's determination regarding the standard used is not subject to 
appeal.
    (b) Medical information requests. Upon request by the QIO, a 
provider or practitioner must deliver all medical information requested 
in response to a Medicare beneficiary complaint within 10 calendar days 
of the request. A QIO is authorized to require the receipt of the 
medical information sooner if the QIO make a preliminary determination 
that the complaint involves a potential gross and flagrant or 
substantial quality of care concern as specified in 42 CFR Part 1004 
and circumstances warrant earlier receipt of the medical information. A 
practitioner's or provider's failure to comply with the request for 
medical information within the established timeframe may result in the 
QIO taking action in accordance with Sec.  476.90.
    (c) Interim initial determination. The QIO peer reviewer will 
complete the review and notify the practitioner and/or provider of its 
interim initial determination within 7 calendar days of the receipt of 
all medical information.
    (1) A practitioner and provider will be notified by telephone of 
the opportunity to discuss the QIO's interim initial determination with 
the QIO in those situations where the peer reviewer determines that the 
quality of services does not meet professionally recognized standards 
of care for any concern in the complaint. The discussion must be held 
no later than 7 calendar days from the date of the initial offer.
    (2) The interim initial determination becomes the final initial 
determination if the discussion is not completed timely as a result of 
the practitioner's and/or provider's failure to respond.
    (3) Written statements in lieu of a discussion must be received no 
later than 7 calendar days from the date of the initial offer.
    (4) In rare circumstances, the QIO may grant additional time to 
complete the discussion or submission of a written statement in lieu of 
a discussion.
    (d) Final initial determination. The QIO must issue notification of 
its final initial determination in those cases in which the QIO has 
determined that care met professionally recognized standards, as well 
as in those cases in which the QIO determined that standards were not 
met and the opportunity for discussion has been completed. No later 
than 72 hours after completion of its review, or for cases in which the 
standard was not met, no later than 72 hours after the discussion or 
receipt of the provider's and/or practitioner's written statement, the 
QIO will notify (by telephone) the beneficiary and the provider/
practitioner of its final initial determination and of the right to 
request a reconsideration of the QIO's final initial determination.
    (1) Written notice of the QIO's final initial determination will be 
forwarded to all parties, unless either party requests a 
reconsideration of the final initial determination. If a 
reconsideration request is submitted, the QIO will notify the parties 
that a written decision will be issued once the reconsideration review 
is completed in accordance with Sec.  476.140(b).
    (2) If a reconsideration request is not received, the written 
decision will be issued within 72 hours after the QIO has contacted the 
parties, as described in

[[Page 45231]]

paragraph (d) of this section, and must include:
    (i) A statement for each concern that care did or did not meet the 
standard of care;
    (ii) The standard identified by the QIO for each of the concerns; 
and
    (iii) A summary of the specific facts that the QIO determines are 
pertinent to its findings, including references to medical information 
and, if held, the discussion with the involved practitioner and/or 
provider.

Sec.  476.140  Beneficiary complaint reconsideration procedures.

    (a) Right to request a reconsideration. Beginning with complaints 
filed after July 31, 2014, a Medicare beneficiary, a provider, or a 
practitioner who is dissatisfied with a QIO's final initial 
determination may request a reconsideration by the QIO.
    (1) The reconsideration request must be received by the QIO, in 
writing or by telephone, no later than noon of the calendar day 
following initial notification (whether by telephone or in writing) of 
the QIO's determination. In rare circumstances, the QIO may grant an 
additional calendar day. If the QIO is unable to accept a request, the 
request must be submitted by noon of the next day the QIO is available 
to accept a request.
    (2) The Medicare beneficiary, or his or her representative, and the 
practitioner and/or provider must be available to answer any questions 
or supply any information that the QIO requests in order to conduct its 
reconsideration.
    (3) The QIO must offer the Medicare beneficiary and the 
practitioner and/or provider an opportunity to provide further 
information. A Medicare beneficiary, a practitioner, and a provider 
may, but are not required to, submit evidence to be considered by the 
QIO in making its reconsideration decision.
    (b) Issuance of the QIO's final decision. No later than 72 hours 
after receipt of the request for a reconsideration, or, if later, 72 
hours after receiving any medical or other records needed for such 
reconsideration, the QIO must complete the review and notify the 
beneficiary and the practitioner/provider of its decision.
    (1) The QIO's initial notification may be done by telephone, 
followed by the mailing of a written notice by noon of the next 
calendar day that includes--
    (i) A statement for each concern that care did or did not meet the 
standard of care;
    (ii) The standard identified by the QIO for each of the concerns;
    (iii) A summary of the specific facts that the QIO determines are 
pertinent to its findings; and
    (iv) A statement that the letter represents the QIO's final 
determination and that there is no right to further appeal.
    (2) The QIO may provide information to the beneficiary, 
practitioner, and provider regarding opportunities for improving the 
care given to patients based on the specific findings of its review and 
the development of quality improvement initiatives.

