DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services 42 CFR Parts 405, 410, 412, 416, 419, 475, 476, 486, and 495 [CMS-1601-P]

RIN 0938-AR54 Medicare and Medicaid Programs: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Syst ems and Quality Reporting Programs; Hospital Value-Based Purchasing Progra m; Organ Procurement Organizations; Quality Improvement Organizations; Elect ronic Health Records (EHR) Incentive Program; Provider Reimbursement Determinations and Appeals

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

ACTION: Proposed rule.

SUMMARY: This proposed rule would revise the Medicare hospital outpatient prospective payment system (OPPS) and th e Medicare ambulatory surgical center (ASC) payment system for CY 2014 to implement applicable statutory requirements and changes arising from our continuing experien ce with these systems. In this proposed rule, we describe the proposed changes to the amounts and factors us ed to determine the payment rates for Medicare services paid under the OPPS and those paid under the ASC payment system. In addition, this pro posed rule would update and refine the requirements for the Hospital Outpatient Quality Reporting (OQR ) Program, the ASC Quality Reporting (ASCQR) Program, and th e Hospital Value-Based Purchasing (VBP) Program.CMS-1601-P 2 We are proposing changes to the cond itions for coverage (CfCs) for organ procurement organizations (OPOs); revisions to the Quality Improvement Organization (QIO) regulations; changes to the Medicare fee-for-service Electronic Health Record (EHR) Incentive Program; and change s relating to provider reimbursement determinations and appeals.

DATES : Comment Period : To be assured consideration, comments on all sections of this proposed rule must be receiv ed at one of the addresses provided in the

ADDRESSES section no later than 5 p.m. EST on [Insert 60 days from date of display at the Office of the Federal Register].

ADDRESSES: In commenting, please refer to file code CMS-1601-P. Because

of staff and resource lim itations, we cannot accept co mments by facsimile (FAX)

transmission. You may submit comments in one of four ways (no duplicates, please): 1. Electronically . You may (and we encourag e 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-1601-P, P.O. Box 8013,CMS-1601-P 3 Baltimore, MD 21244-1850.

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

Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1601-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850. 4. By hand or courier . If you prefer, you may deliver (by hand or courier) your

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

addresses: a. For delivery in Washington, DC—

Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, S.W., Washington, DC 20201. (Because access to the interior of the H ubert H. Humphrey Building is not readily available to persons without Federal G overnment identification, commenters areCMS-1601-P 4 encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available fo r persons wishing to re tain a proof of filing by stamping in and retaining an extra copy of the comments being filed.) b. For delivery in Baltimore, MD—

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

staff members.

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

the “ SUPPLEMENTARY INFORMATION ” section. FOR FURTHER INFORMATION, CONTACT: Marjorie Baldo, (401) 786-4617, for issu es related to new CPT and Level II HCPCS codes, exceptions to the 2 times rule , and stereotactic radiosurgery services. Anita Bhatia, (410) 786-7236, for issues related to the Ambulatory Surgical Center Quality Reporting (ASCQR) Pr ogram – Program Administration and

Reconsideration Issues.CMS-1601-P 5 Chuck Braver, (410) 786-9379, for issues related to the Advisory Panel on Hospital Outpatient Payment (HOP Panel). Erick Chuang, (410) 786-1816, for issues related to OPPS APC weights, mean calculation, copayments, wage index, outlier pa yments, cost-to-charge ratios (CCRs), and rural hospital payments. Diane Corning, (410) 786-8486, for issues related to the Conditions for Coverage for Organ Procurement Organizations (OPOs). Dexter Dickey, (410) 78 6-6856, or Dorothy Myrick, (410) 786-9671, for issues related to partial hospitalization and commun ity mental health center (CMHC) issues. Roxanne Dupert-Frank, (410) 786-4827, fo r issues related to the Hospital Value-Based Purchasing (VBP) Program. Dan Duvall, (410) 786-4592, for issues related to comprehensive APCs. Shaheen Halim (410) 786-0641, for issues related to the Hospital Outpatient Quality Reporting Program (OQR) – Measures Issues and Publication of Hospital OQR Program Data, and Ambulatory Surgical Ce nter Quality Reporting (ASCQR) Program –

Measures Issues and Publica tion of ASCQR Program Data. James Hart, (410) 786-9520, for issues related to the Medicare fee-for-service

Electronic Health Record (EHR) Incentive Program. Jeneen Iwugo, (410) 786-1028, for issues re lated to the revisions of the Quality Improvement Organization (QIO) Regulations. Twi Jackson, (410) 786-1159, for issues related to blood products, devicedependent APCs, extended assessment and management composite APCs, hospitalCMS-1601-P 6 outpatient visits, inpatient-onl y procedures, and no cost/full credit and partial credit

devices. Marina Kushnirova, (410) 786-2682, for i ssues related to OPPS status indicators

and comment indicators. Barry Levi, (410) 786-4529, for issues related to OPPS pass-through devices, brachytherapy sources, intraope rative radiation therapy (I ORT), brachytherapy composite APC, multiple imaging composite APCs, a nd cardiac electrophysiologic evaluation and ablation composite APC. Ann Marshall, (410) 786- 3059, for issues related to packaged items/services, hospital outpatient supervision, proton beam th erapy, therapy caps in CAHs, incident to physician or nonphysician practitioner se rvices, and provide r-based issues. Danielle Moskos, (410) 786-8866, or Michael Zleit, (410) 786-2050, for issues related to Provider Reimbursement Determination Appeals. James Poyer, (410) 786-2261, for issues rela ted to the Hospital Outpatient Quality Reporting - Program Admini stration, Validation, and Reconsideration Issues. Char Thompson, (410) 786-2300, for issues related to OPPS drugs, radiopharmaceuticals, biologicals, blood clot ting factors, new technology intraocular lenses (NTIOLs), and ambulatory surgical center (ASC) payments. Marjorie Baldo, (410) 786-4617, for all othe r issues related to hospital outpatient and ambulatory surgical center paym ents not previously identified.CMS-1601-P 7

SUPPLEMENTARY INFORMATION: Inspection of Public Comments : All comments received before the close of the comment period are available for viewi ng by the public, including any personally

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

all comments received before the close of the comment period on the following Web site as soon as possible after th ey have been received: http://www.regulations.gov. Follow

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

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

1-800-743-3951.

Electronic Access

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

. Addenda Available Only Through th e Internet on the CMS Web Site In the past, a majority of the Addenda referred to in our OPPS/ASC proposed and final rules were published in the Federal Register as part of the annual rulemakings. However, beginning with the CY 2012 OPPS/AS C proposed rule, all of the Addenda noCMS-1601-P 8 longer appear in the Federal Register as part of the annua l OPPS/ASC proposed and

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

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

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

BLS Bureau of Labor StatisticsCMS-1601-P 9 CAH Critical access hospital CAP Competitive Acquisition Program CASPER Certification and Survey Provider Enhanced Reporting CAUTI Catheter associated urinary tract infection

CBSA Core-Based Statistical Area CCI Correct Coding Initiative

CCN CMS Certification Number CCR Cost-to-charge ratio

CDC Centers for Disease Control and Prevention

CEO Chief executive officer CERT Comprehensive Error Rate Testing CfC [Medicare] Condition for coverage CFR Code of Federal Regulations CLFS Clinical Laboratory Fee Schedule CMHC Community mental health center

CMS Centers for Medicare & Medicaid Services CoP [Medicare] Conditi on of participation

CPI-U Consumer Price Inde x for All Urban Consumers CPT Current Procedural Terminology (c opyrighted by the American Medical Association) CQM Clinical quality measure CR Change requestCMS-1601-P 10 CSAC Consensus Standards Approval Committee CY Calendar year DFO Designated Federal Official DRA Deficit Reduction Act of 2005, Pub. L. 109-171 DRG Diagnosis-Related Group DSH Disproportionate share hospital EACH Essential access community hospital eCQM Electronically specified clinical quality measure ECT Electroconvulsive therapy ED Emergency department E/M Evaluation and management

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

HAI Healthcare-associated infection

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

HCPCS Healthcare Common Procedure Coding SystemCMS-1601-P 11 HCRIS Hospital Cost Report Information System HEU Highly enriched uranium

HIPAA Health Insurance Portabi lity and Accountability Act of 1996,

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

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

Modification ICD Implantable cardioverter defibrillator

ICU Intensive care unit

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

IOL Intraocular lens

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

LDR Low dose rateCMS-1601-P 12 LOS Length of Stay LTCH Long-term care hospital

MAC Medicare Administrative Contractor MAP Measure Application Partnership MedPAC Medicare Payment Advisory Commission

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

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

MMEA Medicare and Medicaid Ex tenders Act of 2010, Pub. L. 111-309 MMSEA Medicare, Medicaid, and SCHI P Extension Act of 2007, Pub. L. 110-173 MPFS Medicare Physician Fee Schedule MRA Magnetic resonance angiography MRI Magnetic resonance imaging MSA Metropolitan Statistical Area NCCI National Correct Coding Initiative NHSN National Healthcare Safety NetworkCMS-1601-P 13 NQF National Quality Forum NTIOL New technology intraocular lens NUBC National Uniform Billing Committee OACT [CMS] Office of the Actuary OBRA Omnibus Budget Reconcili ation Act of 1996, Pub. L. 99-509 OIG [HHS] Office of the Inspector General OMB Office of Management and Budget OPD [Hospital] Outpatient Department OPPS [Hospital] Outpatient Prospective Payment System OPSF Outpatient Provider-Specific File OQR [Hospital] Outpatient Quality Reporting OT Occupational therapy PBD Provider-Based Department PCR Payment-to-cost ratio PE Practice expense PEPPER Program for Evaluating Payment Patterns Electronic Report PHP Partial hospitalization program PHS Public Health Service [Act], Pub. L. 96-88

PPI Producer Price Index PPS Prospective payment system PQRS Physician Quality Reporting System PT Physical therapyCMS-1601-P 14 QDC Quality data code QIO Quality Improvement Organization RFA Regulatory Flexibility Act RTI Research Triangle In stitute, International

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

SI Status indicator

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

UR Utilization review

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

Table of Contents I. Summary and BackgroundCMS-1601-P 15 A. Executive Summary of This Proposed Rule 1. Purpose 2. Summary of the Major Provisions 3. Summary of Costs and Benefits B. Legislative and Regulator y Authority for the Hospital OPPS C. Excluded OPPS Services and Hospitals D. Prior Rulemaking E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel or the Panel), Formerly Named the Advisory Panel on Ambulatory Payment Classification Groups (APC Panel) 1. Authority of the Panel

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

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

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

1. Database Construction a. Database Source and Methodology b. Proposed Use of Single and Multiple Procedure Claims c. Proposed Calculation and Us e of Cost-to-Charge Ratios (CCRs)CMS-1601-P 16 2. Proposed Data Development Proce ss and Calculation of Costs Used for Ratesetting a. Claims Preparation b. Splitting Claims and Creation of “Pseudo” Single Procedure Claims (1) Splitting Claims (2) Creation of “Pseudo” Single Procedure Claims c. Completion of Claim Records an d Geometric Mean Cost Calculations (1) General Process (2) Recommendations of the 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 e. Proposed Establishmen t of Comprehensive APCs (1) Definitions and General Principles (2) Comprehensive APCs for Device-Dependent Services f. Proposed Calculation of Co mposite APC Criteria-Based Costs (1) Extended Assessment and Manage ment Composite APCs (APCs 8002 and 8003) (2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001) (3) Cardiac Electrophysiologic Ev aluation and Ablation Composite APC (APC 8000)CMS-1601-P 17 (4) Mental Health Services Composite APC (APC 0034) (5) Multiple Imaging Compos ite APCs (APCs 8004, 8005, 8006, 8007, and 8008) 3. Proposed Changes to Packaged Services a. Background b. Basis for Proposed New Packaging Policies for CY 2014 c. Proposed New Packaging Policies for CY 2014 (1) Drugs, Biologicals, and Radiophar maceuticals That Function as Supplies When Used in a Diagnostic Test or Procedure (2) Drugs and Biologicals That Function as Supplies or Devices When Used in a Surgical Procedure (3) Clinical Dia gnostic Laboratory Tests (4) Procedures Described by Add-On Codes (5) Ancillary Services (Status Indicator “X”) (6) Diagnostic Tests on the Bypass List (7) Device Removal Procedures d. Impact of the New Packaging Proposals e. Clarification Regarding Supp lies That Are Packaged in the OPPS f. Proposed Revision and Clarification of the Regulations at 42 CFR 419.2(b) and

42 CFR 419.22 g. Comment Solicitation on Increased Packaging for Imaging Services h. Summary of CY 2014 Packaging ProposalsCMS-1601-P 18 4. Proposed Calculation of OPPS Scaled Payment Weights B. Proposed Conversion Factor Update C. Proposed Wage Index Changes D. Proposed Statewide Average Default CCRs E. Proposed Adjustment for Rural SCHs and EACHs under Section 1833(t)(13)(B) of the Act F. Proposed OPPS Payment to Certain Cancer Hospitals Described by Section 1886(d)(1)(B)(v) of the Act 1. Background 2. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2014 G. Proposed Hospital Outpatient Outlier Payments 1. Background 2. Proposed Outlier Calculation H. Proposed Calculation of an Adju sted Medicare Payment from the National Unadjusted Medicare Payment I. Proposed Beneficiary Copayments 1. Background 2. Proposed OPPS Copayment Policy 3. Proposed Calculation of an Adju sted Copayment Amount for an APC Group III. Proposed OPPS Ambulatory Paymen t Classification (APC) Group Policies A. Proposed OPPS Treatment of New CPT and Level II HCPCS CodesCMS-1601-P 19 1. Proposed Treatment of New CY 2013 Level II HCPCS and CPT Codes Effective April 1, 2013 and July 1, 2013 for Which We Are Soliciting Public Comments in this CY 2014 OPPS/ASC Proposed Rule 2. Proposed Process for New Level II HCPCS Codes That Will Be Effective October 1, 2013 and New CPT and Level II HCPCS Codes That Will Be Effective January 1, 2014 for Which We Will Solicit P ublic Comments in the CY 2014 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 OPPS APC-Specific Policies 1. Intraoperative Radiation Therapy (IORT) Related Services (APCs 0028 and 0065) 2. Proton Beam Radiation Therapy (APCs 0664 and 0667) 3. Stereotactic Radiosurgery (SRS) Treatment Delivery Services (APCs 0066 and 0067) 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 2014 PolicyCMS-1601-P 20 2. Proposed Provisions for Reducing Transitional Pass-Through Payments to Offset Costs Packaged into APC Groups a. Background b. Proposed CY 2014 Policy 3. Proposed Changes to Device Pass-Thr ough Criteria: Integral and Subordinate

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

Credit Devices 1. Background 2. Proposed Policy for CY 2014 V. Proposed OPPS Payment Changes for Dr ugs, Biologicals, and Radiopharmaceuticals A. Proposed OPPS Transitional Pass-T hrough Payment for Additional Costs of Drugs, Biologicals, and Radiopharmaceuticals 1. Background 2. Proposed Drugs and Biologicals w ith Expiring Pass-Through Status in

CY 2013 3. Proposed Drugs, Biologicals, a nd Radiopharmaceuticals with New or Continuing Pass-Throug h Status in CY 2014 4. Proposed Provisions for Reducing Transitional Pass-Through Payments for Diagnostic Radiopharmaceuticals; Contra st Agents; Drugs, Biologicals, and Radiopharmaceuticals That Function as Supplie s When Used in a Diagnostic Test orCMS-1601-P 21 Procedure; and Drugs and Biologicals That Function as Supplies or Devices When Used in a Surgical Procedure a. Background b. Proposed Payment Offset Policy for Diagnostic Radiopharmaceuticals c. Proposed Payment Offset Policy for Contrast Agents d. Proposed Payment Offset Policy fo r Products Packaged According to the Proposed Policy to Package Drugs, Biologica ls, and Radiopharmaceuticals That Function as Supplies When Used in a Diagnostic Test or Procedure and Drugs and Biologicals That Function as Supplies or Devices When Used in a Surgical Procedure B. Proposed OPPS Payment for Drugs , Biologicals, and Radiopharmaceuticals without Pass-Through Status 1. Background 2. Proposed Criteria for Packaging Payment for Drugs, Biologicals, and Radiopharmaceuticals a. Background b. Proposed Cost Threshold for Packag ing of Payment for HCPCS Codes That Describe Certain Drugs, Ce rtain Biologicals, and Ther apeutic Radiopharmaceuticals (“Threshold-Packaged Drugs”) c. Proposed Packaging Determination fo r HCPCS Codes That Describe the Same Drug or Biological But Different Dosages 3. Proposed Payment for Drugs and Bi ologicals without Pass-Through Status That Are Not PackagedCMS-1601-P 22 a. Proposed Payment for Specified Covered Outpatient Drugs (SCODs) and Other Separately Payable and P ackaged Drugs and Biologicals b. Proposed CY 2014 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

C. Nuclear Medicine Procedur e to Radiolabeled Product Edits 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 fo r Hospital Outpatient Visits A. Background B. Proposed Payment for Hospital Outpa tient Clinic and Emergency Department

Visits C. Proposed Payment for Critical Care Services VIII. Proposed Payment for Partial Hospitalization Services A. Background B. Proposed PHP APC Update for CY 2014

C. Discussion of Possible Future Ini tiatives and Request for Public Comments D. Proposed Separate Threshold for Outlier Payments to CMHCsCMS-1601-P 23 IX. Proposed Procedures That Would Be Paid Only as Inpatient Procedures A. Background B. Proposed Changes to the Inpatient List X. Proposed Nonrecurring Policy Changes A. Supervision of Outpa tient Therapeutic Services

1. Enforcement Instruction for the S upervision of Outpatient Therapeutic Services in CAHs and Certain Small Rural Hospitals 2. Supervision Requirements for Observation Services B. Application of Therapy Caps in CAHs C. Requirements for Payment of Outpatie nt Therapeutic (“Incident to”) Hospital

or CAH Services

1. Overview 2. Background

3. Technical Correction D. Collecting Data on Services Fu rnished in Off-Campus Provider-Based Departments XI. Proposed CY 2014 OPPS Payment Status and Comment Indicators A. Proposed CY 2014 OPPS Paymen t Status Indicator Definitions B. Proposed CY 2014 Comm ent Indicator Definitions XII. Proposed Updates to the Ambulatory Surgical Center (ASC) Payment System A. BackgroundCMS-1601-P 24 1. Legislative History, Statutory Authority, and Prior Rulemaking for the ASC Payment System 2. Policies Governing Changes to the Li sts of Codes and Payment Rates for ASC Covered Surgical Procedures a nd Covered Ancillary Services B. Proposed Treatment of New Codes 1. Proposed Process for Recognizing New Category I and Category III CPT

Codes and Level II HCPCS Codes 2. Proposed Treatment of New Leve l II HCPCS Codes and Category III CPT Codes Implemented in April 2013 and July 2013 for Which We Are Soliciting Public Comments in This CY 2014 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 Solicit Public Comments 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. Additions to the List of ASC Covered Surgical Procedures b. Proposed Covered Surgical Proce dures Designated as Office-Based (1) Background (2) Proposed Changes for CY 2014 to C overed Surgical Procedures Designated

as Office-BasedCMS-1601-P 25 c. ASC Covered Surgical Procedures Proposed to be Designated as

Device-Intensive (1) Background (2) Proposed Changes to List of Covere d ASC Surgical Procedures Designated as

Device-Intensive for CY 2014 d. Proposed Adjustment to ASC Paymen ts for No Cost/Full Credit and Partial

Credit Devices e. Proposed ASC Treatment of Surgi cal Procedures Removed from the OPPS Inpatient List for CY 2014 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 2014

c. Waiver of Coinsurance and Deductible for Certain Preventive Services d. Proposed Payment for Cardiac Resynchronization Therapy Services e. Proposed Payment for Low Dose Rate (LDR) Prostate Brachytherapy Composite 2. Proposed Payment for Covered Ancillary Services a. BackgroundCMS-1601-P 26 b. Proposed Payment for Covered Ancillary Services for CY 2014 E. New Technology Intraocular Lenses (NTIOLs) 1. NTIOL Application Cycle 2. Requests to Establish New NTIOL Classes for CY 2014 3. Payment Adjustment F. Proposed ASC Payment and Comment Indicators 1. Background 2. Proposed ASC Payment and Comment Indicators G. Calculation of the Proposed ASC Conversion Factor and the Proposed ASC Payment Rates 1. Background 2. Proposed Calculation of the ASC Payment Rates a. Updating the ASC Relative Paymen t Weights for CY 2014 and Future Years b. Updating the ASC Conversion Factor 3. Display of Proposed CY 2014 ASC Payment Rates XIII. Hospital Outpatient Quality Reporting Program Updates A. Background

1. Overview 2. Statutory History of the Hospital Ou tpatient Quality Reporting (Hospital OQR) Program 3. Measure Updates and Data Publication a. Process for Updating Quality MeasuresCMS-1601-P 27 b. Publication of Hospital OQR Program Data B. Process for Retention of Hosp ital 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. Proposed Removal of Two Chart-Abst racted Measure from the Hospital OQR Program a. Proposed Removal of OP-19: Transition Record with specified Elements Received by Discharged ED Patients b. Proposed Removal of OP-24: Card iac Rehabilitation Measure: Patient Referral from an Outpatient Setting D. Quality Measures Previously Adopted for the CY 2014 and CY 2015 Payment Determinations and Subsequent Years E. Possible Quality Measures for the CY 2016 Payment Determination and Subsequent Years 1. Influenza Vaccination Coverage Among Healthcare Personnel (NQF #0431) 2. Complications Within 30 Days Following Cataract Surgery Requiring Additional Surgical Procedures (NQF #0564) 3. Endoscopy/Poly Surveillance: Appr opriate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients (NQF #0658)CMS-1601-P 28 4. Endoscopy/Poly Surveillance: Co lonoscopy Interval for Patients with a History of Adenomatous Polyps—Avoida nce of Inappropriate Use (NQF #0659) 5. Cataracts—Improvement in Patient ’s Visual Function Within 90 Days Following Cataract Surgery (NQF # 1536) F. Possible Hospital OQR Program Meas ure Topics for Future Consideration G. Proposed Payment Reduction for Hospitals That Fail to Meet the Hospital OQR Program Requirements for the CY 2014 Payment Update 1. Background 2. Proposed Reporting Ratio Application and Associated Adjustment Policy for

CY 2014 H. Proposed Requirements for Reporti ng of Hospital OQR Data for the CY 2015 Payment Determination and Subsequent Years 1. Administrative Requirements for the CY 2015 Payment Determination and Subsequent Years 2. Form, Manner, and Timing of Data Submitted for the Hospital OQR Program a. Background b. Effects of Proposed Changes on Data Submission for CY 2015 and CY 2016 Payment Determinations and Subsequent Years c. General Requirements d. Proposed Chart-Abstracted Meas ure Requirements for CY 2015 and CY 2016 Payment Determinations and Subsequent YearsCMS-1601-P 29 e. Proposed Claims-Based Measure Da ta Requirements for the CY 2015 Payment Determinations and Subsequent Years f. Proposed Data Submission Requi rements for Measure Data Submitted via Web-Based Tool for the CY 2016 Payment Determination and Subsequent Years g. Proposed Data Submission Require ments for a Measure Reported via NHSN for the CY 2016 Payment Determination and Subsequent Years h. Population and Sampling Data Requirements for the CY 2015 Payment Determination and Subsequent Years 3. Hospital OQR Program Validation Requirements for Chart-Abstracted Measure Data Submitted Directly to CMS for the CY 2015 Payment Determination and Subsequent Years a. Selection of Hospitals for Data Validation of Chart-Abstracted Measures for the CY 2015 Payment Determination and Subsequent Years b. Targeting Criteria for Data Vali dation Selection for CY 2015 Payment Determination and for Subsequent Years c. Methodology for Encounter Selecti on for the CY 2015 Payment Determination and Subsequent Years d. Medical Record Documentation Reque sts for Validation and Validation Score Calculation for the CY 2015 Payment Determination and Subsequent Years I. Proposed Hospital OQR Reconsider ation and Appeals Procedures for the CY 2015 Payment Determination and Subsequent YearsCMS-1601-P 30 J. Extraordinary Circumstances Exte nsion or Waiver for the CY 2014 Payment Determination and Subsequent Years XIV. Hospital Value-Based Purchasing (VBP) Program Updates A. Background B. Proposal for Additional CMS Appeals Review Process 1. Statutory Basis 2. Independent CMS Review Proposal C. Proposed Performance and Baseline Periods for Certain Outcome Measures for the FY 2016 Hospital VBP Program XV. Proposed Requirements for the Ambulat ory Surgical Centers Quality Reporting (ASCQR) Program A. Background

1. Overview 2. Statutory History of the ASC Quality Reporting (ASCQR) Program 3. Regulatory History of the ASCQR Program B. ASCQR Program Quality Measures

1. Considerations in the Selecti on of ASCQR Program Quality Measures 2. ASCQR Program Qual ity Measures Adopted in Previous Rulemaking 3. Proposed Additional ASCQR Progra m Quality Measures for the CY 2016 Payment Determination and subsequent Years a. Complications within 30 Days Following Cataract Surgery Requiring Additional surgical ProceduresCMS-1601-P 31 b. Endoscopy/Poly Surveillance: Appropriate Follow-Up for Normal Colonoscopy in Average Risk Patients (NQR #0658) c. Endoscopy/Poly Surveillance: Co lonoscopy Interval for Patients with a History of Adenomatous Polyps—Avoida nce of Inappropriate Use (NQF #0659) d. Cataracts: Improvement in Patie nt’s Visual Function within 90 Days Following Cataract Surgery (NQF #1536) 4. ASCQR Program Measure Topi cs for Future Consideration 5. Technical Specification U pdates and Data Publication C. Payment Reduction for ASCs That Fail to Meet the ASCQR Program Requirements 1. Statutory Background 2. Reduction to the ASC Payment Rates for ASCs That Fail to Meet the ASCQR Program Requirements for the CY 2015 Payment Determination and Subsequent Years D. Administrative Requirements 1. Proposed Requirements Regarding QualityNet Account and Security

Administrator a. Background for the CY 2014 and CY 2015 Payment Determinations b. Proposed Requirements for the CY 2016 Payment Determination and Subsequent Years 2. Proposed Requirements Rega rding Participation Status a. Background for the CY 2014 Payment Determination and Subsequent YearsCMS-1601-P 32 b. Proposed Requirements for the CY 2016 Payment Determination and Subsequent Years 3. Requirements Regarding Data Pr ocessing and Collection Periods for Claims-Based Measures for the CY 2014 Paym ent Determination and Subsequent Years 4. Proposed Minimum Threshold, Minimum Case Volume, and Data Completeness for Claims-Based Measures Using QDCs a. Background for the CY 2014 Payment Determination and Subsequent Years b. Proposed Requirements for the CY 2016 Payment Determination and Subsequent Years 5. Proposed Requirements for Data Submitted Via a CMS Online Data

Submission Tool a. Background for the CY 2015 Payment Determination and Subsequent Years b. Proposed Requirements for the CY 2016 Payment Determination and Subsequent Years for Meas ures Currently Finalized c. Proposed Requirements for the CY 2016 Payment Determination and Subsequent Years for Proposed New Meas ures with Data Submission Via a CMS

Web-Based Tool 6. Proposed Data Submission Require ments for a Measure Reported Via the National Healthcare Safety Network (NHSN) for the CY 2016 Payment Determination a. Background for the CY 2016 Payment Determination b. Proposed Requirements for the CY 2016 Payment Determination 7. ASCQR Program Validation of Clai ms-Based and CMS Web-Based MeasuresCMS-1601-P 33 8. Extraordinary Circumstances Extens ions or Waivers for the CY 2014 Payment Determination and Subsequent Years a. Background b. Proposal for CMS Granting of Ex traordinary Circumstance Waiver or

Extension for CY 2014 9. ASCQR Program Reconsideration Procedures for the CY 2014 Payment Determination and Subsequent Years XVI. Proposed Changes to the Conditions fo r Coverage (CfCs) for Organ Procurement Organizations (OPOs) A. Background B. Proposed Policy Changes XVII. Proposed Revisions to the Quality Improvement Organization (QIO) Regulations A. Legislative History B. Basis for Proposals C. Proposed Changes to the Nomenclature and Regulations under 42 CFR Parts

475 and 476 1. Proposed Nomenclature Changes 2. Proposals to Add and Revise Definitions 3. Proposals Relating to Scope and A pplicability of Subpart C of Part 475 4. Proposals Relating to Eligibility Requirements for QIOs (§§ 475.101 through 475.106) a. Eligibility to be Awa rded a QIO Contract (§ 475.101)CMS-1601-P 34 b. Eligibility Requirements for QIOs to Perform Case Reviews (§ 475.102) c. Eligibility Requirements for QIOs to Conduct Quality Improvement Initiatives (§ 475.103) d. Prohibitions on Eligibility as a QIO (§ 475.105) 5. Proposals Relating to QIO Contract Awards (§ 475.107)

XVIII. Medicare Fee-for-Service Electronic Health Record (EHR) Incentive Program A. Incentive Payments for Eligible Pr ofessionals (EPs) Reassigning Benefits to

Method II CAHs 1. Background for Definition of EPs and EHR Incentive Payments to EPs 2. Special Circumstances of EPs Re assigning Benefits to Method II CAHs B. Cost Reporting Periods for Inter im and Final EHR Incentive Payments to Hospitals 1. Background 2. Special Circumstances XIX. Medicare Program: Provider Reim bursement Determinations and Appeals A. Matters Not Subject to Admini strative or Judicial Review (§ 405.1801) 1. Background 2. Proposed Technical Conforming Change B. Clarification of Reopening of Predicat ed Facts in Intermediary Determinations of Provider Reimbursement (§ 405.1885)

XX. Files Available to the Public Via the Internet XXI. Collection of Information RequirementsCMS-1601-P 35 A. Legislative Requirement s for Solicitation of Comments B. Requirements in Regulation Text 1. Proposed Changes to the Outcome Measure Requirement for OPOs 2. Proposed Changes to the Medicar e Fee-for-Service EHR Incentive Program C. Associated Information Collections Not Specified in Regulatory Text 1. Hospital OQR Program a. Hospital OQR Program Requi rements for the CY 2015, CY 2016, and Subsequent Years Payment Determinations b. Hospital OQR Program Validatio n Requirements for the CY 2015 and Subsequent Years Payment Determinations c. Hospital OQR Program Recons ideration and Appeals Procedures 2. ASCQR Program Requirements a. Claims-Based Measures for the CY 2014 Payment Determination

b. Claims-Based and Web-Based Measures for the CY 2015 and CY 2016 Payment Determination c. Program Administrative Requi rements and QualityNet Accounts; Extraordinary Circumstance and Extensi on Requests; Recons ideration Requests 3. Hospital VBP Program Requirements XXII. Response to Comments XXIII. Economic Analyses A. Regulatory Impact Analysis

1. IntroductionCMS-1601-P 36

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

Beneficiaries (4) Alternative ASC Payment Policies Considered c. Accounting Statements and Tables d. Effects of Proposed Requireme nts for the Hospital OQR Program e. Effects of Proposals for the ASCQR ProgramCMS-1601-P 37 f. Effects of Proposed Changes to th e CfCs for OPOs Relating to the Outcome Measure Requirement for Recertification g. Effects of Proposed Revisions of the QIO Regulations h. Effects of Proposed Changes to th e Medicare Fee-for-Service EHR Incentive Program B. Regulatory Flexibility Act (RFA) Analysis C. Unfunded Mandates Reform Act Analysis

D. Conclusion XXIV. Federalism Analysis Regulation Text I. Summary and Background A. Executive Summary of this Proposed Rule 1. Purpose In this proposed rule, we are propos ing to update the payment policies and payment rates for services furnished to Me dicare beneficiaries in hospital outpatient departments and Ambulatory Surgical Ce nters (ASCs) beginning January 1, 2014. Section 1833(t) of the Social Security Act (t he Act) requires us to annually review and update the relative payment weights and the conversion factor for services payable under the Outpatient Prospective Payment System (OPPS). Under secti on 1833(i) of the Act, we annually review and update the ASC paymen t rates. We describe these and various other statutory authorities in the releva nt sections of this proposed rule.CMS-1601-P 38 In addition, we are proposing to update a nd refine the requirements for the Hospital Outpatient Quality Reporting (OQR) Progr am, the ASC Quality Reporting (ASCQR) Program, and the Hospital Value-Based Purchasing (VBP) Program. We are proposing changes to the cond itions for coverage (CfCs) for organ procurement organizations (OPOs); revisions to the Quality Improvement Organization (QIO) regulations; changes to the Medicare fee-for-service Electronic Health Record (EHR) Incentive Program; and change s relating to provider reimbursement determinations and appeals. 2. Summary of the Major Provisions

● OPPS Update: For CY 2013, we are proposing to increase the payment rates under the OPPS by an Outpatient Department (OPD) fee schedule increase factor of 1.8 percent. This proposed increase is based on the proposed hospital inpatient market basket percentage increase of 2.5 percent for inpatien t services paid under the hospital inpatient prospective payment system (IPPS), minus the proposed multifactor productivity (MFP) adjustment of 0.4 percentage points, and minus a 0.3 percentage point adjustment required by the Affordable Care Act. U nder this proposed rule, we estimate that proposed total payments for CY 2014, includi ng beneficiary cost-sharing, to the almost 4,000 facilities paid under the OPPS (including general acute care hospitals, children’s hospitals, cancer hospitals, and community me ntal health centers (CMHCs)), will be approximately $50.4 billion, an increase of a pproximately $4.4 billion compared to CY 2013 payments, or $600 million excluding our estimated changes in enrollment, utilization, and case-mixCMS-1601-P 39 We are proposing to continue to impl ement the statutory 2.0 percentage point reduction in payments for hospitals failing to meet the hospital outpatient quality reporting requirements, by applying a reporti ng factor of 0.980 to the OPPS payments and copayments for all applicable services.

● Rural Adjustment: We are proposing to continue the adjustment of 7.1 percent to the OPPS payments to certain rural so le community hospitals (SCHs), including essential access community hospitals (EACHs ). This adjustment will apply to all services paid under the OPPS, excluding se parately payable drugs and biologicals, devices paid under the pass-through payment polic y, and items paid at charges reduced to

cost.

● Cancer Hospital Payment Adjustment: For CY 2014, we are proposing to continue our policy to provide additional pa yments 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 hos pitals using the most recent submitted or settled cost report data. Based on those da ta, a target PCR of 0.90 will be used to determine the proposed CY 2014 can cer hospital payment adjustment to be paid at cost report settlement. That is, the proposed pa yment amount associated with the cancer hospital payment adjustment will be the addi tional payment needed to result in a PCR equal to 0.90 for each cancer hospital.

● Payment of Drugs, Biologicals , and Radiopharmaceuticals: For CY 2014, proposed payment for the acquisition and pharm acy overhead costs of separately payableCMS-1601-P 40 drugs and biologicals that do not have pass-th rough status would be set at the statutory default of average sales price (ASP) plus 6 percent.

● Packaging Proposals: The OPPS packages payment for multiple interrelated items and services into a single payment to create incentives for hospitals to furnish services in the most efficient way by enabli ng hospitals to manage their resources with maximum flexibility, thereby encouraging long -term cost containment. For 2014, we are proposing to unconditionally package or condi tionally package the following items and

services and to add them to the list of OPPS packaged items and services in 42 CFR 419.2(b): (1) Drugs, biologicals, and radiopharmaceu ticals that function as supplies in a diagnostic test or procedure; (2) Drugs and biologicals that functi on as supplies or devices in a surgical procedure; (3) Laboratory tests; (4) Procedures described by add-on codes; (5) Ancillary services (status indicator “X”); (6) Diagnostic tests on the bypass list; and (7) Device removal procedures.

We refer readers to section II.A.3. of this proposed rule for a complete description of our 2014 packaging proposals.

● Establishing Comprehensive APCs: In order to improve the accuracy and transparency of our payment for certain de vice-dependent services, for CY 2014, we areCMS-1601-P 41 proposing to create 29 comprehensive APCs to prospectively pay for the most costly device-dependent services. We are propos ing to define a comprehensive APC as a classification for the provision of a primary service and all adjunct services provided to support the delivery of the primary service. The comprehensive APC would treat all individually reported codes as representing components of the comprehensive service, resulting in a single prospec tive payment based on the cost of all individually reported codes that represent the delivery of a primary service as well as all adjunct services provided to support that deliv ery. We are proposing to make a single payment for the comprehensive service based on all charges on the claim, excluding only charges for

services that cannot be cove red by Medicare Part B or th at are not payable under the

OPPS.

● Payment of Hospital Outpatient Visits: For CY 2014 we are proposing to replace the current five levels of visit codes for each clin ic, Type A ED, and Type B ED visits with three new alpha numeric Level II HCPCS codes representing a single level of payment for the three types of visits, respect ively. We are proposing to assign the new alphanumeric Level II HCPCS to newly created APCs with CY 2014 OPPS payment

rates based on the total mean costs of Leve l 1 through Level 5 visit codes obtained from CY 2012 OPPS claims data for each visit type.

● Proposed OPPS Nonrecurring Policy Changes: We note in this proposed rule that we expect to allow the enforcement in struction for the supervision of outpatient therapeutic services furnished in CAHs and sm all rural hospitals to expire at the end of CY 2013. In addition, we are proposing to amend the conditions of payment forCMS-1601-P 42 “incident to” hospital or CAH outpatient servi ces (sometimes referred to as hospital or CAH “therapeutic” services) to require that individuals furnishing these services be in compliance with State law. We are soliciti ng public comments regarding a potential new

claims or other data element that would indi cate that the services were furnished in an off-campus provider-based department. Finally, we refer readers to the CY 2014 Medicare Physician Fee Schedule (MPFS) proposed rule (CMS-1600-P) to review Medicare’s proposal to apply the therapy caps and related provi sions under section 1833(g) of the Act to physical therapy (PT), speech-language pathology (SLP) and occupational therapy (OT) (“therapy”) servic es that are furnished by a CAH, effective January 1, 2014.

● Ambulatory Surgical Center Payment Update: For CY 2014, we are proposing to increase payment rates under the ASC payment system by 0.9 percent. This proposed increase is based on a projected CPI-U update of 1.4 percent minus a multifactor productivity adjustment required by the Affordab le Care Act that is projected to be 0.5 percent. Based on this proposed update, we estimate that total payments to ASCs (including beneficiary cost-sha ring and estimated changes in enrollment, utilization, and case-mix), for CY 2014 would be approxi mately $3.980 billion, an increase of approximately $133 million compared to estimated CY 2013 payments.

● Hospital Outpatient Quality Reporting (OQR) Program: For the Hospital OQR Program, we are proposing five quality measures for the CY 2016 and subsequent years payment determinations: four where aggregate data (numerators, denominators, and exclusions) are collected and data submitted via an online Web-based tool located onCMS-1601-P 43 a CMS Web page and one HAI measure subm itted through the CDC’s NHSN. We also are proposing to remove two measures and are proposing to codify administrative procedures.

● Ambulatory Surgical Center Qual ity Reporting (ASCQR) Program: For the ASCQR Program, we are proposing four quality measures for the CY 2016 and subsequent years payment determinations wh ere data collection would begin in CY 2014. We are proposing to collect aggregate data (numerators, denominators, and exclusions) on all ASC patients for these four proposed chart-abstracted measures via an online Web-based tool located on a CMS Web page . We also are proposing, for the CY 2016 payment determination and subsequent years’ payment determinations, requirements for facility participation, data collection, and submission for claims-based, CMS Web-based,

and NHSN measures.

● Proposed Revisions to th e Quality Improvement Organizations Regulations. We are proposing to update the regulations at 42 CFR 475 and 476 based on the recently enacted Trade Adjustment Assistance Ex tension Act of 2011 (TAAEA) (Pub. L. 112-40, Section 261) where by Congress authorized numer ous changes to the original legislation and included additional flexibility for the Secretary in the admi nistration of the QIO program. Currently, 42 CFR Part 475 incl udes definitions and standards governing eligibility and the award of contracts to QIOs. In this proposed rule, we set forth proposals for the partial deletion and revisi on of the regulations under 42 CFR Parts 475 and 476, which relate to the QIO progra m, including the following: (1) replace

nomenclature in Part 475 and 476 that has been amended by the TAAEA; (2) revise theCMS-1601-P 44 existing definition for the term “physician”; (3) add new definitions as necessary to support the new substantive provisions in S ubpart C; and (4) replace some of the substantive provisions in Subpart C in their entirety to fully exercise the Secretary’s authority for the program and update the contracting requirements to align with contemporary quality improvement.

● Proposed Changes to the Medicare Fee- for-Service Electronic Record (EHR) Incentive Program . We are proposing to the regulations to provide a special method for making hospital-based determinations for 2013 only in the cases of those eligible professionals (EPs) who reassign their benef its to Method II CAHs. We have been unable to make EHR payments to these EPs for their CAH II claims, or to take those claims into consideration in making hospita l-based determinations because of systems limitations. Adopting our proposed method for 2013 will allow us to begin making payments based on CAH II one year earlier th an we would be able to do under current regulations. We also are propos ing a minor clarification to th e regulations concerning the cost reporting period to be used in determining final EHR payments for hospitals. 3. Summary of Costs and Benefits

In sections XXIII. and XXIV. of this proposed rule, we set forth a detailed analysis of the regulatory and federalism imp acts that the proposed changes would have

on affected entities and benefi ciaries. Key estimated impacts are described below. a. Impacts of the OPPS Update (1) Impacts of All Proposed OPPS ChangesCMS-1601-P 45 Table 39 in section XXIII. of this proposed rule displays the distributional impact all the proposed OPPS changes on various gr oups of hospitals and CMHCs for CY 2014 compared to all estimated OPPS payments in CY 2013. We estimate that the proposed policies in this proposed rule would result in a 1.8 percent overall increase in OPPS payments to providers. We estimate that th e proposed increase in OPPS expenditures, including beneficiary cost-s haring, would be approximately $600 million, not taking into account potential changes in enrollment, utilization, and case-mix. Taking into account estimated spending changes that are attributable to these factors, we estimate an increase of approximately $4.372 billion in OPPS expenditures, including beneficiary cost-sharing, for CY 2014 compared to CY 2013 OPPS expenditures. We estimate that proposed total OPPS payments, including beneficiary cost-s haring, would be $50.4

billion for CY 2014. We estimated the isolated impact of our proposed OPPS policies on CMHCs because CMHCs are only paid for partial hospitalization servi ces under the OPPS. Continuing the provider-specific structure that we adopted for CY 2011 and basing payment fully on the type of provider furnis hing the service, we estimate a 3.8 percent decrease in CY 2014 payments to CMHCs relative to their CY 2013 payments. (2) Impacts of the Proposed Updated Wage Indices We estimate no significant impacts rela ted to our proposal to update the wage indices and apply the frontier State wage index. Proposed adjustments to the wage

indices other than the frontier State wage adjustment would not significantly affect most hospitals.CMS-1601-P 46 (3) Impacts of the Proposed Rural Adju stment and the Cancer Hospital Payment Adjustment There are no significant impacts of our proposed CY 2014 payment policies for hospitals that are eligible for the rural ad justment or for the cancer hospital payment adjustment. We are not proposing to make any change in policies for determining the rural and cancer hospital payment adjustment s, and the proposed adjustment amounts do not significantly impact the budget neutrality adjustments for these proposed policies. (4) Impacts of the Proposed OP D Fee Schedule Increase Factor We estimate that, for many hospitals, th e application of the proposed OPD fee schedule increase factor of 1.8 percent to the conversion factor for CY 2014 would mitigate the small negative impacts of the budget neutrality adjustments. While most classes of hospitals woul d receive an increase that is in line with the proposed 1.8 percent overall increase after the update is applied to the budget neutrality adjustments, some hospitals would receive smaller but still generally positive overall increases. b. Impacts of the Proposed ASC Payment Update For impact purposes, the surgical pr ocedures on the ASC list of covered procedures are aggregated into surgical specialty groups using CPT and HCPCS code range definitions. The proposed percentage change in estimated total payments by specialty groups under the CY 2014 payment rates compared to estimated CY 2013 payment rates ranges between -12 percent for ancillary items and services and 17 percent for hemic and lymphatic system procedures.CMS-1601-P 47 c. Impacts of the Hospital OQR Program We do not expect our proposed CY 2014 policies to signific antly affect the number of hospitals that do not re ceive a full annual payment update. d. Impacts of the ASCQR Program We do not expect our proposed CY 2014 pr oposed policies to significantly affect

the number of ASCs that do not receive a full annual payment update beginning in

CY 2015. e. Impacts for the Proposed QIO Program Changes We estimate the effects of the proposed QIO Program changes to be consistent with the Congressional Budget Office’s 2011 Co st Estimate of the Trade Bill (H.R. 2832) which included a reduction in spending of $330 million over the 2012-2021 period. According to the CBO Estimate the Act a nd subsequently the proposed regulatory changes “would modify the provisions unde r which CMS contracts with independent entities called [“]Quality Improvement Organi zations [(QIOs)”] in Medicare. QIOs, generally staffed by health care professionals , review medical care, help beneficiaries with complaints about the qua lity of care, and implement care improvements. H.R. 2832 would make several change s to the composition and ope ration of QIOs, and would harmonize QIO contracts with requirements of the Federal Acquisition Regulation. Among those changes are a modification to expand the geogra phic scope of QIO contracts and a lengthening of the contract pe riod. CBO estimates that those provisions would reduce spending by $330 million over the 2012-2021 period.”CMS-1601-P 48 B. Legislative and Regulatory Authority for the Hospital OPPS When Title XVIII of the Social Security Act was enacted, Medicare payment for hospital outpatient services was based on hospital-specif ic costs. In an effort to ensure that Medicare and its beneficiaries pay appropr iately for services and to encourage more efficient delivery of care, the Congress mandated replacement of the reasonable cost-based payment methodology with a pros pective payment system (PPS). The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) added section 1833(t) to the Act authorizing implementation of a PPS for hospita l outpatient services. The OPPS was first implemented for services furnished on or after August 1, 2000. Implementing regulations

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

Title I of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA) (Pub. L. 109-432), enacted on December 20, 2006; the Me dicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173), enac ted on December 29, 2007; the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), enacted on July 15, 2008; the Patient Pr otection and Affordable Care ActCMS-1601-P 49 (Pub. L. 111-148), enacted on March 23, 2010, as amended by the Health Care and

Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30, 2010 (These two public laws are co llectively known as the Affordable Care Act); the Medicare and Medicaid Extenders Act of 2010 (MMEA, Pub. L. 111-309); the Temporary Payroll Tax Cut Continuation Act of 2011 (T PTCCA, Pub. L. 112-78), enacted on December 23, 2011; and most recently the Mi ddle Class Tax Relief and Job Creation Act of 2012 (MCTRJCA, Pub. L. 112-96), enacted on February 22, 2012; and most recently the American Taxpayer Relief Act of 2012 (Pub. L. 112-240), enacted January 2, 2013. Under the OPPS, we pay for hospital out patient services on a rate-per-service

basis that varies acco rding to the APC group to which the service is assigned. We use the Healthcare Common Procedure Coding System (HCPCS) (which includes certain Current Procedural Terminology (CPT) codes) to iden tify and group the services within each APC. The OPPS includes payment for most hospital outpatient se rvices, except those identified in section I.C. of this proposed rule. Section 1833(t)(1)(B) of the Act provides for payment under the OPPS for hospital outpati ent services designate d by the Secretary (which includes partial hospitalization se rvices furnished by CMHCs), and certain inpatient hospital services th at are paid under Part B. The OPPS rate is an unadjusted national payment amount that includes the Medicare payment and the beneficiary copayment. This rate is divided into a

labor-related amount and a nonlabor-relat ed amount. The labor-related amount is adjusted for area wage differences using the hospital inpatient wage index value for the locality in which the hospital or CMHC is located.CMS-1601-P 50

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

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

for which we lack sufficient clinical inform ation and cost data to appropriately assign them to a clinical APC group, we have esta blished special APC groups based on costs, which we refer to as New Technology APCs. These New Technology APCs are designated by cost bands which allow us to provide appropriate and consistent payment for designated new procedures that are not yet reflected in our claims data. Similar to pass-through payments, an assignment to a New Technology APC is te mporary; that is,CMS-1601-P 51 we retain a service within a New Technology APC until we acquire sufficient data to assign it to a clinical ly appropriate APC group. C. Excluded OPPS Services and Hospitals Section 1833(t)(1)(B)(i) of the Act aut horizes the Secretary to designate the hospital outpatient services th at are paid under the OPPS. While most hospital outpatient services are payable under the OPPS, sect ion 1833(t)(1)(B)(iv) of the Act excludes payment for ambulance, physical and occupational therapy, and speech-language pathology services, for which payment is made under a fee schedule. It also excludes screening mammography, dia gnostic mammography, and effective January 1, 2011, an annual wellness visit providing personalized pr evention plan services. The Secretary originally exercised the author ity granted under the statute to also exclude from the OPPS those services that are paid under fee sche dules or other payment systems. Such excluded services include, for example, th e professional services of physicians and nonphysician practitioners paid unde r the MPFS; laboratory servic es paid at the Clinical Laboratory Fee Schedule (CLFS) rates; servic es for beneficiaries with end-stage renal disease (ESRD) that are paid under the ESRD prospective payment system; 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. This proposed rule include s proposals to modify 42 CFR 419.22 and

include in the OPPS some of thes e currently excluded services. Under § 419.20(b) of the regulations, we specify the types of hospitals and entities that are excluded from payment under the OPPS. These excluded entitiesCMS-1601-P 52 include: Maryland hospitals, but only for servi ces that are paid under a cost containment waiver in accordance with section 1814(b)(3) of the Act; CAHs; hospitals located outside of the 50 States, the District of Columbia, and Puerto Rico; and Indian Health Service (IHS) hospitals. D. Prior Rulemaking On April 7, 2000, we published in the Federal Register a final rule with comment period (65 FR 18434) to implement a prospective payment system for hospital outpatient services. The hospital OPPS was fi rst implemented for services furnished on or after August 1, 2000. Secti on 1833(t)(9) of the Act requires the Secretary to review certain components of the OPPS, not less ofte n than annually, and to revise the groups, relative payment weights, and other adjust ments that take into account changes in medical practices, changes in technologies, and the addition of new services, new cost data, and other relevant information and factors. Since initially implementing the OPPS, we have published final rules in the Federal Register annually to implement statutory re quirements and changes arising from our continuing experience with this system. These rules can be viewed on the CMS Web

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

.CMS-1601-P 53 E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel or the Panel), Formerly Named the Advisory Panel on Ambulatory Payment Classification Groups (APC Panel) 1. Authority of the Panel Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of Pub. L. 106-113, and redesignated by section 202(a)(2) of Pub. L. 106-113, requires that we consult with an external advisory panel of experts to annually review the clinical integrity of the payment groups and their weights under the OPPS. In CY 2000, based on section 1833(t)(9)(A) of the Act and section 222 of the Public Health Service (PHS) Act, the Secretary established the Advisory Panel on Ambulatory Payment Classification Groups (APC Panel) to fulfill this requirement. In CY 2011, based on section 222 of the PHS Act which gives discreti onary authority to the Secr etary to convene advisory councils and committees, the Secretary expanded the panel’s scope to include the supervision of hospital outpatient therapeuti c services in addition to the APC groups and weights. To reflect th is new role of the panel, the Secr etary changed the panel’s name to the Advisory Panel on Hospital Outpatient Paym ent (the HOP Panel, or the Panel). The

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

2. Establishment of the Panel On November 21, 2000, the Secretary signed the initial charter establishing the HOP Panel, at that time named the APC Pa nel. This expert panel, which may be composed of up to 19 appropriate representa tives of providers (c urrently employed full-CMS-1601-P 54 time, not as consultants, in their respective ar eas of expertise), revi ews clinical data and

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

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

. 3. Panel Meetings and Organizational Structure The Panel has held multiple meetings, with the last meeting taking place on March 11, 2013. 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.CMS-1601-P 55 The Panel has established an operational st ructure that, in part, currently includes

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

Subcommittee reviews and makes recommendations to the Panel on all technical issues pertaining to observation servic es and hospital outpatient vis its paid under the OPPS (for example, APC configurations and APC rela tive payment weights). The Subcommittee for APC Groups and SI Assignments advise s the Panel on the following issues: the appropriate SIs to be assigne d to HCPCS codes, including but not limited to whether a HCPCS code or a category of codes should be packaged or separately paid; and the appropriate APC placement of HCPCS codes regarding services for which separate payment is made. Each of these subcommittees was established by a majority vote from the full Panel during a scheduled Panel meeting, and the Panel recommended that the subcommittees continue at the August 2013 Panel meeting. We accepted this

recommendation.

Discussions of the other recommendati ons made by the Panel at the March 2013 Panel meeting are included in the sections of this final rule that are specific to each

recommendation. For discussions of earlie r Panel meetings and recommendations, we refer readers to previously published OPPS/ ASC proposed and final rules, the CMS WebCMS-1601-P 56

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

. F. Public Comments Received on the CY 2013 OPPS/ASC Final Ru le with Comment

Period We received approximately 27 timely pieces of correspondence on the CY 2013

OPPS/ASC final rule with commen t period that appeared in the Federal Register on November 15, 2012 (77 FR 68210), some of wh ich contained comments on the interim APC assignments and/or status indicators of HCPCS codes identified with comment indicator “NI” in Addenda B, AA, and BB to that final rule. Summaries of these public comments on topics that were open to comment and our responses to them will be set

forth in various sections of the final rule with comment period under the appropriate subject-matter headings.CMS-1601-P 57 II. Proposed Updates Affecting OPPS Payments A. Proposed Recalibration of APC Relative Payment Weights

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

calculated the relativ e payment weights that were implemented on August 1, 2000 for each APC group. For the CY 2014 OPPS, we are proposing to recalibrate the APC relative payment weights for services furnished on or afte r January 1, 2014, and before January 1, 2015 (CY 2014), using the same basic methodol ogy that we described in the CY 2013

OPPS/ASC final rule with comm ent period. That is, we are proposing to recalibrate the relative payment weights for each APC based on claims and cost report data for hospital outpatient department (HOPD) 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 wei ghts for CY 2014, we used approximately 146 million final action claims (claims for whic h all disputes and adjustments have been resolved and payment has been made) for hospital outpatient department services furnished on or after January 1, 2012, and be fore January 1, 2013. 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:CMS-1601-P 58http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html

. Of the approximately 146 million final ac tion claims for services provided in hospital outpatient settings us ed to calculate the CY 2014 OPPS payment rates for this proposed rule, approximately 117 million clai ms were the type of bill potentially appropriate for use in setting rates for OPPS services (but did not necessarily contain services payable under the OPPS). Of the approximately 117 million claims, approximately 5 million claims were not for services paid under the OPPS or were excluded as not appropriate for use (for exampl e, erroneous cost-to-ch arge ratios (CCRs) or no HCPCS codes reported on the claim) . From the remaining approximately 112 million claims, we created approximately 82 million single records, of which approximately 34 million were “pseudo” single or “single session” claims (created from approximately 19 million multiple procedure claims using the process we discuss later in this section). Approximately 1 million claims were trimmed out on cost or units in

excess of +/- 3 standard de viations from the geometric mean, yielding approximately 82 million single bills for ratesetting. As de scribed in section II.A.2. of this proposed rule, our data development process is designe d with the goal of using appropriate cost information in setting the APC relative payment weights. The bypass process is described in section II.A.1.b. of this proposed rule. This sectio n discusses how we develop “pseudo” single procedure claims (as defined below), with the intention of using more appropriate data from the available claims. In some cases, the bypass process allows us to use some portion of the submitted claim for cost estimation purposes, whileCMS-1601-P 59 the remaining information on the claim conti nues to be unusable. Consistent with the goal of using appropriate information in our data development process, we only use claims (or portions of each claim) that are appropriate for ratesetting purposes. The proposed APC relative weights a nd payments for CY 2014 in Addenda A and B to this proposed rule (which are avai lable via the Internet on the CMS Web site) were calculated using claims from CY 2012 that were processed through December 31, 2012. While prior to CY 2013 we historically based the payments on median hospital costs for services in th e APC groups, beginning with the CY 2013 OPPS, we established the cost-based relative pa yment weights for the OPPS using geometric mean costs, as discussed in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68259 through 68271). For the CY 2014 OPPS, we are proposing to use this same methodology, basing payments on geometri c mean costs. Under this methodology, we select claims for services paid under the OPPS and match these claims to the most recent cost report filed by the individual hospi tals 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 2014 payment rates.CMS-1601-P 60 b. Proposed Use of Single and Multiple Procedure Claims For CY 2014, in general, we are propos ing to continue to use single procedure

claims to set the costs on which the AP C relative payment weights are based. We generally use single procedure claims to se t the estimated costs for APCs because we believe that the OPPS relative weights on which payment rates are based should be derived from the costs of furnishing one un it of one procedure and because, in many circumstances, we are unable to ensure that packaged costs can be appropriately allocated across multiple procedures performed on the same date of service. It is generally desirable to use the da ta from as many claims as possible to recalibrate the APC relative payment wei ghts, including those claims for multiple procedures. As we have for several years, we are proposing to continue to use date of service stratification and a list of codes to be bypassed to convert multiple procedure claims to “pseudo” single procedure claims . Through bypassing specified codes that we believe do not have significant packaged costs, we are able to use more data from multiple procedure claims. In many cases, th is enables us to create multiple “pseudo” single procedure claims from claims that were submitted as multiple procedure claims spanning multiple dates of service, or claims that contained numerous separately paid procedures reported on the same date on one claim. We refer to these newly created single procedure claims as “pse udo” single procedure claims. The history of our use of a bypass list to generate “pseudo” single pr ocedure claims is well documented, most recently in the CY 2013 O PPS/ASC final rule with comment period (77 FR 68227 through 68229). In addition, for CY 2008 (72 FR 66614 through 66664), we increasedCMS-1601-P 61 packaging and created the first composite APCs, and continued t hose policies through CY 2013. Increased packaging and creation of composite APCs also increased the

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

number of bills we were able to use in developing the OPPS relative weights on which payments are based. We have continued the composite APCs for multiple imaging services through CY 2013, and are proposing to continue this policy for CY 2014. We also are proposing to further expand our packaging policies for CY 2014. We refer readers to section II.A.2.f. of this proposed ru le for a discussion of the use of claims in modeling the costs for composite APCs and to s ection II.A.3. of this proposed rule for a discussion of our proposed packaging policies for CY 2014. We are proposing to continue to apply thes e processes to enable us to use as much claims data as possible for ratesetting fo r the CY 2014 OPPS. This methodology enabled us to create, for this proposed rule, appr oximately 34 million “pseudo” single procedure claims, including multiple imaging composite “s ingle session” bills (we refer readers to section II.A.2.f.(5) of this proposed rule for further discussion), to add to the approximately 48 million “natural” single procedure claims. For CY 2014, we are proposing to bypass 179 HCPCS codes that are identified in Addendum N to this proposed rule (which is available via the Internet on the CMS Web site). Since the inception of the bypass list, which is the li st of codes to be bypassed toCMS-1601-P 62 convert multiple procedure claims to “p seudo” single procedure claims, we have calculated the percent of “natural” single bi lls that contained packaging for each HCPCS code and the amount of packaging on each “natural ” single bill for each code. Each year, we generally retain the codes on the prev ious year’s bypass list and use the updated year’s data (for CY 2014, data available fo r the March 11, 2013 meeting of the Advisory Panel on Hospital Outpatient Payment (the Panel) from CY 2012 claims processed through September 30, 2012, and CY 2011 claims data processed through June 30, 2012, used to model the payment rates for CY 2013) to determine whether it would be appropriate to add additional codes to the previous year’s bypass list. For CY 2014, we are proposing to continue to bypass all of the HCPCS codes on the CY 2013 OPPS bypass list, with the excepti on of HCPCS codes that we are proposing to delete for CY 2014, which are listed in Table 1 of this proposed rule. We also are proposing to remove HCPCS codes that are not separately paid under the OPPS b ecause the purpose of the bypass list is to obtain more data for thos e codes relevant to ratesetting. Some of the codes we are proposing to remove from the CY 2014 bypass list are affected by the CY 2014 packaging proposal, discussed in se ction II.A.3. of this proposed rule. In addition, we are proposing to add to the bypa ss list for CY 2014 HCPCS codes not on the CY 2013 bypass list that, using either the CY 2013 final rule data (CY 2011 claims) or the March 11, 2013 Panel data (first 9 mont hs of CY 2012 claims), met the empirical criteria for the bypass list that are summarized below. Finally, to remain consistent with the CY 2014 proposal to continue to devel op OPPS relative payment weights based on geometric mean costs, we also are proposing th at the packaged cost criterion continue toCMS-1601-P 63 be based on the geometric mean cost. The entire list proposed for CY 2014 (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” si ngle 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 “n atural” single procedure clai ms for the code. This number of single procedure claims ensure s that observed outcomes are sufficiently representative of packaging that might occur in the multiple claims.

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

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

of cost estimates for low cost servic es billed with the bypassed service.CMS-1601-P 64 We note that, as we did for CY 2013, we are proposing to continue to establish the CY 2014 OPPS relative payment weights based on geometric mean costs. To remain consistent in the metric used for identifyi ng cost patterns, we are proposing to use the geometric mean cost of packaging to identi fy potential codes to add to the bypass list. In response to public comments on the CY 2010 OPPS/ASC proposed rule requesting that the packaged cost threshold be updated, we consid ered whether it would be appropriate to update the $50 packaged cost threshold fo r inflation when examining potential bypass list additions. As discu ssed in the CY 2010 OPPS/ ASC final rule with comment period (74 FR 60328), the real value of this packaged cost threshold criterion has declined due to inflation, making the pack aged cost threshold more restrictive over time when considering additions to the bypass li st. Therefore, adjusting the threshold by the market basket increase would prevent contin uing decline in the threshold’s real value.

Based on the same rationale described fo r the CY 2013 OPPS/ASC final rule with comment period (77 FR 68221), we are proposing for CY 2014 to continue to update the packaged cost threshold by the market bask et increase. By applying the final CY 2013 market basket increase of 1.8 percent to the prior nonrounded do llar threshold of $53.76 (77 FR 68221), we determined that the th reshold would remain for CY 2014 at $55 ($54.73 rounded to $55, the nearest $5 increment) . Therefore, we are proposing to set the geometric mean packaged cost threshold on the CY 2012 claims at $55 for a code to be considered for addition to the CY 2014 OPPS bypass list.

● The code is not a code for an unlisted service. Unlisted codes do not describe a specific service, and thus th eir costs would not be appropr iate for bypass list purposes.CMS-1601-P 65 In addition, we are proposing to conti nue to include on the bypass list HCPCS

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

their clinical assessment of the complete CY 2014 OPPS proposal. Some of these codes were identified by CMS medical advisors a nd some were identified in prior years by commenters with specialized knowledge of the packaging associated with specific services. We also are proposing to conti nue to include certain HCPCS codes on the bypass list in order to purposefully direct the assignment of p ackaged costs to a companion code where services always appear together and where there would otherwise be few single procedure claims available for ratesetting. For example, we have previously discussed our reasoning for adding HCPCS code G0390 (Trauma response team associated with hosp ital critical care serv ice) to the bypass list (73 FR 68513). As a result of the multiple imaging composite APCs that we established in CY 2009, the program logic for creating “pse udo” single procedure claims from bypassed codes that are also members of multiple imaging composite APCs changed. When creating the set of “pse udo” single procedure claims, clai ms that contain “overlap bypass codes” (those HCPCS codes th at are both on the bypass list and are members of the multiple imaging composite APCs) were identif ied first. These HCPCS codes were then processed to create multiple imaging composite “single session” bills, that is, claims containing HCPCS codes from only one imagi ng family, thus suppressing the initial use of these codes as bypass codes. However, th ese “overlap bypass codes” were retained on the bypass list because, at the end of the “pse udo” single processing logic, we reassessed the claims without suppression of the “ overlap bypass codes” under our longstandingCMS-1601-P 66 “pseudo” single process to determine whethe r we could convert additional claims to “pseudo” single procedure claims. (We refer r eaders to section II.A.2.b. of this proposed

rule for further discussion of the treatment of “overlap bypass codes.”) This process also created multiple imaging composite “single session” bills that could be used for calculating composite APC costs. “Overlap bypass codes” that are members of the proposed multiple imaging composite APCs ar e identified by asterisks (*) in Addendum N to this proposed rule (which is availa ble via the Internet on the CMS Web site). Addendum N to this proposed rule incl udes the proposed list of bypass codes for CY 2014. The list of bypass codes contains codes that were reported on claims for services in CY 2012 and, therefor e, includes codes that were in effect in 2012 and used for billing but were deleted for CY 2013. We retained these deleted bypass codes on the proposed CY 2014 bypass list because these co des existed in CY 2012 and were covered OPD services in that period, and CY 2012 cl aims data are used to calculate CY 2014 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 pr oposed multiple imaging composite APCs are identified by asterisks (*) in the third co lumn of Addendum N to this proposed rule. HCPCS codes that we are proposing to add fo r CY 2014 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 2014 bypass list because these codes were either deleted from the HCPCS before CY 2012 (and therefore were not covered OP D services in CY 2012) or were notCMS-1601-P 67 separately payable codes under the proposed CY 2014 OPPS because these codes are not used for ratesetting through the bypass proce ss. The list of codes proposed for removal from the bypass list includes those that would be affected by the CY 2014 OPPS proposed packaging policy described in section II.A.3. of this proposed rule.

TABLE 1.—HCPCS CODES PROPOSED TO BE REMOVED FROM THE CY 2014 BYPASS LIST

HCPCS

Code HCPCS Short Descriptor 17003 Destruct premalg les 2-14 31231 Nasal endoscopy dx 31505 Diagnostic laryngoscopy 31579 Diagnostic laryngoscopy 51741 Electro-uroflowmetry first 51798 Us urine capacity measure 54240 Penis study 56820 Exam of vulva w/scope 57452 Exam of cervix w/scope 57454 Bx/curett of cervix w/scope 69210 Remove impacted ear wax 70030 X-ray eye for foreign body 70100 X-ray exam of jaw <4views 70110 X-ray exam of jaw 4/> views 70120 X-ray exam of mastoids 70130 X-ray exam of mastoids 70140 X-ray exam of facial bones 70150 X-ray exam of facial bones 70160 X-ray exam of nasal bones 70200 X-ray exam of eye sockets 70210 X-ray exam of sinuses 70220 X-ray exam of sinuses 70240 X-ray exam pituitary saddle 70250 X-ray exam of skull 70260 X-ray exam of skull 70320 Full mouth x-ray of teethCMS-1601-P 68

HCPCS

Code HCPCS Short Descriptor 70328 X-ray exam of jaw joint 70330 X-ray exam of jaw joints 70355 Panoramic x-ray of jaws 70360 X-ray exam of neck 70370 Throat x-ray & fluoroscopy 70371 Speech evaluation complex 71021 Chest x-ray frnt lat lordotc 71022 Chest x-ray frnt lat oblique 71023 Chest x-ray and fluoroscopy 71030 Chest x-ray 4/> views 71034 Chest x-ray&fluoro 4/> views 71035 Chest x-ray special views 71100 X-ray exam ribs uni 2 views 71101 X-ray exam unilat ribs/chest 71110 X-ray exam ribs bil 3 views 71111 X-ray exam ribs/chest4/> vws 71120 X-ray exam breastbone 2/>vws 71130 X-ray strenoclavic jt 3/>vws 72010 X-ray exam spine ap&lat 72020 X-ray exam of spine 1 view 72040 X-ray exam neck spine 3/<vws 72050 X-ray exam neck spine 4/5vws 72052 X-ray exam neck spine 6/>vws 72069 X-ray exam trunk spine stand 72070 X-ray exam thorac spine 2vws 72072 X-ray exam thorac spine 3vws 72074 X-ray exam thorac spine4/>vw 72080 X-ray exam trunk spine 2 vws 72090 X-ray exam scloiosis erect 72100 X-ray exam l-s spine 2/3 vws 72110 X-ray exam l-2 spine 4/>vws 72114 X-ray exam l-s spine bending 72120 X-ray bend only l-s spine 72170 X-ray exam of pelvis 72190 X-ray exam of pelvis 72202 X-ray exam si joints 3/> vwsCMS-1601-P 69

HCPCS

Code HCPCS Short Descriptor 72220 X-ray exam sacrum tailbone 73000 X-ray exam of collar bone 73010 X-ray exam of shoulder blade 73020 X-ray exam of shoulder 73030 X-ray exam of shoulder 73050 X-ray exam of shoulders 73060 X-ray exam of humerus 73070 X-ray exam of elbow 73080 X-ray exam of elbow 73090 X-ray exam of forearm 73100 X-ray exam of wrist 73110 X-ray exam of wrist 73120 X-ray exam of hand 73130 X-ray exam of hand 73140 X-ray exam of finger(s) 73510 X-ray exam of hip 73520 X-ray exam of hips 73540 X-ray exam of pelvis & hips 73550 X-ray exam of thigh 73560 X-ray exam of knee 1 or 2 73562 X-ray exam of knee 3 73564 X-ray exam knee 4 or more 73565 X-ray exam of knees 73590 X-ray exam of lower leg 73600 X-ray exam of ankle 73610 X-ray exam of ankle 73620 X-ray exam of foot 73630 X-ray exam of foot 73650 X-ray exam of heel 73660 X-ray exam of toe(s) 74000 X-ray exam of abdomen 74010 X-ray exam of abdomen 74020 X-ray exam of abdomen 74022 X-ray exam series abdomen 74210 Contrst x-ray exam of throat 74220 Contrast x-ray esophagusCMS-1601-P 70

HCPCS

Code HCPCS Short Descriptor 74230 Cine/vid x-ray throat/esoph 74246 Contrst x-ray uppr gi tract 74247 Contrst x-ray uppr gi tract 74249 Contrst x-ray uppr gi tract 76100 X-ray exam of body section 76510 Ophth us b & quant a 76511 Ophth us quant a only 76512 Ophth us b w/non-quant a 76513 Echo exam of eye water bath 76514 Echo exam of eye thickness 76516 Echo exam of eye 76519 Echo exam of eye 76536 Us exam of head and neck 76645 Us exam breast(s) 76801 Ob us < 14 wks single fetus 76805 Ob us >/= 14 wks sngl fetus 76811 Ob us detailed sngl fetus 76816 Ob us follow-up per fetus 76817 Transvaginal us obstetric 76830 Transvaginal us non-ob 76881 Us xtr non-vasc complete 76882 Us xtr non-vasc lmtd 76970 Ultrasound exam follow-up 77072 X-rays for bone age 77073 X-rays bone length studies 77074 X-rays bone survey limited 77075 X-rays bone survey complete 77076 X-rays bone survey infant 77077 Joint survey single view 77082 Dxa bone density vert fx 77084 Magnetic image bone marrow 77300 Radiation therapy dose plan 77301 Radiotherapy dose plan imrt 77305 Teletx isodose plan simple 77310 Teletx isodose plan intermed 77315 Teletx isodose plan complexCMS-1601-P 71

HCPCS

Code HCPCS Short Descriptor 77327 Brachytx isodose calc interm 77331 Special radiation dosimetry 77336 Radiation physics consult 77338 Design mlc device for imrt 77370 Radiation physics consult 80500 Lab pathology consultation 80502 Lab pathology consultation 85097 Bone marrow interpretation 86510 Histoplasmosis skin test 86850 RBC antibody screen 86870 RBC antibody identification 86880 Coombs test direct 86885 Coombs test indirect qual 86886 Coombs test indirect titer 86890 Autologous blood process 86900 Blood typing abo 86901 Blood typing rh (d) 86904 Blood typing patient serum 86905 Blood typing rbc antigens 86906 Blood typing rh phenotype 86930 Frozen blood prep 86970 Rbc pretx incubatj w/chemicl 86977 Rbc serum pretx incubj/inhib 88104 Cytopath fl nongyn smears 88106 Cytopath fl nongyn filter 88108 Cytopath concentrate tech 88112 Cytopath cell enhance tech 88120 Cytp urne 3-5 probes ea spec 88160 Cytopath smear other source 88161 Cytopath smear other source 88162 Cytopath smear other source 88172 Cytp dx eval fna 1st ea site 88173 Cytopath eval fna report 88182 Cell marker study 88184 Flowcytometry/ tc 1 marker 88185 Flowcytometry/tc add-onCMS-1601-P 72

HCPCS

Code HCPCS Short Descriptor 88189 Flowcytometry/read 16 & > 88300 Surgical path gross 88302 Tissue exam by pathologist 88304 Tissue exam by pathologist 88305 Tissue exam by pathologist 88307 Tissue exam by pathologist 88311 Decalcify tissue 88312 Special stains group 1 88313 Special stains group 2 88314 Histochemical stains add-on 88321 Microslide consultation 88323 Microslide consultation 88325 Comprehensive review of data 88329 Path consult introp 88331 Path consult intraop 1 bloc 88342 Immunohistochemistry 88346 Immunofluorescent study 88347 Immunofluorescent study 88348 Electron microscopy 88358 Analysis tumor 88360 Tumor immunohistochem/manual 88361 Tumor immunohistochem/comput 88365 Insitu hybridization (fish) 88368 Insitu hybridization manual 88385 Eval molecul probes 51-250 88386 Eval molecul probes 251-500 89049 Chct for mal hyperthermia 89220 Sputum specimen collection 89230 Collect sweat for test 89240 Pathology lab procedure 90472 Immunization admin each add 90474 Immune admin oral/nasal addl 92020 Special eye evaluation 92025 Corneal topography 92060 Special eye evaluation 92081 Visual field examination(s)CMS-1601-P 73

HCPCS

Code HCPCS Short Descriptor 92082 Visual field examination(s) 92083 Visual field examination(s) 92133 Cmptr ophth img optic nerve 92134 Cptr ophth dx img post segmt 92136 Ophthalmic biometry 92225 Special eye exam initial 92226 Special eye exam subsequent 92230 Eye exam with photos 92240 Icg angiography 92250 Eye exam with photos 92275 Electroretinography 92285 Eye photography 92286 Internal eye photography 92520 Laryngeal function studies 92541 Spontaneous nystagmus test 92542 Positional nystagmus test 92546 Sinusoidal rotational test 92548 Posturography 92550 Tympanometry & reflex thresh 92552 Pure tone audiometry air 92553 Audiometry air & bone 92555 Speech threshold audiometry 92556 Speech audiometry complete 92557 Comprehensive hearing test 92567 Tympanometry 92570 Acoustic immitance testing 92582 Conditioning play audiometry 92585 Auditor evoke potent compre 92603 Cochlear implt f/up exam 7/> 92604 Reprogram cochlear implt 7/> 92626 Eval aud rehab status 93005 Electrocardiogram tracing 93017 Cardiovascular stress test 93225 Ecg monit/reprt up to 48 hrs 93226 Ecg monit/reprt up to 48 hrs 93229 Remote 30 day ecg tech suppCMS-1601-P 74

HCPCS

Code HCPCS Short Descriptor 93270 Remote 30 day ecg rev/report 93271 Ecg/monitoring and analysis 93278 ECG/signal-averaged 93290 Icm device eval 93306 Tte w/doppler complete 93701 Bioimpedance cv analysis 93786 Ambulatory BP recording 93788 Ambulatory BP analysis 93880 Extracranial bilat study 93882 Extracranial uni/ltd study 93886 Intracranial complete study 93888 Intracranial limited study 93922 Upr/l xtremity art 2 levels 93923 Upr/lxtr art stdy 3+ lvls 93924 Lwr xtr vasc stdy bilat 93925 Lower extremity study 93926 Lower extremity study 93930 Upper extremity study 93931 Upper extremity study 93965 Extremity study 93970 Extremity study 93971 Extremity study 93975 Vascular study 93976 Vascular study 93978 Vascular study 93979 Vascular study 93990 Doppler flow testing 94015 Patient recorded spirometry 94690 Exhaled air analysis 95250 Glucose monitoring cont 95800 Slp stdy unattended 95803 Actigraphy testing 95805 Multiple sleep latency test 95806 Sleep study unatt&resp efft 95807 Sleep study attended 95808 Polysom any age 1-3> paramCMS-1601-P 75

HCPCS

Code HCPCS Short Descriptor 95810 Polysom 6/> yrs 4/> param 95812 Eeg 41-60 minutes 95813 Eeg over 1 hour 95816 Eeg awake and drowsy 95819 Eeg awake and asleep 95822 Eeg coma or sleep only 95869 Muscle test thor paraspinal 95872 Muscle test one fiber 95900 Motor nerve conduction test 95921 Autonomic nrv parasym inervj 95925 Somatosensory testing 95926 Somatosensory testing 95930 Visual evoked potential test 95950 Ambulatory eeg monitoring 95953 EEG monitoring/computer 96000 Motion analysis video/3d 96361 Hydrate iv infusion add-on 96366 Ther/proph/diag iv inf addon 96367 Tx/proph/dg addl seq iv inf 96370 Sc ther infusion addl hr 96371 Sc ther infusion reset pump 96375 Tx/pro/dx inj new drug addon 96411 Chemo iv push addl drug 96415 Chemo iv infusion addl hr 96417 Chemo iv infus each addl seq 96423 Chemo ia infuse each addl hr G0365 Vessel mapping hemo access G0399 Home sleep test/type 3 Porta G0416 Sat biopsy 10-20

c. Proposed Calculation and Use of Cost-to-Charge Ratios (CCRs) For CY 2014, we are proposing to continue to use the hospital-specific overall ancillary and departmental co st-to-charge ratios (CCRs) to convert charges to estimatedCMS-1601-P 76 costs through applicatio n of a revenue code-to-cost cente r crosswalk. To calculate the APC costs on which the proposed CY 2014 APC payment rates are based, we calculated hospital-specific overall anci llary CCRs and hospital-spec ific departmental CCRs for each hospital for which we had CY 2012 claims data from the most recent available hospital cost reports, in most cases, cost reports beginning in CY 2011. For the CY 2014 OPPS proposed rates, we used the set of cl aims processed during CY 2012. We applied the hospital-specific CCR to the hospital’s char ges at the most detailed level possible,

based on a revenue code-to-cost center crosswal k that contains a hierarchy of CCRs used to estimate costs from charges for each reve nue code. That crosswalk is available for

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

. To ensure the completeness of the re venue code-to-cost center crosswalk, we reviewed changes to the list of revenue code s for CY 2012 (the year of claims data we used to calculate the propos ed CY 2014 OPPS payment rates) and found that the National Uniform Billing Committee ( NUBC) did not add any new revenue codes to the NUBC 2012 Data Specifications Manual. In accordance with our longstanding policy, we calculated CCRs for the standard and nonstandard cost centers accepted by the elec tronic cost report database. In general, the most detailed level at which we calculated CCRs was the hospital-specific departmental level. For a discussion of the hospital-specific overall ancillary CCR calculation, we refer readers to the CY 2007 OP PS/ASC final rule with comment periodCMS-1601-P 77 (71 FR 67983 through 67985). One longstanding exception to this general methodology for calculation of CCRs used for converting char ges to costs on each claim, as detailed in

the CY 2007 OPPS/ASC final rule with comm ent period, is the cal culation 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 th e 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 parame dical education programs and weighted the outpatient charges by the volume of outpatient services furnished by the hospital. We

refer readers to the CY 2007 OPPS/ASC fina l rule with comment period for more information (71 FR 67983 through 67985). We first limited the population of cost reports to only those hospitals that filed out patient claims in CY 2012 before determining

whether the CCRs for suchhospitals were valid.