Sec.  476.150  Abandoned complaints and reopening rights.

    (a) Abandoned complaints. If a Medicare beneficiary fails to 
participate or otherwise comply with the requirements of the 
beneficiary complaint review process and the QIO does not have 
sufficient information to complete its review, the QIO may determine 
that the complaint has been abandoned and--
    (1) Inform the parties that its complaint review will be 
discontinued; and
    (2) Inform the beneficiary of his or her right to resubmit a 
written complaint in accordance with the procedures in Sec.  476.120.
    (b) Reopening complaint reviews. A QIO may reopen a Medicare 
beneficiary complaint review using the same procedures that the QIO 
would use for reopening initial denial determinations and changes as a 
result of DRG validation, as described in Sec.  476.96.

Sec.  476.160  General quality of care review procedures.

    (a) Scope of the QIO review. A QIO may conduct a general quality of 
care review in accordance with section 1154(a)(1)(B) of the Act.
    (1) A QIO may conduct general quality of care reviews based on--
    (i) Concerns identified during the course of other QIO review 
activities;
    (ii) Referrals from other sources, including but not limited to 
individuals, contractors, other Federal or State agencies; or
    (iii) Analysis of data.
    (2) The QIO's review will focus on all concerns identified by the 
QIO and/or identified by those who have referred or reported the 
concerns, with consideration being given to the episode of care related 
to the concerns.
    (3) The QIO will use evidence-based standards of care to the 
maximum extent practicable. If no standard of care exists, the QIO must 
use available norms, best practices, and established guidelines to 
establish the standard that will be used in completing the review. The 
QIO's determination regarding the standard used is not subject to 
appeal.
    (b) Medical information requests. Upon request by the QIO, a 
provider or practitioner must deliver all medical information requested 
within 10 calendar days of the request. A QIO is authorized to require 
the receipt of the medical information sooner if the QIO makes a 
preliminary determination that the review involves a potential gross 
and flagrant or substantial quality of care concern and circumstances 
warrant earlier receipt of the medical information. A practitioner's or 
provider's failure to comply with the request for medical information 
within the established time frame may result in the QIO taking action 
pursuant to Sec.  476.90.
    (c) Initial determination. The QIO peer reviewer will complete the 
review and notify the practitioner and/or provider within 7 calendar 
days of the receipt of all medical information.

Sec.  476.170  General quality of care reconsideration procedures.

    (a) Right to request a reconsideration. Beginning with reviews 
initiated after July 31, 2014, a provider or practitioner who is 
dissatisfied with a QIO's initial determination may request a 
reconsideration by the QIO.
    (1) The reconsideration request must be received by the QIO, in 
writing or by telephone, by no later than noon of the calendar day 
following initial notification (whether by telephone or in writing) of 
the QIO's determination. In rare circumstances, the QIO may grant an 
additional calendar day. If the QIO is unable to accept the request, 
the request must be submitted by noon of the next day the QIO is 
available to accept a request.
    (2) The practitioner or provider must be available to answer any 
questions or supply any information that the QIO requests in order to 
conduct its reconsideration.
    (3) The QIO must offer the practitioner or provider an opportunity 
to provide further information. A practitioner or provider may, but is 
not required to, submit evidence to be considered by the QIO in making 
its reconsideration decision.
    (b) Issuance of the QIO's final decision. No later than 72 hours 
after receipt of the request for a reconsideration, or, if later, 72 
hours after receiving any medical or other records needed for such 
reconsideration, the QIO must complete the review and notify the 
practitioner or provider of its decision.
    (1) The QIO's initial notification may be done by telephone, 
followed by the

[[Page 45232]]

mailing of a written notice by noon the next calendar day that 
includes:
    (i) A statement for each concern that care did or did not meet the 
standard of care;
    (ii) The standard identified by the QIO for each of the concerns;
    (iii) A summary of the specific facts that the QIO determines are 
pertinent to its findings; and
    (iv) A statement that the letter represents the QIO's final 
determination and that there is no right to further appeal.
    (2) The QIO may provide information regarding opportunities for 
improving the care given to patients based on the specific findings of 
its review.

PART 478--RECONSIDERATIONS AND APPEALS

    24. The authority citation for Part 478 continues to read as 
follows:

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

Sec.  478.15  [Amended]

    25. In Sec.  478.15(b), the reference ``Sec. Sec.  473.18 through 
473.36, and 473.48(a) and (c)'' is removed and the reference 
``Sec. Sec.  478.18 through 478.36 and Sec.  478.48(a) and (c)'' is 
added in its place.

Sec.  478.16  [Amended]

    26. In Sec.  478.16, the reference ``Sec.  473.14(a)'' is removed 
and the reference ``Sec.  478.14'' is added in its place.

Sec.  478.20  [Amended]

    27. In Sec.  478.20--
    a. In paragraph (a)(1), the reference ``Sec.  473.22'' is removed 
and the reference ``Sec.  478.22'' is added in its place.
    b. In paragraph (b), the reference ``Sec.  473.22'' is removed and 
the reference ``Sec.  478.22'' is added in its place.
    c. In paragraph (c), the reference ``Sec.  473.18(c)'' is removed 
and the reference ``Sec.  478.18(c)'' is added in its place.

Sec.  478.28  [Amended]

    28. In Sec.  478.28 (a), the reference ``Sec.  466.98'' is removed 
and the reference ``Sec.  476.98'' is added in its place.

Sec.  478.38  [Amended]

    29. In Sec.  478.38--
    a. In paragraph (a), the reference ``Sec.  473.40'' is removed and 
the reference ``Sec.  478.40'' is added in its place.
    b. In paragraph (b), the reference ``Sec.  473.48'' is removed and 
the reference ``Sec.  478.48'' is added in its place.

Sec.  478.42  [Amended]

    30. In Sec.  478.42--
    a. In paragraph (a) introductory text, the reference ``Sec.  
473.40'' is removed and the reference ``Sec.  478.40'' is added in its 
place.
    b. In paragraph (b), the reference ``Sec.  473.22'' is removed and 
the reference ``Sec.  478.22'' is added in its place.

Sec.  478.48  [Amended]

    31. In Sec.  478.48--
    a. In paragraph (a)(1), the reference ``Sec.  473.15'' is removed 
and the reference ``Sec.  478.15'' is added in its place.
    b. In paragraph (a)(2) introductory text, the reference ``Sec.  
473.15'' is removed and the reference ``Sec.  478.15'' is added in its 
place.

PART 480--ACQUISITION, PROTECTION, AND DISCLOSURE QUALITY 
IMPROVEMENT ORGANIZATION REVIEW INFORMATION

    32. The authority citation for Part 480 continues to read as 
follows:

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

Sec.  480.105  [Amended]

    33. In Sec.  480.105(a), the phrase ``Medicare fiscal 
intermediaries'' is removed and the phrase ``Medicare administrative 
contractors or fiscal intermediaries'' is added in its place.
    34. Section 480.107 is amended by adding a new paragraph (l) to 
read as follows:

Sec.  480.107  Limitations on redisclosure.

* * * * *
    (l) Redisclosures of information that is confidential because it 
identifies the parties involved in immediate advocacy may occur if all 
parties have consented to the redisclosure, as provided for under Sec.  
476.110(c) of this chapter.
    35. Section 480.132 is amended by--
    a. Revising paragraph (a) introductory text, paragraph (a)(1)(iii), 
and paragraph (a)(2).
    b. Revising paragraph (b)(1).
    c. Revising paragraph (c).
    d. Removing the undesignated text following paragraph (c)(3).
    The revisions read as follows.

Sec.  480.132  Disclosure of information about patients.

    (a) General requirements for disclosure. Except as specified in 
Sec. Sec.  476.130(d) and 476.140(b) of this chapter and paragraph (b) 
of this section, a QIO must--
    (1) * * *
    (iii) Except as provided under paragraph (b) of this section, all 
other patient and practitioner identifiers have been removed.
    (2) Make disclosure to the patient or the patient's representative 
within 14 calendar days of receipt of the request.
    (b) * * *
    (1) If a request for information is in connection with an initial 
denial determination under section 1154(a)(2) of the Act, the QIO must 
provide only the information used to support that determination in 
accordance with the procedures for disclosure of information related to 
determinations under Sec.  478.24, including relevant practitioner 
identifiers.
* * * * *
    (c) Manner of disclosure. (1) The QIO must disclose the patient 
information directly to the patient or the patient's representative 
when the representative has been authorized or appointed to receive 
that information.
    (2) In identifying a representative, the QIO must follow pertinent 
State law requirements regarding the designation of health care 
representatives and agents. If the patient is unable to designate a 
representative and the identity of the representative is not already 
dictated by State law, the QIO must disclose the information to a 
person whom the QIO determines is responsible for the patient.
    36. Section 480.133 is amended by--
    a. Adding a new paragraph (a)(2)(iv).
    b. In paragraph (b)(1), removing the reference to ``Part 466'' and 
adding the reference ``Part 476'' in its place; and removing the 
reference ``Sec.  473.24'' and adding the reference ``Sec.  478.24 of 
this subchapter'' is its place.
    The addition reads as follows:

Sec.  480.133  Disclosure of information about practitioners, 
reviewers, and institutions.