We then calculated the CCRs for each co st center and the overall ancillary CCR for each hospital for which we had claims data. We did this using hospital-specific data from the Hospital Cost Report Information Sy stem (HCRIS). We used the most recent available cost report data, in most cases , cost reports with cost reporting periods beginning in CY 2011. 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 2014 OPPS payment rates. If the most recently available cost report was submitted but not settled, we looked at the last settled cost re port to determine the ratio of submitted to settled cost using the overall ancillary CCR, and we then adjusted the most recentCMS-1601-P 78 available submitted, but not settled, cost report using that ratio. We then calculated both an overall ancillary CCR and cost center-speci fic CCRs for each hospital. We used the overall ancillary CCR referenced above for all purposes that require use of an overall ancillary CCR. We are proposing to con tinue this longstanding methodology for the

calculation of costs for CY 2014. 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-co st items and overvaluing low-cost items when an estimate of average markup, embodied in a single CCR, is applied to items of widely varying costs in the same cost cente r. This issue was evaluated in a report by Research Triangle Institute, International (RTI). The RT I final report can be found on

RTI’s Web site at: http://www.rti.org/re ports/cms/HHSM-500-2005- 0029I/PDF/Refining_Cost_to_C harge_Ratios_200807_Final.pdf . For a complete discussion of the RTI recommendations, public comments, and our responses, we refer

readers to the CY 2009 OPPS/ ASC final rule with comm ent period (73 FR 68519 through 68527). We addressed the RTI finding that ther e was aggregation bias in both the IPPS and the OPPS cost estimation of expensive and inexpensive medical supplies in the FY 2009 IPPS final rule (73 FR 48458 through 45467) . Specifically, we created one cost center for “Medical Supplies Charged to Pati ents” and one cost center for “ImplantableCMS-1601-P 79 Devices Charged to Patients,” essentially splitting the then current cost center for “Medical Supplies Charged to Patients” into one cost center for low-cost medical supplies and another cost center for high-cost implantable devices in order to mitigate some of the effects of charge compression. In determining the items that should be reported in these respective cost centers, we adopted commenters’ recommendations that hospitals should use revenue codes established by the AHA’s NUBC to determine the items that should be reported in the “Med ical Supplies Charged to Patients” and 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 respons es, we refer readers to the FY 2009 IPPS

final rule. The cost center for “Implantable Devices Charged to Patients” has been available for use for cost reporting periods beginni ng on or after May 1, 2009. In the CY 2013

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

Because a sufficient amount of data from whic h to generate a mean ingful analysis was available, we established in the CY 2013 OPPS/ASC final rule with comment period a policy to create a distinct CCR using the “Imp lantable Devices Charged to Patients” cost center (77 FR 68225). For the CY 2014 OPPS, we are proposing to continue to use data from the “Implantable Devices Charged to Patie nts” cost center to create a distinct CCR for use in calculating the OPPS relative payment weights.CMS-1601-P 80

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

RTI concluded that both the IPPS and the OPPS relative payment weights would better

estimate the costs of those services if CMS were to add standard costs centers for CT scans, MRIs, and cardiac catheterization in or der for hospitals to report separately the costs and charges for those services and in order for CMS to calculate unique CCRs to estimate the cost from charges on claims data. We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080) for a more detailed discussion

on the reasons for the creation of standard co st centers for CT scans, MRIs, and cardiac

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

catheterization were effective for cost re port periods beginning on or after May 1, 2010, on the revised cost report Form CMS-2552-10. Using the December 2012 HCRIS update wh ich we use to estimate costs in the CY 2014 OPPS ratesetting process, we were ab le to calculate a valid implantable device CCR for 2,936 hospitals, a valid MRI CCR for 1,853 hospitals, a valid CT scan CCR for 1,956 hospitals, and a valid Cardiac Catheter ization CCR for 1,367 hospitals. We believeCMS-1601-P 81

that there is a sufficient amount of data in the Form CMS 2552- 10 cost reports from which to generate a meaningful analysis of CCRs. Therefore, we are providing various data analyses below in Tables 2 and 3 demons trating the changes as a result of including

the new CCRs calculated from the new sta ndard cost centers into the CY 2014 OPPS ratesetting process.CMS-1601-P 82

TABLE 2.—MEDIAN CCRs CALCULATED USING DIFFERENT COST REPORT DISTRIBUTIONS

Calculated CCR “New” Standard Cost Center Using Form 2552-96 CCRs only Using Form 2552-96 and Form 2552-10 CCRs Cardiology 0.2915 0.5112 Cardiac Catheterization * 0.1685 0.1590 Radiology – Diagnostic 0.2025 0.2279 Magnetic Resonance Imaging (MRI) * 0.1074 0.0959 CT Scan * 0.0568 0.0502 Medical Supplies Charged to Patient 0.3389 0.3315 Implantable Devices Charged to Patient * 0.4371 0.4190

TABLE 3.—PERCENTAGE CHANGE IN ESTIMATED COST FOR THOSE APCs SIGNIFICANTLY AFFECTED BY USE OF THE NEW STANDARD COST CENTER CCRs IN THE CMS FORM 2552-10 COST REPORTS

APC APC Descriptor Percentage Change in Estimated Cost 0282 Miscellaneous Computed Axial Tomography -38.1% 0332 Computed Tomography without Contrast -34.0% 8005 CT and CTA without Contrast Composite -33.9% 0331 Combined Abdomen and Pelvis CT without Contrast -32.9% 8006 CT and CTA with Contrast Composite -29.0% 0334 Combined Abdomen and Pelvis CT with Contrast -28.8% 0662 CT Angiography -27.0% 0283 Computed Tomography with Contrast -27.0% 0333 Computed Tomography without Co ntrast followed by Contrast -26.3% 0383 Cardiac Computed Tomographic Imaging -24.8%

0336 Magnetic Resonance Imaging and Magnetic Resonance Angiography without Contrast -19.3% 8008 MRI and MRA with Contrast Composite -18.9%CMS-1601-P 83

APC APC Descriptor Percentage Change in Estimated Cost 8007 MRI and MRA without Contrast Composite -18.5%

0337 Magnetic Resonance Imaging and Magnetic Resonance Angiography without Contrast followed by Contrast -18.2%

0284 Magnetic Resonance Imaging and Magnetic Resonance Angiography with Contrast -14.9% 0080 Diagnostic Cardiac Catheterization -8.7% 0276 Level I Digestive Radiology 15.2% 0378 Level II Pulmonary Imaging 15.2% 0396 Bone Imaging 15.5% 0390 Level I Endocrine Imaging 15.8% 0395 GI Tract Imaging 16.2% 0402 Level II Nervous System Imaging 16.2% 0398 Level I Cardiac Imaging 16.3% 0262 Plain Film of Teeth 16.9% 0377 Level II Cardiac Imaging 17.0% 0267 Level III Diagnostic and Screening Ultrasound 17.2% 0406 Level I Tumor/Infection Imaging 17.4% 0403 Level I Nervous System Imaging 18.9% 0266 Level II Diagnostic and Screening Ultrasound 25.1% 0265 Level I Diagnostic and Screening Ultrasound 29.9% 8004 Ultrasound Composite 30.2%

We note that the estimated changes in geometric mean estimated APC cost of using data from the new standard cost cente rs cited above appear consistent with the expected results based on RTI’s analysis of cost report and claims data in the July 2008 final report (pages 5 and 6), which state “in hospitals that aggregate data for CT scanning, MRI, or nuclear medicine services with th e standard line for Di agnostic Radiology, costs for these services all appear substantially overstated, while the costs for plain films, ultrasound and other imaging pr ocedures are correspondingly unde rstated.” We also note that there are limited additional impacts in the implantable device related APCs due toCMS-1601-P 84 using the new cost report form CMS 2552-10 because the standard cost center for implantable medical devices was previously incorporated into cost report form

CMS 2552-96. As we have discussed in prior ru lemaking (77 FR 68223 through 68225), once we determined that cost report data were av ailable for analysis, we would propose, if appropriate to use the distinct CCRs descri bed above in the calc ulation of the OPPS relative payment weights. We believe that the analytic findings described above support the original decision to develop distinct st andard cost centers for implantable devices, MRIs, CT scans, and cardi ac catheterization, and we see no reason to further delay proposing to implement the CCRs of each of thes e cost centers. Therefore, beginning in CY 2014, we are proposing to calculate the O PPS relative payment weights using distinct CCRs for cardiac catheterization, CT scan, and MRI and to continue using a distinct CCR for implantable medical devices. Section XXIII. of this proposed rule includes the impacts of calculating the proposed CY 2014 O PPS relative payment weights using these

new standard cost centers. 2. Proposed Data Development Process and Ca lculation of Costs Used for Ratesetting In this section of this pr oposed rule, we discuss the us e of claims to calculate the proposed OPPS payment rates for CY 2014. The Hospital OPPS page on the CMS Web site on which this proposed rule is posted ( http://www.cms.gov/Medicare/MedicareFee-for-Service-Payment/HospitalOutpatientPPS/index.html ) provides an accounting of claims used in the development of the proposed payment rates. That accounting provides additional detail regarding the number of claims derived at each stage of the process. InCMS-1601-P 85 addition, below in this section we discuss the file of claims that comprises the data set that is available for purchase under a CMS data use agreement. The CMS Web site,http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html , includes information about purchasing the “OPPS Limited Data Set,” which now include s the additional variables previously available only in the OPPS Id entifiable Data Set, includi ng ICD-9-CM diagnosis codes and revenue code payment amounts. This file is derived from the CY 2012 claims that

were used to calculate the proposed payment rates for the CY 2014 OPPS. In the history of the OPPS, we have traditionally established the scaled relative weights on which payments are based using APC median costs, which is a process

described in the CY 2012 OPPS/ASC final ru le with comment period (76 FR 74188). However, as discussed in more detail in section II.A.2.f. of the CY 2013 OPPS/ASC final rule with comment period (77 FR 68259 through 68271), we finalized the use of geometric mean costs to calculate the relative weights on which the CY 2013 OPPS payment rates were based. While this po licy changed the cost metric on which the relative payments are based, the data proce ss in general remained the same, under the methodologies that we used to obtain appr opriate claims data and accurate cost information in determining estimated servic e cost. For CY 2014, we are proposing to continue to use geometric mean costs to calculate the relative weights on which the proposed CY 2014 OPPS payments rates are based. We used the methodology described in s ections II.A.2.a. throu gh II.A.2.f. of this proposed rule to calculate the costs we used to establish the pr oposed relative weightsCMS-1601-P 86 used in calculating the proposed OPPS paym ent rates for CY 2014 shown in Addenda A and B to this proposed rule (w hich are available via the Inte rnet on the CMS Web site). We refer readers to section II.A.4. of this pr oposed rule for a discussion of the conversion of APC costs to scaled payment weights. a. Claims Preparation For this proposed rule, we used the CY 2012 hospital outpatient claims processed through December 31, 2012, to calculate the geom etric mean costs of APCs that underpin the proposed relative payment weights for CY 2014. To begin the calculation of the proposed relative payment weights for CY 2014, we pulled all claims for outpatient

services furnished in CY 2012 from the nationa l claims history file. This is not the population of claims paid under the OPPS, but all outpatient claims (including, for example, critical access hospital (CAH) claims and hospital claims for clinical laboratory tests for persons who are neither inpati ents nor outpatients of the hospital). We then excluded claims with condition codes 04, 20, 21, and 77 because these are claims that providers submitted to Me dicare knowing that no payment would be made. For example, providers submit claims w ith a condition code 21 to elicit an official

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

excluded claims for services furnished in Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the Northern Mari ana Islands because hospitals in those geographic areas are not paid under the OPPS, and, therefore, we do not use claims for services furnished in these areas in ratesetting.CMS-1601-P 87 We divided the remaining claims into the three groups shown below. Groups 2 and 3 comprise the 116 million claims that contain hosp ital bill types paid

under the OPPS. 1. Claims that were not bill types 12 X (Hospital Inpatient (Medicare Part B only)), 13X (Hospital Outpatient), 14X (H ospital--Laboratory Services Provided 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 w ith bill type 14X are laboratory specimen claims, of which we use a subset for the limite d 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 hos pital-specific CCR associated with the revenue code for the charge as discussed in section II.A.1.c. of this proposed rule. We then flagged and excluded CAH claims (which are not paid under the OPPS) and claims from hospitals

with invalid CCRs. The latter included claims from hospitals without a CCR; those from hospitals paid an all-inclus ive rate; those from hospitals with obviously erroneous CCRs (greater than 90 or less th an 0.0001); and those from hospita ls with overall ancillary

CCRs that were identified as outliers (that exceeded +/-3 st andard deviations from the geometric mean after removi ng error CCRs). In addition, we trimmed the CCRs at the cost center (that is, departme ntal) level by removing the CCRs for each cost center asCMS-1601-P 88 outliers if they exceeded +/- 3 standard devia tions from the geometric mean. We used a four-tiered hierarchy of cost center CCRs, which is the revenue code-to-cost center crosswalk, to match a cost center to ever y possible revenue code appearing in the outpatient claims that is re levant to OPPS services, with the top tier being the most common cost center and the last tier being th e default CCR. If a hospital’s cost center CCR was deleted by trimming, we set the CCR for th at cost center to “missing” so 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 questi on as the default CCR. For example, if a visit was reported under the clinic revenue code but the hospital did not have a clinic cost center, we mapped the hospital-specific overall ancillary CCR to the clinic revenue code.

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

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

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

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

We identified claims with condition code 41 as partial hospitalization services of hospitals and moved them to another file. We note that the separate file containingCMS-1601-P 89 partial hospitalization claims is included in the files that are available for purchase as

discussed above.

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

used to set OPPS rates. We next copied line-item costs for drugs, blood, and brachytherapy sources to a separate file (the lines stay on the claim, but are copied ont o another file). No claims were deleted when we copied these lines onto another file. These line-items are used to calculate a per unit arithmetic and geometri c mean and median cost and a per day arithmetic and geometric mean and medi an cost for drugs and nonimplantable biologicals, therapeutic radiopharmaceutical agents, and brachytherapy sources, as well as other information used to set payment ra tes, such as a unit-to-day ratio for drugs. Prior to CY 2013, our payment policy fo r nonpass-through separately paid drugs and biologicals was based on a redistribut ion methodology that accounted for pharmacy overhead by allocating cost from packaged drugs to separately paid drugs. This methodology typically would have required us to reduce the cost associated with packaged coded and uncoded drugs in order to allocate that cost. However, for CY 2013, we paid for separately payable drugs and biologicals under the O PPS at ASP+6 percent, based upon the statutory default described in section 1833(t)(14)(A)(iii)(II) of the Act. Under that policy, we did not redistribute th e pharmacy overhead costs from packaged drugs to separately paid drugs. For the CY 2014 OPPS, we are proposing to continue theCMS-1601-P 90 CY 2013 payment policy for separately payable drugs and biologicals. We refer readers to section V.B.3. of this proposed rule for a complete discussion of our CY 2014 proposed payment policy for separately paid drugs and biologicals.

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

line-items with an OPPS status indicator that were not paid during claims processing in the claim year, but have a status indicator of “S,” “T,” or “V ,” in the prospective year’s payment system. This logic preserves charges for services that woul d not have been paid in the claim year but for which some estimate of cost is needed for the prospective year, such as services newly removed from the inpatient list for CY 2013 that were assigned status indicator “C” in the claim year. It al so preserves charges for packaged services so

that the costs can be included in the cost of the services with which they are reported, even if the CPT codes for the packaged services were not paid because the service is part of another service that was reported on the sa me claim or the code otherwise violates claims processing edits. For CY 2014, we are proposing to con tinue the policy we implemented for CY 2013 to exclude line-item data for pa ss-through drugs and biologicals (status indicator “G” for CY 2012) and nonpass-thr ough drugs and biological s (status indicatorCMS-1601-P 91 “K” for CY 2012) where the charges reported on th e claim for the line were either denied or rejected during claims processing. Removi ng lines that were eligible for payment but were not paid ensures that we are using appropr iate data. The trim a voids using cost data

on lines that we believe were defective or i nvalid because those rej ected or denied lines did not meet the Medicare requirements for pa yment. For example, edits may reject a line for a separately paid drug because the num ber of units billed exceeded the number of

units that would be reasonable and, therefore, is likely a bil ling 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 2013 OPPS/ASC final rule with comment period (77 FR 68226) 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, th erefore, should not be used for ratesetting. We believe th at removing lines with valid st atus indicators that were edited and not paid during claims processing in creases the accuracy of the data used for ratesetting purposes. For the CY 2014 OPPS, as part of the pr oposal to package clinical diagnostic laboratory tests, we also are pr oposing to apply the lin e item trim to these services if they did not receive payment in the claims year. Removing these lines ensures that, in establishing the CY 2014 OPPS relative payments weights, we appropriately allocate the costs associated with packaging these servi ces. For a more detailed discussion of the proposal to package clinical diagnostic laboratory tests, we refer readers to section II.A.3.b.(3) of this proposed rule.CMS-1601-P 92 b. Splitting Claims and Creation of “Pseudo” Single Procedure Claims (1) Splitting Claims For the CY 2014 OPPS, we then split the remaining claims into five groups: single majors; multiple majors; single minors; multiple minors; and other claims. (Specific definitions of these groups are presented below.) We note that, under the proposed CY 2014 OPPS packaging policy, we ar e proposing to delete status indicator

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

discussed in sections II.A.3. and XI. of this proposed rule. For CY 2014, we are proposing to define major procedures as a ny HCPCS code having a status indicator of “S,” “T,” or “V”; to define minor procedures as any code ha ving a status indicator of “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N”; and to classify “other” pr ocedures as any code having a status indicator other than one that we have classified as major or minor. For CY 2014, we are proposing to continue to assi gn status indicator “R ” to blood and blood products; status indicator “U” to brachytherapy sources; stat us indicator “Q1” to all “STV-packaged codes”; status indicator “Q2” to all “T-p ackaged codes”; and status indicator “Q3” to all codes that may be paid through a composite APC based on composite-specific criteria or paid separately through single code APCs when the criteria

are not met.

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

identification of the different categories of codes. We are proposing to treat these codes in the same manner for data purposes for CY 2014 as we have treated them sinceCMS-1601-P 93 CY 2008. Specifically, we are continuing to ev aluate whether the criteria for separate payment of codes with status indicator “Q1” or “Q2” are met in determining whether they are treated as major or minor codes. Code s with status indicato r “Q1” or “Q2” are carried through the data either w ith status indicator “N” as p ackaged or, if they meet the criteria for separate payment, they are given the status indicator of the APC to which they are assigned and are considered as “pseudo” si ngle procedure claims for major codes. Codes assigned status indicator “Q3” are paid under individual APCs unless they occur 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 duri ng both the split and “p seudo” single creation process. The calculation of the geometric mean costs for composite APCs from multiple procedure major claims is discussed in section II.A.2.f. of this proposed rule. Specifically, we are proposing to divide the remaining claims into the following five groups: 1. Single Procedure Major Claims : Claims with a single separately payable procedure (that is, status indicator “S,” “T ,” or “V” which includes codes with status indicator “Q3”); claims with one unit of a st atus indicator “Q1” code (“STV-packaged”)

where there was no code with status indicator “S,” “T,” or “V” on the same claim on the same date; or claims with one unit of a stat us indicator “Q2” code (“T-packaged”) where

there was no code with a st atus indicator “T” on the sa me claim on the same date. 2. Multiple Procedure Major Claims : Claims with more than one separately payable procedure (that is, stat us indicator “S,” “T,” or “V ,” which includes codes withCMS-1601-P 94 status indicator “Q3”), or multiple units of one payable procedure. These claims include

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

this set claims that contained one unit of one code when the bilateral modifier was appended to the code and the code was conditiona lly or independently b ilateral. 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” (“STV-packaged”) or stat us indicator “Q2” (“T-packaged”) code. 4. Multiple Procedure Minor Claims : Claims with multiple HCPCS codes that are assigned status indicator “F ,” “G,” “H,” “K,” “L,” “R,” “U,” or “N”; claims that

contain more than one code with status indi cator “Q1” (“STV-packaged”) or more than one unit of a code with status indicator “Q1” but no codes with status indicator “S,” “T,” or “V” on the same date of service; or claims that contain more than one code with status indicator “Q2” (T-packaged), or “Q2” and “Q 1,” or more than one unit of a code with status indicator “Q2” but no code with status indicator “T” on the same date of service.

5. Non-OPPS Claims : Claims that contain no se rvices payable under the OPPS (that is, all status indicators other than thos e listed for major or minor status). These

claims were excluded from the files used for the OPPS. Non-OPPS claims have codesCMS-1601-P 95 paid under other fee schedules, for example, durable medical equipment, and do not contain a code for a separately payable or packaged OPPS service. Non-OPPS claims include claims for therapy services paid sometimes under the OPPS but billed, in these non-OPPS cases, with revenue code s indicating that the therapy services would be paid under the Medicare Physician Fee Schedule (MPFS). The claims listed in numbers 1, 2, 3, and 4 above are included in the data file that can be purchased as described above. Clai ms that contain codes to which we have assigned status indicators “Q1” (“STV-packag ed”) and “Q2” (“T-packaged”) appear in the data for the single major file, the multiple major file, and the multiple minor file used for ratesetting. Claims that contain codes to which we have assi gned status indicator “Q3” (composite APC members) appear in both the data of the single and multiple major files used in this proposed rule, depe nding 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 clai ms for dates of service to determine if we could break them into “pseudo” single procedur e claims using the dates of service for all

lines on the claim. If we c ould create claims with single major procedures by using dates of service, we created a single procedure claim record for each separately payable procedure on a different date of service (that is, a “pseudo” single procedure claim). We also are proposing to use the bypa ss codes listed in Addendum N to this proposed rule (which is available via the Internet on our Web site) and discussed inCMS-1601-P 96 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 2014 “overlap bypass codes” are listed in Adde ndum N to this proposed rule (which is available via the Internet on the CMS Web site). When one of the two separately payable procedures on a multiple procedure claim was on the bypass li st, we split the claim into two “pseudo” single procedure claim records. The single procedure claim record that contained the bypass code did not retain packaged services . The single procedure claim record that contained the other separately payable pr ocedure (but no bypass code) retained the packaged revenue code charges and the p ackaged HCPCS code charges. We also removed lines that contained multiple units of codes on the bypass list and treated them as “pseudo” single procedure claims by divi ding the cost for the multiple units by the

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

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

We then assessed the claims to determin e if the proposed crit eria for the multiple imaging composite APCs, discussed in secti on II.A.2.f.(5) of this proposed rule, wereCMS-1601-P 97 met. If the criteria for the imaging composite APCs were met, we created a “single session” claim for the applicable imaging co mposite service and determined whether we could use the claim in ratesetting. For HCPCS codes that are both conditionally packaged and are members of a multiple imaging composite APC, we first assessed whether the code would be pack aged and, if so, the code ceased to be available for 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 fo r use in setting the composite APC costs on which the proposed CY 2014 OPPS payments are based. Having identified “single session ” claims for the imaging composite APCs, we reassessed the claim to determine if, after removal of all lines for bypass codes, including the “overlap bypass codes,” a single unit of a singl e separately payable code remained on the claim. If so, we attributed the packaged co sts on the claim to the si ngle unit of the single remaining separately payable code other thanthe 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 us e 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” (“STV-packaged”) on the same date of service or contained multiple units of a single code with status indicator “Q1,” we selected the status indi cator “Q1” HCPCS code that had the highest CY 2013 relative payment weight, set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indi cator of “Q1.” We thenCMS-1601-P 98 packaged all costs for the following into a sing le cost for the “Q1” HCPCS code that had the highest CY 2013 relative payment weight to create a “pseudo” si ngle procedure claim

for that code: additional units of the status indicator “Q1” HCPCS code with the highest CY 2013 relative payment weight; other codes wi th 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 st atus indicator of “N” to the status indicator of the APC to which the selected procedure was assigned for furthe r data processing and considered this claim as a major procedure clai m. We used this claim in the calculation of the APC geometric mean cost for th e status indicator “Q1” HCPCS code. Similarly, if a multiple procedure minor claim contained multiple codes with status indicator “Q2” (“T-packaged”) or mu ltiple units of a single code with status indicator “Q2,” we selected the status indi cator “Q2” HCPCS code that had the highest CY 2013 relative payment weight and set the uni ts to one on that HCPCS code to reflect our policy of paying only one unit of a code w ith a status indicator of “Q2.” We then packaged all costs for the following into a sing le cost for the “Q2” HCPCS code that had the highest CY 2013 relative payment weight to create a “pseudo” si ngle procedure claim

for that code: additional units of the status indicator “Q2” HCPCS code with the highest CY 2013 relative payment weight; other codes with status indicator “Q2”; and other packaged HCPCS codes and packaged revenue code costs. We changed the status

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

of the APC to which the selected code was a ssigned, and we consider ed this claim as a major procedure claim.CMS-1601-P 99 If a multiple procedure minor claim contai ned multiple codes with status indicator “Q2” (“T-packaged”) and status indicator “Q1” (“STV-packaged”), we selected the T-packaged status indicator “Q2” HCPCS code that had the highest re lative payment weight for CY 2013 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 proce dure claim for that code: ad ditional units of the status indicator “Q2” HCPCS code with the highe st CY 2013 relative pa yment weight; other codes with status indicator “Q2”; codes with status indicator “Q 1” (“STV-packaged”); and other packaged HCPCS codes and packaged revenue code costs. We selected status indicator “Q2” HCPCS codes instead of “Q1” HCPCS codes because “Q2” HCPCS codes have higher CY 2013 relative payment wei ghts. If a status indicator “Q1” HCPCS code had a higher CY 2013 relative payment we ight, it became the primary code for the simulated single bill process. We changed th e status indicator for the selected status indicator “Q2” (“T-packaged”) code from a da ta status indicator of “N” to the status

indicator of the APC to which the selected code was assigned and we considered this claim as a major procedure claim. We then applied our proposed proce ss for creating “pseudo” single procedure claims to the conditionally packaged codes that do not meet the criteria for packaging, which enabled us to create single procedure cl aims from them, if they met the criteria for single procedure claims. Conditionally pack aged codes are identified using status indicators “Q1” and “Q2,” a nd are described in section XI.A. of this proposed rule.CMS-1601-P 10 0 Lastly, we excluded those claims that we were not able to convert to single procedure claims even after applying all of the techniques for creation of “pseudo” single procedure claims to multiple procedure majo r claims and to multiple procedure minor claims. As has been our practice in recent ye ars, we also excluded claims that contained codes that were viewed as independently or conditionally bilateral a nd that contained the bilateral modifier (Modifier 50 (Bilateral pr ocedure)) because the line-item cost for the code represented the cost of two units of the procedure, notwithstanding that hospitals

billed the code w ith a unit of one. We are proposing to continue to a pply the methodology described above for the purpose of creating “pseudo” single pro cedure claims for the CY 2014 OPPS. c. Completion of Claim Records and Geometric Mean Cost Calculations (1) General Process We then packaged the costs of pack aged HCPCS codes (codes with status

indicator “N” listed in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) and the costs of those lines for codes w ith status indicator “Q1” or “Q2” when they are not separately paid), and the costs of the services reported under packaged revenue codes in Table 4 be low that appeared on the claim without a HCPCS code into the cost of the single ma jor procedure remaining on the claim. For a more complete discussion of our propos ed CY 2014 OPPS packaging policy, we refer

readers to section II.A.3. of this proposed rule.

As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66606), for the CY 2008 OPPS, we adopt ed an APC Panel recommendation thatCMS-1601-P 10 1

CMS should review the final lis t of packaged revenue codes for consistency with OPPS policy and ensure that future versions of th e I/OCE edit accordingly. As we have in the past, we are proposing to conti nue to compare the final list of packaged revenue codes that we adopt for CY 2014 to the revenue c odes that the I/OCE will package for CY 2014 to ensure consistency. In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68531), we replaced the NUBC standard abbreviations for the revenue codes liste d in Table 2 of the CY 2009 OPPS/ASC proposed rule with the mo st current NUBC descriptions of the revenue code categories and subcategories to better articulate the meanings of the revenue codes without changing the list of revenue codes. In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60362 through 60363), we finalized changes to the packaged revenue code list based on our examination of the updated NUBC codes and public comment on the CY 2010 proposed list of packaged revenue codes. For CY 2014, as we did for CY 2013, we reviewed the changes to revenue codes that were effective during CY 2012 for purposes of determining the charges reported with

revenue codes but without HCPCS codes that we would propose to package for CY 2014. We believe that the charges reported under the revenue codes listed in Table 4 below continue to reflect ancillary and supportive services for which hospitals report charges without HCPCS codes. Therefore, for CY 2014, we are proposing to continue to package

the costs that we derive from the char ges reported without HCPCS codes under the revenue codes displayed in Table 4 below fo r purposes of calculating the geometric mean costs on which the proposed CY 2014 OPPS/ASC payment rates are based.CMS-1601-P 10 2

TABLE 4.—PROPOSED CY 2014 PACKAGED REVENUE CODES

Revenue

Code Description 0250 Pharmacy; General Classification 0251 Pharmacy; Generic Drugs 0252 Pharmacy; Non-Generic Drugs 0254 Pharmacy; Drugs Incident to Other Diagnostic Services 0255 Pharmacy; Drugs Incident to Radiology 0257 Pharmacy; Non-Prescription 0258 Pharmacy; IV Solutions 0259 Pharmacy; Other Pharmacy 0260 IV Therapy; General Classification 0261 IV Therapy; Infusion Pump 0262 IV Therapy; IV Therapy/Pharmacy Svcs 0263 IV Therapy; IV Therapy/Drug/Supply Delivery 0264 IV Therapy; IV Therapy/Supplies 0269 IV Therapy; Other IV Therapy 0270 Medical/Surgical Supplies and Devices; General Classification 0271 Medical/Surgical Supplies a nd Devices; Non-sterile Supply 0272 Medical/Surgical Supplies and Devices; Sterile Supply 0275 Medical/Surgical Supplies and Devices; Pacemaker 0276 Medical/Surgical Supplies a nd Devices; Intraocular Lens 0278 Medical/Surgical Supplies and Devices; Other Implants 0279 Medical/Surgical Supplies and Devices; Other Supplies/Devices 0280 Oncology; General Classification 0289 Oncology; Other Oncology 0343 Nuclear Medicine; Diagnostic Radiopharmaceuticals 0344 Nuclear Medicine; Therapeutic Radiopharmaceuticals 0370 Anesthesia; General Classification 0371 Anesthesia; Anesthesia Incident to Radiology 0372 Anesthesia; Anesthesia Inci dent to Other DX Services 0379 Anesthesia; Other Anesthesia

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

0392 Administration, Processing and Stor age for Blood and Blood Components; Processing and StorageCMS-1601-P 10 3

Revenue

Code Description

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

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

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

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

0804 Inpatient Renal Dialysis; Inpatient C ontinuous Cycling Peritoneal Dialysis (CCPD) 0809 Inpatient Renal Dialysis; Other Inpatient Dialysis 0810 Acquisition of Body Component s; General Classification 0819 Acquisition of Body Co mponents; Other Donor 0821 Hemodialysis-Outpatient or Home; He modialysis Composite or Other Rate 0824 Hemodialysis-Outpatient or Home; Maintenance – 100% 0825 Hemodialysis-Outpatient or Home; Support ServicesCMS-1601-P 10 4

Revenue

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

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

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

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

In accordance with our longstanding po licy, we are proposing to continue to exclude: (1) claims that had zero costs after summing all costs on the claim; and (2) claims containing packaging flag number 3. Effective for services furnished on or after July 1, 2004, the I/OCE assigned packag ing flag number 3 to claims on which hospitals submitted token charges less than $1.0 1 for a service with status indicator “S” or “T” (a major separately payable serv ice under the OPPS) for which the fiscal intermediary or Medicare administrative cont ractor (MAC) was required to allocate the sum of charges for services with a status indicator equaling “S” or “T” based on the relative payment weight of the APC to whic h each code was assigned. We do not believe that these charges, which were token char ges 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 re venue 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 2014 OPPS.CMS-1601-P 10 5 For the remaining claims, we are proposi ng to then standardiz e 60 percent of the costs of the claim (which we have previously determined to be the labor-related portion) for geographic differences in labor input costs. We made this adjustment by determining the wage index that applied to the hospital th at furnished the service and dividing the cost for the separately paid HCPCS code furnishe d by the hospital by that wage index. The claims accounting that we provide for the propo sed and final rule contains the formula we

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

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

items and services in the area in wh ich the hospital is located than the post-reclassification wage indices and, ther efore, would result in the most accurate unadjusted geometric mean costs. In accordance with our longstanding practi ce, we also are proposing to exclude single and “pseudo” single proc edure claims for which the total cost on the claim was outside 3 standard deviations from the geom etric mean of units for each HCPCS code on the bypass list (because, as discussed above, we used claims that contain multiple units of the bypass codes). After removing claims for hospitals with error CCRs, claims without HCPCS codes, claims for immunizations not covered under the OPPS, and claims for services not paid under the OPPS, approximately 112 m illion claims were left. Using these approximately 112 million claims, we crea ted approximately 82 million single and “pseudo” single procedure claims, of which we used slightly more than 82 million singleCMS-1601-P 10 6 bills (after trimming out approximately 1 milli on claims as discussed in section II.A.1.a. of this proposed rule) in the CY 2014 geometri c mean cost development and ratesetting. As discussed above, the OPPS has histor ically developed th e relative weights on which APC payments are based using APC me dian costs. For the CY 2013 OPPS, we calculated the APC relative payment weight s using geometric mean costs, and are proposing to do the same for CY 2014. Th erefore, the following discussion of the 2 times rule violation and the development of the relative payment weight refers to geometric means. For more detail about the CY 2014 OPPS/ASC policy to calculate relative payment weights based on geometric me ans, we refer readers to section II.A.2.f. of this proposed rule. We are proposing to use these claims to calculate the CY 2014 geometric mean costs for each separately payable HCPCS code and each APC. The comparison of HCPCS code-specific and APC geometric mean costs determines the applicability of the 2 times rule. Section 1833(t)(2) of the Act provides that, subject to certain exceptions, the items and services within an APC group shall not be treated as comparable with respect to the use of resources if the highest median cost (o r mean cost, if elected by the Secretary) for an item or service within the group is more than 2 times greater than the lowest median cost (or mean cost, if so el ected) for an item or service within the same group (the 2 times rule). While we have hist orically applied the 2 times rule based on median costs, in the CY 2013 OPPS/ASC fina l rule with comment period (77 FR 68270), as part of the CY 2013 policy to develop th e OPPS relative payment weights based on geometric mean costs, we also applied the 2 times rule based on geometric mean costs.CMS-1601-P 10 7 For the CY 2014 OPPS, we are proposing to continue to develop the APC relative payment weights based on geometric mean costs. We note that, for purposes of identifying significant HCPCS codes for examination in the 2 times rule, we consid er codes that have more than 1,000 single major claims or codes that ha ve both greater th an 99 single major claims and contribute at least 2 percent of the singl e major claims used to establish the APC geometric mean cost to be significant. This longstanding de finition of when a HCPC S code is significant for purposes of the 2 times rule was selected because we believe that a subset of 1,000 claims is negligible within the set of approximately 82 million single procedure or single session claims we use for establishing geomet ric mean costs. Similarly, a HCPCS code for which there are fewer than 99 single bills and which comprises le ss than 2 percent of the single major claims within an APC will have a negligible impact on the APC geometric mean. We note that this met hod of identifying significant HCPCS codes within an APC for purposes of the 2 times rule was used in prior years under the median-based cost methodology. Under our proposed CY 2014 policy to continue to base the relative payment weights on geometri c mean costs, we believe that this same consideration for identifying significant HCPCS codes should apply because the principles are consistent w ith their use in the median-based cost methodology. Unlisted

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

their costs used in the calculation of the AP C geometric mean. Finally, we reviewed the geometric mean costs for the services for wh ich we are proposing to pay separately under this proposed rule, and we r eassigned HCPCS codes to different APCs where it wasCMS-1601-P 10 8 necessary to ensure clini cal and resource homogeneity within the APCs. The APC geometric means were recalculated after we r eassigned the affected HCPCS codes. Both the HCPCS code-specific geometric means a nd the APC geometric means were weighted

to account for the inclusion of multiple units of the bypa ss codes in the creation of “pseudo” single procedure claims.

As we discuss in sections II.A.2.d. and II.A.2.f. 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. Specificall y, section II.A.2.d. of this proposed rule addresses the proposed calculation of single AP C criteria-based geometric mean costs. Section II.A.2.f. of this propos ed rule discusses the proposed calculation of composite APC criteria-based geometric mean costs. Section VIII.B. of this proposed rule addresses the methodology for calculating the pr oposed geometric mean costs for partial hospitalization services.CMS-1601-P 10 9 (2) Recommendations of the Advisory Pane l on Hospital Outpatient Payment Regarding Data Development At the March 11, 2013 meeting of the A dvisory Panel on Hospital Outpatient Payment (the Panel), we provided the Data Subcommittee with a list of all APCs fluctuating by greater than 10 percent wh en comparing the CY 2013 OPPS/ASC final rule costs based on CY 2011 claims proce ssed through June 30, 2012, to those based on CY 2012 OPPS/ASC final rule data (CY 2011 claims processed through June 30, 2011).

The Data Subcommittee reviewed the fluctuat ions in the APC costs and their respective weights. At the March 2013 Panel meeting, the Panel made a number of recommendations related to the data process. The Panel’ s recommendations and our responses follow.

Recommendation : The Panel recommends that the work of the Data

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

Recommendation : The panel recommended that CMS provide data on the impact of the CY 2013 method of using geometric m ean costs rather than median costs to establish relative APC weights. CMS Response : We are accepting this recommendation and will provide the data at a future meeting.CMS-1601-P 11 0 d. Proposed Calculation of Single Procedure APC Criteria-Based Costs (1) Device-Dependent APCs Historically, device-dependent APCs are populated by HCPCS codes that usually, but not always, require that a device be implan ted or used to perform the procedure. The standard methodology for calculating device-dep endent APC costs utilizes claims data that generally reflect the full cost of the required device by us ing only the subset of single procedure claims that pass th e procedure-to-device and devi ce-to-procedure edits; do not contain token charges (less th an $1.01) for devices; do not contain the “FB” modifier signifying that the device was furnished wit hout cost to the provider, or where a full credit was received; and do not contain the “FC” modifier signif ying that the hospital received partial credit for the device. For a full history of how we have calculated payment rates for device-dependent APCs in previous years and a de tailed discussion of how we developed the standard device-dep endent APC ratesetting methodology, we refer

readers to the CY 2008 OPPS/ ASC final rule with comm ent period (72 FR 66739 through 66742). Overviews of the procedure-to-devic e edits and device-to-p rocedure edits used in ratesetting for device-dependent APCs ar e 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 2014, we are proposing in section II. A.2.e. of this proposed rule to define 29 device-dependent APCs as single comp lete services and to assign them to comprehensive APCs that would provide all-in clusive payments for those services. As we explain in that section, we are proposing this as a further step to improve the accuracyCMS-1601-P 11 1 and transparency of our payments for these se rvices where the cost of the device is large compared to the other costs that contribute to the cost of the service. Table 5 below provides a list of the 39 APCs currently recognized as device-dependent APCs and identifies those 29 APCs that we are propos ing to include in the comprehensive APCs proposal. We are proposing to treat th e remaining 10 device-dependent APCs by applying our standard APC ratesetting met hodology to calculate th eir CY 2014 payment rates. We initially adopted a specific device-depende nt APC ratesetting methodology because commenters had previously expressed concerns that the costs associated with certain high-cost devices were not always being accurately reported and included in the calculation of relative payment weights for th e associated procedures. In this proposed rule, we do not believe that it is necessary to continue to apply the more specific device-dependent APC ratesett ing methodology to ensure accu rate ratesetting for the 10 APCs that are not included in the compre hensive APCs proposal because hospitals now have had several years of experience reporti ng procedures involving implantable devices and have grown accustomed to ensuring that th ey code and report charges so that their claims fully and appropriately reflect the cost s of those devices. Therefore, we believe that it is possible to calculat e the payment rates for these APCs using our standard APC ratesetting methodology. Beginning in CY 2014, we also ar e proposing to no longer implement procedure-to-device edits and device-to-pr ocedure edits for any APCs. Under this proposal, hospitals would still be expected to adhere to the guidelines of correct coding and append the correct device code to the cl aim when applicable. However, claimsCMS-1601-P 11 2 would no longer be returned to providers when specific procedure and device code pairings do not appear on a claim. We belie ve that this is appr opriate because of the experience hospitals now have had in c oding and reporting these claims fully and because, for the more costly devices, the proposed comprehensive APCs would reliably

reflect the cost of the device if it is included anywhere on the claim. Therefore, we do not believe that the burden on hospitals of adhering to the procedur e-to-device edits and device-to-procedure edits, a nd the burden on the Medicare program of maintaining those edits, continue to be warranted. As with al l other items and servic es recognized under the OPPS, we expect hospitals to code and repor t their costs appropria tely, regardless of whether there are claims processing edits in place.

TABLE 5.—APCs CURRENTLY RECOGN IZED AS DEVICE-DEPENDENT APCs

APC APC Title 0039* Level I Implantation of Neurostimulator Generator 0040* Level I Implantation/Revision/Replac ement of Neurostimulator Electrodes 0061* Level II Implantation/Revision/Repla cement of Neurostimulator Electrodes 0082* Coronary or Non-Coronary Atherectomy 0083* Coronary Angioplasty, Valvulopl asty, and Level I Endovascular Revascularization 0084 Level I Electrophysiologic Procedures 0085* Level II Electrophysiologic Procedures 0086 Level III Electrophysiologic Procedures 0089* Insertion/Replacement of Permanent Pacemaker and Electrodes 0090* Level I Insertion/Replaceme nt of Permanent Pacemaker 0104* Transcatheter Placement of Intracoronary Stents 0106* Insertion/Replacement of Pacemaker Leads and/or Electrodes 0107* Level I Implantation of Card ioverter-Defibrillators (ICDs) 0108* Level II Implantation of Card ioverter-Defibrillators (ICDs) 0115 Cannula/Access Device Procedures 0202* Level VII Female Reproductive Procedures 0227* Implantation of Drug Infusion Device 0229* Level II Endovascular Revascular ization of the Lower Extremity 0259* Level VII ENT ProceduresCMS-1601-P 11 3

APC APC Title 0293* Level VI Anterior Segment Eye Procedures 0315* Level II Implantation of Neurostimulator Generator 0318* Implantation of Neurostimulato r Pulse Generator and Electrode 0319* Level III Endovascular Revascular ization of the Lower Extremity 0384 GI Procedures with Stents 0385* Level I Prosthetic Urological Procedures 0386* Level II Prosthetic Urological Procedures 0425* Level II Arthroplasty or Implantation with Prosthesis 0427 Level II Tube or Catheter Changes or Repositioning 0622 Level II Vascular Access Procedures 0623 Level III Vascular Access Procedures 0648* Level IV Breast Surgery 0652 Insertion of Intraperiton eal and Pleural Catheters 0653 Vascular Reconstruction/Fi stula Repair with Device 0654* Level II Insertion/Replacement of Permanent Pacemaker 0655* Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker or Pacing 0656* Transcatheter Placement of Intracoronary Drug-Eluting Stents 0674* Prostate Cryoablation 0680* Insertion of Patient Activated Event Recorders 0687 Revision/Removal of Ne urostimulator Electrodes *Denotes proposed comprehensive APC. (2) Blood and Blood Products Since the implementation of the OPPS in August 2000, we have made separate payments for blood and blood pr oducts through APCs rather th an packaging payment for them into payments for the procedures with which they are administered. Hospital payments for the costs of blood and blood product s, 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 2014, we are proposing to conti nue to establish payment rates for blood and blood products using our blood-specific CCR methodology, which ut ilizes actual or simulated CCRs from the most recently availabl e hospital cost reports to convert hospitalCMS-1601-P 11 4 charges for blood and blood products to costs. This methodology has been our standard ratesetting methodology for blood and blood pr oducts 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-speci fic 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 cen ter often resulted in an underestimation of the true hospital costs for blood and blood products. Specifica lly, in order to address the

differences in CCRs and to bett er reflect hospitals’ costs, we are proposing to continue to simulate blood CCRs for each hospital thatdoes not report a bl ood cost center by calculating the ratio of the blood-specific CCRs to hospitals’ overall CCRs for those hospitals that do report costs and charges for blood cost centers. We would then apply this mean ratio to the overall CCRs of hosp itals not reporting costs and charges for blood cost centers on their cost reports in orde r to simulate blood-specific CCRs for those hospitals. We calculated the costs upon wh ich the proposed CY 2014 payment rates for blood and blood products are based using the act ual 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 continue to believe the hospita l-specific, blood-specific CCR methodology best responds to the absen ce 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 theCMS-1601-P 11 5 unique charging and cost accounting structure of each hospital, we be lieve that it yields more accurate estimated costs for these produc ts. We continue to believe that this methodology in CY 2014 would result in co sts for blood and blood products that appropriately reflect the relative estimated co sts of these products for hospitals without blood cost centers and, th erefore, for these blood products in general. We note that, as discussed in section II.A.2.e. of this proposed rule, we are proposing comprehensive APCs that would pr ovide all-inclusive payments for certain device-dependent procedures. Under this proposal, we would incl ude the costs of blood and blood products when calculating the overall costs of these comprehensive APCs. We note that we would continue to apply th e blood-specific CCR met hodology described in this section when calculating the costs of the blood and bl ood products that appear on claims with services assigned to the compre hensive APCs. Because the costs of blood and blood products would be reflected in th e overall costs of the comprehensive APCs (and, as a result, in the payment rates of th e comprehensive APCs), we would not make separate payments for blood and blood products when they appear on the same claims as services assigned to the comprehensive APCs.

We refer readers to Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) for the pr oposed CY 2014 payment rates for blood and blood products (which are identif ied with status indicator “R”). For a more detailed discussion of the blood-speci fic CCR methodology, we refer readers to the CY 2005 OPPS proposed rule (69 FR 50524 through 50525). For a full history of OPPS paymentCMS-1601-P 11 6 for blood and blood products, we refer reader s to the CY 2008 OPPS/AS C final rule with comment period (72 FR 66807 through 66810). e. Proposed Establishmen t of Comprehensive APCs (1) Definition and General Principles During the initial develo pment of a proposal for an outpatient prospective payment system in 1998 (63 FR 47552 through 48036), we considered developing the payment system based on a comprehensive ou tpatient bundle, as opposed to on a HCPCS component level. In 2000, we implemented an OPPS based generally on making payments at the HCPCS level (65 FR 18434 through 18820). Since then, however, we have been steadily moving the OPPS toward s a more comprehensive approach that increases flexibility and opportunity for efficiencies in a prospective system. For CY 2014, we are proposing to creat e 29 comprehensive APCs to replace 29 existing device-dependent APCs. We are proposing to define a comprehensive APC as a classification for the provision of a primary se rvice and all adjunctive services provided to support the delivery of th e primary service. Because a comprehensive APC would treat all individually reported codes as re presenting components of the comprehensive service, our proposal is to make a single prospective payment based on the cost of all individually reported codes th at represent the provision of a primary service and all adjunctive services provided to support that deliver y of the primary service. Specifically, we are proposing to create comprehensive AP Cs for the 29 most costly device-dependent services, where the cost of the device is larg e compared to the other costs that contribute to the cost of delivering the primary service.CMS-1601-P 11 7 We believe that, under the authority of s ections 1833(t)(1) and (t)(2) of the Act, the Secretary has the discretion to establish comprehensive APCs as part of developing the OPPS classification system, and that this proposal furthers our ongoing efforts to move the OPPS towards a more comprehensive payment system in support of our objectives to increase flexibility and efficiencies. The OPPS data we have accumulated over the past decade have enabled us to

continue to address several longstanding goals, including: continuing to improve the validity of our payments to most accurately reflect costs; improving transparency and reducing complexity and admi nistrative burden whenever possible; and increasing flexibility for hospitals to de velop increased efficiencies in the delivery of quality care. We believe this proposal to establis h comprehensive APCs will improve our ability to accurately set payment rates. In the normal process of setting payment rates, costs in certain cost centers (“uncoded costs”) are added to the costs of services reported with specific HCPCS codes only when they can be reliably assigned to a single service. Under the proposal, the entire claim would be associated with a single comprehensive service so all costs reported on the claim may be reliably assi gned to that service. This increases the accuracy of the payment for th e comprehensive service and also increases the stability of the payment from year to year. As an example, room and board revenue center charges are not included in OPPS rate setting calculations because room and board is typically not separately charged for out patient services. In the case of these 29 device-dependent procedures, the patient typi cally stays overnight to recover from the procedure. Thus, for these 29 comprehensive services, the cost of the room, nutritionCMS-1601-P 11 8 (board) and nursing care that is required to sustain the pa tient while the comprehensive device-dependent service is delivered will be associated with the service even if the hospital reports the costs in room and board revenue codes that are not usually used to report outpatient procedure costs. We also believe our proposal will enhance beneficiary understanding and transparency. Typically beneficiaries unders tand the primary procedure to be the OPPS service they receive, and do not generally consider that the other HCPCS codes are separate services. For example, beneficiarie s think of a single serv ice such as “getting my gall bladder removed” or “getting a pacemaker.” We believe that defining certain

services within the OPPS in terms of a si ngle comprehensive service delivered to the beneficiary improves transparency for the be neficiary, for physicians, and for hospitals by creating a common reference point with a similar meaning for all three groups and using the comprehensive service concept that already identifies these same services when they are performed in an inpatient environment. Finally, we believe that la rger bundles that contain a wider mix of related services in the prospectively paid bundles increase the opportunitie s for providers to tailor services to the specific needs of indivi dual beneficiaries, thereby increasing the opportunities for efficiencies and impr oving the delivery of medical care. (2) Comprehensive APCs for Device-Dependent Services (a) Identification of High-Cos t Device-Dependent Procedures In order to identify those services for which comprehensive packaging would have the greatest impact on cost validity, payment accuracy, beneficiary transparency,CMS-1601-P 11 9 and hospital efficiency, we ranked all AP Cs by CY 2012 costs and then identified 29 device-dependent APCs where we believe that the device-d ependent APC is characterized by a costly primary service with relatively small cost contributions from adjunctive services. (b) Proposal to Create Comprehensive APCs for Certain Device-Dependent Procedures For CY 2014, we are proposing to create 29 comprehensive APCs to prospectively pay for device-dependent servic es associated with 136 HCPCS codes. We are proposing to base the singl e all-inclusive comprehensiv e APC payment on all charges on the claim, excluding only char ges that cannot be covered by Medicare Part B or that are not payable under the OPPS. This comprehensive APC payment would include, for example, payment for the following types of services.

● Inclusion of Otherwise P ackaged Services and Supplies As part of the comprehensive APC, we ar e proposing to package all services that are packaged in CY 2013, and all services proposed for unconditional or conditional packaging for CY 2014.

● Inclusion of Ad junctive Services We have previously noted in section II.A .3.a. of this proposed rule that it has been a goal of the OPPS to package services that are typically integral, ancillary, supportive, dependent, or adjunctive to a primary servic e. We are proposing to package into the comprehensive APCs all these integral, anci llary, supportive, depende nt, and adjunctive services, hereinafter collectively referred to as “adjunctive services,” provided during the delivery of the comprehensive service. This includes the diagnostic procedures,CMS-1601-P 12 0 laboratory tests and other diagnostic tests, and treatments th at assist in the delivery of the primary procedure; visits and evaluations pe rformed in association with the procedure; uncoded services and supplies used during the service; outpatient department services delivered by therapists as part of the comp rehensive service; durable medical equipment as well as prosthetic and orthotic items and supplies when provided as part of the outpatient service; and any other components reported by HCPCS codes that are provided during the comprehensive service, except for mammography services and ambulance services, which are never payable as OP D services in accordance with section 1833(t)(1)(B)(iv) of the Act.

● Inclusion of Devices, Du rable Medical Equipment , Prosthetics, Orthotics and Supplies (DMEPOS) As part of the comprehensive service p ackaging proposal described above, we are proposing to package all de vices; implantable durable medical equipment (DME); implantable prosthetics; DME, prosthetics, and orthotics when used as supplies in the delivery of the comprehensive service; and s upplies used in support of these items when these items or supplies are provided as part of the delivery of a comp rehensive service. We have a longstanding policy of providing payment under the OPPS for implantable DME, implantable prosthetics, and medical and surgical supplies, as provided at sections 1833(t)(1)(B)(i) and(iii) of the Act and 42 CFR 419.2(b)(4), (b)(10), and (b)(11). Under this proposal, DME, prosthetics, and orthotic s, when used as supplies in the delivery of the comprehensive service, would be covere d OPD services as provided under section 1833(t)(1)(B)(i) of the Act and 42 CFR 419.2(b)(4). Under this proposal, we believe thatCMS-1601-P 12 1 when such items and services are provided as adjunctive components in the delivery of a comprehensive service, such items are a ppropriate for coverage under the OPPS as covered OPD services, and for payment under th e OPPS. We note that, at other times, such items when not provided as adjunc tive components in the delivery of a comprehensive service would not constitute covered OPD services, and such items would be appropriately provided by suppliers and pa id for under the DMEPOS benefit. More specifically, we do not believe that this pr oposed policy limits a hos pital’s ability to function as a DMEPOS supplier and bill DMEPOS items to the DME-MAC when those items are unrelated to the outpa tient procedure and provided out side of the delivery of the comprehensive service. In summary, we are proposing to consid er all DMEPOS items to be covered OPD services and to be adjunctive to the primar y service when they ar e delivered during the comprehensive service, as described above, a nd, therefore, are proposing to package such items into the applicable comprehensive se rvice. This proposal includes any items described by codes that are otherwise covered and paid separately in accordance with the payment rules for DMEPOS items and services, and applies to those items when they are provided as part of the delivery of the compre hensive service. Under this proposal, when such items are provided during the delivery of a comprehensive service, we are proposing that they are covered OPD se rvices as provided under sec tions 1833(t)(1)(B)(i) and (iii) of the Act and 42 CFR 419.2(b)(4), (b)(10), a nd (b)(11), and payable under the OPPS, as

described above.

● Inclusion of OPD Servi ces Reported by Therapy CodesCMS-1601-P 12 2 Generally, section 1833(t)(1)(B )(4) of the Act excludes th erapy services from the OPPS. We have previously not ed that therapy services ar e those provided by therapists under a plan of care, and are pa id under section 1834(k) of th e Act subject to an annual therapy cap, when applied. However, certain other activities similar to therapy services are considered and paid as outpatient serv ices. Although some ad junctive services may be provided by therapists and re ported with therapy codes, we do not believe they always constitute therapy services. In the case of adjunctive co mponents of a comprehensive service that are described by codes that woul d, under other circumstances, be indicative of therapy services, we note that there are a number of factor s that would more appropriately identify them as OPD services. They are not independent services but are delivered as an integral part of the OPD service on the order of the physician who is providing the service; they are not typically provided under an established plan of care but on a direct physician order; they may be performed by nontherapists; and they frequently do not contribute to a rehabilita tive process. For example, we note that therapists might be asked to provide a detaile d documentation of patient weaknesses to be used by the physician to help identify or quant ify a possible procedure-associated stroke or help with the mobilization of the patient af ter surgery in order to prevent blood clots. We note that these nontherapy services fu rnished by a therapist are limited to the immediate perioperative period, consistent with their inclusion as part of the larger service to deliver the device, and are distinct from subseque nt therapy services furnished under a therapy plan of care which serve to establish rehabilitativ e needs and begin the process of rehabilitation.CMS-1601-P 12 3 For that reason, when provided with in this very limited context of a comprehensive service such as the implantati on of an expensive device, we are proposing that services reported by therapy HCPCS code s, including costs associated with revenue codes 042X, 043X and 044X, would be consider ed to be adjunctive OPD services in support of the primary service wh en those services occur within the peri-operative period; that is, during the delivery of this comprehensive service that is bracketed by the OPD registration to initiate the service and the OPD discharge at the conclusion of the service. They do not constitute therapy services provided under a plan of care, are not subject to a therapy cap, if applied, and are not pa id separately as therapy services.

● Inclusion of Additional Ho spital Room and Board Revenue Centers in the Calculation

of Covered Costs

We believe that the cost of the bed and room occupied by the patient, the cost of nursing services, and the cost of any necessary fluid and nut rition (board) are considered covered costs when incurred during the provisi on of an OPD service, that is, during the provision of the comprehensive service. Because we are ab le to assign all costs on the claim to the comprehensive service, we believe we have an opportunity to better capture costs by including these costs in our calculati ons even when they appear in certain revenue centers not usually used to report OPPS costs. Specifically, we are including costs reported with room, board, and nursing revenue codes 012X, 013x, 015X, 0160, 0169, 0200 through 0204, 0206 through 0209, 0210 through 0212, 0214, 0219, 0230 through 0234, 0239, 0240 through 0243, and 0249, as we believe these revenue centersCMS-1601-P 12 4

are sometimes associated with the costs of room, nutrition, and nursing care provided during these comprehensive services.CMS-1601-P 12 5

● Inclusion of Hospita l-Administered Drugs We also are proposing to package all drugs provided to the bene ficiary as part of the delivery of the comprehensive service exce pt for those drugs separately paid through a transitional pass through paym ent. Intravenous drugs, for example, are OPPS services that are considered adjunctive to the primary procedure because the correct administration of the drug either promotes a beneficial outcome, such as the use of intravenous pain medications, or prevents possible complications, such as the use of intravenous blood pressure medications to temporarily replace oral blood pressure

medications and reduce the risk of a sudden rise in blood pressure when a normal daily medication is stopped. We note that, in defi ning these packaged drugs, we are applying both our existing definitions of self-administered drugs (SADs) and our existing definition of drugs as supplies to the situa tion where the OPD service is a comprehensive

service. We are proposing that all medications provided by the hospital for delivery during a comprehensive service pursuant to a physic ian order, regardless of the route of administration, would be considered to be ad junctive supplies and therefore packaged as part of the comprehensive APC. We believe that the physician order demonstrates that the delivery of the medication by the hos pital is necessary to avoid possible complications during the delivery of the comprehensive service, to ensure patient safety, and to ensure that the comprehensive servic e delivery is not compromised, and therefore

the medication should be cons idered an adjunctive supply.CMS-1601-P 12 6 Therefore, we are proposing to consider all medications to be supplies that are adjunctive to the primary service if the medicines are ordered by the physician and supplied and delivered by the hospital fo r administration during the comprehensive

service. (c) Methodology We calculated the proposed relative paym ent weights for these device-dependent comprehensive APCs by using relative cost s derived from our standard process as

described earlier in section II.A. of this proposed rule. Specifi cally, after converting charges to costs on the claims, we identif ied all claims containing one of the 136 HCPCS-defined procedures specified as cons tituting a comprehensive service. These claims were, by definition, classified as single major procedure claims. Any claims that contained more than one of these procedur es were identified but were included in calculating the cost of the procedure that ha d the greatest cost when traditional HCPCS level accounting was applied. All other costs were summed to calculate the total cost of the comprehensive service, and statistics for t hose services were calculated in the usual

manner. Claims with extreme costs were excl uded in accordance with our usual process. (d) Payments We used the proposed relative paymen t weights of these device-dependent comprehensive services to calculate pr oposed payments following our standard methodology. The proposed payments for the HCPCS codes assigned to these proposed comprehensive APCs are included in Addendu m B of this proposed rule (which is available via the Internet on the CMS Web site). We are proposing to assign a new statusCMS-1601-P 12 7 indicator, “J1” (OPD servi ces paid through a comprehens ive APC), to these devicedependent procedures. The claims processi ng system would be configured to make a single payment for the device-dependent co mprehensive service whenever a HCPCS for one of these primary procedures appears on the claim. From a processing system perspective, all other adj unctive services except mamm ography, ambulance, and passthrough services would be conditionally pack aged when a comprehensive service is identified on a claim. From our data, we have determined that multiple primary HCPCS codes occur together in 24 percent of thes e device-dependent claims but only rarelyrepresent unrelated services. Having determined that having multiple unrelated devicedependent services is an uncommon event, we are proposing to pay only the largest comprehensive payment associated with a claim. However, the costs of all of these more

extensive or additional services are included in the calculati ons of the relative payment weights for the comprehensive service, so th e prospective payment includes payment for

these occurrences. (e) Impact of Proposed Comprehensive APCs for Device-Dependent Procedures

● Impact on Medicare Payments Because these proposed device-depende nt comprehensive APCs are entirely derived from existing services currently re ported in Medicare claims, the proposed policy is effectively budget neutral in its impact on Medicare payments. We note that room, board, and nursing services have been covered costs in the delivery of outpatient services that require the patient to receive nursing services, occupy a bed for outpatient care, and

maintain a controlled metabolic intake dur ing a prolonged outpatient stay. Although weCMS-1601-P 12 8 are including new revenue center costs fo r room and board when reported on these claims, we are including them to increase th e accuracy of reporti ng not because they represent a new cost.

● Impact on APCs Impact on Composite APCs . There is currently one device-dependent composite service in the OPPS, Cardiac Resynchr onization Therapy, assigned to APC 0108. Because a comprehensive APC would treat all individually reported codes as representing components of the comprehensiv e service, all of the elements of the composite service are included in the proposed new comprehensive service. Therefore, Cardiac Resynchronization Therapy would no l onger be identified as a composite service but would be identified as a comprehensive se rvice. All services currently assigned to APC 0108, including Cardiac Resynchronizatio n Therapy, would be assigned to the proposed new comprehensive APC, with the proposed payment for CY 2014 identified in Addendum B of this proposed rule (which is available via the Inte rnet on the CMS Web site). Impact on Claims Used to Calculate Other APCs . Some costs reported on claims for device-dependent procedures may no l onger be available to contribute to the

calculations for other services through the pseudo-single pr ocess, described in section II.A. of this proposed rule. However, the loss of usable cost data for these services would

be small because most of these services cu rrently cannot be isolated as the “single

services” that can be used in the cost calcu lation process. The exceptions are services such as EKGs and chest x-rays that occur in very high frequency across all types ofCMS-1601-P 12 9 encounters, and laboratory serv ices and drugs, neither of wh ich are calculated based on average cost. Finally, it is important to note that any loss is a small impact when compared against the 400,000 new claims that could now be used because of the establishment of the pro posed comprehensive APC. Impact on Device-Dependent APCs . The impact on current device-dependent

APCs is described above in section II.A.2.d.(1) of this pr oposed rule. Comprehensive APC costs exceed the device-dependent procedure costs by an average of 11 percent, less than $1,000 per claim. The direct cost cont ribution of other OPPS services accounts for most of this increase, with laboratory tests contributing approximately $18 per claim (a 0.1 percent increase) and other non-OPPS paym ents contributing an additional $18 per claim. There is significant variation acr oss comprehensive APCs, however, not only because the distribution of supporting services varies but also because the larger bundle allows a more complete incorporation of uncoded costs. Finally, the use of comprehensive APCs would allow the number of claims used to estimate costs for these services to almost triple from 233,000 to 649,000, increasing the accuracy of our cost

estimates.

● Impact on Beneficiary Payments Under the proposed comprehensive servic e APCs, instead of paying copayments for a number of separate serv ices that are generally, indivi dually subject to the copayment liability cap at section 1833(t)(8 )(C)(i) of the Act, beneficiar ies could expect to pay only a single copayment that is subject to the cap. This would likely reduce beneficiary overall liability for most of these claims.CMS-1601-P 13 0 (f) Summary of Proposal to Create Comprehensive APCs for High-Cost Device-Dependent Procedures For CY 2014, we are proposing to create 29 comprehensive APCs to prospectively pay for device-dependent servic es associated with 136 HCPCS codes. We are proposing to treat all individually reported codes as representing components of the comprehensive service, making a single paym ent for the comprehensive service based on all charges on the claim, excluding only char ges for services that cannot be covered by Medicare Part B or that are not payable unde r the OPPS. This w ould create a single all-inclusive payment for the claim that is su bject to a single beneficiary copayment, up to the cap set at the level of the inpatient hospital deductible, as provided at section 1833(t)(8)(C)(i) of the Act. As part of the proposed compre hensive APC, we are proposing to—

● Continue to packag e all services that were packaged in CY 2013.

● Unconditionally package all services elsewhere pr oposed for unconditional or conditional packaging for CY 2014.

● Package all adjunctive services provided during the delivery of the comprehensive service.

● Package room, board, and nursing costs necessary to deliver the outpatient service, regardless of whether or not th e stay extends beyond a single calendar day.

● Package all hospital-administered drugs pursuant to a physician order, excluding pass-through drugs that are require d to be separately paid by statute.CMS-1601-P 13 1

● Pay separately for mammography services and ambulance services as non-OPPS services, regardless of whether they are reported as part of a comprehensive

service. We are inviting public comment on this proposal.CMS-1601-P 132 f. Proposed Calculation of Co mposite APC Criteria-Based Costs

As discussed in the CY 2008 OPPS/AS C final rule with comment period (72 FR 66613), we believe it is important that the OPPS enhance incentives for hospitals to provide necessary, high quality care and as efficiently as possible. For CY 2008, we developed composite APCs to provide a single payment for groups of services that are typically performed together during a single clinical encounter and that result in the provision of a complete service. Combining payment for multiple, independent services into a single OPPS payment in this way enable s hospitals to manage their resources with maximum flexibility by monitoring and adjustin g the volume and efficiency of services themselves. An additional advantage to the co mposite APC model is that we can use data from correctly coded multiple procedure claims to calculate payment rates for the specified combinations of services, rather than relying upon single procedure claims which may be low in volume and/or incorr ectly coded. Under th e OPPS, we currently have composite policies for extended assessment and management services, low dose rate (LDR) prostate brachytherapy, cardiac el ectrophysiologic evaluation and ablation services, mental health services, multiple imaging services, and cardiac resynchronization therapy services. We refer readers to the CY 2008 OPPS/AS C final rule with comment period for a full discussion of the development of the composite APC methodology (72 FR 66611 through 66614 and 66650 thr ough 66652) and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163) for more recent background. For CY 2014, we are proposing to conti nue our composite policies for extended assessment and management services, LDR prostate brachytherapy, cardiacCMS-1601-P 133 electrophysiologic evaluation and ablation servic es, mental health services, and multiple imaging services, as discussed below. We are proposing to discontinue and supersede the cardiac resynchronization th erapy composite APC by our proposed comprehensive APC 0108, as discussed in section II.A.2.e of this proposed rule. (1) Extended Assessment and Manageme nt Composite APCs (APCs 8002 and 8003) (a) Background Beginning in CY 2008, we included composite APC 8002 (Level I Extended Assessment and Management Composite) a nd composite APC 8003 (Level II Extended Assessment and Management Composite) in the OPPS to provide payment to hospitals in

certain circumstances when extended assessmen t and management of a patient occur (an extended visit). In most of these circumstances, observati on services are supportive and ancillary to the other services provided to a patient. From CY 2008 through CY 2013, in the circumstances when observation care is pr ovided in conjunction with a high level visit, critical care, 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 741 65) for a full discussion of this longstanding policy for CY 2013 and prior years. For CY 2014, we are proposing to modi fy our longstanding policy to provide payment to hospitals in certain circumstances when extended assessment and management of a patient occur. Primarily, we are proposing to allow any visit furnished by a hospital in conjunction with observation se rvices of substantia l duration to qualifyCMS-1601-P 134 for payment through the Extended Assessm ent and Management (EAM) Composite APC. Also, rather than recognizing two levels of EAM Composite APCs, we are proposing to create a new composite APC entitled, “Extended Assessment and Management (EAM) Composite,” (APC 8009) to provide payment for all qualifying extended assessment and management encounter s. These proposals are discussed in greater detail below. (b) Proposed Payment for Extended Assessment and Management Services

As discussed in section VII. of this proposed rule, we are proposing to no longer recognize five distinct visit leve ls for clinic visits and emergency department visits based on the existing HCPCS E/M codes, and in stead recognize three new alphanumeric HCPCS codes for each visit type. Currently, the payment criteria for the EAM composite APCs 8002 and 8003 include a high level visit represented by HCPCS code 99205, 99215, 99284, 99285, or G0304; critical care repr esented by CPT code 99281; or direct referral represented by HCPCS code G0379 pr ovided in conjunction with observation care represented by HCPCS code G0378. In light of the pro posal to no longer differentiate visit payment levels, and the f act that the current high level visit codes (HCPCS codes 99205, 99215, 99284, 99285 and G0304) would no longer be recognized under the OPPS, it would no longer be feasible to continue with our current payment criteria for the EAM composite APCs 8002 a nd 8003 for CY 2014. Therefore, to ensure that we continue to provide payment to hospi tals in certain circumstances when extended assessment and management of a patient occur, for CY 2014, we are proposing to provide payment for the entire care encounter through proposed new EAM Composite APC 8009CMS-1601-P 135 when observation care is provide d in conjunction with a visit, critical care, or direct referral and is an integral part of a patient’s extended encounter of care. Specifically, for CY 2014, we are proposing to provide EAM composite APC payment, through a newly created composite APC in circumstances when a clinic or ED visit, identified by one of the three new alphanumeric HCPC S codes proposed in section VII. of this proposed rule, is accompanied by observation care of substa ntial duration on a claim. We would no longer recognize APC 8002 or APC 8003. The sp ecific criteria we are proposing to be met for the proposed new EAM composite APC to be paid is provided below in the description of the claims that we are propos ing to select for the calculation of the proposed CY 2016 mean costs for this composite APC. We are proposing to calculate the mean costs for the proposed new EAM composite APC (APC 8009) for CY 2014 using CY 2012 single and “pseudo” single procedure claims that meet each of the following criteria:

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

status indicator ‘‘T’’ on the same date of service.);

● The claim contains 8 or more un its of HCPCS code G0378 (Observation services, per hour); and

● The claim contains one of the fo llowing codes: HCPCS code G0379 (Direct referral of patient for hospital observation care) on the same da te of service as G0378; orCMS-1601-P 136 CPT code 99201 (Office or other outpatient vi sit for the evaluation and management of a new patient (Level 1)); CP T code 99202 (Office or other outpatient visit for the evaluation and management of a new patient (Level 2)); CPT code 99203 (Office or other outpatient visit for the evaluation and manageme nt of a new patient (Level 3)); CPT code 99204 (Office or other outpatient visit for the evaluation and management of a new patient (Level 4)); CPT code 99205 (Office or other outpatient visit for the evaluation and management of a new patient (Level 5)); CPT code 99211 (Office or other outpatient

visit for the evaluation and mana gement of an established patient (Level 1)); CPT code 99212 (Office or other outpatient visit for the evaluation and management of an established patient (Level 2)); CPT code 99213 (Office or other outpatient visit for the evaluation and management of an establishe d patient (Level 3)); CPT code 99214 (Office or other outpatient visit for the evaluation and management of an established patient (Level 4)); CPT code 99215 (Office or othe r outpatient visit for the evaluation and management of an established patient (Level 5)); CPT code 99281 (Emergency department visit for the evaluation and manage ment of a patient (Level 1)); CPT code 99282 (Emergency department visit for the evaluation and management of a patient (Level 2)); CPT code 99283 (Emergency de partment visit for the evaluation and management of a patient (Level 3)); CPT code 99284 (Emergency department visit for the evaluation and management of a patient (Level 4)); CPT code 99285 (Emergency department visit for the evaluation and manage ment of a patient (Level 5)); or HCPCS code G0380 (Type B emergency department vi sit (Level 1)); HCPCS code G0381 (Type B emergency department visit (Level 2 )); HCPCS code G0382 (Type B emergencyCMS-1601-P 137 department visit (Level 3)); HCPCS code G0383 (Type B emergency department visit (Level 4)); HCPCS code G0384 (Type B emerge ncy department visit (Level 5)); or CPT code 99291 (Critical care, evaluation and manageme nt of the critically ill or critically injured patient; first 30-74 minutes) provided on the same date of service or 1 day before

the date of service for HCPCS code G0378. The proposed CY 2014 cost resulting from this methodology for the proposed new EAM composite APC (APC 8009) is approximately $1,357, which was calculated from 318,265 single and “pseudo” single clai ms that met the required criteria. When hospital claims data for the CY 2014 proposed clinic and ED visit codes becomes available, we are proposing to calcu late the mean costs for the proposed new EAM composite APC (APC 8009) for CY 2016 using CY 2014 single and “pseudo” single procedure claims that meet each of the following criteria:

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

status indicator ‘‘T’’ on the same date of service.);

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

● The claims contain one of the follo wing codes: HCPCS code G0379 (Direct referral of patient for hospital observation care) on the same da te of service as G0378; or CPT code 99291 (Critical care, evaluation a nd management of the critically ill orCMS-1601-P 138 critically injured patient; first 30–74 minutes ); or newly proposed alphanumeric Level II HCPCS code GXXXA (Type A ED visit); newly proposed alphanumeric Level II HCPCS code GXXXB (Type B ED visit); or newly propos ed alphanumeric Level II HCPCS code GXXXC (Clinic visit) provided on the same date of service or 1 day before

the date of service for HCPCS code G0378. (2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001) LDR prostate brachytherapy is a treatm ent for prostate cancer in which hollow

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

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

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

claims for the same date of service th at contain both CPT codes 55875 and 77778 andCMS-1601-P 139 that do not contain other separately paid code s that are not on the bypass list. We refer

readers to the CY 2008 OPPS/ ASC final rule with comm ent period (72 FR 66652 through 66655) for a full history of OPPS payment fo r LDR prostate brachytherapy and a detailed description of how we developed the LD R prostate brachytherapy composite APC. For CY 2014, we are proposing to c ontinue to pay for LDR prostate brachytherapy services using the co mposite APC methodology proposed and implemented for CY 2008 through CY 2013. Th at is, we are proposing to use CY 2012

claims on which both CPT codes 55875 and 77778 were billed on the same date of service with no other separately paid procedur e codes (other than those on the bypass list) to calculate the payment rate for composite APC 8001. Consistent with our CY 2008 through CY 2013 practice, we are proposing not to use the claims that meet these criteria

in the calculation of the costs for APC 0163 (Level IV Cystourethroscopy and Other Genitourinary Procedures) and APC 0651 (C omplex Interstitial Radiation Source Application), the APCs to which CPT c odes 55875 and 77778 are assigned, respectively. We are proposing to continue to calculate the costs for APCs 0163 and 0651 using single and “pseudo” single procedure claims. We be lieve that this composite APC contributes to our goal of creating hospital incentives fo r efficiency and cost containment, while providing hospitals with the most flexibility to manage their resources . We also continue to believe that data from claims reporti ng both services required for LDR prostate brachytherapy provide the most accurate cost upon which to base the composite APC payment rate.CMS-1601-P 140 Using a partial year of CY 2012 clai ms data available for this CY 2014 OPPS/ASC proposed rule, we we re able to use 1,487 claims that contained both CPT

codes 55875 and 77778 to calculate the cost upon which the proposed CY 2014 payment for composite APC 8001 is based. The proposed cost for composite APC 8001 for CY 2014 is approximately $4,340. (3) Cardiac Electrophysiologic Evaluati on and Ablation Composite APC (APC 8000) Effective January 1, 2008, we establis hed APC 8000 (Cardiac Electrophysiologic Evaluation and Ablation Composite) to pay for a composite service made up of at least one specified electrophysiologic evaluation se rvice 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 thr ough different APCs (specifically, APC 0085 (Level II Electrophysiologic Evaluation), APC 0086 (Ablat e Heart Dysrhythm Focus), and APC 0087 (Cardiac Elect rophysiologic Recording/Mapping)). Calculating a composite APC for these services allowed us to utilize many more claims than were

available to establish the individual APC cost s for these services, a nd advanced our stated goal of promoting hospital efficiency thr ough 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 contai ned 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 co mment period (72 FR 66656) identified the CPT codes thatCMS-1601-P 141 are assigned to Groups A and B. For a full discussion of how we identified the Group A and Group B procedures and establishe d the payment rate for the cardiac electrophysiologic evaluation a nd ablation composite APC, we refer readers to the

CY 2008 OPPS/ASC final rule with comme nt period (72 FR 66655 through 66659). Where a service in Group A is furnished on a da te of service that is different from the date of service for a CPT code in Group B for the same beneficiary, payments are made under the appropriate single procedure APCs and the composite APC does not apply

. Subsequent to the publication of th e CY 2013 OPPS/ASC proposed rule, the

AMA’s CPT Editorial Panel created fi ve new CPT codes describing cardiac electrophysiologic evaluation and ablation services, effective January 1, 2013. These five

new codes are:

● CPT code 93653 (Comprehensive el ectrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or attempted induction of an arrhythmia with right atrial pacing and reco rding, right vent ricular pacing and recording, His recording w ith intracardiac catheter ablatio n of arrhythmogenic focus; with treatment of supraventricul ar tachycardia by ablation of fast or slow atrioventricular pathway, accessory atrioventricular connec tion, cavo-tricuspid isthmus or other single

atrial focus or source of atrial re-entry);

● CPT code 93654 (Comprehensive el ectrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or attempted induction of an arrhythmia with right atrial pacing and reco rding, right vent ricular pacing and recording, His recording w ith intracardiac catheter ablatio n of arrhythmogenic focus;CMS-1601-P 142 with treatment of ventricular tachycardi a or focus of ventricular ectopy including intracardiac electrophysiologic 3D mapping, when performed, and left ventricular pacing and recording, when performed);

● CPT code 93655 (Intracardiac catheter ab lation of a discrete mechanism of arrhythmia which is distinct from the pr imary ablated mechanism, including repeat diagnostic maneuvers, to treat a spontaneous or induced arrhythmia (List separately in addition to code for primary procedure));

● CPT code 93656 (Comprehensive el ectrophysiologic evaluation including transseptal catheterizations, insertion and repositioning of multiple electrode catheters with induction or attempted i nduction of an arrhythmia with atrial recording and pacing, when possible, right ventricular pacing and recording, His bun dle recording with

intracardiac catheter ablati on of arrhythmogenic focus, with treatment of atrial fibrillation by ablation by pulmonary vein isolation); and

● CPT code 93657 (Additional linear or fo cal intracardiac cathet er ablation of the left or right atrium for treat ment of atrial fibrillation remaining after completion of pulmonary vein isolation (List separately in addition to code for primary procedure)).

The CPT Editorial Panel also deleted tw o electrophysiologic ablation codes, CPT code 93651 (Intracardiac catheter ablation of arrhythmogenic focus; for treatment of supraventricular tachycardia by ablation of fast or slow atrioventricular pathways, accessory atrioventricular connectio ns or other atrial foci, sing ly or in combination) and CPT code 93652 (Intracardiac catheter ablation of arrhythmogenic focus; for treatment of ventricular tachycardia), effective January 1, 2013.CMS-1601-P 143

As we described in the CY 2013 OPPS/ ASC final rule with comment period (77 FR 68425), new CPT codes 93653, 93654, a nd 93656 are primary electrophysiologic services that encompass ev aluation as well as ablation, while new CPT codes 93655 and 93657 are add-on codes. Because CPT codes 93653, 93654, and 93656 already encompass both evaluation and ablation servic es, we assigned them to composite APC 8000 with no further requirement to have anot her electrophysiologic se rvice from either Group A or Group B furnished on the same date of service, and we assigned them interim status indicator “Q3” (Codes that may be paid through a composite APC) in Addendum B

to the CY 2013 OPPS/ASC final rule with co mment period. To facilitate implementing this policy, we assigned CPT codes 93653, 93654, and 93656 to a new Group C, which is paid at the composite APC 8000 payment rate . (We noted that we will use single and “pseudo” single claims for CPT codes 93653, 93654, and 93656 when they become available for calculating the costs upon which the payment rate for APC 8000 will be based in future ratesetting.) Because CPT codes 93655 and 93657 are dependent services that may only be performed as ancillary services to the primary CPT codes 93653, 93654, and 93656, we believed that packaging CP T codes 93655 and 93657 with the primary procedures is appropriate, and we assigned th em interim status indicator “N.” Because

the CPT Editorial Panel deleted CPT c odes 93651 and 93652, effective January 1, 2013, we deleted them from the Group B code lis t, leaving only CPT code 93650 (Intracardiac

catheter ablation of atrioven tricular node function, at rioventricular conduction for creation of complete heart block, with or without temporary pacemaker placement) in Group B.CMS-1601-P 144 As is our usual practice for new CPT code s that were not available at the time of the proposed rule, our treatment of new CPT codes 93653, 93654, 93655, 93656, and 93657 was open to public comment for a period of 60 days following the publication of

the CY 2013 OPPS/ASC final ru le with comment period. For CY 2014, we are proposing to conti nue to pay for cardiac electrophysiologic evaluation and ablation services using the composite APC methodology proposed and implemented for CY 2008 through CY 2013. We also are proposing to continue the new Group C methodology we first established for CY 2013, described above, in response to the CPT Editorial Panel’s creation of primary CPT codes 93653, 93654, and 93656. We

continue to believe that th e cost for cardiac electrophysio logic evaluation and ablation services calculated from a high volume of correctly coded multiple procedure claims would result in an accurate and appropriate pr oposed payment for these services when at least one evaluation service is furnished during the same clinical encounter as at least one ablation service. Consistent with our pr actice since CY 2008, we are proposing not to use the claims that met the composite payment criteria in the calculation of the costs for APC 0085, to which the CPT codes in both Groups A and B for composite APC 8000 are otherwise assigned. We are pr oposing that the costs for AP C 0085 would continue to be calculated using single procedure claims. For CY 2014, using a partial year of CY 2012

claims data available for this CY 2014 OPPS/ ASC proposed rule, we were able to use 15,817 claims containing a combination of Group A and Group B CPT codes (Group C was not effective until January 1, 2013) to calculate a proposed cost of approximately $13,402 for composite APC 8000.CMS-1601-P 145 Table 6 below lists the proposed groups of procedures upon which we would base composite APC 8000 for CY 2014.

TABLE 6.—PROPOSED GROUPS OF CARDIAC ELECTROPHYSIOLOGIC EVALUATION AND ABLATION PROCEDURES UPON WHICH COMPOSITE APC 8000 IS BASED

Codes Used in Combinations: At Least One in Group A and One in Group B, or At Least One in Group C CY 2014 CPT Code Proposed Single Code

CY 2014

APC Proposed CY 2014 SI (Composite) Group A Comprehensive electrophysiologic evaluation with righ t atrial pacing and recording, right vent ricular pacing and recording, His bundle recording, including insertion and repositioning of multiple electrode catheters, without induction or attempted induction of arrhythmia 93619 0085 Q3 Comprehensive electrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or at tempted induction of arrhythmia; with righ t atrial pacing and recording, right vent ricular pacing and recording, His bundle recording 93620 0085 Q3 Group B Intracardiac cathe ter ablation of atrioventricular node function, atrioventricular conduct ion for creation of complete heart block, with or without temporary pacemaker placement 93650 0085 Q3CMS-1601-P 146 Group C Comprehensive electrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or atte mpted induction of an arrhythmia with righ t atrial pacing and recording, right vent ricular pacing and recording, His recordi ng with intracardiac catheter ablation of arrhythmogenic focus; with treatment of supraventricular tachycardia by ablation of fast or slow atrioventricular pathway, accessory atrioventricular conn ection, cavo-tricuspid isthmus or other single atrial focus or source of atrial re-entry 93653 8000 Q3 Comprehensive electrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or atte mpted induction of an arrhythmia with righ t atrial pacing and recording, right vent ricular pacing and recording, His recordi ng with intracardiac catheter ablation of arrhythmogenic focus; with treatment of ventricular tachycardia or focus of ventricular ectopy including intracardiac electrophysiologic 3D mapping, when performed, and left ventricular pacing and recording, when performed 93654 8000 Q3 Comprehensive electrophysiologic evaluation including transseptal catheterizations, inser tion and repositioning of multiple electrode catheters with induction or attempted induction of an arrhythmia with atrial recording and pacing, when possible, right ventricular pacing and recording, His bundle recording with intracardiac cathete r ablation of arrhythmogenic focus, with treatment of atrial fibrillation by ablation by pulmonary vein isolation 93656 8000 Q3CMS-1601-P 147 (4) Mental Health Services Composite APC (APC 0034) For CY 2104, we are proposing to conti nue our longstanding policy of limiting the aggregate payment for specified less res ource-intensive mental health services furnished on the same date to the payment for a day of partial hos pitalization services provided by a hospital, which we consider to be the most resource-intensive of all outpatient mental health treatments. 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. 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 AP Cs for the individual services exceeds the maximum per diem payment rate for partia l hospitalization services provided by a hospital, those specified mental health se rvices would be assigned to APC 0034 (Mental Health Services Composite). Specifically, we are proposing to continue to set the payment rate for APC 0034 at the same paymen t rate that we are proposing to establish for APC 0176 (Level II Partial Hospitalization (4 or more services) for hospital-based PHPs), which is the maximum partial hospitali zation per diem paymen t rate for a hospital and proposing that the hospital would continue to be paid one unit of APC 0034. Under this policy, the I/OCE would continue to de termine whether to pay for these specified mental health services individually or to ma ke a single payment at the same payment rate established for APC 0176 for all of the specifi ed mental health services furnished by theCMS-1601-P 148 hospital on that single date of service. We continue to believe that the costs associated with administering a partial hos pitalization program represent the most resource-intensive of all outpatient mental health treatments. Therefore, we do not believe that we should pay more for mental health services under the OPPS than the highest partial hospitalization per diem payment rate for hospitals. (5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 8008) Effective January 1, 2009, we provide a si ngle payment each time a hospital bills more than one imaging procedure within an im aging family on the same date of service, in order to reflect and promote the efficien cies hospitals can ac hieve when performing multiple imaging procedures during a singl e session (73 FR 41448 through 41450). We utilize three imaging families based on imaging modality for purposes of this methodology: (1) ultrasound; (2) computed tomography (CT) and computed tomographic angiography (CTA); and (3) magnetic resonance imaging (MRI) and magnetic resonance angiography (MRA). The HCPCS codes subject to the multiple imaging composite policy and their respective families are listed in Table 6 of the

CY 2013 OPPS/ASC final rule with co mment period (77 FR 68253 through 68257). While there are three imaging families, there are five multiple imaging composite APCs due to the statutory requirement unde r section 1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging servi ces provided with and without contrast. While the ultrasound procedures included in the policy do not involve contrast, 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:CMS-1601-P 149

● 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 fo r the “with contrast” composite APCs as having at least one or more imaging procedures from the same family performed with

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

we refer readers to the CY 2009 OPPS/A SC final rule with comment period (73 FR 68559 through 68569). For CY 2014, we are proposing to con tinue to pay for all multiple imaging procedures within an imaging family perfor med on the same date of service using the multiple imaging composite APC payment methodology. We continue to believe that this policy would reflect and promote the efficiencies hospitals can achieve when performing multiple imaging procedures dur ing a single session. The proposed CY 2014CMS-1601-P 150 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 2012 claims available for this CY 2014 OPPS/ASC proposed rule that qualified for composite payment under the current policy (t hat is, those claims with more than one procedure within the same family on a single da te of service). To calculate the proposed costs, we used the same methodology that we used to calculate the final CY 2012 and CY 2013 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 referred to as “overlap bypass codes” that we removed fr om the bypass list for purposes of calculating the proposed multiple imaging composite AP C costs, pursuant to our established methodology (76 FR 74169), are identified by aste risks in Addendum N to this proposed rule (which is available via the Internet on the CMS Web site ) and are discussed in more

detail in section II.A.1.b. of this proposed rule. We were able to identify approximately 0.8 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 cl aims, to calculate the proposed CY 2014 costs for the multiple imaging composite APCs. Table 7 below lists the proposed HCPCS codes that would be subject to the multiple imaging composite policy and their respective families and approximate composite APC costs for CY 2014. We note that the proposed costs calculated for many imaging APCs, including the multiple imaging composite APCs, have changed significantly from the costs calculated fo r the CY 2013 OPPS/ASC final rule withCMS-1601-P 151 comment period for these APCs as a result of the proposed adoption of the new MRI and CT cost centers, as discussed in se ction II.A.1.c. of this proposed rule.