    (a) * * *
    (2) * * *
    (iv) A QIO is not required to obtain the consent of a practitioner 
or provider prior to the release of information to a beneficiary in 
connection with an initial denial determination or in providing a 
beneficiary with the QIO's findings in response to a beneficiary 
complaint. Information that must be specified in a QIO's final decision 
in a complaint review is specified in Sec. Sec.  476.130(d) and 
476.140(b) of this subchapter.
* * * * *

Sec.  480.139  [Amended]

    37. Section 480.139 is amended by redesignating the existing 
paragraph (1) as paragraph (a)(1).
    38. A new Sec.  480.145 is added to read as follows:

Sec.  480.145  Beneficiary authorization of use of confidential 
information.

    (a) Except as otherwise provided under this part, a QIO may not use 
or

[[Page 45233]]

disclose a beneficiary's confidential information without an 
authorization from the beneficiary. The QIO's use or disclosure must be 
consistent with the authorization.
    (b) A valid authorization is a document that contains the 
following:
    (1) A description of the information to be used or disclosed that 
identifies the information in a specific and meaningful fashion.
    (2) The name or other specific identification of the QIO(s) and QIO 
point(s) of contact making the request to use or disclose the 
information.
    (3) The name or other specific identification of the person(s), or 
class of persons, to whom the QIO(s) may disclose the information or 
allow the requested use.
    (4) A description of each purpose of the requested use or 
disclosure. The statement ``at the request of the individual'' is a 
sufficient description of the purpose when an individual initiates the 
authorization and does not, or elects not to, provide a statement of 
purpose.
    (5) An expiration date or an expiration event that relates to the 
beneficiary or the purpose of the use or disclosure. The statement 
``end of the QIO research study,'' ``none,'' or similar language is 
sufficient if the authorization is for a use or disclosure of 
confidential information for QIO research, including for the creation 
and maintenance of a research database or research repository.
    (6) Signature of the individual and date. If the authorization is 
signed by a beneficiary's representative, a description of such 
representative's authority to act for the beneficiary must also be 
provided.
    (c) In addition to those items contained in paragraph (b) of this 
section, the authorization must contain statements adequate to place 
the individual on notice of all of the following:
    (1) The individual's right to revoke the authorization in writing; 
and
    (2) Any exceptions to the right to revoke and a description of how 
the individual may revoke the authorization;
    (3) The ability or inability of the QIO to condition its review 
activities on the authorization, by stating either:
    (i) That the QIO may not condition the review of complaints, 
appeals, or payment determinations, or any other QIO reviews or other 
tasks within the QIO's responsibility on whether the individual signs 
the authorization;
    (ii) The consequences to the individual of a refusal to sign the 
authorization when the refusal will render the QIO unable to carry out 
an activity.
    (4) The potential for information disclosed pursuant to the 
authorization to be subject to either appropriate or inappropriate 
redisclosure by a recipient, after which the information would no 
longer be protected by this subpart.
    (d) The authorization must be written in plain language.
    (e) If a QIO seeks an authorization from a beneficiary for a use or 
disclosure of confidential information, the QIO must provide the 
beneficiary with a copy of the signed authorization.
    (f) A beneficiary may revoke an authorization provided under this 
section at any time, provided the revocation is in writing, except to 
the extent that the QIO has taken action in reliance upon the 
authorization.

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

    39. 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).

    40. Section 495.8 is amended by revising paragraph (b)(2)(vi) to 
read as follows:

Sec.  495.8  Demonstration of meaningful use criteria.

* * * * *
    (b) * * *
    (2) * * *
    (vi) Exception for Medicare eligible hospitals and CAHs for FY 2012 
and 2013--Participation in the Medicare EHR Incentive Program 
Electronic Reporting Pilot. In order to satisfy the clinical quality 
measure reporting requirements of meaningful use, aside from 
attestation, a Medicare eligible hospital or CAH may participate in the 
Medicare EHR Incentive Program Electronic Reporting Pilot.
* * * * *

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; Program No. 93.774, Medicare--
Supplementary Medical Insurance Program; and Program No. 93.778 
(Medical Assistance)

    Dated: June 28, 2012.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: June 29, 2012.
Kathleen Sebelius,
Secretary.
[FR Doc. 2012-16813 Filed 7-6-12; 4:15 pm]
BILLING CODE 4120-01-P
```