TABLE 7.—PROPOSED OPPS IMAGING FAMILIES AND MULTIPLE IMAGING PROCEDURE COMPOSITE APCs Family 1 – Ultrasound Proposed CY 2014 APC 8004 (Ultrasound Composite) Proposed CY 2014 Approximate APC Cost = $322 76604 Us exam, chest 76700 Us exam, abdom, complete 76705 Echo exam of abdomen 76770 Us exam abdo back wall, comp 76775 Us exam abdo back wall, lim 76776 Us exam k transpl w/Doppler 76831 Echo exam, uterus 76856 Us exam, pelvic, complete 76870 Us exam, scrotum 76857 Us exam, pelvic, limited Family 2 - CT and CTA wi th and without Contrast Proposed CY 2014 APC 8005 (CT and CTA without Contrast Composite)* Proposed CY 2014 Approximate APC Cost = $304 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 & pelvisCMS-1601-P 152 Proposed CY 2014 APC 8006 (CT and CTA with Contrast Composite) Proposed CY 2014 Approximate APC Cost = $522 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+ regnsCMS-1601-P 153 * If a “without contrast” CT or CTA procedur e is performed during the same session as a “with contrast” CT or CTA procedure, th e I/OCE will assign APC 8006 rather than APC 8005. Family 3 - MRI and MRA with and without Contrast Proposed CY 2014 APC 8007 (MRI and

MRA without Contrast Composite)* Proposed CY 2014 Approximate APC Cost = $612 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 2014 APC 8008 (MRI and MRA with Contrast Composite) Proposed CY 2014 Approximate APC Cost = $908 70549 Mr angiograph neck w/o&w/dye 70542 Mri orbit/face/neck w/dye 70543 Mri orbt/fac/nck w/o & w/dyeCMS-1601-P 154 70545 Mr angiography head w/dye 70546 Mr angiograph head w/o&w/dye 70547 Mr angiography neck w/o dye 70548 Mr angiography neck w/dye 70552 Mri brain w/dye 70553 Mri brain w/o & w/dye 71551 Mri chest w/dye 71552 Mri chest w/o & w/dye 72142 Mri neck spine w/dye 72147 Mri chest spine w/dye 72149 Mri lumbar spine w/dye 72156 Mri neck spine w/o & w/dye 72157 Mri chest spine w/o & w/dye 72158 Mri lumbar spine w/o & w/dye 72196 Mri pelvis w/dye 72197 Mri pelvis w/o & w/dye 73219 Mri upper extremity w/dye 73220 Mri uppr extremity w/o&w/dye 73222 Mri joint upr extrem w/dye 73223 Mri joint upr extr w/o&w/dye 73719 Mri lower extremity w/dye 73720 Mri lwr extremity w/o&w/dye 73722 Mri joint of lwr extr w/dye 73723 Mri joint lwr extr w/o&w/dye 74182 Mri abdomen w/dye 74183 Mri abdomen w/o & w/dye 75561 Cardiac mri for morph w/dye 75563 Card mri w/stress img & dye C8900 MRA w/cont, abd C8902 MRA w/o fol w/cont, abd C8903 MRI w/cont, breast, uni C8905 MRI w/o fol w/cont, brst, un C8906 MRI w/cont, breast, bi C8908 MRI w/o fol w/cont, breast, C8909 MRA w/cont, chest C8911 MRA w/o fol w/cont, chest C8912 MRA w/cont, lwr extCMS-1601-P 155 C8914 MRA w/o fol w/cont, lwr ext C8918 MRA w/cont, pelvis C8920 MRA w/o fol w/cont, pelvis C8931 MRA, w/dye, spinal canal C8933 MRA, w/o&w/dye, spinal canal C8934 MRA, w/dye, upper extremity C8936 MRA, w/o&w/dye, upper extr * If a “without contrast” MRI or MRA procedure is performe d during the same session as a “with contrast” MRI or MRA procedure, the I/OCE will assign APC 8008 rather than APC 8007.CMS-1601-P 156 3. Proposed Changes to Packaged Items and Services a. Background Like other prospective payment syst ems, 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, overa ll payment is adequate to ensure access to appropriate care. The OPPS packages payment for multiple interrelated items and services into a single payment to create incentives for hospitals to furnish services in the most efficient way by enabling hospitals to manage their re sources with maximum flexibility, thereby encouraging long-term cost containment. Our packaging policies support our strategic goal of using larger payment bundles to maxi mize hospitals’ incentives to provide care in the most efficient matter. In addition, the OPPS packages payment for multiple interrelated items and services into a singl e payment, regardless of whether dedicated

CPT or HCPCS codes describe the services or the cost of the individual items and services. For example, where there are a vari ety of devices, drugs, items, supplies, etc. that could be used to furnish a service, so me of which are more expensive than others, packaging encourages hospitals to use the most cost-efficient item that meets the patient’s needs, rather than to routinel y use a more expensive item, wh ich often results if separate payment is provided for the items. This enc ourages hospitals that are spending more per case than the payment they received to review their service patterns to ensure that they furnish services as efficiently as possible. Similarly, we believe that separate paymentCMS-1601-P 157 for items and services heightens the hosp ital’s focus on the payment for individual services, rather than the effici ent delivery of those services. Packaging also encourages hospitals to effectively negotiate with manufacturers and suppliers to reduce the purchase price of it ems and services or to explore alternative group purchasing arrangements, thereby encour aging the most economical health care delivery. Similarly, packaging encourages hospi tals to establish protocols that ensure that necessary services are furnished, while scrutinizing the services ordered by practitioners to maximize the efficient use of hospital resources. Packaging payments into larger payment bundles promotes the predictability and accura cy of payment for

services over time. Finall y, packaging may reduce the importance of refining servicespecific payment because packaged payments include costs associated with higher cost cases requiring many ancillary items and servi ces and lower cost cases requiring fewer ancillary items and services. Because pack aging encourages efficiency and is an essential component of a pros pective payment system, packaging payment for items and services that are typically integral, ancillar y, supportive, dependent, or adjunctive to a primary service has been a f undamental part of the OPPS since its implementation in August 2000. Most, but not necessarily all, items and services currently packaged in the OPPS are listed in 42 CFR 419.2(b). For an extensive discussion of the history and background of the OPPS packaging policy, we refer readers to the CY 2008 OPPS/ASC proposed rule (72 FR 42628) and the CY 2008 OPPS/ASC final rule with comment period (72 FR 66580).CMS-1601-P 158 We use the term “dependent service” to refer to the HCPCS codes that represent services that are typically an cillary and supportive to a prim ary diagnostic or therapeutic modality. We use the term “primary service” to refer to the HCPCS codes that represent the primary therapeutic or diagnostic modality into which we package payment for the dependent service. Over the last deca de, we have refined our understanding and implementation of the OPPS and have packaged numerous services that we originally paid as primary services, and as we consid er the development of larger payment groups that more broadly reflect services provided in an encounter or episode of care, we may propose to expand these packaging policies as they apply to serv ices that we may currently pay as primary services. We assign status indicator “N” to those HCPCS codes of dependent services that we believe are always integral to the perf ormance 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. The following description of the conditional packaging status indicators reflects our proposal to discont inue the use of status indi cator “X,” which we discuss below. We assign status indicator “Q1” (STV-Packaged Codes), “Q2” (T-Packaged Codes), or “Q3” (Codes that may be paid through a composite APC) to each conditionally packaged HCPCS code. An ST V-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,” or “V” furnis hed in the hospital outpatient encounter. A T-packaged code describes a code whose pa yment is only packaged with one or moreCMS-1601-P 159 separately paid surgical procedures with th e status indicator of “T” that are provided during the hospital outpatient encounter. STV-packaged codes and T-packaged codes are paid separately in those uncommon cases when they do not meet thei r respective criteria for packaged payment. STV-packaged codes and T-packaged codes are conditionally packaged. We refer readers to the discus sion of proposed CY 2014 OPPS payment status

and comment indicators in section XI. of this proposed rule and Addendum D1, which is available via the Internet on the CMS Web site, for a complete listing of status indicators and the meaning of each status indicator. Hospitals include HCPCS codes and ch arges 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 CP T Editorial Panel or CMS provides other specific 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 comme nt period (72 FR 66610 through 66659), we adopted the packaging of paym ent 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 s upportive. The seven categories are: (1) guidance services; (2) image processing services; (3) intraopera tive services; (4) imaging supervision andCMS-1601-P 160 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 ancill ary and supportive to a primar y diagnostic or therapeutic modality and, in those cases, are an integral pa rt of the primary service they support. In addition, in the CY 2009 OPPS/ ASC final rule with comm ent period (73 FR 68634), we packaged products described as implantable biologicals. As discussed below, we are proposing to add each of these categories of packaged items and services that were packaged beginning in CYs 2008 and 2009, along with newly proposed packaged items

and services for CY 2014 as described be low to the OPPS packaging regulation at § 419.2(b). Packaging under the OPPS also includes composite APCs, which are

described in section II.A.2.f . of this proposed rule. b. Basis for Proposed New Packaging Policies for CY 2014 As discussed above, the OPPS is a prospect ive payment system. It is not intended to be a fee schedule, in which separate pa yment is made for each coded line item. However, the OPPS is currently a prospective payment system that packages some items and services but not others. Payment for some items and services in the OPPS is according to the principles of a prospective payment system, while the payment for other

items and services is more like that of a f ee schedule. Our overarching goal is to make OPPS payments for all services paid under th e OPPS more consistent with those of a prospective payment system and less like those of a per service fee schedule, which pays separately for each coded item. As a part of this effort, we have continued to examine theCMS-1601-P 161 payment for items and services provided in the OPPS to determine which OPPS services can be packaged to achieve the objective of advanci ng the OPPS as a prospective payment system. Therefore, as we did in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66610 through 66659), we have examined the items and services currently provided under the OPPS, reviewing categor ies of integral, ancillary, supportive, dependent, or adjunctive items and services for which we believe payment would be appropriately packaged into payment of the primary service they support. Specifically,

we examined the HCPCS code definitions (including CPT code de scriptors) to see whether there were categories of codes for which packaging would be appropriate according to existing OPPS pack aging policies or a logical expansion of those existing OPPS packaging policies. In general, we are proposing to package th e costs of selected HCPCS codes into payment for services re ported with other HCPCS codes where we believe that one code reported an item or service that was integral, ancillary, supportive, dependent, or adjunctive to the provision of care that was reported by another HCPCS code. Below we discuss categories and clas ses of items and services that we are proposing to package beginning in CY 2014. In several cases, we are proposing that services be conditionally packag ed so that if they are provided without other services, there will be a separate payment for the serv ice. The proposed policies detailed below are not exhaustive, and we exp ect to continue to review th e OPPS and consider additional packaging policies in the future.CMS-1601-P 162 c. Proposed New Packaging Policies for CY 2014 (1) Drugs, Biologicals, and Radiopharmaceu ticals That Function as Supplies When Used in a Diagnostic Test or Procedure In the OPPS, we currently unconditionally package the following six categories of drugs, biologicals, and radiopharmaceutical s (unless temporary pass-through status applies): (1) those with per day costs at or below the packaging threshold (discussed further in section V.B.2. of this proposed rule); (2) diagnosti c radiopharmaceuticals; (3) contrast agents; (4) anesthesia drugs; (5) drugs used as supplies according to § 419.2(b)(4)); and (6) implantable biologicals. For CY 2014, we reviewed all of the drugs, biologicals, and radiopharmaceuticals administered in the hospital outpatient setting to identify categories or classes of drugs, biologicals, and radiopharmaceuticals that either should be packaged according to existing packaging policies or should be packaged as a logical expansion of existing OPPS packaging policies for drugs, biologicals, and radiopharmaceuticals. Currently, two of the categories of dr ugs, biologicals, and radiopharmaceuticals that are packaged in the OPPS (contrast agents and diagnostic radiopharmaceuticals)

have a common characteristic--th ey both describe products that function as supplies that are used in a diagnostic test or procedure. Although in the past we identified these specific categories of drugs, biologicals, a nd radiopharmaceuticals as packaged after the expiration of pass-through status, we recogni ze that they actually represent subcategories of a broader category of drugs, biological s, and radiopharmaceuticals that should be packaged in the OPPS according to OPPS pack aging principles: drugs, biologicals, andCMS-1601-P 163 radiopharmaceuticals that func tion as supplies when used in a diagnostic test or procedure. In particular, we are referring to drugs, biologicals, and radiopharmaceuticals that function as supplies as a part of a la rger, more encompassing service or procedure, namely, the diagnostic test or proced ure in which the drug, biological, or radiopharmaceutical is employed. Because di agnostic radiopharmaceuticals and contrast agents represent specific examples of a broader category of drugs, biologicals, or radiopharmaceuticals that may function as a s upply that is integr al and supportive to a diagnostic test or procedure, we are proposing to unconditionally package drugs, biologicals, and radiopharmaceuticals that functi on as a supply when used in a diagnostic test or procedure, except when the drug, biological, or radiopharmaceutical has pass-through status. A diagnostic test or procedure is defi ned as any kind of test or procedure performed to aid in the diagnosis, detecti on, monitoring, or evaluation of a disease or condition. A diagnostic te st or procedure also includes te sts or procedures performed to determine which treatment option is optimal. A diagnostic test or procedure can have multiple purposes, but at least one purpose must be diagnostic. We are proposing to revise the regulations at § 419.2(b) to specify that any drugs, biologicals, and radiopharmaceuticals that function as supp lies when used in diagnostic tests or procedures will be packaged as supplies in the OPPS, except when pass-through status applies. This proposed broader categor y of packaged drugs, biologicals, and radiopharmaceuticals includes the currently pack aged categories of contrast agents and diagnostic radiopharmaceuticals when used in a diagnostic test or procedure. We haveCMS-1601-P 164 identified specific drugs that function as supplies when us ed in a diagnostic test or procedure that fall under this proposed packaging policy, and discuss these drugs below. (a) Stress Agents Our review of OPPS drugs identifi ed pharmacologic stress agents (“stress agents”) as a class of drugs that is descri bed by the proposed packaged category of drugs, biologicals, and radiopharmaceuticals that functi on as supplies when used in a diagnostic test or procedure. Stress agents are a class of drugs that are used in diagnostic tests to evaluate certain aspects of cardiac function. In many cases, these agents are used in patients who are unable to perform an exerci se stress test, which typically precedes additional diagnostic testing. The primary dia gnostic test in which these agents are used is myocardial perfusion imaging (MPI), wh ich is the highest co st nuclear medicine procedure in the OPPS, with OPPS paym ents exceeding $800 million in CY 2012. Approximately 96 percent of MPI is billed with CPT code 78452. Stress agents include the following drugs described by these HC PCS codes: HCPCS codes J0152 (Injection, adenosine for diagnostic use, 30 mg); J1245 (Injection, dipyridamole, per 10 mg); J1250 (Injection, dobutamine hydrochloride, per 250 mg); and J2785 (Injection, regadenoson, 0.1 mg). For CY 2013, HCPCS codes J1245 an d J1250 are packaged in the OPPS, and J0152 and J2785 are separately paid. OPPS payments for the two separately payable stress agents totaled approximately $111 million in CY 2012. Beginning in CY 2014, we are proposing to package all stress agents that function as supplies into the diagnostic tests or procedures in which they are employed, consistent with the policy proposed above. The prim ary service in which stress agents areCMS-1601-P 165 employed is MPI. MPI with stress encompasse s the imaging service, the stress test, and

either exercise to induce stress or the admi nistration of a pharmacol ogic stress agent. The

various combinations of items and services that constitute MPI with stress are depicted in the table below, which includes the CY 2013 se parate payment rates versus the proposed CY 2014 packaged payment rate for MPI.

TABLE 8.—CY 2013 SEPA RATE PAYMENT VERSUS CY 2014 PROPOSED PACKAGED PAYMENT FOR MPI

Service or Supply CY 2013 Separate Payment for MPI Components CY 2013 Separate Payment for MPI Components CY 2013 Separate Payment for MPI Components CY 2013 Separate Payment for MPI Components CY 2014 Proposed Packaged Payment for MPI 78452 $672 $672 $672 $672 $1,235 93017 $178 $178 $178 $178 P € Exercise or Stress Agent ¥ Exercise

− $0 J1245

− P J2785

− $215 J0152

− $219* P Radiopharmaceutical P P P P P Total $850 $850 $1,065 $1,069 $1,235 P = Packaged € The stress test described by CPT code 93017 is propos ed to be conditionally packaged as a result of the proposal described below to conditionally package ancillary services. ¥ April 2013 ASP Drug Pricing File. *70 kg patient.

The proposed CY 2014 payment rate for MPI with the stress test, stress agent, and diagnostic radiopharmaceutical packaged into MPI is 14 percent higher than the sum of the CY 2013 payments for separately paid MPI, a separately paid stre ss test, and either of the two separately paid stress agents. (b) Hexaminolevulinate Hydrochloride (Cysview ® )—HCPCS Code C9275 Cysview is a drug for which pass-thr ough status expired on December 31, 2012. Beginning in CY 2013, Cysview was unconditionally packaged in the OPPS as a contrastCMS-1601-P 166 agent (77 FR 68364). The indications and usage of Cysview as listed in the FDA-approved label are as follows: “Cysview is an optical imaging agent indicated for use in the cystoscopic detect ion of non-muscle invasive pa pillary cancer of the bladder among patients suspected or known to have lesi on(s) on the basis of a prior cystoscopy. Cysview is used with the Karl Storz D- Light C Photodynamic Diagnostic (PDD) system to perform cystoscopy with the bl ue light setting (Mode 2) as an adjunct to the white light setting (Mode 1).” In the CY 2008 OPPS/ASC final rule with comment period (72 FR 42672), we described contrast agents as follows: “Contrast agents are generally considered to be

those substances introduced into or around a structure that, because of the differential absorption of x-rays, alteration of magnetic fiel ds, or other effects of the contrast medium in comparison with surrounding tissues, permit visualization of the structure through an imaging modality. The use of certain contrast agents is generally associated with specific imaging modalities, including x-ray, co mputed tomography (CT), ultrasound, and magnetic resonance imaging (MRI), for purpos es of diagnostic testing or treatment.” Upon reexamining this description of c ontrast agents and co nsidering our prior application of this description to specific compounds, we believe that contrast agents should include those compounds that are used with the imaging modalities x-ray, computed tomography (CT), ultrasound, magne tic resonance imaging (MRI), and other related modalities that could represent adva ncements of these modalities. Based on the indications and usage describe d above for Cysview, we do not believe that Cysview isCMS-1601-P 167 best described as a contrast agent. Rather , we believe Cysview is more appropriately described as a drug used in a proc edure to diagnose bladder cancer. As discussed above, we are proposing a new policy to package all drugs, biologicals, and radiopharmaceuticals that functi on as supplies when used in a diagnostic test or procedure. Cysview is a drug that f unctions as a supply when used in a diagnostic test or procedure for the purpose of the “d etection of non-muscle invasive papillary

cancer of the bladder.” Theref ore, as a drug that functions as a supply when used in a diagnostic test or procedure, we are pr oposing to package Cysview for CY 2014 under the OPPS. Cysview is currently assigned to status indicator “N” for CY 2013, and under this proposal, the status indicator assi gnment of “N” would continue for CY 2014. (2) Drugs and Biologicals That Function as Supplies or Devices When Used in a Surgical Procedure Since the inception of the OPPS we have packaged medical devices, medical and surgical supplies, and surgical dressings in to the related proce dure under § 419.2(b)(4). Medical and surgical supplies are a broad category of items used in the hospital outpatient setting. Supplies is a large category of items that typically are either for single patient use or have a shorter life span in us e than equipment. Supplies include not only minor, inexpensive, or commodity-type items but also include a wide range of products used in the hospital outpatient setting, including certain implantable medical devices. We consider implantable medical devices to be integral to, de pendent on, and supportive to a surgical implantation pro cedure. For further discussion, we refer readers to the CY 2000 OPPS final rule (65 FR 18443 through 184 44). Packaged supplies can includeCMS-1601-P 168 certain drugs, biologicals, and radiopharmaceuticals. Packaged supplies in the OPPS also include implantable biologicals, whic h are packaged because they function as implantable devices which, as noted above, are considered to be a t ype of supply in the

OPPS. We refer readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68634) for a more detailed discussion. We believe that the existing packaging policy for implantable biologicals represents an example of a broa der category of drugs and biologicals that should be packaged in the OPPS according to longstanding regulations and existing policie s: drugs and biologicals th at function as supplies or devices in a surgical procedure. Theref ore, beginning in the CY 2014 OPPS, we are proposing to unconditionally package all drugs and biologicals that function as supplies or devices in a surgical procedure, followi ng the current policy that is applied to implantable biologicals. A class of products that we treat as bi ologicals in the OPPS that is described by the proposed packaging category of drugs and biologicals that function as supplies or devices in a surgical procedure is skin substitu tes. The term “skin substitutes” refers to a category of products that are most commonly used in outpati ent settings for the treatment of diabetic foot ulcers and venous leg ul cers. Although the term “skin substitute” has been adopted to refer to this category of products in certain cont exts, these products do not actually function like human skin that is grafted onto a wound; they are not a substitute for a skin graft. Instead, these products are va rious types of wound dressings that, through various mechanisms of action, s timulate the host to re generate lost tissue and replace the wound with functional skin. We refer readers to the “Skin SubstitutesCMS-1601-P 169 for Treating Chronic Wounds Technology A ssessment Report at ES-2” which is available on the AHRQ Web site at: http://www.ahrq.gov/research/findings/ta /skinsubs/HCPR0610_skinsubst-final.pdf

. Currently, available skin substitutes are regul ated by the FDA as either medical devices (and classified as wound dressings) or as human cell, tissue, a nd cellular and tissuebased products (HCT/Ps) under section 361 of the Public Health Service Act. The different skin substitutes are applied to a wound during a surgical procedure described by CPT codes in the range 15271 through 15278. To be properly performed, every surgical procedure in this CPT code range requires the use of at least one skin substitute product. These surgical procedures include preparati on of the wound and app lication of the skin substitute product through suturing or vari ous other techniques. Currently skin substitutes are separately paid in the OPPS as if they ar e biologicals according to the ASP methodology and are subject to the drug and biological packaging threshold.

Because a skin substitute must be used to perform any of the procedures described by a CPT code in the range 15271 through 15278, and conversely because it is the surgical procedure of treating the wound and applying a covering to the wound that is the independent service, skin substitute produc ts serve as a necessary supply for these surgical repair procedures. In addition, ma ny skin substitutes are classified by the FDA as wound dressings, which make them the same or similar to surgical dressings that are packaged under § 419.2(b)(4). Finally, implan table biological products are very similar to (and in some instances the same as) skin substitute products, excep t that the clinical applications for implantable biologicals are typically an internal surgery versus theCMS-1601-P 170 application to a wound for a skin substitute. Some products had or have dual uses as both skin substitutes and implantable biologi cals, which underscores the similarity of these sometimes overlapping classes of pr oducts. Implantable biologicals and skin substitutes both function as supplies or devices that are used in surg ical procedures and, therefore, should be packaged with the surgical procedur e in which the products are used. Since CY 2009, we have packaged im plantable biologicals and we are proposing to package skin substitutes with their associated surgeries beginning in CY 2014. We see no reason to distinguish skin substitu tes from implantable biologicals for OPPS packaging purposes based on the clinical appl ication of individual products. Therefore, we are proposing to unconditionally package skin substitutes into their associated surgical procedures. Packaging payment for these skin substitutes into the APC payment for the related surgical procedures also would result in a total prospective payment that is more reflective of the average resource costs of the procedures because prices for these products vary significantly from product to product. Packaging these products also would promote more efficient resource use by hospitals and would be more consistent

with the treatment of similar products under the OPPS. We are proposing to revise the regulations at § 419.2(b)(4) to include skin substitutes as an example of a packaged surgical supply. Pass-through status would stil l be available to new skin substitutes that meet the pass-through criteria. The skin substitute products that would be unconditionally packaged under this proposal and assigned to status indicator “N” for

CY 2014 are listed in Addendum P of this CY 2014 OPPS/ASC proposed rule. The proposed payment for CPT codes 15271 th rough 15278, including the cost of theCMS-1601-P 171 packaged skin substitutes, for CY 2014 are li sted in Addendum B of this proposed rule.

These addenda are available on the CMS Web site at:http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html. (3) Clinical Diagnos tic Laboratory Tests Since the beginning of the OPPS, clinical diagnostic laborator y tests (laboratory tests) provided in the hospital outpatient setting have been separately paid to hospitals at Clinical Laboratory Fee Schedule (CLFS) rates (65 FR 18442). Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to designa te the hospital outpatient services that are paid under the OPPS. Under this authority, the Secretary excluded from the OPPS those services that are paid under fee schedules or other paym ent systems. As stated in the April 17, 2000 OPPS final rule with comment period: “Rather than duplicate existing payment systems that are effectively achievi ng consistency of payments across different service delivery sites, we proposed to ex clude from the outpatient PPS those services furnished in a hospital outpatient setting th at were already subject to an existing fee schedule or other prospectively determin ed payment rate” (65 FR 18442). Because payment rates for laboratory tests were ba sed on the CLFS, laboratory tests are among

the services excluded from the OPPS. We codified this policy at 42 CFR 419.22(l). As discussed above, it is our intent to make the OPPS a more complete prospective payment system, and less of a f ee schedule-type payment system that makes separate payment for each separately coded item. We have examined the services performed in the hospital outpatie nt setting to determine thos e services that we believeCMS-1601-P 172 should be packaged in order to make the O PPS a more complete a nd robust prospective payment system. We were guided by our longstanding OPPS packaging principle of packaging the payment of items or services when they are provided along with primary services they support. Based on this approac h, we believe that labo ratory tests (other than molecular pathology tests, as discu ssed below) that are integral, ancillary, supportive, dependent, or adjunctive to the primary services provided in the hospital outpatient setting are services th at should be packaged. Labor atory tests and their results support clinical decisionmaking for a broad spec trum of primary services provided in the hospital outpatient setting, incl uding surgery and diagnostic evaluations. Therefore, except as discussed below for molecular pat hology tests, we are proposing to package laboratory tests when they are integral, anci llary, supportive, depende nt, or adjunctive to a primary service or services provided in the hospital outpati ent setting. We are proposing that laborato ry tests would be integral, an cillary, supportive, dependent, or adjunctive to a primary service or services provided in the hospital outpatient setting when they are provided on the same date of se rvice as the primary service and when they are ordered by the same practitioner who or dered the primary service. We would consider a laboratory test to be unrelated to a primary servi ce and, thus, not part of this packaging policy when the laboratory test is the only service provi ded on that date of service or when the laboratory test is provide d on the same date of service as the primary

service but is ordered for a different purpose than the prim ary service by a practitioner different than the practitioner who ordered the primary service pr ovided in the hospitalCMS-1601-P 173 outpatient setting. The laborat ory tests not included in th e packaging proposal would continue to be paid separately at CLFS rates when billed on a 14X bill type. We are proposing an exception for mo lecular pathology tests described by CPT codes in the ranges of 81200 through 81383, 81400 through 81408, and 81479 from this proposed packaging policy. We are not propos ing that these services be packaged because we believe that these relatively new test s have a different pattern of clinical use, which may make them generally less tied to a primary service in the hospital outpatient setting than the more common and routine laboratory tests that we are proposing to package. As we gain more experience w ith these molecular pathology tests, we will consider if packaging in the OPPS would be appropriate for these types of tests. In addition to the laboratory packag ing policy proposals described above, we considered proposing an alternative laborat ory packaging policy that would package those laboratory tests meeting the proposed policies above, but also include a dollar threshold policy similar to the approach we us e for separately paid drugs and biologicals in the OPPS so that only laboratory tests (meeting the proposed st andards above) with CLFS payment rates below a cer tain dollar threshold amount would be packaged. Under this alternative policy, tests meeting the proposed standards above, but for which the CLFS payment rates are above the threshold amount, would c ontinue to be separately paid. We decided not to pr opose this alternative policy be cause, as discussed above in the background section, our pack aging policies generally do not consider the cost of the

individual items and services that are packaged, meaning that we package both inexpensive and expensive items accor ding to OPPS packaging principles.CMS-1601-P 174 We recognize that the Me dicare Part B deductible a nd coinsurance generally do not apply for laboratory tests pa id to hospitals at CLFS rates, but that the deductible and coinsurance would apply to labo ratory tests packaged into other services in the OPPS. The purpose of the laboratory packaging propos al is not to shift program costs onto beneficiaries, but to encourage greater effi ciency by hospitals and the most economical delivery of medically necessary laboratory te sts. We estimate that the combination of packaging laboratory tests into a wide array of primary services provided in the hospital outpatient setting combined with our long-standing methodolo gy to adjust the copayment percentages to 20 percent as provided in section 1833(t)(3 )(B)(ii) of the Act and as

discussed in section II.I. of this proposed rule, and the limitation on the copayment amount for a procedure to the inpatient hos pital deductible as set forth at section 1833(t)(8)(C)(i) of the Act would fully o ffset the financial impact on Medicare beneficiaries receiving laborat ory tests that would be subj ect to the proposed packaging policy. Further, we believe that creating these larger bundles will result in a more efficient use of laboratory services when they are adjunctive to an out patient service. In addition, to the extent that the coinsuran ce and deductible do not apply under the CLFS, they would continue not to apply for te sts that are ordered, provided, and billed independently from a primary service as discussed above, or for molecular pathology tests. We are inviting public comments on th e effect of packaging laboratory tests on beneficiary coinsurance. The laboratory test codes that we are proposing to be packaged and assigned

status indicator “N” for CY 2014 are listed in Addendum P of this proposed rule (whichCMS-1601-P 175

is available via the Internet on the CMS We b site. We are proposing to revise the regulation text at § 419.2(b) a nd § 419.22(l) to reflect this laboratory test packaging proposal.CMS-1601-P 176 (4) Procedures Described By Add-On Codes Add-on codes describe procedures that are always performed in addition to a primary procedure. Add-on codes can be ei ther CPT codes or Level II HCPCS codes. For example, the procedure described by CP T code 11001 is “Debridement of extensive eczematous or infected skin; each additional 10 % of the body surface, or part thereof (list separately in addition to code for primary pro cedure).” This code is used for additional debridement beyond that described by the pr imary procedure code. Currently, add-on

codes are treated like other codes in the OPPS. Add-on codes typically received separate payment based on an APC assignment, and are typically assigned status indicator “T.” Procedures described by add-on codes repr esent an extension or continuation of a primary procedure, which means that they are typically supportive, dependent, or adjunctive to a primary surgical procedure. The parent code defi nes the purpose of the patient encounter and the add-on code typically describes additional incremental work, when the extent of the procedure encompa sses a range rather than a single defined endpoint applicable to all pa tients. For example, add-on CPT code 11001 is used for each additional 10 percent of debridement. Therefore, according to longstanding OPPS packaging principles described above a nd the dependent nature and adjunctive characteristics of procedures described by add- on codes, we believe that such procedures should be packaged with the primary pro cedure. For CY 2014, we are proposing to unconditionally package all procedures described by add-on codes in the OPPS. There is an additional benefit to p ackaging add-on codes--more accurate OPPS payment for procedures described by add-on co des. Currently, calculating mean costs forCMS-1601-P 177 procedures described by add-on codes is problematic in the O PPS because we cannot determine which costs on a claim are attributable to the primary procedure and which costs are attributable to the add-on procedure. Furthermore, because we use single claims and “pseudo” single procedure claims for ratesetting, we generally must rely on incorrectly coded claims containing only the add-on code to calculate payment rates for add-on procedures. Claims containing only an add-on code are incorrectly coded because they should be reported with (or “added-on” ) a primary procedure. Packaging the line

item costs associated with an add-on code into the cost of the prim ary procedure will help address this ratesetting concern because the co sts of the add-on code would be packaged into the primary procedure, and we would no longer have to calcula te costs for add-on

codes based on miscoded claims. In additi on, packaging add-on codes would increase the number of single bills available for ratesetting for the primary procedures. We are revising the regulations at § 4 19.2(b) to include the packaging of add-on codes. The specific add-on codes that we are proposing to be unconditionally packaged and assigned status indicator “N” for CY 2014 are listed in Addendum P of this proposed rule, which is available via the Internet on the CMS Web site. (5) Ancillary Services (Status Indicator “X”) Under the OPPS, we currently pay separately for certain ancillary services that are assigned to status indicator “X,” defined as “ancillary services.” Some other services that are ancillary to other services are currentl y packaged in the OPPS. Those ancillary services assigned status indicator “X” in th e OPPS and paid separately are, by definition, ancillary relative to primary services pr ovided in the OPPS and include many minorCMS-1601-P 178 diagnostic tests that are typically performed with a primary servi ce, although there are instances where such services are not always performed with a primary service and may be performed alone. As mentioned above, our intent is th at the OPPS be more of a prospective payment system through expanding packaging. Given that the longstanding OPPS policy is to package items and serv ices that are integral, anci llary, supportive, dependent, or adjunctive to a primary service, we believe that these ancillary services, which are assigned status indicator “X,” should be packaged when they are performed with another service, but should continue to be separately paid when performed alone. This packaging approach is most consistent with a prospective payment sy stem and the regulations at § 419.2(b) that packages ancillary services into primary services while preserving separate payment for those instances in which on e of these services is provided alone (not with a separate primary serv ice) to a hospital outpatient. In summary, we are proposing to conditionally package all ancillary services that were previously assigned a status indicator of “X” and assign these services to status indicator “Q1” (packaged when provided with a service assigned a status indicator of “S,” “T,” or “V”). Status indicator “X” would be discont inued. To encourage maximum flexibility to beneficiaries across different sites of service, we are not proposing to conditionally package preventive services assign ed to status indicator “X” and instead are proposing to change the status indicator fo r preventive services from the currently assigned status indicator “X” to status indicator “S.” The specific codes for procedures assigned to status indicator “X” that are proposed to be conditionally packaged andCMS-1601-P 179 assigned to status indicator “Q1” for CY 2014 are listed in Addendum P of this proposed rule, which is available via the Internet on the CMS Web site. (6) Diagnostic Tests on the Bypass List For the CY 2013 OPPS, we implemente d a bypass list to convert lines from multiple procedure claims into “pseudo” singl e procedure claims. We are proposing to continue developing “pseudo” single pro cedure claims using a bypass list for the CY 2014 OPPS, as discussed in section II.A.1.b. of this proposed rule. The bypass list of separately paid services is used to convert claims with multiple separately payable procedures, which are generally not used for ratesetting purposes, into claims with a single separately paid procedure that can be used for ratesetting. Services on the bypass list have limited associated packaged cost s so they can be bypassed when assigning packaged costs on a claim to a separately paid procedure on the same claim. As noted above, beginning in CY 2008, we packaged several diagnostic items and services including guidance serv ices, image processing services , intraoperative services, imaging supervision and interpretation se rvices, diagnostic radiopharmaceuticals, and contrast agents. In this proposed rule, we also are proposing to conditionally package several diagnostic items and services , including drugs, biologicals, and radiopharmaceuticals that func tion as supplies when used in a diagnostic test or procedure, ancillary services (many of which are diagnostic tests), a nd laboratory tests. We believe that the diagnostic tests on the bypass list share many of the characteristics with these other conditionally or unconditio nally packaged or proposed packaged categories of items and services in that th ey are diagnostic and ar e integral, ancillary,CMS-1601-P 180 supportive, dependent, or adjunc tive to a primary service. Examples include a barium swallow test (CPT code 74220) and a visual field examination (CPT code 92081). Given the nature of these services, we are proposi ng to conditionally package these procedures. We recognize that some of these services are sometimes provided without other services and, therefore, they will continue to be separately paid in those circumstances. We are proposing that these codes be a ssigned status indicator “Q1” beginning in the CY 2014 OPPS. Some of these diagnosti c tests on the bypass list are currently assigned to status indicator “X” and, theref ore, would be conditionally packaged under the proposed policy to conditionally package an cillary services curr ently assigned status indicator “X.” The only diagnostic codes on the bypass list affected by this proposal are currently assigned to status indicator “S.” The specific codes for the diagnostic tests on the bypass list that we are proposing to be c onditionally packaged and assigned to status indicator “Q1” for CY 2014 are listed in Addendum P of this proposed rule, which is

available via the Internet on the CMS Web s ite. Similar to our conditional packaging proposal for services previously assigned to st atus indicator “X,” we are not proposing to conditionally package preventive services th at are diagnostic te sts on the bypass list. (7) Device Removal Procedures Implantable devices frequently require removal or replacement due to wear, failure, recall, and infection, among others . Since the beginning of the OPPS, implantable devices have been packaged (either as supplies, implantable prosthetics, or implantable DME) into their associated procedures. Device removal is sometimes described by a code that may include repair or replacement. In other cases, deviceCMS-1601-P 181 removal is described by a separate code that only describes removal of a device. Device removal procedures are frequently performe d with procedures to repair or replace devices, although it is possible that device removal may occur without repair or replacement if the clinical indication for th e device that was removed no longer exists. When a separately coded device removal proced ure is performed with a separately coded device repair or replacement procedure, the device removal procedure actually represents a part of an overall procedure that is rem oval with repair or replacement of the device. Given that a separately coded device rem oval that accompanies a device repair or replacement procedure represents a service th at is integral and supportive to a primary service, we are proposing to conditionally package device removal codes when they are billed with other surgical pr ocedures involving repair or re placement. We believe that this conditional pack aging policy is appr opriate under longsta nding OPPS packaging principles because these device removal proced ures are an integral and supportive step in a more comprehensive overall procedure. Furthermore, conditionally packaging these device removal procedures with the replacemen t or revision codes would be consistent with our packaging policies for other depende nt services. The specific codes for the device removal procedures that we are pr oposing to be conditionally packaged and assigned to status indicator “Q2” for CY 2014 are listed in Addendum P of this proposed rule, which is available via the Internet on the CMS Web site.CMS-1601-P 182 d. Impact of the New Packaging Proposals We have examined the proposed aggreg ate impact of making these proposed changes to packaging for CY 2014. Becau se the OPPS is a budget neutral payment system in which the amount of the relative payment weight in the system is annually adjusted for changes in expe nditures created by changes in APC weights and codes (but is not currently adjusted base d on estimated growth in service volume), the effects of the packaging changes that we are proposing woul d result in changes to scaled weights and, therefore, to the payment rates for all se parately paid procedures. These proposed changes would result from shifts in mean costs as a result of increased packaging, changes in multiple procedure discounting patterns, and a higher weight scaler that is applied to all unscaled APC weights. Furt her, to properly budget neutralize the money that would previously have been paid thr ough other payment systems, we have included those payments when performing OPPS budget neut rality calculations. We refer readers to section II.A.4. of this proposed rule for an explanation of the weight scaler for OPPS budget neutrality. In a budget neutral system, the monies previously paid for services that are now proposed to be packaged are not lost, but are redist ributed to all other services. A higher weight scaler would incr ease payment rates relative to observed mean costs for independent services by redistributi ng the lost weight of packaged items that historically have been paid separately a nd the lost weight when the mean costs of independent services do not completely reflec t the full incremental cost of the packaged services. The impact of this proposed change on proposed CY 2014 OPPS payments isCMS-1601-P 183

discussed in section XXIII.A. of this proposed rule, and the impact on various classifications of hospitals is shown in Column 5 in Table 39 in that section. We estimate that our CY 2014 pack aging proposal would redistribute approximately 4 percent of the estimated CY 2013 base year expenditures under the OPPS. If the relative payment weight for a pa rticular APC decreases as a result of the proposed packaging approach, the increased we ight scaler may or may not result in a relative payment weight that is equal to or greater than the relative weight that would occur without the proposed pack aging approach. In general, the packaging policies that we are proposing would have more effect on payment for some services than on payment for others because the dependent items and se rvices that we are proposing for packaging are furnished more often with some independe nt services than with others. However, because of the amount of relative payment we ight that would be redistributed by this proposal, there would be some impact on paym ents for all OPPS services whose rates are set based on relative payment weights, and the impact on any given hospital would vary

based on the mix of services furnished by the hospital. e. Clarification Regarding Supplie s That Are Packaged in the OPPS Under the regulations at § 419.2(b)(4), medical and surgical supplies and equipment are packaged in the OPPS. Supplies is a large category of items that typically are either for single patient use or have a shorter life span in use than equipment. Packaged supplies can include certain drugs, biologicals, a nd radiopharmaceuticals. The only supplies that are sometimes paid separa tely in the OPPS are prosthetic suppliesCMS-1601-P 184 under § 419.22(j), and if paid separately, th ey are paid according to the DMEPOS fee schedule. All other supplies are unconditionally packaged in the OPPS.

In our annual review of the OPPS for CY 2014, we discovered many supplies that should be packaged in the OPPS according to § 419.2(b)(4), but that are currently assigned to status indicator “A ” and are separately paid in the hospital outpatient setting according to the DMEPOS fee schedule. Fo r CY 2014, we are proposing to revise the status indicator for all supplies descri bed by Level II HCPCS A-codes (except for prosthetic supplies) from stat us indicator “A” to “N,” so that these supplies would be unconditionally packaged as required by § 419.2(b)(4). The specific Level II HCPCS Acodes whose status indicator wi ll be revised from “A” to “N” are listed in Addendum P of this CY 2014 OPPS/ASC proposed rule, which is available via the Internet on the CMS

Web site. f. Proposed Revision and Clarification of the Regulations at 42 CFR 419.2(b) and

42 CFR 419.22

In the CY 2013 OPPS/ASC final rule w ith comment period (77 FR 68272), after consideration of public comments we receiv ed on the proposed rule, we clarified the regulatory language at § 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 ar e packaged into the payments for the related procedures or

services with which such items and services are provided. In this proposed rule, we are proposing to further revise this regulation to add the packaging categories that were adopted in CYs 2008 and 2009 in addition to the new proposed policies described above.CMS-1601-P 185 We also are proposing to make some further minor revisions and edito rial clarifications to the existing language of § 419.2(b) to make it more clearly refl ect current packaging policy. Finally, we are proposing to revise the list of servi ces excluded from the OPPS at § 419.22. g. Comment Solicitation on Increased Packaging for Imaging Services We currently package several kinds of imaging services in the OPPS, including image guidance services, image processing serv ices, intraoperative imaging, and imaging supervision and interpretation services. In addition, some imaging services are included in this year’s proposal to conditionally pack age ancillary services and diagnostic tests on the bypass list. In addition to these imaging se rvices that are either packaged or proposed to be packaged, we are contemplating a pr oposal for CY 2015 that would conditionally package all imaging services with any associat ed surgical procedures . Imaging services not provided with a surgical procedure would continue to either be separately paid according to a standard clinical APC or a composite APC. We are requesting public comments on this potential CY 2015 proposal. h. Summary of CY 2014 Packaging Proposals Beginning in CY 2014, we are proposing to unconditionally package or conditionally package the following items and se rvices and to add them to the list of OPPS packaged items and services in § 419.2(b): (1) Drugs, biologicals, and radiopharmaceu ticals that function as supplies when used in a diagnostic test or procedure;CMS-1601-P 186 (2) Drugs and biologicals that function as supplies or devices when used in a surgical procedure; (3) Clinical diagnos tic laboratory tests; (4) Procedures described by add-on codes; (5) Ancillary services (status indicator “X”); (6) Diagnostic tests on the bypass list; and (7) Device removal procedures. We believe that each of the above proposed unconditionally or conditionally packaged categories of items or services is appropriate according to existing packaging policies or expansions of existing packagi ng policies. However, we recognize that decisions about packaging payment involve a balance between ensuring that payment is adequate to enable the hospital to provide qua lity care while establishing incentives for efficiency through larger units of payment. Therefore, we are inviting public comments regarding our packaging pr oposals for the CY 2014 OPPS. The HCPCS codes that we are proposi ng to be packaged either unconditionally (for which we are proposing to assign status indicator “N”), or c onditionally (for which we are proposing to assign stat us indicator “Q1” or “Q2”), for CY 2014 are displayed in

both Addendum P and A ddendum B of this proposed rule . The supporting documents for this proposed rule, including but not limited to the Addenda, are available at the CMS Web site at: http://www.cms.hhs.gov/M edicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html.CMS-1601-P 187 4. Proposed Calculation of OPPS Scaled Payment Weights For CY 2014, we are proposing to calculat e the relative payment weights for each

APC for CY 2014 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 year s 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 perf ormed 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 standard ized all of the relative payment weights for APC 0606 (Level 3 Clinic Visits) because we deleted APC 0601 as part of the reconfiguration of th e clinic visit APCs. We selected APC 0606

as the base because APC 0606 was the mid-level clinic visit APC (that is, Level 3 of five levels). For the CY 2013 OPPS (77 FR 68283), we established a policy of using geometric mean-based APC costs to calcula te relative payment weights. For the CY 2014 OPPS, we are proposing to continue basing the relative payment weights on which OPPS payments will be made by using ge ometric mean costs. As we discuss in section VII. of this propose d rule, we are proposing to reconfigure the CY 2014 visit APCs so that they would include a single level for each visit type. However, in an effort to maintain consistency in calculating unscaled weights that represent the cost of some ofCMS-1601-P 188 the most frequently provided services, we are proposing to use the cost of the clinic visit APC in calculating unscaled weights, whic h for CY 2014 is proposed APC 0634. While we have previously used APC 0606 as the ba se from which to develop the OPPS budget neutral weight scaler, under our proposal to reconfigure the visit APCs, we would have a single APC for each visit type. The proposal to reconfigure the visit APCs is discussed in more detail in section VII. of this pro posed rule. Following our general methodology for establishing relative payment weights derive d from APC costs, but using the proposed CY 2014 geometric mean cost for APC 0634, for CY 2014, we are proposing to assign APC 0634 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 0634 to derive the proposed unscaled relative payment weight for each AP C. The choice of the APC on which to base the proposed relative payment weight s for all other APCs does not affect the payments made under the OPPS because we scale the weights for budget neutrality. Section 1833(t)(9)(B) of the Act requ ires that APC reclassification and recalibration changes, wage index changes, and other adjustments be made in a budget neutral manner. Budget neutrality ensures th at the estimated aggregate weight under the OPPS for CY 2014 is neither greater than nor less than the estimated aggregate weight

that would have been made without the cha nges. To comply with this requirement concerning the APC changes, we are propos ing to compare the estimated aggregate weight using the CY 2013 scaled relative pa yment weights to the estimated aggregate weight using the proposed CY 2014 uns caled relative payment weights.CMS-1601-P 189 For CY 2013, we multiplied the CY 2013 scaled APC relative payment weight applicable to a service paid under the OPPS by the volume of that service from CY 2012 claims to calculate the total relative payment weight for each service. We then added together the total relative paym ent weight for each of these se rvices in order to calculate an estimated aggregate weight for the y ear. For CY 2014, we are proposing the same process using the proposed CY 2014 unscaled relative payment weights rather than scaled relative payment weights. We are proposing to calculate the weight scaler by dividing the CY 2013 estimated aggregate we ight by the proposed CY 2014 estimated aggregate weight. The service-mix is the same in the current and prospective years

because we use the same set of claims fo r service volume in calculating the aggregate weight for each year. We note that, as a result of the CY 2014 proposed OPPS packaging policy for laboratory tests described in sect ion II.A.3.b.(3) of this proposed rule, we would need to incorporate the estimated rela tive payment weights from those services. Therefore, the CY 2013 estimated OPPS aggreg ate weight would include payments for outpatient laboratory tests paid at the CLFS rates. For a detailed discussion of the weight sc aler calculation, we refer readers to the OPPS claims accounting document available on the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html. We are proposing to include estimated payments to CMHCs in our comparison of the estimated unscaled relative payment weights in CY 2014 to the estimated total relative payment weights in CY 2013 using CY 2012 claims data, holding all otherCMS-1601-P 190 components of the payment system constant to isolate changes in to tal weight. Based on this comparison, we adjusted the proposed CY 2014 unscaled relative payment weights for purposes of budget neutrality. The pr oposed CY 2014 unscaled relative payment weights were adjusted by multiplying them by a proposed weight scaler of 1.2143 to ensure that the proposed CY 2014 relativ e payment weights are budget neutral. Section 1833(t)(14) of the Act provide s the payment rates for certain SCODs. Section 1833(t)(14)(H) of the Act states that “Additional expenditures resulting from this paragraph shall not be taken into account in establishing the convers ion factor, weighting, and other adjustment factors for 2004 and 2005 under paragraph (9), but shall be taken into account for subsequent years.” Therefor e, the cost of those SCODs (as discussed in section V.B.3. of this proposed rule) is included in the proposed budget neutrality

calculations for the CY 2014 OPPS. The proposed CY 2014 unscaled relative pa yment weights listed in Addenda A and B to this proposed rule (which are avai lable via the Internet on the CMS Web site) incorporate the proposed recalibration adjust ments discussed in sections II.A.1. and II.A.2. of this proposed rule.CMS-1601-P 191 B. Proposed Conversion Factor Update Section 1833(t)(3)(C)(ii) of the Act requires the Secret ary to update the conversion factor used to determine the pa yment rates under the OPPS on an annual basis by applying the OPD fee schedule increas e factor. For purposes of section 1833(t)(3)(C)(iv) of the Act, s ubject to sections 1833(t)(17) and 1833(t) (3)(F) of the Act, the OPD fee schedule increase factor is equa l to the hospital inpatient market basket percentage increase applicable to hospital discharges under section 1886(b)(3 )(B)(iii) of the Act. In the FY 2014 IPPS/LTCH PPS propos ed rule (78 FR 27572), consistent with current law, based on IHS Global Insight, Inc.’s first quarter 2013 forecast of the

FY 2014 market basket increas e, the proposed FY 2014 IPPS market basket update is 2.5 percent. However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(iii) of the Act, as added by section 3401(i) of the Patien t Protection and Affordable Care Act of 2010 (Pub. L. 111-148) and as amended by section 10319(g) of that law and further amended by section 1105(e) of the Health Care and Educati on Reconciliation Act of 2010 (Pub. L. 111-152), provide adjustments to the OPD fee schedule increase factor for CY 2014. Specifically, section 1833(t)(3)(F)(i) of the Act requires that, for 2012 and subsequent years, the OPD fee schedule incr ease factor under subpa ragraph (C)(iv) be reduced by the productivity adjustment descri bed in section 1886(b )(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi )(II) of the Act defines the productivity adjustment as equal to the 10-year moving average of changes in annual economy-wide, private nonfarm business multifactor productivity (MFP) (as projected by the Secretary for the 10-year period ending with the applicable fiscal year, year, cost repo rting period, or otherCMS-1601-P 192 annual period) (the “MFP adjustment”). In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 51692), we finalized our methodology for calculating and applying the MFP adjustment. In th e FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27572), we discussed the calculati on of the proposed MFP adjustment for FY 2014, which is 0.4 percentage point. We are proposing that if more recent data become subsequently available after the publication of this proposed ru le (for example, a more r ecent estimate of the market basket increase and the MFP adjustment), we would use such data , if appropriate, to determine the CY 2014 market basket update and the MFP adjustment, components in calculating the OPD fee schedule increase fa ctor under sections 1833(t)(3)(C)(iv) and 1833(t)(3)(F) of the Act, in the CY 2014 O PPS/ASC final rule with comment period. In addition, section 1833(t)( 3)(F)(ii) of the Act require s that for each of years 2010 through 2019, the OPD fee sche dule increase factor unde r section 1833(t)(3)(C)(iv) of the Act be reduced by the adjustment desc ribed in section 1833(t)(3 )(G) of the Act. For CY 2014, section 1833(t)(3)(G)(iii) of the Act provides a 0.3 percentage point

reduction to the OPD fee schedule increase f actor under section 1833(t) (3)(C)(iv) of the Act. Therefore, in accordance with sectio ns 1833(t)(3)(F)(ii) and 1833(t)(3)(G)(iii) of the Act, we are proposing to apply a 0.3 percenta ge point reduction to the OPD fee schedule

increase factor for CY 2014. We note that section 1833(t)(3)(F) of the Act provides that application of this subparagraph may result in the OPD fee schedule increase fa ctor under section 1833(t)(3)(C)(iv) of the Act being less than 0.0 for a year, and may result in paymentCMS-1601-P 193 rates under the OPPS for a year being less than such paym ent rates for the preceding year. As described in further detail belo w, we are proposing to apply an OPD fee schedule increase factor of 1.8 percent for th e CY 2014 OPPS (which is 2.5 percent, the proposed estimate of the hospital inpatient ma rket basket percentage increase, less the proposed 0.4 percentage point MFP adjust ment, and less the 0.3 percentage point additional adjustment). We note that hospitals that fail to meet the Hospital OQR Program reporting requirements are subject to an additional re duction of 2.0 percenta ge points from the

OPD fee schedule increase factor adjustment to the convers ion factor that would be used to calculate the OPPS payment rates for their services, as required by section 1833(t)(17) of the Act. As a result, those hospitals failing to meet the Hospital OQR Program reporting requirements would receive an OPD fee schedule increase factor of -0.2 percent (which is 2.5 percent, the proposed estimat e of the hospital inpatient market basket percentage increase, less the proposed 0.4 per centage point MFP adjustment, less the 0.3 percentage point additional adjustment, and less 2.0 percentage points for the Hospital OQR Program reduction). For further discus sion of the Hospital OQR Program, we refer readers to section XIII. of this proposed rule. In this proposed rule, we are propos ing to amend 42 CFR 419.32(b)(1)(iv)(B) by adding a new paragraph ( 5 ) to reflect the requirement in section 1833(t)(3)(F)(i) of the Act that, for CY 2014, we reduce the OPD f ee schedule increase factor by the MFP adjustment as determined by CMS, and to reflect the requirement in section 1833(t)(3)(G)(iii) of the Act, as required by section 1833(t)(3)(F )(ii) of the Act, that weCMS-1601-P 194

reduce the OPD fee schedule increase factor by an additional 0.3 percentage point for

CY 2014.

To set the OPPS conversion factor for CY 2014, we are proposing to increase the CY 2013 conversion factor of $71.313 by 1.8 per cent. In accordance with section 1833(t)(9)(B) of the Act, we are proposing to further adjust the conversion factor for CY 2014 to ensure that any revisions made to the updates for a revised wage index and rural adjustment are made on a budget neutral basis. We are proposing to calculate an overall proposed budget neutra lity factor of 1.004 for wage index changes by comparing proposed total estimated payments from our simulation model using the proposed FY 2014 IPPS wage indices to those paymen ts using the current (FY 2013) IPPS wage indices, as adopted on a cale ndar year basis for the OPPS. For CY 2014, we are not proposing to ma ke a change to our rural adjustment policy, as discussed in section II.E. of this proposed rule. Therefor e, the proposed budget neutrality factor for the rural adjustment is 1.0000. For CY 2014, we are proposing to conti nue previously established policies for implementing the cancer hospital payment adjust ment described in section 1833(t)(18) of the Act, as discussed in section II.F. of this proposed rule. We are proposing to calculate a CY 2014 budget neutrality adjustment f actor for the cancer hospital payment adjustment by comparing the estimated tota l CY 2014 payments under section 1833(t) of the Act, including the proposed CY 2014 cancer hospital payment adjustment, to the estimated CY 2014 total payments using the CY 2013 final cancer hospital payment adjustment as required under se ction 1833(t)(18)(B) of the Act. The difference in theCMS-1601-P 195 CY 2014 estimated payments as a result of applying the proposed CY 2014 cancer hospital payment adjustment relative to the CY 2013 final cancer hospital payment adjustment has a limited impact on the budge t neutrality calculation. Therefore, we are proposing to apply a proposed budget neutra lity adjustment factor of 1.0001 to the

conversion factor to ensure that the cancer hospital payment adjustment is budget neutral. For this proposed rule, we estimate th at pass-through spending for both drugs and biologicals and devices for CY 2014 woul d equal approximately $12 million, which represents 0.02 percent of total projec ted CY 2014 OPPS spending. Therefore, the proposed conversion factor also would be adjusted by the difference between the 0.15 percent estimate of pass-through sp ending for CY 2013 and the 0.02 percent estimate of CY 2014 pass-through spending, resulting in a proposed adjustment for CY 2014 of 0.13 percent. Fina lly, estimated payments for outliers would remain at 1.0 percent of total OPPS payments for CY 2014. The proposed OPD fee schedule increase f actor of 1.8 percent for CY 2014 (that is, the estimate of the hospita l inpatient market basket per centage increase of 2.5 percent less the proposed 0.4 percentage point MFP adjustment and less the 0.3 percentage point required under section 1833(t) (3)(F) of the Act), the required proposed wage index budget neutrality adjustment of approxi mately 1.0004, the proposed cancer hospital payment adjustment of 1.0001, and the proposed adjustment of 0.13 percent of projected OPPS spending for the difference in the pass-through spending result in a proposed conversion factor for CY 2014 of $72.728.CMS-1601-P 196 Hospitals that fail to meet the re porting requirements of the Hospital OQR Program would continue to be subject to a further reduction of 2.0 percentage points to the OPD fee schedule increase 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 hospita ls that fail to meet those requirements,

we refer readers to section XIII.G. of this proposed rule. To calculate the proposed

CY 2014 reduced market basket conversion factor for those hospitals that fail to meet the requirements of the Hospital OQR Program for the full CY 2014 payment update, we are proposing to make all other adjustments disc ussed above, but using a proposed reduced OPD fee schedule update factor of –0.2 percent (that is, th e proposed OPD fee schedule increase factor of 1.8 percent further re duced by 2.0 percentage points as required by section 1833(t)(17)(A)(i) of the Act for fa ilure to comply with the Hospital OQR requirements). This results in a proposed reduced conversion fa ctor for CY 2014 of $71.273 for those hospitals that fail to meet the Hospital OQR requirements (a difference of -$1.455 in the conversion factor relative to those hospitals that met the Hospital OQR requirements). In summary, for CY 2014, we are propos ing to use a conversion factor of $72.728 in the calculation of the national unadjusted payment rates for those items and services for which payment rates are calculated using geometric mean costs. We are proposing to amend § 419.32(b)(1)(iv)(B) by adding a new paragraph ( 5 ) to reflect the reductions to

the OPD fee schedule increase fact or that are required for CY 2014 in order to satisfy theCMS-1601-P 197 statutory requirements of secti ons 1833(t)(3)(F) and (t)(3)(G)(iii ) of the Act. We also are proposing to use a reduced c onversion factor of $71.273 in th e calculation of payments for hospitals that fail to comply with th e Hospital OQR Program requirements to reflect

the reduction to the OPD fee schedule incr ease 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 adjust the portion of payment and coinsurance attributable to

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

in the CY 2006 OPPS final rule with comment period (70 FR 68553). Therefore, we are not proposing to revise this policy for the CY 2014 OPPS. We refer readers to section II.H. of this proposed rule for a de scription and example of how the wage index for a particular hospital is used to determine the payment for the hospital. As discussed in section II.A.2.c. of this proposed rule, for estimating APC costs, we standardize 60CMS-1601-P 198 percent of estimated claims costs for geogr aphic area wage varia tion using the same proposed FY 2014 pre-reclassified wage index that the IPPS us es to standardize costs. This standardization process removes the eff ects of differences in area wage levels from the determination of a national unadjuste d OPPS payment rate and the copayment

amount. Under 42 CFR 419.41(c)(1) and 419.43(c) (published in the original OPPS April 7, 2000 final rule with comment period (65 FR 18495 and 18545)), the OPPS adopted the final fiscal year IPPS wage i ndex as the calendar year wage index for adjusting the OPPS standard payment amounts for labor market differences. Thus, the wage index that applies to a particular acu te care short-stay hosp ital under the IPPS also applies to that hospital under the OPPS. As initially explained in the September 8, 1998 OPPS proposed rule (63 FR 47576), we 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 stat us of the HOPD within the hos pital overall. In accordance with section 1886(d)(3)(E) of the Act, the IPPS wage index is updated annually. The Affordable Care Act contained provi sions affecting the wage index. These provisions were discussed in the CY 2012 O PPS/ASC final rule with comment period (76 FR 74191). As discussed in that final rule with comment period, section 10324 of the Affordable Care Act added section 1886(d)(3 )(E)(iii)(II) to the Act, which defines “frontier State,” and amended section 1833(t) of the Act to add new paragraph (19), which requires a “frontier State” wage index fl oor of 1.00 in certain cases, and states that

the frontier State floor shall no t be applied in a budget neutra l manner. We codified theseCMS-1601-P 199 requirements in §§ 419.43(c)(2) and (c)(3) of our regulations. For the CY 2014 OPPS, we will implement this provision in the same manner as we did since CY 2011. That is, frontier State hospitals would receive a wage index of 1.00 if the otherwise applicable wage index (including reclas sification, rural and imputed floor, and rural floor budget neutrality) is less than 1.00. Similar to our current policy for HOPDs that are affiliated with multicampus hospital systems, the HOPD would receive a wage index based on the geographic location of the sp ecific inpatient hospital with which it is associated. Therefore, if the associated hospital is lo cated in a frontier St ate, the wage index adjustment applicable for the hospital would also apply for the affiliated HOPD. We refer readers to the FY 2011, FY 2012, and FY 2013 IPPS/LTCH PPS final rules (75 FR 50160 through 50161, 76 FR 51793, 51795, and 51825, and 77 FR 53369 through 53370, respectively) and the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27556 through 27557) for discussions regarding this provision, including our methodology for identifying which areas meet the definition of frontier States as pr ovided for in section 1886(d)(3)(E)(iii)(I I) of the Act. In addition to the changes required by th e Affordable Care Act, we note that the proposed FY 2014 IPPS wage indices continue to reflect a number of adjustments implemented over the past few years, includi ng, but not limited t o, reclassification of hospitals to different geographic areas, the rural and imputed floor provisions, an adjustment for occupational mix, and an adjustment to the wage index based on commuting patterns of employees (the out-migra tion adjustment). We refer readers to the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27552 through 27561) for a detailedCMS-1601-P 200 discussion of all proposed changes to the FY 2014 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. For purposes of the OPPS, we are propos ing to continue our policy for CY 2014 of allowing non-IPPS hospitals paid under th e OPPS to qualify for the out-migration adjustment if they are located in a sec tion 505 out-migration county (section 505 of the Medicare Prescription Drug, Improvement , and Modernization Act of 2003 (MMA) (Pub. L. 108-173)). We note that, because non -IPPS hospitals cannot reclassify, they are eligible for the out-migration wage adjustment. Table 4J listed in the FY 2014 IPPS/LTCH PPS proposed rule (available via the Internet on the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/index.html ) identifies counties eligib le for the out-migration adjustment and hospitals that would receive the adjustment for FY 2014. We also note that, beginning with FY 2012, under the IPPS, an eligible hospital that waives its Lugar status in order to receive the out-migration ad justment has effectively waived its deemed urban status and, thus, is rural for all purposes under the IPPS, including being

considered rural for the di sproportionate 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 PP S final rule (77 FR 53371) for a more detailed discussion on the Lugar redesignation waiver for the out-migration adjustment. As we have done in prior years, we are including Table 4J from the FY 2014 IPPS/LTCHCMS-1601-P 201 PPS proposed rule as Addendum L to this pr oposed rule with the addition of non-IPPS hospitals that would receive the section 505 out-migration adjustment under the CY 2014

OPPS. Addendum L is available via the Internet on the CMS Web site.

As discussed in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27552 through 27553), the Office of Management a nd Budget (OMB) issued revisions to the current geographic area desi gnations on February 28, 2013, that included a number of significant changes such as ne w CBSAs, urban counties that b ecome rural, rural counties that become urban, and splitting existing CBS As (OMB Bulletin 13-01. This bulletin can

be found at: http://www.whitehouse.gov/sites/defa ult/files/omb/bulletins/2013/b13- 01.pdf . All of these designations have corres ponding effects on the wage index system and its adjustments. In order to allow for sufficient time to assess the new revisions and their ramifications, we intend to propose ch anges to the IPPS wage index based on the newest CBSA designations in the FY 2015 IPPS/ LTCH PPS proposed rule. Similarly, in the OPPS, which uses the IPPS wage index, we intend to propose changes based on the

new OMB revisions in the CY 2015 OPPS/AS C proposed rule, consistent with any proposals in the FY 2015 I PPS/LTCH PPS proposed rule.

As stated earlier in this section, we continue to believe that using the IPPS wage index as the source of an adju stment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall. Therefore, we are not proposing to change our current regulations whic h require that we use the FY 2014 IPPS wage indices for calculati ng OPPS payments in CY 2014. With the exception of the proposed out-migration wage adjustment table (Addendum L to thisCMS-1601-P 202 proposed rule, which is available via the In ternet on the CMS Web site), which includes non-IPPS hospitals paid under the OPPS, we are not reprinting the proposed FY 2014 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-forService-Payment/HospitalOutpatientPPS/index.html . At this link, readers will find a link to the proposed FY 2014 IPPS wage index tables. D. Proposed Statewide Average Default CCRs In addition to using CCRs to estimate cost s from charges on claims for ratesetting, CMS uses overall hospital-specific CCRs calcu lated from the hospital’s most recent cost report to determine outlier payments, paym ents for pass-through devices, and monthly interim transitional corridor payments unde r the OPPS during the PPS year. Medicare

contractors cannot calculate a CCR for some hos pitals 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, hospita ls 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 proposingCMS-1601-P 203 to update the default ratios for CY 2014 us ing the most recent cost report data. We discuss our policy for using default CCRs, in cluding 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 2014, we are proposing to conti nue to use our standard methodology of calculating the statewide average default CCRs using the same hospital overall CCRs that we use to adjust charges to costs on clai ms data for setting the proposed CY 2014 OPPS relative payment weights. Table 9 below lists the proposed CY 2014 default urban and rural CCRs by State and compares them to last year’s default CCRs. These proposed CCRs represent the ratio of total costs to tota l charges for those cost centers relevant to outpatient services from each hospital’s most recently submitted cost report, weighted by Medicare Part B charges. We also are pr oposing to adjust ratios from submitted cost reports to reflect the final settled status by applying the differential between settled to

submitted overall CCRs for the cost centers releva nt to outpatient services from the most recent pair of final settled and submitted cost reports. We then are proposing to weight each hospital’s CCR by the volume of separate ly paid line-items on hospital claims corresponding to the year of the majority of cost reports used to calculate the overall

CCRs. We refer readers to the CY 2008 O PPS/ASC final rule with comment period (72 FR 66680 through 66682) and prior OPPS rule s for a more detailed discussion of our established methodology for calculating the st atewide average default CCRs, including the hospitals used in our calcula tions and our trimming criteria.CMS-1601-P 204 For Maryland, we used an overall wei ghted average CCR for all hospitals in the

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

readers to the CY 2005 OPPS final rule with comment period (69 FR 65822 ) for further discussion and the rationale for our longsta nding policy of using the national average CCR for Maryland. In general, observed cha nges in the statewide average default CCRs between CY 2013 and CY 2014 are modest and the few significant changes are associated with areas that have a small number of hospitals. Table 9 below lists the proposed statewide average default CCRs for OPPS services furnished on or after January 1, 2014.

TABLE 9.–PROPOSED CY 2014 ST ATEWIDE AVERAGE CCRs

State Urban/Rural Proposed CY 2014 Default CCR Previous Default CCR (CY 2013 OPPS Final Rule) ALASKA RURAL 0.472 0.489 ALASKA URBAN 0.296 0.307 ALABAMA RURAL 0.223 0.209 ALABAMA URBAN 0.198 0.193 ARKANSAS RURAL 0.227 0.219 ARKANSAS URBAN 0.230 0.234 ARIZONA RURAL 0.223 0.238 ARIZONA URBAN 0.188 0.190 CALIFORNIA RURAL 0.210 0.192 CALIFORNIA URBAN 0.210 0.202 COLORADO RURAL 0.396 0.331CMS-1601-P 205

State Urban/Rural Proposed CY 2014 Default CCR Previous Default CCR (CY 2013 OPPS Final Rule) COLORADO URBAN 0.222 0.226 CONNECTICUT RURAL 0.359 0.364 CONNECTICUT URBAN 0.285 0.287 DISTRICT OF COLUMBIA URBAN 0.282 0.302

DELAWARE RURAL 0.278 0.282 DELAWARE URBAN 0.331 0.353 FLORIDA RURAL 0.172 0.182 FLORIDA URBAN 0.166 0.167 GEORGIA RURAL 0.271 0.237 GEORGIA URBAN 0.209 0.214 HAWAII RURAL 0.350 0.323 HAWAII URBAN 0.311 0.306 IOWA RURAL 0.312 0.296 IOWA URBAN 0.284 0.269 IDAHO RURAL 0.333 0.417 IDAHO URBAN 0.491 0.357 ILLINOIS RURAL 0.258 0.240 ILLINOIS URBAN 0.235 0.230 INDIANA RURAL 0.358 0.285 INDIANA URBAN 0.288 0.256 KANSAS RURAL 0.298 0.290 KANSAS URBAN 0.245 0.210 KENTUCKY RURAL 0.226 0.217 KENTUCKY URBAN 0.232 0.241 LOUISIANA RURAL 0.258 0.242 LOUISIANA URBAN 0.229 0.225 MASSACHUSETTS RURAL 0.436 0.427 MASSACHUSETTS URBAN 0.330 0.323 MAINE RURAL 0.443 0.445 MAINE URBAN 0.455 0.449 MARYLAND RURAL 0.286 0.275 MARYLAND URBAN 0.251 0.246 MICHIGAN RURAL 0.353 0.303 MICHIGAN URBAN 0.316 0.303 MINNESOTA RURAL 0.462 0.469CMS-1601-P 206

State Urban/Rural Proposed CY 2014 Default CCR Previous Default CCR (CY 2013 OPPS Final Rule) MINNESOTA URBAN 0.339 0.321 MISSOURI RURAL 0.282 0.241 MISSOURI URBAN 0.287 0.262 MISSISSIPPI RURAL 0.228 0.226 MISSISSIPPI URBAN 0.187 0.182 MONTANA RURAL 0.486 0.431 MONTANA URBAN 0.407 0.384 NORTH CAROLINA RURAL 0.251 0.253 NORTH CAROLINA URBAN 0.255 0.254 NORTH DAKOTA RURAL 0.667 0.322 NORTH DAKOTA URBAN 0.376 0.414 NEBRASKA RURAL 0.333 0.318 NEBRASKA URBAN 0.251 0.254 NEW HAMPSHIRE RURAL 0.325 0.317 NEW HAMPSHIRE URBAN 0.300 0.292 NEW JERSEY URBAN 0.212 0.207 NEW MEXICO RURAL 0.294 0.256 NEW MEXICO URBAN 0.307 0.279 NEVADA RURAL 0.234 0.234 NEVADA URBAN 0.159 0.162 NEW YORK RURAL 0.347 0.420 NEW YORK URBAN 0.347 0.369 OHIO RURAL 0.337 0.321 OHIO URBAN 0.237 0.237 OKLAHOMA RURAL 0.253 0.239 OKLAHOMA URBAN 0.210 0.212 OREGON RURAL 0.332 0.314 OREGON URBAN 0.352 0.335 PENNSYLVANIA RURAL 0.270 0.267 PENNSYLVANIA URBAN 0.199 0.200 PUERTO RICO URBAN 0.600 0.504 RHODE ISLAND URBAN 0.310 0.264 SOUTH CAROLINA RURAL 0.196 0.211 SOUTH CAROLINA URBAN 0.210 0.214 SOUTH DAKOTA RURAL 0.309 0.307 SOUTH DAKOTA URBAN 0.208 0.218CMS-1601-P 207

State Urban/Rural Proposed CY 2014 Default CCR Previous Default CCR (CY 2013 OPPS Final Rule) TENNESSEE RURAL 0.212 0.209 TENNESSEE URBAN 0.200 0.195 TEXAS RURAL 0.233 0.235 TEXAS URBAN 0.203 0.206 UTAH RURAL 0.343 0.374 UTAH URBAN 0.338 0.359 VIRGINIA RURAL 0.223 0.227 VIRGINIA URBAN 0.243 0.237 VERMONT RURAL 0.429 0.408 VERMONT URBAN 0.395 0.384 WASHINGTON RURAL 0.315 0.366 WASHINGTON URBAN 0.322 0.301 WISCONSIN RURAL 0.347 0.345 WISCONSIN URBAN 0.308 0.307 WEST VIRGINIA RURAL 0.294 0.277 WEST VIRGINIA URBAN 0.327 0.338 WYOMING RURAL 0.444 0.379 WYOMING URBAN 0.279 0.301 ALASKA RURAL 0.472 0.489 ALASKA URBAN 0.296 0.307

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

the Act

In the CY 2006 OPPS final rule w ith comment period (70 FR 68556), we finalized a payment increase for rural SCHs of 7.1 percent for all services and procedures paid under the OPPS, excluding drugs, biologi cals, brachytherapy sources, and devices paid under the pass-through payment policy in a ccordance with section 1833(t)(13)(B) of the Act, as added by section 411 of the Me dicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173). Section 1833(t)(13) of the ActCMS-1601-P 208 provided the Secretary the author ity to make an adjustment to OPPS payments for rural hospitals, effective January 1, 2006, if justified by a study of the difference in costs by APC between hospitals in rural areas and hospita ls in urban areas. Our analysis showed a

difference in costs for rural SCHs. Theref ore, for the CY 2006 OPPS, we finalized a payment adjustment for rural SCHs of 7.1 perc ent for all services and procedures paid under the OPPS, excluding separately paya ble drugs and biologicals, brachytherapy sources, and devices paid under the pass-th rough payment policy, in accordance with section 1833(t)(13)(B) of the Act. In CY 2007, we became aware that we di d not specifically address whether the adjustment applies to EACHs, which ar e considered to be SCHs under section 1886(d)(5)(D)(iii)(III) of the Ac t. Thus, under the statute, EACHs are treated as SCHs. Therefore, in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010 and 68227), for purposes of receiving this rural adjustment, we revised § 419.43(g) of the regulations to clarify that EA CHs also are eligible to receive the rural SCH adjustment, assuming these entities otherwise meet the ru ral adjustment criteria. Currently, three hospitals are classified as EACHs, an d as of CY 1998, under section 4201(c) of Pub. L. 105-33, a hospital can no longer become newly classified as an EACH. This adjustment for rural SCHs is budge t neutral and applied before calculating outlier payments and copayments. We st ated in the CY 2006 OPPS final rule with comment period (70 FR 68560) th at we would not reestablis h the adjustment amount on an annual basis, but we may review the adju stment in the future and, if appropriate, would revise the adjustment. We provided the same 7.1 percent adjustment to ruralCMS-1601-P 209 SCHs, including EACHs, again in CYs 2008 through 2013. Further, in the CY 2009

OPPS/ASC final rule with co mment period (73 FR 68590), we updated the regulations at § 419.43(g)(4) to specify, in general terms, that items paid at charges adjusted to costs by application of a hospital-specific CCR are excluded from the 7.1 percent payment adjustment. For the CY 2014 OPPS, we are proposing to continue our pol icy of a 7.1 percent payment adjustment that is done in a budge t neutral manner for rural SCHs, including EACHs, for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, devices pa id under the pass-through payment policy, and items paid at charges reduced to costs. F. Proposed OPPS Payment to Certain Cancer Hospitals Described by Section 1886(d)(1)(B)(v) of the Act 1. Background Since the inception of the OPPS, which was authorized by the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), Medicare has paid cancer hospi tals identified in section 1886(d)(1)(B )(v) of the Act 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 that are exempted from pa yment under the IPPS. With the Medicare, Medicaid and SCHIP Balanced Budget Refinement Act of 1999 Pub. L. 106-113), Congress established sec tion 1833(t)(7) of the Act, “T ransitional Adjustment to Limit Decline in Payment,” to hold harmle ss cancer hospitals a nd children’s hospitals based on their pre-BBA amount under the OPPS. As required under sectionCMS-1601-P 210 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 perm anently held harmless to their “pre-BBA amount,” and they receive transitional out patient payments (TOPS) or hold harmless payments to ensure that they do not receive a payment that is lower under the OPPS than the payment they would have received before implementation of the OPPS, as set forth in section 1833(t)(7)(F) of the Act. The “p re-BBA amount” is an amount equal to the product of the reasonable cost of the hospita l for covered outpatient services for the portions of the hospital’s cost reporting peri od (or periods) occurring in the current year and the base payment-to-cost ratio (PCR) for the hospital defined in section 1833(t)(7)(F)(ii) of the Act. The “pre-BBA am ount,” 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 of 2010 amended section 1833(t) of the Act by adding a new paragraph (18), which inst ructs the Secretary to conduct a study to determine if, under the OPPS, outpatient costs incurred by cancer hospi tals described in section 1886(d)(1)(B)(v) of the Act with respec t to APC groups exceed the costs incurred by other hospitals furnishing services under se ction 1833(t) of the Act, as determined appropriate by the Secretary. In addition, section 1833(t)(18)(A ) of the Act requires the Secretary to take into consideration the co st of drugs and biol ogicals incurred by suchCMS-1601-P 211 hospitals when studying cancer ho spital costliness. Further, section 1833(t)(1 8)(B) of the Act provides that if the Secr etary determines that costs by these cancer hospitals 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 1833(t)(18)(A) of the Act, we determined in 2011 that outpatient costs in curred by the 11 specified cancer hospitals were greater than the costs incurred by othe r 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 highe r outpatient costs as

discussed in the CY 2012 O PPS/ASC final rule with comment period (76 FR 74202 through 74206). Specifically, we adopted a po licy 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 ma de on an aggregate basis at cost report settlement. We note that the changes ma de by section 1833(t)(18) of the Act do notCMS-1601-P 212 affect the existing statutory provisions that provide for TOPs for cancer hospitals. The TOPs are assessed as usual after all paymen ts, including the cancer hospital payment adjustment, have been made for a cost reporting period. For CYs 2012 and 2013, the target PCR for purposes of the cance r hospital payment adjustment was 0.91. 2. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2014 For CY 2014, we are proposing to con tinue our policy to provide additional payments to cancer hospitals so that each cancer hospital’s final PCR is equal to the weighted average PCR (or “target PCR”) fo r the other OPPS hospitals using the most recent submitted or settled cost report da ta that are available at the time of the development of this proposed rule. To cal culate the proposed CY 2014 target PCR, we used the same extract of cost report data from HCRIS, as discussed in section II.A. of this proposed rule, used to estimate costs for th e CY 2014 OPPS. Using these cost report data, we included data from Work sheet E, Part B, for each hospital, using data from each hospital’s most recent cost report, whether as submitted or settled. We then limited the dataset to the hospitals with CY 2012 claims data that we used to model the impact of the proposed CY 2014 APC relative weights (3,951 hos pitals) because it is appropriate to use the same set of hospitals that we are usi ng to calibrate the modeled CY 2014 OPPS. The cost report data for the hospitals in this dataset were from cost report periods with fiscal year ends ranging from 2011 to 2012. We then removed the cost report data of the 45 hospitals located in Puerto Rico from our data set because we do not believe that their cost structure reflects the costs of most hospita ls paid under the OPPS and, therefore, their inclusion may bias the calculation of hospital- weighted statistics. We also removed theCMS-1601-P 213 cost report data of 118 hospitals because the cost report data 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 paymen t and cost data necessary to calculate a PCR for each hospital, leading to a proposed analytic file of 3,788 hospitals with cost report data. Using this smaller dataset of cost report data, we estimated that, on average, the OPPS payments to other hospitals furnishi ng services under the OPPS are approximately 90 percent of reasonable cost (a weighted average PCR of 0.90) . Based on these data, we are proposing a target PCR of 0.90 to dete rmine the CY 2014 cancer hospital payment adjustment to be paid at cost report sett lement. 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 n eeded to result in a proposed target PCR equal to 0.90 for each cancer hospital. Table 10 below indicates the estimated pe rcentage increase in OPPS payments to each cancer hospital for CY 2014 due to the cancer hospital payment adjustment policy. The actual amount of the CY 2014 cancer hospi tal payment adjustment for each cancer hospital will be determined at cost report se ttlement and will de pend on each hospital’s CY 2014 payments and costs. We note that the changes made by section 1833(t)(18) of the Act do not affect the existing statutory pr ovisions that provide for TOPs for cancer hospitals. The TOPs will be assessed as usual after all payments, including the cancer hospital payment adjustment, have been made for a cost reporting period.CMS-1601-P 214

TABLE 10.—ESTIMATED CY 2014 HOSPITAL-SPECIFIC PAYMENT ADJUSTMENT FOR CANCER HOSPITALS TO BE PROVIDED AT COST REPORT SETTLEMENT

Provider Number Hospital Name Estimated Percentage Increase in OPPS Payments for CY 2014 050146 City of Hope Helford Clinical Research Hospital 15.0% 050660 USC Kenneth Norris Jr. Cancer Hospital 28.9% 100079 University of Miami Hospital & Clinic 16.7% 100271 H. Lee Moffitt Cancer Center & Research Institute 23.7% 220162 Dana-Farber Cancer Institute 48.2% 330154 Memorial Hospital for Cancer and Allied Diseases 41.4% 330354 Roswell Park Cancer Institute 35.2% 360242 James Cancer Hospital & Solove Research Institute 35.6% 390196 Hospital of the Fox Chase Cancer Center 16.7% 450076 University of Texas M. D. Anderson Cancer Center 58.9% 500138 Seattle Cancer Care Alliance 55.1%

G. Proposed Hospital Outpatient Outlier Payments 1. Background Currently, the OPPS provides outlier paymen ts on a service-by-service basis. In CY 2012, 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 fi xed-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 t hose high-cost and complex procedures where a very costly service could present a hospital with significant financial loss. If the cost of aCMS-1601-P 215 service meets both of these conditions, th e 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 cons idered a final payment by longstanding OPPS policy. However, we implemented a reconcil iation process similar to the IPPS outlier reconciliation process fo r cost reports with cost reporti ng periods beginning on or after January 1, 2009, in our CY 2009 OPPS/AS C final rule with comment period (73 FR 68594 through 68599). It has been our policy for the past seve ral years to report the actual amount of outlier payments as a percent of total spe nding in the claims being used to model the proposed OPPS. Our current estimate of tota l outlier payments as a percent of total CY 2012 OPPS payment, using available CY 2012 claims and the revised OPPS expenditure estimate for the 2013 Trustee’s Re port, is approximately 1.1 percent of the total aggregated OPPS payments. Therefore, for CY 2012, we estimate that we paid 0.1 percent above the CY 2012 outlier target of 1.0 percent of to tal aggregated OPPS payments. As explained in the CY 2013 OPPS/AS C final rule with comment period (77 FR 68295 through 68297), we set our projecte d target for aggregate outlier payments at 1.0 percent of the estimated aggregate total payments under the OPPS for CY 2013.

The outlier thresholds were set so that estimated CY 2013 aggregate outlier payments would equal 1.0 percent of th e total estimated aggregate payments under the OPPS. Using CY 2012 claims data and CY 2013 paymen t rates, we currently estimate that theCMS-1601-P 216 aggregate outlier payments for CY 2013 will be approximately 1.2 percent of the total CY 2013 OPPS payments. The difference between 1.2 percent and 1.0 percent is reflected in the regulatory impact analysis in section XXIII. of this proposed rule. We note that we provide estimated CY 2014 outli er payments for hospitals and CMHCs with

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

. 2. Proposed Outlier Calculation For CY 2014, we are proposing to con tinue our policy of estimating outlier payments to be 1.0 percent of the estimated aggregate total paymen ts under the OPPS for outlier payments. We are proposing that a port ion of that 1.0 percent, an amount equal to 0.18 percent of outlier payments (or 0.0018 perc ent of total OPPS pa yments) 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 disc ussed in section VIII.D. of this proposed rule, for CMHCs, we are proposing to continue our longstanding policy that if a CMHC’s cost for partial hospitalization services, paid under either APC 0172 (Level I Partial Hospitalization (3 services) for CMHCs) or APC 0173 (Level II Partia l Hospitalization (4 or more services) for CMHCs), exceeds 3.40 times the payment rate for APC 0173, the outlier payment would be calculated as 50 percent of the amount by which the costCMS-1601-P 217 exceeds 3.40 times the APC 0173 payment rate. For further discussion of CMHC outlier payments, we refer readers to sect ion VIII.D. of this proposed rule.

To ensure that the estimated CY 2014 aggregate outlier payments would equal 1.0 percent of estimated aggregate total paym ents under the OPPS, we are proposing that the hospital outlier thre shold be set so that outlier payments would be triggered when the cost of furnishing a service or proced ure by a hospital exceeds 1.75 times the APC payment amount and exceeds the APC payment rate plus a $2,775 fixed-dollar threshold. We calculated the proposed fixed-dollar threshold using largely the standard methodology, most recently used for CY 2013 (77 FR 68295 through 68297). For purposes of estimating outlier payments for this proposed rule, we used the hospital-specific overall ancillary CCRs available in the April 2013 update to the Outpatient Provider-Specific File (OPSF). The OPSF contains provider-specific data, such as the most current CCR, which are ma intained by the Medica re contractors and used by the OPPS Pricer to pay claims. Th e claims that we use to model each OPPS update lag by 2 years. In order to estimate the CY 2014 hospital outlier payments for this proposed rule, we inflated the charges on the CY 2012 clai ms using the same inflation factor of 1.0993

that we used to estimate the IPPS fixe d-dollar outlier thre shold for the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27767). We used an inflation factor of 1.0485 to estimate CY 2013 charges from the CY 2012 ch arges reported on CY 2012 claims. The methodology for determining this charge infl ation factor is disc ussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27767). As we stated in the CY 2005 OPPS finalCMS-1601-P 218 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, hos pitals use the same ancillary and outpatient cost centers to capture costs and charges for inpatient and outpatient services.

As noted in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68011), we are concerned that we c ould systematically ove restimate the OPPS hospital outlier threshold if we did not a pply a CCR inflation adjustment factor. Therefore, for this CY 2014 OPPS/ASC propos ed rule, we are proposing to apply the same CCR inflation adjustment factor that we are proposing to apply for the FY 2014

IPPS outlier calculation to the CCRs used to simulate the proposed CY 2014 OPPS outlier payments to determine the fixed-dol lar threshold. Specifically, for CY 2014, we are proposing to apply an adjustment factor of 0.9732 to the CCRs that were in the April 2013 OPSF to trend them forward from CY 2013 to CY 2014. The methodology for calculating this proposed adjustment was discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27766 through 27768). Therefore, to model hospital outlier paym ents for this proposed rule, we applied the overall CCRs from the April 2013 OPSF f ile after adjustment (using the proposed CCR inflation adjustment factor of 0.9732 to approximate CY 2014 CCRs) to charges on CY 2012 claims that were adjusted (using th e proposed charge inflation factor of 1.0993 to approximate CY 2014 charges). We simu lated aggregated CY 2014 hospital outlier payments using these costs for several diffe rent fixed-dollar thresholds, holding the 1.75 multiple threshold constant and assuming th at outlier payments would continue to beCMS-1601-P 219 made at 50 percent of the amount by which the cost of furnishing the service would exceed 1.75 times the APC payment amount, un til the total outlier payments equaled 1.0 percent of aggregated estimated total CY 2014 OPPS payments. We estimated that a proposed fixed-dollar threshold of $2,775, 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 th e 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 thresh old of $2,775 are met. For CMHCs, we are proposing that, if a CMHC’s cost for partia l hospitalization services, paid under either APC 0172 or APC 0173, exceeds 3.40 times the payment rate for APC 0173, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate. Section 1833(t)(17)(A) of the Act, which applies to hospitals as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to report data required for the quality measures selected by the Secretary, in the form and manner required by the Secretary under 1833(t)(17)(B ) of the Act, incur a 2.0 per centage point reduction to their OPD fee schedule increase factor, that is, the annual payment update factor. The application of a reduced OPD fee schedule increase factor results in reduced national unadjusted payment rates that will apply to certain outpatient items and services furnished by hospitals that are required to report outpatient qu ality data and that fail to meet the Hospital OQR Program requirements. For hospitals that fail to meet theCMS-1601-P 220 Hospital OQR Program requirements, we are pr oposing to continue the policy that we implemented in CY 2010 that the hospitals' costs will be compared to the reduced payments for purposes of outlier eligibility and payment calculation. For more information on the Hospital OQR Program, we refer readers to section XIII. of this proposed rule.CMS-1601-P 221 H. Proposed Calculation of an Adjust ed Medicare Payment from the National Unadjusted Medicare Payment The basic methodology for determining prospective payment rates for HOPD

services under the OPPS is set forth in ex isting regulations at 42 CFR Part 419, Subparts C and D. For this CY 2014 OPPS/ASC proposed rule, the payment rate for most services and procedures for which payment is ma de under the OPPS is the product of the

conversion factor calculated in accordance with section II.B. of this proposed rule and the relative payment weight determined under sectio n II.A. of this proposed rule. Therefore, the proposed national unadjusted payment rate for most APCs contained in Addendum A to this proposed rule (which is available via the Internet on the CMS Web site and for most HCPCS codes to which separate payment under the OPPS has been assigned in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) was calculated by multiplying the propos ed CY 2014 scaled weight for the APC by the proposed CY 2014 conversion factor. We note that section 1833(t)(17) of the Ac t, which applies to hospitals as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to submit data required to be submitted on quality measures selected by the Secretary, in the form and manner and at a time specified by the Secretary, incur a reduction of 2.0 percentage points to their OPD fee schedule increase f actor, that is, the annual payment update factor. The application of a reduced OPD fee schedule increase factor results in reduced national unadjusted payment rates that apply to certain outpatient items and services provided by hospitals that are re quired to report outpatient qual ity data and that fail toCMS-1601-P 222 meet the Hospital OQR Program (formerly referr ed to as the Hospital Outpatient Quality Data Reporting Program (HOP QDRP)) requir ements. For further discussion of the payment reduction for hospitals that fail to meet the requirements of the Hospital OQR Program, we refer readers to sec tion XIII. of this proposed rule. We demonstrate in the steps below how to determine the APC payments that will be made in a calendar year under the OPPS to a hospital th at fulfills the Hospital OQR Program requirements and to a hospital that fails to meet the Hospital OQR Program requirements for a service that has any of the following status indicator assignments: “J1,” “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” or “V” (as 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 condi tionally packaged serv ices (status indicator of “Q1” and “Q2”) qualify for separate paym ent. We note that, although blood and blood products with status indicator “R” and brachytherapy sources with status indicator “U” are not subject to wage adjustment, they are subject to reduced payments when a hospital fails to meet the Hospital OQR Program requirements. We note that we are also proposing to create status i ndicator “J1” to reflect the proposed comprehensive APCs

discussed in section II.A.2.e . of this proposed rule. Individual providers intere sted in calculating the paym ent amount that they would receive for a specific service from the natio nal unadjusted paymen t rates presented in Addenda A and B to this proposed rule (which are available via th e 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 paymentCMS-1601-P 223 rate for hospitals that meet the requirement s of the Hospital OQR Pr ogram as the “full” national unadjusted payment rate. We refer to the national unadjusted payment rate for hospitals that fail to meet the requirements of the Hospital OQR Program as the “reduced” national unadjusted payment rate. The reduced national unadjusted payment rate is calculated by multiplying the proposed reporting ratio of 0.980 times the “full” national unadjusted payment rate. The natio nal unadjusted payment rate used in the

calculations below is either the full nati onal unadjusted payment rate or the reduced national unadjusted payment rate, depending on whether the hospital met its Hospital OQR Program requirements in order to receive the full proposed CY 2014 OPPS fee schedule increase factor of 1.8 percent. Step 1 . Calculate 60 percent (the labor-related portion) of the national unadjusted payment rate. Since the initial implementati on of the OPPS, we have used 60 percent to represent our estimate of that portion of cost s attributable, on average, to labor. We refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18496 through 18497) for a detailed discussion of how we derived this percentage. During our regression analysis for the payment adjustme nt for rural hospitals in the CY 2006 OPPS final rule with comment period (70 FR 68553), we confirmed that this labor-related share for hospital outpatient services is appropriate. The formula below is a mathematical representation of Step 1 and identifies the labor-related portion of a specific payment rate for a specific service. X is the labor-related portion of the national unadjusted payment rate.

X

= .60 * (national unadjusted payment rate)CMS-1601-P 224 Step 2 . Determine the wage index area in which the hospita l 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 2014 under the IPPS, reclassifications through the MGCRB, section 1886 (d)(8)(B) “Lugar” hospitals, reclassifications under section 1886(d)(8)(E) of the Act, as defined in § 412.103 of the regulations, and hospitals designated as urban under section 601(g) of P ub. L. 98-21. (For further discussion of the proposed changes to the FY 2014 IPPS wage indices, as applied to the CY 2014 OPPS, we refer readers to section II.C. of this propos ed rule.) We are proposing to continue to apply a wage index floor of 1.00 to frontie r States, in accordance with section 10324 of

the Affordable Care Act of 2010. Step 3 . Adjust the wage index of hospitals located in certain qualifying counties that have a relatively high percentage of hos pital employees who reside in the county, but who work in a different county with a higher wage index, in accordance with section 505 of Pub. L. 108-173. Addendum L to this pr oposed rule (which is available via the Internet on the CMS Web site) contains th e qualifying counties and the associated proposed wage index increase developed for the FY 2014 IPPS and listed as Table 4J in the FY 2014 IPPS/LTCH PPS proposed rule and available via the Internet on the CMS

Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/index.html . This step is to be followed only if the hospital is not reclassified or redesignated under secti on 1886(d)(8) or secti on 1886(d)(10) of the

Act.CMS-1601-P 225 Step 4 . Multiply the applicab le wage index determined under Steps 2 and 3 by the amount determined under Step 1 that re presents the labor-related portion of the national unadjusted payment rate. The formula below is a mathematical representation of Step 4 and adjusts the labor-related portion of the na tional unadjusted payment rate for the specific service by the wage index.

X

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

X

a = .60 * (national unadjusted paymen t rate) * applicab le wage index. Step 5 . Calculate 40 percent (the nonla bor-related portion) of the national unadjusted payment rate and add that amount to the resulting product of Step 4. The result is the wage index adjusted paymen t rate for the relevant wage index area.

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

Y

= .40 * (national unadjusted payment rate) Adjusted Medicare Payment = Y + X a Step 6 . If a provider is an SCH, set fort h in the regulations at § 412.92, or an EACH, which is considered to be an SC H under section 1886(d)(5 )(D)(iii)(III ) of the Act, and located in a rural area, as defined in § 412.64(b), or is treated as being located in a rural area under § 412.103, multiply the wage index adjusted payment rate by 1.071 to calculate the total payment.CMS-1601-P 226

The formula below is a mathematical re presentation of Step 6 and applies the proposed rural adjustment for rural SCHs. Adjusted Medicare Payment (SCH or EA CH) = Adjusted Medicare Payment * 1.071 We have provided examples below of the calculation of both the proposed full and reduced national unadjusted payment rate s that would apply to certain outpatient items and services performed by hospitals that meet and that fail to meet the Hospital OQR Program requirements, using the steps outlined above. For purposes of this example, we used a provider that is locat ed in Brooklyn, New York that is assigned to CBSA 35644. This provider bills one servi ce that is assigned to APC 0019 (Level I Excision/Biopsy). The proposed CY 2014 fu ll national unadjusted payment rate for APC 0019 is approximately $345.75. The proposed reduced national unadjusted payment rate for APC 0019 for a hospital that fails to meet the Hospital OQR Program requirements is approximately $338.84. 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 2014 wage inde x for a provider located in CBSA 35644 in New York is 1.3158. The proposed la bor-related portion of the full national unadjusted payment is approximately $272.96 (.60 * $345.75 * 1.3158). The labor-related portion of the proposed re duced national unadjusted payment is approximately $267.51 (.60 * $338.84 * 1.3158). The proposed nonlabor-related portion of the full national unadjusted payment is approximately $138.30 (.40 * $345.75). The nonlabor-related portion of the proposed reduced national unadjusted payment is approximately $135.54 (.40 * $338.84). The sum of the labor-related andCMS-1601-P 227 nonlabor-related portions of the proposed full national adjusted payment is approximately $411.26 ($272.96 + $138.30). The sum of the reduced national adjusted payment is approximately $403.05 ($267.51 + $135.54). I. Proposed Beneficiary Copayments 1. Background Section 1833(t)(3)(B) of the Act requires the Secretary to set rules for determining the unadjusted copayment amounts to be paid by beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of the Act specifies that the Secretary must reduce the national unadjusted copayment amount for a covered OPD service (or group of such services) furnished in a year in a manner so that th e effective copayment rate (determined on a national unadjusted basis) fo r that service in the year does not exceed a specified percentage. As specified in section 1833(t)(8)(C )(ii)(V) of the Act, the effective copayment rate for a covered OPD service paid under the OPPS in CY 2006, and in calendar years thereafter, shall not exceed 40 percent of the APC payment rate. Section 1833(t)(3)(B)(ii) of the Act provi des that, for a covered OPD service (or group of such services) furnished in a y ear, the national unadjusted copayment amount cannot be less than 20 percent of the OP D fee schedule amount. However, section 1833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be collected for a procedure performed in a y ear to the amount of the inpatient hospital deductible for that year.

Section 4104 of the Affordable Care Ac t eliminated the Part B coinsurance for preventive services furnished on and after January 1, 2011, that meet certainCMS-1601-P 228 requirements, including flex ible sigmoidoscopies and sc reening colonoscopies, and waived the Part B deductible for screening colonoscopies that b ecome diagnostic during the procedure. Our discussi on of the changes made by the Affordable Care Act with regard to copayments for pr eventive services furnished on and after January 1, 2011, may

be found in section XII.B. of the CY 2011 O PPS/ASC final rule with comment period (75 FR 72013). 2. Proposed OPPS Copayment Policy For CY 2014, we are proposing to determine copayment amounts for new and revised APCs using the same methodology th at we implemented beginning in CY 2004. (We refer readers to the November 7, 2003 OPPS final rule with comment period (68 FR 63458).) In addition, we are propos ing to use the same standard rounding principles that we have hist orically used in instances where the appli cation of our standard copayment methodology would result in a copayment amount that is less than 20 percent and cannot be rounded, under standa rd rounding principles, to 20 percent. (We refer readers to the CY 2008 OPPS/ ASC final rule with comment period (72 FR 66687) in which we discuss our rationale for applying these r ounding principles.) The proposed national unadjusted copaymen t amounts for services payable under the OPPS that would be effective January 1, 2014, are shown in Addenda A and B to this proposed rule (which are available via the In ternet on the CMS Web site). As discussed in section XIII.G. of this proposed rule, for CY 2014, the proposed Medicare beneficiary’s minimum unadjusted copaymen t and national unadjusted copayment for a service to which a reduced national unadjus ted payment rate applies will equal theCMS-1601-P 229 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 du e to updated cost report and claims data, and any changes to the OPPS co st modeling process. Howeve r, as described in the CY 2004 OPPS/ASC final rule with comment pe riod, the development of the copayment methodology generally moves bene ficiary copayments closer to 20 percent of OPPS APC payments (68 FR 63458 through 63459). 3. Proposed Calculation of an Adjust ed Copayment Amount for an APC Group Individuals interested in calculating the national copayment liability for a Medicare beneficiary for a give n service provided by a hospital that met or failed to meet its Hospital OQR Program requirements shoul d follow the formulas presented in the following steps. 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, approximately $69.15 is 20 percent of the proposed full national unadjusted payment rate of approximately $345.75. For APCs with only a minimum unadjusted copayment in Addenda A and B to this proposed rule (which are availa ble via the Internet on the CMS Web site), the beneficiary payment percentage is 20 percent. The formula below is a mathematical repr esentation of Step 1 and calculates the national copayment as a percentage of national payment for a given service. B is the beneficiary payment percentage.CMS-1601-P 230

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 Step s 2 through 4 under sect ion II.H. of this proposed rule. Calculate the rural adjustment fo r eligible providers as indicated in Step 6 under section II.H. of this proposed rule. Step 3 . Multiply the percentage calcula ted in Step 1 by the payment rate calculated in Step 2. The result is the wage-adjusted copayment amount for the APC.

The formula below is a mathematical re presentation of Step 3 and applies the beneficiary payment percentage to the adju sted payment rate for a service calculated under section II.H. of this proposed rule, w ith and without the ru ral adjustment, to calculate the adjusted beneficiar y copayment for a given service. Wage-adjusted copayment amount for the APC = Adjusted Medicare Payment * B Wage-adjusted copayment amount for th e 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 proposed reporting ratio of 0.980. The proposed unadjusted copayments for services payable under the OPPS that would be effective January 1, 2014, are shown in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site). We note that the proposed national unadjusted payment rates and copaym ent rates shown in Addenda A and B toCMS-1601-P 231 this proposed rule reflect the proposed fu ll CY 2014 OPD fee sche dule increase factor

discussed in section II.B. of this proposed rule. In addition, as noted above, section 1 833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be collected for a procedure performed in a year to the amount of the inpatient hospita l deductible for that year.CMS-1601-P 232 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. Speci fically, CMS recognizes the following codes

on OPPS claims:

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

● Category III CPT codes, which desc ribe new and emerging technologies, services, and procedures; and

● Level II HCPCS codes, which are used primarily to identify products, supplies, temporary procedures, and servic es not described by CPT codes. CPT codes are established by the Americ an Medical Association (the AMA) and Level II HCPCS codes are established by the CMS HCPCS Workgroup. These codes are updated and changed throughout the year. CPT and HCPCS code changes that affect the OPPS are published both thr ough the annual rulemaking cy cle and through the OPPS quarterly update Change Requests (CRs). CMS releases new Level II HCPCS codes to the public or recognizes the release of new CPT codes by the AMA and makes these codes effective (that is, the codes can be reported on Medicare claims) outside of the formal rulemaking process through OPPS quart erly update CRs. This quarterly update 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. WeCMS-1601-P 233 solicit public comments on thes e new codes and finalize our proposals related to these codes through our annual rulemaking proce ss. In Table 11 below, we summarize our proposed process for updating codes thr ough our OPPS quarterly update CRs, seeking public comments, and finalizing their treatm ent under the hospital O PPS. We note that 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, th e Level II HCPCS codes and the Category III CPT codes implemen ted through the July 2013 OPPS quarterly update CR could not be include d in Addendum B to this pr oposed rule (which is

available via the Internet on the CMS Web s ite), while those codes based upon the April 2013 OPPS quarterly update CR are included in Addendum B. Nevertheless, we are requesting public comments on the codes in cluded in the July 2013 OPPS quarterly update CR and including these codes in the preamble of this proposed rule (we refer readers to Tables 13 and 14 for the July 2013 CPT and Level II HCPCS codes).

TABLE 11.—COMMENT TIMEFRAME FOR NEW OR REVISED HCPCS CODES

OPPS Quarterly Update CR Type of Code Effective Date Comments Sought When Finalized

April l, 2013 Level II HCPCS Codes April 1, 2013 CY 2014 OPPS/ASC proposed rule CY 2014 OPPS/ASC final rule with comment period

Level II HCPCS Codes July 1, 2013 CY 2014 OPPS/ASC proposed rule CY 2014 OPPS/ASC final rule with comment period July 1, 2013 Category I (certain vaccine July 1, 2013 CY 2014 OPPS/ASC CY 2014 OPPS/ASC finalCMS-1601-P 234

OPPS Quarterly Update CR Type of Code Effective Date Comments Sought When Finalized codes) and III

CPT codes proposed rule rule with comment period

October 1, 2013 Level II HCPCS Codes October 1, 2013 CY 2014 OPPS/ASC final rule with comment period CY 2015 OPPS/ASC final rule with comment period

Level II HCPCS Codes January 1, 2014 CY 2014 OPPS/ASC final rule with comment period CY 2015 OPPS/ASC final rule with comment period January 1, 2014 Category I and III CPT Codes January 1, 2014 CY 2014 OPPS/ASC final rule with comment period CY 2015 OPPS/ASC final rule with comment period

This process is discussed in detail below. We have separated our discussion into

two sections based on whether we are so liciting public comments in this CY 2014 OPPS/ASC proposed rule or whether we will be soliciting public comments in the

CY 2014 OPPS/ASC final rule with comment period. We note that we sought public comments in the CY 2013 OPPS/ASC final rule with comment period on the new CPT

and Level II HCPCS codes that were effective January 1, 2013. We also sought public comments in the CY 2013 OPPS/ASC final rule with comment period on the new

Level II HCPCS codes that were effective October 1, 2012. These new codes, with an effective date of October 1, 2012, or Janua ry 1, 2013, were flagged with comment indicator “NI” (New code, interim APC a ssignment; comments will be accepted on the interim APC assignment for the new code) in Addendum B to the CY 2013 OPPS/ASCCMS-1601-P 235 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 2013 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 2014 OPPS/ASC final rule with comment period. 1. Proposed Treatment of New CY 2013 Level II HCPCS and CPT Codes Effective April 1, 2013 and July 1, 2013 for Which We Are Soliciting Public Comments in This CY 2014 OPPS/ASC Proposed Rule Through the April 2013 OPPS quarterly update CR (Transmittal 2664, Change Request 8228, dated March 1, 2013), and th e July 2013 OPPS quarterly update CR (Transmittal 2718, Change Request 8338, dated June 7, 2013), we recognized several new HCPCS codes for separate payment under th e OPPS. Effective Ap ril 1 and July 1 of CY 2013, we made effective 18 new Level II HCPCS codes and 6 Category III CPT codes. Specifically, 8 new Level II HCPC S codes were effective for the April 2013 quarterly update and another 10 new Level II HCPCS codes were effective for the July 2013 quarterly update for a total of 18. In addition, six new Category III CPT codes were effective for the July 2013 quarterly update. Of the 24 new HCPCS codes, we recognized for separate payment under the OPPS 14 new codes from the April and July 2013 OPPS quarterly updates. Through the April 2013 OPPS quarterly update CR, we allowed separate payment for five new Level II HCPCS codes. Specifi cally, as displayed in Table 12 below, we provided separate payment for HCPCS codes C9130, C9297, C9298, C9734, and C9735.CMS-1601-P 236 HCPCS codes Q0507, Q0508, and Q0509 were assi gned to OPPS status indicator “A” to indicate that they are paid through another Medicare payment system other than the OPPS. Although HCPCS codes Q0507, Q0508, a nd Q0509 were effective April 1, 2013, they were previously described by HCPCS code Q0505, which was deleted on March 31, 2013.

TABLE 12.—NEW LEVEL II HCPCS CO DES IMPLEMENTED IN APRIL 2013

CY 2013 HCPCS

Code CY 2013 Long Descriptor Proposed CY 2014

Status Indicator Proposed CY 2014

APC C9130* Injection, immune globul in (Bivigam), 500 mg G 9130 C9297* Injection, omacetaxine mepesuccinate, 0.01 mg G 9297 C9298* Injection, ocriplasmin, 0.125 mg G 9298

C9734 # Focused ultrasound ablation/therapeutic intervention, other than uterine leiomyomata, with or without magne tic resonance (MR) guidance S 0065

C9735 Anoscopy; with directed submucosal injection(s), any substance T 0150

Q0507 Miscellaneous supply or accessory for use with an external ventricular assist device A N/A

Q0508 Miscellaneous supply or accessory for use with an implanted ventricular assist device A N/A

Q0509 Miscellaneous supply or accessory for use with any implanted ventricular assist device for which payment was not made under Medicare Part A A N/A *The proposed payment rate for HCPCS codes C9130, C9297, and C9298 are based on ASP+6 percent. # HCPCS code C9734 has been revised to delete the word s “or without” from the lo ng descriptor effective July 1, 2013.

In this CY 2014 OPPS/ASC proposed rule, we are soliciting public comments on the proposed status indicator s and APC assignments, where applicable, for the Level IICMS-1601-P 237 HCPCS codes listed in Table 12 of this propo sed rule. The proposed payment rates for these codes, where applicable, can be found in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site). Through the July 2013 OPPS quarterly update CR, we allowed separate payment under the OPPS for 5 of the 10 new Level II HCPCS codes effective July 1, 2013. Specifically, as displayed in Table 13 belo w, we allowed separate payment for HCPCS codes C9131, C9736, G0460, Q2050, and Q2051. We note that two of the Level II HCPCS Q-codes that were made effective July 1, 2013, were previously described by HCPCS J-codes that were sepa rately payable under the hospi tal OPPS. First, the HCPCS Workgroup replaced HCPCS code J9002 (Injection, doxorubicin hydrochloride, liposomal, Doxil, 10mg) with new HCPC S code Q2050, effective July 1, 2013, to appropriately identify and pay for both th e brand and generic forms of doxorubicin hydrochloride liposome. Consequently, the status indicator for HCPCS code J9002 was changed to “E” (Not Payable by Medicare) , effective July 1, 2013. Because HCPCS code Q2050 describes the same product as HC PCS code J9002, we continued its separate payment status and assigned HCPCS code Q2050 to status indicator “K” (Nonpass-through drugs and nonimplantable biological, including therapeutic radiopharmaceuticals; paid under OPPS; separate APC payment). We also continued to assign HCPCS code Q2050 to the same APC as HCPCS code J9002, specifically APC 7046 (Doxil injection), effective July 1, 2013. Secondly, the HCPCS Workgroup repl aced HCPCS codes J3487 (Injection, zoledronic acid (Zometa), 1 mg) and J3488 (In jection, zoledronic acid (Reclast), 1 mg)CMS-1601-P 238 with one new HCPCS code, specifically Q 2051, effective July 1, 2013, to appropriately identify and pay for both the brand and generi c forms of zoledronic acid. Consequently,

the status indicators for both HCPCS code J3487 and J3488 were changed to “E,” effective July 1, 2013, to indicate that th ese codes are not separately payable by Medicare. Because HCPCS code Q2051 desc ribes the same product as HCPCS codes J3487 and J3488, we assigned HCPCS code Q2051 to separate payment status indicator “K,” effective July 1, 2013. Because HCPCS codes J3487 and J3488, which were assigned to two separate APCs , were replaced with only one code, we assigned HCPCS code Q2051 to a new APC to maintain data consistency for future rulemaking. Specifically, HCPCS code Q2051 is assigne d to APC 1356 (Zoldedronic acid 1mg), effective July 1, 2013.

Of the 10 Level II HCPCS codes that we re made effective July 1, 2013, we did not recognize for separate payment under the hospital OPPS five HCPCS codes. Specifically, HCPCS codes K0008, K0013, and K 0900 are assigned to status indicator “Y” (Non-implantable durable medical equi pment; not paid under OPPS); HCPCS code Q2033 is assigned to status indicator “L” (Not paid under OPPS; paid at reasonable cost); and HCPCS code Q0090 is assigned to status indicator “E” (Not pa yable/Non-covered by Medicare; not paid under OPPS). Table 13 below includes a complete list of the Level II HCPCS codes that were made effective July 1, 2013. As stated a bove, the codes effective July 1, 2013, do not appear in Addendum B of this proposed rule, and, as a re sult, their proposed paymentCMS-1601-P 239 rates along with their proposed status indicators and propos ed APC assignments, where applicable, for CY 2014 are provided in Table 13.

TABLE 13.—NEW LEVEL II HCPCS CODES IMPLEMENTED IN JULY 2013

CY 2013 HCPCS

Code CY 2013 Long Descriptor Proposed CY 2014

Status Indicator Proposed CY 2014

APC Proposed CY 2014 Payment Rate C9131* Injection, ado-trastuzumab emtansine, 1 mg G 9131 $29.40

C9736 Laparoscopy, surgical, radiofrequency ablation of uterine fi broid(s), including intraoperative guida nce and monitoring, when performed T 0131 $3,765.67

G0460 Autologous platelet rich plasma for chronic wounds/ulcers, including phlebotomy, centrifugation, and all other preparatory procedures, administration and dressings, per treatment T 0013 $83.85

K0008 Custom Manual Wheelchair Base Y N/A N/A K0013 Custom Motorized/Power Wheelchair Base Y N/A N/A

K0900 Customized Durable Medical Equipment, Other Than Wheelchair Y N/A N/A

Q0090 Levonorgestrel-Releas ing Intrauterine Contraceptive System (SKYLA), 13.5 mg E N/A N/A

Q2033 Influenza Vaccine, Recombinant Hemagglutinin Antigens, For Intramuscular Use (Flublok) L N/A N/A

Q2050** Injection, Doxorubicin Hydrochloride, Liposomal, Not Otherwise Specified, 10mg K 7046 $545.44CMS-1601-P 240

CY 2013 HCPCS

Code CY 2013 Long Descriptor Proposed CY 2014

Status Indicator Proposed CY 2014

APC Proposed CY 2014 Payment Rate Q2051*** Injection, Zoledronic Acid, Not Otherwise Specified, 1mg K 1356 $196.42 *The proposed payment rate for HCPCS code C9131 is based on ASP+6 percent. **HCPCS code Q2050 replaced HCPCS code J9002, effective July 1, 2013. The status indicator for HCPCS code J9002 was changed to “E” (Not Payable by Medicare), effective July 1, 2013. The proposed payment rate for HCPCS code Q2050 is based on ASP+6 percent. ***HCPCS code Q2051 replaced HCPC S codes J3487 and J3488 effective July 1, 2013. The status indicator for HCPCS codes J3487 and J3488 was changed to “E” (Not Payable by Medicare), effective July 1, 2013. The proposed payment rate for HCPCS code Q2051 is based on ASP+6 percent.

For CY 2014, we are proposing to conti nue our established policy of recognizing Category I CPT vaccine codes for which F DA approval is imminent and Category III CPT codes that the AMA releases in January of each year for implementation in July through the OPPS quarterly update process. Under the OPPS, Category I CPT vaccine codes and Category III CPT codes that are re leased on the AMA Web site in January are made effective in July of the same year through the July OPPS quarterly update CR, consistent with the AMA’s implementation date for the codes. For the July 2013 quarterly update, there were no new Category I CPT vaccine codes. However, we note that Level II HCPCS code Q2033, which is listed in Table 13, describe s a flu vaccine that was effective July 1, 2013, and is separately payable by Medicare at reasonable cost. Through the July 2013 OPPS quarterly update CR (Transmittal 2718, Change Request 8338, dated June 7, 2013), we allowed se parate payment for four of the six new Category III CPT codes effective July 1, 2013. Specifically, as displayed in Table 14 below, we allowed separate payment for Category III CPT codes 0330T, 0331T, 0332T,CMS-1601-P 241 and 0334T. We did not recognize for separate payment Category III CPT code 0329T because the device associated with this pro cedure has not received FDA approval. In addition, we did not recognize for separate payment Category III CPT code 0333T because this procedure is not covered by Medicare. As listed in Table 14, both CPT codes 0329T and 0333T are assigned to status indicator “E” (Not payable/Non-covered by Medicare; not paid under OPPS). Table 14 below lists the Category III CPT codes that were implemented in July 2013, along with their proposed status indicators, proposed APC assignments, and proposed payment rates, where applicable, for CY 2014.

TABLE 14.—NEW CATEGORY III CPT CODES IMPLEMENTED IN JULY 2013

CY 2013 CPT Code CY 2013 Long Descriptor Proposed CY 2014

Status Indicator Proposed CY 2014

APC Proposed CY 2014 Payment Rate

0329T Monitoring of intraocula r pressure for 24 hours or longer, unilateral or bilateral, with interpretation and report E N/A N/A

0330T Tear film imaging, unilateral or bilateral, with interpretation and report S 0230 $51.83

0331T Myocardial sympathetic innervation imaging, planar qualitative and quantitative assessment; S 0398 $397.32

0332T Myocardial sympathetic innervation imaging, planar qualitative and quantitative assessment; with tomographic SPECT S 0398 $397.32

0333T Visual evoked potential , screening of visual acuity, automated E N/A N/A

0334T Sacroiliac joint stabiliz ation for arthrodesis, percutaneous or minimally invasive (indirect visualization), includes obtaining and applying autograft or allograft (structural or morselized), T 0208 $4,171.56CMS-1601-P 242

We are soliciting public comments on the CY 2014 proposed status indicators and the proposed APC assignments and payment ra tes for the Level II HCPCS codes and the Category III CPT codes that were effectiv e April 1, 2013, and July 1, 2013. These codes are listed in Tables 12, 13, and 14 of this proposed rule. We are proposing to finalize their status indicators and their APC assignments and payment rates, if applicable, in the

CY 2014 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 th e OPPS/ASC proposed rule, our policy is to include the codes, their proposed status indi cators, proposed APCs (where applicable), and proposed payment rates (where applicable) in the preamble of the proposed rule but not in the Addenda to the proposed rule. These codes are listed in Tables 13 and 14, respectively, of this proposed rule. We are proposing to incorporate these codes into

Addendum B to the CY 2014 OPPS/ASC final rule with comment period, which is consistent with our annual OPPS update pol icy. The Level II HCPCS codes implemented or modified through the April 2013 OPPS quart erly update CR and displayed in Table 12 are included in Addendum B to this proposed ru le (which is availabl e via the Internet on the CMS Web site), where their proposed CY 2014 payment rates are also shown. 2. Proposed Process for New Level II HCPCS Codes That Will Be Effective October 1, 2013 and New CPT and Level II HCPCS Codes That Will Be Effective when performed, includes image guidance when performed (eg, CT or fluoroscopic)CMS-1601-P 243 January 1, 2014 for Which We Will Be Soliciting Public Comments in the CY 2014

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 through the CMS HCPCS Workgroup (for Level II HCPCS codes) and the AMA’s 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 2014, these codes will be flagged with comment

indicator “NI” in Addendum B to the O PPS/ASC final rule with comment period to indicate that we are assigning them an interi m payment status which is subject to public comment. In addition, the CPT and Level II HCPCS codes that will be effective January 1, 2014, will be flagged with comment indicator “NI” in Addendum B to the

OPPS/ASC final rule with comm ent period. Specifically, the interim 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 2014. Specifically, for CY 2014, we are proposing to include inCMS-1601-P 244

Addendum B to the CY 2014 OPPS/ASC final ru le with comment period the following

new HCPCS codes:

● New Level II HCPCS codes effect ive October 1, 2013 that would be incorporated in the Octobe r 2013 OPPS quarterly update CR;

● New Category I and III CPT codes e ffective January 1, 2014 that would be incorporated in the January 2014 OPPS quarterly update CR; and

● New Level II HCPCS codes effect ive January 1, 2014 that would be incorporated in the January 2014 OPPS quarterly update CR. As stated above, the October 1, 2013 a nd January 1, 2014 codes would be flagged

with comment indicator “NI” in Addendum B to the CY 2014 OPPS/ASC final rule with comment period to indicate that we have assigned them an interim OPPS payment status for CY 2014. We are proposing that their st atus indicators and their APC assignments and payment rates, if app licable, would be open to publ ic comment and would be

finalized in the CY 2015 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 departme nt services. Secti on 1833(t)(2)(B) of the Act provides that the Secretary may establish groups of covered OPD services within this classification system, so that services cl assified within each group are comparable clinically and with respect to the use of resources. In accordance with these provisions, we developed a grouping classification sy stem, referred to as Ambulatory PaymentCMS-1601-P 245 Classifications (APCs), as se t forth in § 419.31 of the regula tions. We use Level I and Level II HCPCS codes to identify and group the services within each APC. The APCs are organized such that each group is hom ogeneous both clinically and in terms of resource use. Using this classification syst em, we have establishe d distinct groups of similar services. We also have develope d separate APC groups for certain medical devices, drugs, biologicals, therapeutic ra diopharmaceuticals, and brachytherapy devices. We have packaged into payment for each procedure or service within an APC group the costs associated with those items or services that are dire ctly 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. In general, according to the regul ations at § 419.2(b), packaged items and services include,

but are not limited to: (1) Use of an operating suite, pr ocedure room, or treatment room; (2) Use of recovery room; (3) Use of an observation bed; (4) Anesthesia, certain drugs, biologi cals, and other pharmaceuticals; medical and surgical supplies and equipment; surgical dressings; and devices used for external reduction of fractures and dislocations; (5) Supplies and equipment for admini stering and monitoring anesthesia or sedation; (6) Intraocular lenses (IOLs); (7) Incidental services such as venipuncture;CMS-1601-P 246 (8) Capital-related costs; (9) Implantable items used in connecti on with diagnostic X-ray tests, diagnostic laboratory tests, and ot her diagnostic tests; (10) Durable medical equipment that is implantable; (11) Implantable prosthetic devices (oth er than dental) which replace all or part of an internal body organ (including colostom y bags and supplies directly related to colostomy care), including re placement of these devices; (12) Costs incurred to procure dono r tissue other than corneal tissue. Significant revisions to the regulations at §419.2(b) are being proposed. Further discussion of our packaging proposals is include d in section II.A.3. of this proposed rule. In CY 2008, we implemented composite APCs to provide a single payment for groups of services that are ty pically performed together duri ng a single clini cal encounter and that result in the provision of a co mplete service (72 FR 66650 through 66652). Under the CY 2013 OPPS (77 FR 68243 th rough 68258), we provided composite APC payments for 10 categories of services: (1) Mental Health Services (APC 0034); (2) Cardiac Electrophysiologic Evaluation and Ablation (APC 8000); (3) Low Dose Rate (LDR) Pr ostate Brachytherapy (APC 8001); (4) Level I Extended Assessment & Management Composite (APC 8002); (5) Level II Extended Assessment & Management Composite (APC 8003); (6) Ultrasound (APC 8004); (7) CT and CTA without Contrast (APC 8005);CMS-1601-P 247 (8) CT and CTA with Contrast (APC 8006); (9) MRI and MRA without Cont rast Composite (APC 8007); and (10) MRI and MRA with Contrast Composite (APC 8008) Further discussion of composite APCs is included in section II.A.2.f. of this proposed rule. Under the OPPS, we generally pay for hospital outpatient services on a rate-per-service basis, where the service may be reported with one or more HCPCS codes. Payment varies according to the APC group to which the independent service or combination of services is assigned. Each APC relative payment we ight represents the hospital cost of the services included in that APC, relative to the hospital cost of the services included in new proposed APC 0634 (Hos pital Clinic Visits). The APC relative payment weights are scaled to new proposed APC 0634 because it is the hospital clinic visit APC and because clinic visits are among the most frequently furnished services in the hospital outpatient setting. We refer read ers to section VII. (Proposed OPPS Payment for Hospital Outpatient Visits) of this pr oposed rule for further discussion of the establishment of new proposed APC 0634. 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. Secti on 1833(t)(9)(A) of the Act also requires the Secretary to consult with an expert outside advisory panel composed of an appropriateCMS-1601-P 248 selection of representa tives of providers to review (and advise the Secretary concerning) the clinical integrity of the APC groups and the relative payment weights (the HOP Panel recommendations for specific services for th e CY 2014 OPPS and our responses to them

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

those HCPCS codes that are si gnificant based on the number of claims. We note that, for purposes of identifying significant HCPCS code s for examination in the 2 times rule, we consider codes that have more than 1,000 si ngle major claims or c odes that have bothCMS-1601-P 249 greater than 99 single major claims and contri bute 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 signifi cant 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 variati on of costs within each APC group in unusual cases, such as low-volume items and services, for CY 2014. We have identified APCs with 2 times rule violations for which we are proposing changes to their HCPCS codes’ APC assignmen ts in Addendum B to this proposed rule. We note that Addendum B does not app ear in the printed version of the Federal Register as part of the CY 2014 OPPS/ ASC proposed rule. Rather, it is published and made

available via the Internet on the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html . In these cases, to eliminate a 2 times rule violation or to improve clinical and res ource homogeneity, we are proposing to reassign

the codes to APCs that contain services that are similar with regard to both their clinical and resource characteristics. In many cas es, the proposed HCPCS code reassignments and associated APC reconfigurations for CY 2014 included in this proposed rule are related to changes in costs of services that were observed in the CY 2012 claims dataCMS-1601-P 250 newly available for CY 2014 ratesetting. We also are proposing changes to the status indicators for some codes that are not spec ifically and separately discussed in this proposed rule. In these cases, we are proposi ng 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 perspe ctive based on the po licies that we are proposing for CY 2014. In addition, we are prop osing to rename existing APCs or create new clinical APCs to complement proposed HCPCS code reassignments. Addendum B of this CY 2014 OPPS/ASC proposed rule iden tifies with a comme nt indicator “CH” those HCPCS codes for which we are proposi ng a change to the APC assignment or status indicator, or both, that were initially assigned in the April 2013 Addendum B Update (available via the Intern et on the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html ). 3. Proposed Exceptions to the 2 Times Rule As discussed earlier, we may make excep tions to the 2 times 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 2014, 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;CMS-1601-P 251

● Hospital outpatien t 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). We note that, for cases in which a recommendation by the HOP Panel appears to

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

recommendation because those recommendations are based on explicit consideration of resource use, clinical homogene ity, site of service, and the qu ality of the claims data used to determine the APC payment rates. Table 15 of this proposed ru le lists 10 APCs that we are proposing to exempt

from the 2 times rule for CY 2014 based on th e criteria cited above and based on claims data processed from January 1, 2012, through December 31, 2012. For the final rule with comment period, we plan to use claims data for dates of service between January 1, 2012, and December 31, 2012, that were processed on or before June 30, 2013, and updated CCRs, if available. Based on the CY 2012 cl aims data, we found 10 APCs with 2 times rule violations. We applied th e criteria as described earlier to identify the APCs that we are proposing as exceptions to the 2 times rule for CY 2014, and identified 10 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 rule violati on is not a relevant concept, such as APC 0375 (Ancillary Outpatient Serv ices when Patient Expires), with an APC cost set based on multiple procedure claims. Therefore, we have identified only APCs,CMS-1601-P 252 including those with cr iteria-based costs, those APCs lis ted under section II.A.2.f. of this proposed rule, with 2 times rule violations. These proposed APC exceptions are listed in

Table 15 below.

TABLE 15.—PROPOSED APC EXCEPTIONS TO THE 2 TIMES RULE FOR CY 2014

APC Description 0057 Bunion Procedures 0060 Manipulation Therapy 0075 Level V Endoscopy Upper Airway 0105 Repair/Revision/Removal of Pacemak ers, AICDs, or Vascular Devices 0148 Level I Anal/Rectal Procedures 0272 Fluoroscopy 0278 Diagnostic Urography 0330 Dental Procedures 0402 Level II Nervous System Imaging 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 th is proposed rule can be found on the CMS Web

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

. C. Proposed OPPS APC-Specific Policies 1. Intraoperative Radiation Therapy (IO RT) Related Services (APCs 0028 and 0065) HCPCS code C9726 (Placement and removal (if performed) of applicator into breast for radiation therapy) was created eff ective January 1, 2006 to describe the service of placing and removing (if performed) an applic ator into the breast fo r radiation therapy. The service was brought to our attent ion by means of a New Technology APCCMS-1601-P 253 application, and we created HCPCS code C9726 because there were no HCPCS codes

that described this service. HCPCS c ode C9726 is assigned to APC 0028, which has a CY 2013 payment rate of $1,862.77. Based on our CY 2014 proposed rule claims data, APC 0028 has a geometric mean cost of approximately $2,147, and HCPCS code C9726 has a geometric mean cost of approxi mately $2,165 based upon 8 single claims.

The AMA’s CPT Editorial Panel crea ted two new Category I CPT codes for intraoperative radiation ther apy (IORT) treatment deliver y, effective January 1, 2012: CPT codes 77424 (Intraoperative radiation tr eatment delivery, x-ray, single treatment session) and 77425 (Intraoperative radiation treatment delivery, electrons, single treatment session). For CY 2013, we finalized a policy to assign these CPT codes to APC 0065 (IORT, MRgFUS, and MEG), with a CY 2013 payment rate of $978.25

because we believed these IORT service codes were similar to services assigned to APC

0065 in terms of clinical char acteristics, and the range of estimated costs for IORT services (77 FR 68345). CPT codes 77424 and 77425 describe the placement and removal (if performed) of an applicator into the br east for radiation therapy, as we ll as the delivery of radiation therapy when performed intraoperatively, and HCPCS code C9726 is no longer required to report the placement and removal of the a pplicator. Therefore, we are proposing to delete HCPCS code C9726, effective January 1, 2014. Under this proposal, hospitals would report the costs of the service to place and remove (if performed) an applicator

into the breast for radiation therapy, as well as the deliver y of radiation therapy whenCMS-1601-P 254 performed intraoperatively, with CPT c odes 77424 and 77425, which we are proposing to maintain assignment to APC 0065. We are i nviting public comments on this proposal. 2. Proton Beam Radiation Therapy (APCs 0664 and 0667) APC 0664 (Level I Proton Beam Radiati on Therapy) includes two procedures, CPT code 77520 (Proton treatment delivery; simple, without compensation) with an estimated cost of approximately $417 (based on 217 single claims of 218 total claims submitted for CY 2012), and CPT code 77522 (Proton treatment delivery; simple, with compensation) with an estimated cost of approximately $883 (based on 10,629 single claims of 11,260 total claims submitted fo r CY 2012). APC 0667 (Level II Proton Beam Radiation Therapy) also includes two pro cedures: CPT code 77523 (Proton treatment delivery, intermediate), with an estimated cost of a pproximately $687 (based on 6,707 single claims of 7,104 total claims submitte d for CY 2012); and CPT code 77525 (Proton treatment delivery, complex), with an estimat ed cost of approximately $1,044 (based on 438 single claims of 547 tota l claims submitted for CY 2012). Based on these CY 2012 claims data, the estimated cost of APC 0664 is approximately $870, and the estimated cost of APC 0667 is approximately $705. The payment rates for proton beam radiat ion therapy services are set annually based on claims data according to the sta ndard OPPS ratesetting methodology. Based on our updated data for CY 2014, we noted a viola tion of the 2 times rule in APC 0664. As we discuss in section III.B. of this proposed rule, a 2 times violation occurs when the cost of the highest cost item or se rvice within an APC group is mo re than 2 times greater than

the cost of the lowest cost item or serv ice within that same group. In making thisCMS-1601-P 255 determination, we consider only codes that ha ve more than 1,000 single major claims or codes that have both greater than 99 single ma jor claims and contribute at least 2 percent of the single major claims used to establish th e APC cost to be significant. If neither of these claims thresholds are met, there is not a 2 times violation even if the highest cost item or service is more than 2 times greater than the cost of the lowest cost item or service in the APC. In pr ior years, even though the cost of CPT code 77522 was more than 2 times the cost of CPT code 77520, th ere was no 2 times violation in APC 0664

because the claims volume for CPT code 77520 di d not meet either of the claims volume tests discussed above (72 FR 66719; 75 FR 71901; and 77 FR 68341). However, for CY 2014, the claims volume for CPT code 77520 in creased such that there is a 2 times violation within APC 0664, with the single claims for CPT code 77520 greater than 99 and contributing 2 percent of the single clai ms used to establish the cost of APC 0664. To resolve the 2 times violation, we are proposing to reassign CPT codes 77520 and 77522 from APC 0664 to APC 0667, and to re vise the title of APC 0667 to “Proton Beam Radiation Therapy,” which would now include all proton beam radiation therapy services. We also are proposing to delete APC 0664. The estimated cost of the new APC 0667 is approximately $998, which would be the payment rate for each of the four proton beam radiation therapy services. We ar e inviting public comments on this proposal.

3. Stereotactic Radiosurgery (S RS) Services (APCs 0066 and 0067) Since 2001, we have distinguished the various methods of delivery of stereotactic radiosurgery (SRS) with HCPCS G-codes. SRS includes two different source types, specifically, Cobalt-60 and lin ear accelerator (linac). Among the linac-based SRSCMS-1601-P 256 devices, the HCPCS G-codes distinguish be tween robotic and nonrobotic (66 FR 59865). In 2007 new CPT codes were established for SRS, and at that time, we recognized one of the three new CPT codes for SRS for separa te payment under the OPPS, but we did not replace all of the HCPCS G-codes for SRS w ith the new CPT codes because we believed

that the distinctions reflec ted in the HCPCS G-codes s hould be maintained for APC assignment purposes. Specifically, in 2007 we replaced HCPCS code G0243 (Multisource photon stereotactic radiosurgery, delivery including collimator changes and custom plugging, complete course of treatment, all lesions) with CPT code 77371 because this CPT code corresponded directly to procedures for HCPCS code G0243. We

refer readers to the CY 2007 OPPS final ru le (71 FR 68023 through 68026) for a detailed discussion of the history of the SRS codes. Since 2007, HCPCS G-codes G0173, G0251, G0339, G0340, and CPT code

77371 have been the codes used in the O PPS to describe SRS treatment delivery procedures. However, SRS techniques and equipment have evolved and advanced over time. In light of these considerations, we have reexamined the HCPCS G-codes and CPT codes for SRS with the intent of identifyi ng the codes that would best capture the significant differences between the various procedures while eliminating unnecessary complexity, redundancy, and outdated distinctio ns that no longer represent meaningful distinctions, given current tec hnology and clinical practice. Based on our review of the current SRS technology, it is our understandi ng that most current linac-based SRS technology incorporates some type of robotic feature. Theref ore, we believe that it is no longer necessary to continue to distinguish robotic versus nonrobotic linac-based SRSCMS-1601-P 257 through the HCPCS G-codes. For CY 2014, we are proposing to replace the existing four SRS HCPCS G-codes G0173, G0251, G0339, and G0340, with the SRS CPT codes 77372 and 77373. We believe that utilizing all of the CPT codes for SRS (77371, 77372, and 77373) will more accurately capture the mo st significant distinctions between the various SRS procedures that are currently used today, namely: (1) Cobalt-60 versus linac; and (2) single session cranial treat ment versus fractionated treatments. Table 16 below shows the complete list of HCPCS G-codes and CPT codes for SRS, along with their long descriptors. Th e table also shows the proposed CPT codes

and their associated status indicators and APC assignments for the current HCPCS G-codes for SRS that we are proposing to repl ace. We are proposing to assign CPT code 77373 as the only code assigned to APC 0066, wh ich we are proposing to rename “Level I Stereotactic Radiosurgery.” We are propos ing to assign both of the single session cranial treatment codes (CPT codes 77371 and 77372) as the only two codes assigned to APC 0067, which we are proposing to rename “Lev el II Stereotactic Radiosurgery.” We believe that the high degree of clinical similarity of CPT codes 77371 and 77372 supports the proposed grouping of these procedures t ogether in the proposed renamed APC 0067 (Level II Stereotactic Radios urgery). The CY 2014 APC pr oposed payment rates for the

CPT codes for SRS can be found in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site). We are proposing to finalize their status indicators and their APC assignments and payment rates in the CY 2014 OPPS/ASC final rule with comment period.CMS-1601-P 258 In addition, although the SRS HCPCS G- codes will no longer be separately payable under the OPPS, the codes will remain active in the MPFS for CY 2014. Consequently, we are proposing to reassign th e HCPCS G-codes for SRS to OPPS status indicator “B” (Altern ative code may be available under the OPPS) for CY 2014.CMS-1601-P 259

TABLE 16.—PROPOSED SEPARATE LY PAYABLE STEREOTACTIC RADIOSURGERY (SRS) SERVICES FOR CY 2014

CY 2013 CPT Code Long Descriptor CY 2014 CPT Code Long Descriptor CY 2014

SI CY 2014 APC

77371 Radiation treatment delivery, stereotactic radiosurgery (SRS), complete course of treatment of cranial lesion(s) consisting of 1 session; multi-source Cobalt 60 based 77371 Radiation treatment delivery, stereotactic radiosurgery (SRS), complete course of treatment of cranial lesion(s)consisting of 1 session; multisource Cobalt 60 based S 0067

G0173 Linear accelerator based stereotactic radiosurgery, complete course of therapy in one session 77372 Radiation treatment delivery, stereotactic radiosurgery (SRS), complete course of treatment of cranial lesion(s) consisting of 1 session; linear accelerator based S 0067

G0251 Linear accelerator based stereotactic radiosurgery, delivery including collimator changes and custom plugging, fractionated treatment, all lesions, per session, maximum five sessions per course of treatment

G0339* Image-guided robotic linear accelerator-based stereotactic radiosurgery, complete course of therapy in one session or first session of fractionated treatment 77373 Stereotactic body radiation therapy, treatment delivery, per fraction to 1 or more lesions, including image guidance, entire course not to exceed 5 fractions S 0066CMS-1601-P 260

CY 2013 CPT Code Long Descriptor CY 2014 CPT Code Long Descriptor CY 2014

SI CY 2014 APC

G0340 Image-guided robotic linear accelerator-based stereotactic radiosurgery, delivery including collimator changes and custom plugging, fractionated treatment, all lesions, per session, second through fifth sessions, maximum five sessions per course of treatment *Although not reflected in the above table (in or der to avoid confusion), single session cranial cases currently billed with HCPCS code G0339 woul d be billed with CPT code 77372 beginning in CY 2014. Any other reporting of HCPCS c ode G0339 (other than single session cranial cases) would be reported beginning in CY 2014 with CPT code 77373.CMS-1601-P 261 IV. Proposed OPPS Payment for Devices A. Proposed Pass-Through Payments for Devices 1. Expiration of Transitional Pass- Through Payments for Certain Devices a. Background Section 1833(t)(6)(B)(iii) of the Act requires that, unde r the OPPS, a category of devices be eligible for transi tional pass-through payments for at least 2, but not more than 3 years. This pass-through pa yment eligibility period begins with the first date on which transitional pass-through payments may be made for any medical device that is described by the category. We may establish a new device category for pass-through payment in any quarter. Under our established policy, we base the pass-through status expiration date for a device category on the date on whic h pass-through payment is effective for the category, which is the first date on which pass-through payment may be made for any medical device that is described by such cat egory. We propose and finalize the dates for expiration of pass-through status for device ca tegories as part of the OPPS annual update. We also have an established policy to p ackage the costs of the devices that are no longer eligible for pass-through payments into the costs of the procedures with which the devices are reported in the cl aims data used to set the payment rates (67 FR 66763). Brachytherapy sources, which are now separa tely paid in accordance with section 1833(t)(2)(H) of the Act, are an ex ception to this established policy. There currently are three device categor ies eligible for pass-through payment. These device categories are described by HCPCS codes C1830 (Powered bone marrow biopsy needle) and C1840 (Lens, intraocular (telescopic)), wh ich we made effective forCMS-1601-P 262 pass-through payment as of October 1, 2011; and HCPCS code C1886 (Catheter, extravascular tissue ablation, a ny modality (insertable)), wh ich we made effective for pass-through payment as of January 1, 2012. Recognizing that these three device categories were eligible for at least 2, but not more than 3, years of pass-through status, in

the CY 2013 OPPS/ASC final rule with commen t period, we finalized the expiration of pass-through payment for all three of these HCPCS codes, which will expire after December 31, 2013 (77 FR 68352). Therefore, in accordance with our established policy, after December 31, 2013, we will pack age the respective costs of the HCPCS codes C1830, C1840, and C1886 devices into the co sts of the procedures with which the devices are reported in the hospital cl aims data used in OPPS ratesetting. b. Proposed CY 2014 Policy As previously stated, we have an estab lished policy to package the costs of the devices that are no longer eligible for pa ss-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). In the case of device category C1840, we are proposing that the device costs be packaged only when billed with CPT code 0308T (Insertion of ocular telescope prosthesis including removal of cr ystalline lens), which became effective on July 1, 2012. We announced the policy that device category C1840 must be billed with CPT code 0308T, effective July 1, 2012, in Transmittal 2483, dated June 8, 2012. CPT code 0308T is currently assigned to AP C 0234 (Level IV Anterior Segment Eye Procedures), which has a proposed geometri c mean cost of approximately $1,794. When the CPT code C1840 device costs are packaged into the cost of CPT code 0308T (and theCMS-1601-P 263 equivalent procedure described by HCPCS c ode C9732 for the first half of 2012), the proposed mean cost of the procedure is approximately $15,249. Based on this mean cost for CPT code 0308T, we are proposing to cr eate new APC 0351 (Level VII Anterior Segment Eye Procedures), and to assign CPT code 0308T to this APC, which has a proposed mean cost of approximately $15,249. The mean cost for CY 2014 that will be reported in the final rule for this new AP C will depend on the mean cost of CPT code 0308T (including the cost of HCPCS code C 1840) as calculated using claims data

available for the final rule. With the expiration of these three device categories at the en d of CY 2013, there are no currently active categor ies for which we would propos e expiration of pass-through

status in CY 2014. If we create new devi ce categories for pass-through payment status during the remainder of CY 2013 or during CY 2014, we will propose future expiration dates in accordance with the statutory require ment that they be e ligible for pass-through payments for at least 2, but not more than 3, years from the date on which pass-through payment for any medical device describe d by the category may first be made. 2. Proposed Provisions for Reducing Transitiona l Pass-through Payments to Offset Costs Packaged into APC Groups a. Background Section 1833(t)(6)(D)(ii) of the Act se ts the amount of additional pass-through payment for an eligible device as the am ount by which the hospital’s charges for a device, adjusted to cost (the cost of th e device) exceeds the portion of the otherwise applicable Medicare outpat ient department fee schedule amount (the APC paymentCMS-1601-P 264 amount) associated with the device. We ha ve an established policy to estimate the portion of each APC payment rate that could reasonably be attr ibuted to the cost of the

associated devices that ar e eligible for pass-through payments (66 FR 59904) for purposes of estimating the portion of the otherwise applicable APC payment amount associated with pass-through devices. For eligible device categories, we deduct an amount that reflects the portion of the AP C payment amount that we determine is associated with the cost of the device, defi ned as the device APC offset amount, from the charges adjusted to cost for the device, as provided by section 1833( t)(6)(D)(ii) of the Act, to determine the eligible device’s pass-through payment amount. We have consistently used an established met hodology to estimate the portion of each APC payment rate that could reasonably be attrib uted to the cost of an associated device eligible for pass-through paymen t, using claims data from the period used for the most recent recalibration of the APC rates (72 FR 66751 through 66752). We establish and update the applicable device APC offset amounts for eligible pass-through device categories through the transmittals that implement the quarterly OPPS updates. Currently, we have published a list of all procedural APCs with the CY 2013 portions (both percentages and dollar amounts) of the APC payment amounts that we

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

APC offset amounts in a related APC are used in order to evaluate whether the cost of aCMS-1601-P 265 device in an application for a new devi ce category for pass-th rough payment is not insignificant in relation to the APC payment amount for the service related to the category of devices, as specified in our regulations at § 419.66(d). Beginning in CY 2010, we include pack aged costs related to implantable biologicals in the device offset calculations in accordance with our policy that the pass-through evaluation process and paymen t methodology for implantable biologicals that are surgically inserted or implanted (thr ough a surgical incision or a natural orifice) and that are newly approved for pass -through status beginning on or after January 1, 2010, be the device pass-thr ough process and payment methodology only (74 FR 60476). b. Proposed CY 2014 Policy We are proposing to continue, fo r CY 2014, our established methodology to estimate the portion of each APC payment rate th at could reasonably be attributed to (that is, reflect) the cost of an associated device eligible for pass-through payment, using claims data from the period used for the most recent recalibration of the APC payment rates. We are proposing to continue our policy, for CY 2014, that the pass-through evaluation process and pass-through payment methodology for implantable biologicals that are surgically inserted or implanted (thr ough a surgical incision or a natural orifice) and that are newly approved for pass -through status beginning on or after January 1, 2010, be the device pass-through process and payment methodology only. The rationale for this policy is provided in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60471 through 60477). We also are proposing to continue ourCMS-1601-P 266 established policies for calcu lating and setting the device APC offset amounts for each device category eligible for pass-through payment. In addition, we are proposing to continue to review each new device categ ory on a case-by-case basis to determine

whether device costs associated with the ne w category are already packaged into the existing APC structure. If device costs p ackaged 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 de vice 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 devi ce category for pass-th rough payment is not insignificant in relation to the APC payment amount for the service related to the category of devices (§ 419.66(d)). For CY 2014, we also are proposing to continue our polic y established in

CY 2010 to include implantable biologicals in our calculation of the device APC offset amounts. In addition, we are proposing to co ntinue to calculate and set any device APC offset amount for any new device pass-thr ough category that include s a newly eligible implantable biological beginning in CY 2014 using the same methodology we have historically used to calcul ate and set device APC offset amounts for device categories eligible for pass-through paymen t, and to include the costs of implantable biologicals in

the calculation of the device APC offset amounts. In addition, we are proposing to update th e list of all procedural APCs with the final CY 2014 portions of the APC payment am ounts that we determine are associated

with the cost of devices on the CMS Web site at:CMS-1601-P 267http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html so that this information is available for use by the public in developing potential CY 2014 device pass-through payment applications and by CMS in reviewing those applications. 3. Proposed Changes to Device Pass-Through Criteria: Integral and Subordinate

Criterion We established a number of specific criter ia that new medical devices must meet

to be considered e ligible for pass-through payments under section 1833(t)(6) of the Act (42 CFR 419.66; 65 FR 18480 and 65 FR 47672 th rough 47674). In this proposed rule, we are proposing to change one of thes e criteria for device pass-through payment, described at § 419.66(b)(3), which requires that a device “is an inte gral and subordinate part of the service furnished, is used for one patient only, comes in contact with human tissue, and is surgically implanted or insert ed whether or not it remains with the patient when the patient is released from the hospital” (65 FR 47674). Regarding the existing regulation at § 419.66(b)(3), applicants for device pass-through status have continued to ask what is meant by the phrase “integral and subordinate part of the service furnished,” and more specifically, what the terms “integral” and “subordinate” mean. These te rms have not been specifically defined or described in prior regulatory language, preamble, or guidance. In an effort to reduce further confusion and ensure all applican ts understand the intent of the existing regulation, we are proposing to provide guida nce on the meaning of the term “integral”

and delete the term “subordinate” from the exis ting regulation in this proposed rule. WeCMS-1601-P 268 have interpreted the term “integral” to mean that the device is necessary to furnish or deliver the primary procedure with which it is used. For example, a pacemaker is integral to the procedure of implantation of a pacemak er. We have interpreted the accompanying term “subordinate” in conjunction with the term “integral,” in that a “subordinate” device is dependent upon the overall procedure of implanting the device, and we have not interpreted the term separatel y, or applied the term “subordina te” as a separate criterion. Because of confusion among pass-through status applicants regard ing the use of both terms “integral” and “subordinate,” and because we do not believe it is necessary that the regulation specifically state th at a device must be subordina te to the procedure, in addition to the requirement that a device be inte gral to the procedure, and have not treated “subordinate” as a separate crite rion, as previously explained, we are proposing to delete

the term “subordinate” from this criterion’s regulatory text under existing § 419.66(b)(3). The proposed revised § 419.66(b)(3) regulatory language reads: “The device is an integral part of the service fu rnished, is used for one patient only, comes in contact with human tissue, and is surgically implanted or inserted, whether or not it remains with the patient when the patient is released from the hospital.” B. Proposed Adjustment to OPPS Payment for No Cost/Full Credit and Partial Credit

Devices 1. Background To ensure equitable payment when the hospital receives a device without cost or with full credit, in CY 2007, we implem ented a policy to reduce the payment for specified device-dependent APCs by the estimated portion of the APC paymentCMS-1601-P 269 attributable to device costs (that is, the device offset) when the hospital receives a specified device at no cost or with full credit (71 FR 68071 through 68077). Hospitals are instructed to report no cost/full credit ca ses using the “FB” modifier on the line with the procedure code in which the no cost/full credit device is used. In cases in which the

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

device. We refer readers to the CY 2008 O PPS/ASC final rule with comment period for more background information on the “FB” and “FC” payment adjustment policies (72 FR 66743 through 66749). 2. Proposed Policy for CY 2014 Beginning in CY 2014, we are proposi ng to modify our existing policy of reducing OPPS payment for specified APCs when a hospital furnishes a specified device without cost or with a full or partial credit . For CY 2013 and prior years, our policy has been to reduce OPPS payment by 100 percen t of the device offset amount when aCMS-1601-P 270 hospital furnishes a specified device without cost or with a full credit and by 50 percent of the device offset amount when the hospi tal receives partial cr edit in the amount of 50 percent or more of the cost for the sp ecified device. For CY 2014, we are proposing to reduce OPPS payment, for the applicable AP Cs listed below in Tabl e 17, by the full or partial credit a provider receives for a replaced device. Specifically, under this proposed policy for CY 2014, hospitals would be required to report the amount of the credit in the amount portion for value code “FD” (Credi t Received from the Manufacturer for a Replaced Medical Device) when the hospital rece ives a credit for a replaced device listed in Table 18 that is 50 percent or greater than the cost of the device. Under this proposal, hospitals would no longer be required to append the “FB” or “FC” modifier when receiving a device at no cost or with a full or partial credit. For CY 2014, we are proposing to continue using the three criter ia established in

the CY 2007 OPPS/ASC final rule with comm ent period for determining the APCs to which our modified CY 2014 policy applies (71 FR 68072 through 68077). Specifically: (1) all procedures assigned to the selected APCs must invol ve implantable devices that would be reported if device inse rtion procedures were perfor med; (2) the required devices must be surgically inserted or implanted de vices that remain in the patient’s body after the conclusion of the procedur e (at least temporarily); and (3) the device offset amount must be significant, which, for purposes of th is policy, is defined as exceeding 40 percent of the APC cost. We also are proposing to co ntinue to restrict the devices to which the APC payment adjustment would apply to a specif ic set of costly devices to ensure that the adjustment would not be triggered by the implantation of an inexpensive deviceCMS-1601-P 271

whose cost would not constitute a significant proportion of the total payment rate for an

APC. We continue to believe these criteria are appropriate because no cost devices and device credits are likely to be associated with particular cases only when the device must be reported on the claim and is of a type th at 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 2014 proposed rule data and the clinical characteristics of the pr oposed CY 2014 APCs to determine which APCs

would meet the criteria for CY 2014. Based on the CY 2012 claims data available for this proposed rule, we are not proposing any changes to the APCs and devices to which this proposed modified policy would apply. Table 17 below lists the proposed APCs to which the proposed modified payment adjustment policy for no cost/full credit a nd partial credit devices would apply in

CY 2014. Table 18 below lists the proposed devi ces to which the proposed modified payment adjustment policy for no cost/full cr edit and partial credit devices would apply in CY 2014. We are proposing to update th e lists of APCs and devices to which the proposed modified no cost/full credit and par tial credit device adjustment policy would apply for CY 2014, consistent with the three cr iteria discussed earli er in this section,CMS-1601-P 272

based on the final CY 2012 claims data ava ilable for the CY 2014 OPPS/ASC final rule with comment period.

TABLE 17.—PROPOSED APCs TO WHICH THE PROPOSED MODIFIED NO COST/FULL CREDIT AND PARTIAL CREDIT DEVICE PAYMENT ADJUSTMENT POLICY WOULD APPLY IN CY 2014

Proposed CY 2014

APC Proposed CY 2014 APC Title 0039 Level I Implantation of Neurostimulator Generator

0040 Level I Implantation/Revision/Re placement of Neurostimulator Electrodes

0061 Level II Implantation/Revision/Replacement of Neurostimulator Electrodes 0082 Coronary or Non-Coronary Atherectomy

0083 Coronary Angioplasty, Valvulopl asty, and Level I Endovascular Revascularization 0085 Level II Electrophysiologic Procedures 0086 Level III Electrophysiologic Procedures 0089 Insertion/Replacement of Permanent Pacemaker and Electrodes 0090 Level I Insertion/Replaceme nt of Permanent Pacemaker 0104 Transcatheter Placement of Intracoronary Stents 0106 Insertion/Replacement of Pacemaker Leads and/or Electrodes 0107 Level I Implantation of Card ioverter-Defibrillators (ICDs) 0108 Level II Implantation of Card ioverter-Defibrillators (ICDs) 0227 Implantation of Drug Infusion Device 0229 Level II Endovascular Revascular ization of the Lower Extremity 0259 Level VII ENT Procedures 0293 Level VI Anterior Segment Eye Procedures 0315 Level II Implantation of Neurostimulator Generator 0318 Implantation of Neurostimulato r Pulse Generator and Electrode 0319 Level III Endovascular Revascular ization of the Lower Extremity 0385 Level I Prosthetic Urological Procedures 0386 Level II Prosthetic Urological Procedures 0425 Level II Arthroplasty or Implantation with Prosthesis 0648 Level IV Breast SurgeryCMS-1601-P 273 Proposed CY 2014

APC Proposed CY 2014 APC Title 0654 Level II Insertion/Replacement of Permanent Pacemaker

0655 Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker or Pacing 0656 Transcatheter Placement of Intracoronary Drug-Eluting Stents 0674 Prostate Cryoablation 0680 Insertion of Patient Activated Event Recorders

TABLE 18.—PROPOSED DEVICES TO WHICH THE PROPOSED MODIFIED NO COST/FULL CREDIT AND PART IAL CREDIT DEVICE PAYMENT ADJUSTMENT POLICY WOULD APPLY IN CY 2014

CY 2014 Device

HCPCS Code CY 2014 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, permCMS-1601-P 274

CY 2014 Device

HCPCS Code CY 2014 Short Descriptor 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 slingCMS-1601-P 275 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 paymen ts” for certain drugs and biol ogicals (also referred to as biologics). As enacted by the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (BBRA) (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 in cancer th erapy; and current radiopharmaceutical drugs and biologicals. “Cur rent” refers to drugs or biologicals that are outpatient hospital services under Part B for which payment was made on the first date the hospital O PPS was implemented. Transitional pass-through pa yments are also provided for certain “new” drugs and biologicals that were not being paid for as an HOPD service as of December 31, 1996 and whose cost is “not insigni ficant” in relation to the OPPS payments for the procedures

or services associated with the new dr ug or biological. For pass-through payment purposes, radiopharmaceuticals are included as “drugs.” As required by statute, transitional pass-through payments for a drug or biological described in section 1833(t)(6)(C)(i)(II) of the Ac t can be made for a period of at least 2 years, but not moreCMS-1601-P 276 than 3 years, after the payment was first made for the product as a hospital outpatient service under Medicare Part B. Proposed CY 2014 pass-through dr ugs and biologicals and their designated APCs are assigned status indicator “G” in Addenda A and B to this proposed rule, which are available vi a the Internet on the CMS Web site. Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through payment amount, in the case of a drug or biologi cal, is the amount by which the amount determined under section 1842(o) of the Act for the drug or biological exceeds the portion of the otherwise app licable Medicare OPD fee sc hedule that the Secretary determines is associated with the drug or biol ogical. If the drug or biological is covered under a competitive acquisition contract under section 1847B of the Act, the pass-through payment amount is determined by the Secretary to be equal to the average price for the drug or biological for all competitive acquis ition areas and the year established under such section as calculated and adjusted by the Secretary. However, we note that the Part B drug CAP program has been postpone d since CY 2009, and such a program has

not been reinstated for CY 2014. This methodology for determining the pa ss-through payment amount is set forth in regulations at 42 CFR 419.64. These re gulations specify that the pass-through payment equals the amount determined under section 1842(o) of the Act minus the portion of the APC payment that CMS determ ines is associated with the drug or biological. Section 1847A of the Act establishes the average sales price (ASP) methodology, which is used for payment for dr ugs and biologicals described in section 1842(o)(1)(C) of the Act furnished on or after January 1, 2005. The ASP methodology,CMS-1601-P 277 as applied under the OPPS, uses several source s 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 methodol ogy” 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/Medi care-Fee-for-Service-Part-BDrugs/McrPartBDrugAvgSalesPrice/index.html

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

. 2. Proposed Drugs and Biologicals with Expiring Pass-Through Status in CY 2013 We are proposing that the pass-through status of 15 drugs and biologicals would expire on December 31, 2013, as listed in Tabl e 19 below. All of these drugs and biologicals will have received OPPS pass-throu gh payment for at least 2 years and no more than 3 years by December 31, 2013. Thes e drugs and biologicals were approved for pass-through status on or before January 1, 2012. With the excep tion of those groups of drugs and biologicals that are always p ackaged when they do not have pass-through status, specifically diagnostic radiopharmaceu ticals, contrast agents, anesthesia drugs, and our new proposed groups of policy packaged products described in section II.A.3. of this proposed rule, namely drugs, biologica ls, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure and drugs and biologicals that function as supplies or devices when used in a surgical procedure, our standardCMS-1601-P 278 methodology for providing payment for drugs and biologicals with expiring pass-through status in an upcoming calendar year is to de termine the product’s estimated per day cost and compare it with the OPPS drug packaging th reshold for that calendar year (which is proposed at $90 for CY 2014), as discussed fu rther in section V.B.2. of this proposed rule. If the estimated per day cost for the drug or biological 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 great er than the OPPS drug packaging threshold, we would provide separa te payment at the applicable relative ASPbased payment amount (which is proposed at ASP+6 percent for CY 2014, as discussed further in section V.B.3. of this proposed rule).

TABLE 19.—PROPOSED DRUGS AND BIOLOGICALS FOR WHICH PASS-THROUGH STATUS WILL EXPIRE DECEMBER 31, 2013

Proposed CY 2014 HCPCS

Code Proposed CY 2014 Long Descriptor Proposed CY 2014 SI Proposed CY 2014

APC A9584 Iodine I-123 ioflupane, diagnostic, per study dose, up to 5 millicuries N N/A

C9285 Lidocaine 70 mg/tetracaine 70 mg, per patch N 9285 J0131 Injection, acetaminophen, 10 mg N 9283 J0485 Injection, belatacept, 1 mg K 9286 J0490 Injection, belimumab, 10 mg K 1353 J0638 Injection, canakinumab, 1mg K 1311 J0712 Injection, ceftaroline fosamil, 10 mg N 9282

J1572 Injection, immune globulin, (flebogamma/flebogamma dif), intravenous, non-lyophilized (e.g. liquid), 500 mg K 0947CMS-1601-P 279

Proposed CY 2014 HCPCS

Code Proposed CY 2014 Long Descriptor Proposed CY 2014 SI Proposed CY 2014

APC J2507 Injection, pegloticase, 1 mg K 9281 J7180 Injection, factor xiii (antihemophilic factor, human), 1 i.u K 1416 J9042 Injection, brentuximab vedotin, 1 mg K 9287 J9179 Injection, eribulin mesylate, 0.1 mg K 1426 J9228 Injection, ipilimumab, 10 mg K 9284 Q4124 Oasis Ultra Tri-Layer matrix, per square centimeter N 9365 Q4131 EpiFix, per square centimeter N 9366

3. Proposed Drugs, Biologicals, and Radi opharmaceuticals with New or Continuing Pass-Through Status in CY 2014 We are proposing to continue pass-th rough status in CY 2014 for 18 drugs and biologicals. None of these drugs and bi ologicals will have received OPPS pass-through payment for at least 2 years and no more than 3 years by December 31, 2013. These drugs and biologicals, which were ap proved for pass-through status between April 1, 2012 and July 1, 2013, are listed in Table 20 below. The APCs and HCPCS codes for these drugs and biologicals approved for pass-through status through April 1, 2013 are assigned status indicator “G” in Addenda A and B of this proposed rule. Addenda A and B of this proposed rule are 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 biologi cals (the pass-through payment amount) as the difference

between the amount authorized under section 1842(o) of th e Act and the portion of theCMS-1601-P 280 otherwise applicable OPD fee schedule that th e Secretary determines is associated with the drug or biological. Payment for drugs a nd biologicals with pass-through status under the OPPS is currently made at the physician’s office payment rate of ASP+6 percent. We

believe it is consistent with the statute to propose to continue to provide payment for drugs and biologicals with pass-through status at a rate of ASP+ 6 percent in CY 2014, the amount that drugs and biologicals rece ive under section 1 842(o) of the Act. Therefore, for CY 2014, we are propos ing to pay for pass-through drugs and biologicals at ASP+6 percent, equivalent to the rate thes e drugs and biologicals would receive in the physician’s office setting in CY 2014. We are proposing that a $0.00 pass-through payment amount would be paid for most pass-through drugs and biologicals

under the CY 2014 OPPS because the differen ce between the amount authorized under section 1842(o) of the Act, which is ASP+6 percent, and the porti on of the otherwise applicable OPD fee schedule that the Secret ary determines is appropriate, proposed at ASP+6 percent, is $0. In the case of pass-through for policy packaged drugs (which include contrast agents, diagnostic radiopharmaceuticals, anesthesia drugs, and our new proposed groups of policy packaged products described in se ction II.A.3. of this proposed rule, namely drugs, biologicals, and radiopharmaceuticals th at function as supplies when used in a diagnostic test or procedure and drugs and biol ogicals that function as supplies or devices when used in a surgical procedure), we ar e proposing that their pass-through payment amount would be equal to ASP+6 percent for CY 2014 because, if not on pass-through status, payment for these products would be packaged into the a ssociated procedure.CMS-1601-P 281 In addition, we are proposing to conti nue to update pass-thr ough payment rates on a quarterly basis on the CMS Web site duri ng CY 2014 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 2014, as is consistent with our CY 2013 policy for diagnostic and therapeutic radiopharmaceuticals, we are proposing to provide payment for both diagnostic and therapeutic radiopharmaceutical s that are granted pass-through status based on the ASP methodology. As stated a bove, for purposes of pass-through payment, we consider radiopharmaceuticals to be drugs un der the OPPS. Therefore, if a diagnostic or therapeutic radiopharmaceutical receive s pass-through status during CY 2014, we are proposing to follow the standard ASP me thodology to determine the pass-through payment rate that drugs receive under sect ion 1842(o) of the Act, which is ASP+6 percent. If ASP data are not available for a radiopharmaceutical, we are proposing to provide pass-through payment at WAC+6 percen t, the equivalent payment provided to pass-through drugs and biologi cals without ASP information. If WAC information is also not available, we are proposing to provide payment for the pass-through radiopharmaceutical at 95 percen t of its most recent AWP.

As discussed in more detail in section II.A.3. of this proposed rule, over the last 6 years, we implemented a policy where by payment for all n onpass-through diagnostic radiopharmaceuticals, contrast ag ents, and anesthesia drugs is packaged into payment forCMS-1601-P 282 the associated procedure. We are proposing to continue the packaging of these items and also are proposing new groups of policy packag ed products described in section II.A.3. of this proposed rule, namely drugs, biologica ls, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure and drugs and biologicals that function as supplies or devices when used in a surgical procedure, regardless of their per day cost, in CY 2014. As stated earlier, pa ss-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 policy packaged 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 biol ogical is utilized. The proposed calculation of the policy packag ed 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 a pplicable fee schedule amount that we would also offset from payment for the drug or biological if a paymen t offset applies) of the total OPPS payment for those drugs and biologicals would, therefore, be accounted for in the copayment for the associated clin ical APC in which the drug or biological is

used. 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 inCMS-1601-P 283 CY 2013, we are proposing to con tinue to set the associated copayment amount to zero for CY 2014 for pass-through diagnostic radi opharmaceuticals, contrast agents, and anesthesia drugs that would otherwise be p ackaged if the item di d not have pass-through status. We also are proposing to set the associated copayment amount to zero for the additional categories of policy-packaged pr oducts proposed for CY 2014 described in section II.A.3. of this proposed rule. The separate OPPS payment to a ho spital for the pass-through diagnostic radiopharmaceutical, contrast agent, anesth esia drug, and the additional categories of policy-packaged products proposed for CY 2014 is not subject to a copayment according to the statute. Therefore, we are propos ing to not publish a copa yment amount for these items in Addenda A and B to this proposed ru le (which are availabl e via the Internet on the CMS Web site). For CY 2013, we estimated the OPPS pass-through payment for drugs and biologicals to be $22 million. Our proposed OPPS pass-through payment estimate for drugs and biologicals in CY 2014 is $1 million, which is discussed in section VI.B. of this proposed rule. The 18 drugs and biologi cals that we are proposing to continue on pass-through status for CY 2014 or have been granted pass-through status as of July 2013 are displayed in Table 20 below.

TABLE 20.—PROPOSED DRUG S AND BIOLOGICALS WITH PASS-THROUGH STATUS IN CY 2014CMS-1601-P 284

*Because the payment rates associated with these codes effectiv e July 1, 2013 are no t available to us in time for incorporation into the Addenda of this pro posed rule, the Level II HCPCS codes and the Category III CPT codes implemented through the July 2013 OPPS quarterly update CR could not be included in Addendum B to this proposed rule. Proposed CY 2014 HCPCS

Code CY 2014 Long Descriptor Proposed CY 2014 SI Proposed CY 2014

APC C9130 Injection, immune globul in (Bivigam), 500 mg G 9130 C9131* Injection, ado-trastuzumab emtansine, 1 mg G 9131 C9290 Injection, bupivicaine liposome, 1 mg G 9290 C9292 Injection, pertuzumab, 10 mg G 9292 C9293 Injection, glucarpidase, 10 units G 9293 C9294 Injection, taliglucerase alfa, 10 units G 9294 C9295 Injection, carfilzomib, 1 mg G 9295 C9296 Injection, ziv-aflibercept, 1 mg G 9296 C9297 Injection, omacetaxine mepesuccinate, 0.01 mg G 9297 C9298 Injection, ocriplasmin, 0.125 mg G 9298 J0178 Injection, aflibercept, 1 mg vial G 1420 J0716 Injection, centruroides (sco rpion) immune f(ab)2, up to 120 milligrams G 1431 J7315 Mitomycin, ophthalmic, 0.2 mg G 1448 J9019 Injection, asparaginase (erwinaze), 1,000 iu G 9289 Q4122* Dermacell, per square centimeter G 1419 Q4127 Talymed, per square centimeter G 1449 Q4132 Grafix core, per square centimeter G 9368 Q4133 Grafix prime, per square centimeter G 9369CMS-1601-P 285 4. Proposed Provisions for Reducing Transiti onal Pass-Through Payments for Diagnostic Radiopharmaceuticals; Contrast Agents; Dr ugs, Biologicals, and Radiopharmaceuticals That Function as Supplies When Used in a Di agnostic Test or Procedure; and Drugs and Biologicals That Function as S upplies or Devices When Used in a Surgical Procedure to Offset Costs Packaged into APC Groups a. Background Prior to CY 2008, diagnostic radiopharmaceu ticals and contrast agents were paid separately under the OPPS if their mean per day costs were greater than the applicable year’s drug packaging threshold. In CY 2008 (72 FR 66768), we began a policy of packaging payment for all nonpass-through diag nostic radiopharmaceuticals and contrast agents as ancillary and suppor tive items and services into their associated nuclear medicine procedures. Therefore, be ginning in CY 2008, nonpass-through diagnostic radiopharmaceuticals and contra st agents were not subject to the annual OPPS drug packaging threshold to determine their packag ed or separately payable payment status, and instead all nonpass-through diagnostic radio pharmaceuticals and contrast agents were packaged as a matter of policy. For CY 2014, we are proposing to c ontinue to package payment for all nonpass-through diagnostic radi opharmaceuticals, contrast agents, and anesthesia drugs and to begin packaging all nonpass-through dr ugs, biologicals, and radiopharmaceuticals that func tion as supplies when used in a diagnostic test or procedure and drugs and biologi cals that function as supplies or devices when used in a surgical procedure, as discussed in s ection II.A.3. of this proposed rule.CMS-1601-P 286 b. Proposed Payment Offset Policy for Diagnostic Radiopharmaceuticals As previously noted, radiopharmaceuticals are considered to be drugs for OPPS pass-through payment purposes. As describe d above, section 1833(t)(6 )(D)(i) of the Act specifies that the transiti onal pass-through payment amount for pass-through drugs and biologicals is the difference between the amount paid under section 1842(o) of the Act and the otherwise applicable OPD fee sc hedule amount. There is currently one radiopharmaceutical with pass-through st atus 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 HCPC S code A9584, was granted pass-through status using HCPCS code C9406 beginning July 1, 2011, and we are proposing that its pass-through status would expire on D ecember 31, 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 radiopharmaceutic als would be paid at ASP+6 percent, while those new pass-through diagnostic ra diopharmaceuticals without ASP information would be paid at WAC+6 percent or, if WAC is not available, payment would be based on 95 percent of the product’s most recently published AWP. Because a payment offset is necessary in order to provide an appropriate transitional pass-through payment, we deduct from the pass-through payment for diagnostic radiopharmaceuticals an amount re flecting the portion of the APC payment associated with predecessor radiopharmaceuti cals in order to ensure no duplicate radiopharmaceutical payment is made. In CY 2009, we established a policy to estimateCMS-1601-P 287 the portion of each APC payment rate that coul d reasonably be attributed to the cost of predecessor diagnostic radiopharmaceuticals when considering a new diagnostic radiopharmaceutical for pa ss-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 th e following: the cost from single procedure claims in the APC after removing the cost fo r 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 po licy packaged drugs as only nonpass-through diagnostic radiopharmaceuticals and contrast agen ts, 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 biolog icals that are surgically inserted or implanted (through a surgical incision or a natural orif ice) and implantable biologicals that are surgically inserted or implan ted (through a surgical incision or a natural or ifice) with newly approved pass-through stat us beginning in CY 2010 or late r as devices, rather than drugs. To determine the actual APC o ffset amount for pass-through diagnostic radiopharmaceuticals that take s 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 a nd, accordingly, reduce the separate OPPS payment for the pass-through diagnostic radiopharmaceutical by this amount.CMS-1601-P 288 Beginning in CY 2011 and as discussed in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71934 through 719 36), we finalized a policy to require hospitals to append modifier “FB” to specified nuclear medicine procedures and to report a token charge of less than $1.01 in cases in which the diagnostic radiopharmaceutical is

received without cost or with full credit. Beginning in CY 2014, we are proposing to no longer require hospitals to append modifier “FB” to specified nuclear medicine procedures or to report a t oken charge of less than $1.01 in cases in which the diagnostic radiopharmaceutical is received at no cost/full credit. U nder this proposed policy, the OPPS payment amount for nuclear medicine pr ocedures would not be reduced when a diagnostic radiopharmaceutical is received at no co st or full credit. Based on claims data, it appears that hospitals rare ly receive diagnostic radiopharmaceuticals at no cost or full credit and, therefore, we do not believe that the burden on hospitals of adhering to the

nuclear medicine “FB” modifier policy continues to be warranted. For CY 2013, we finalized a policy to apply the diagnostic radiopharmaceutical offset policy to payment for pass-through di agnostic radiopharmaceuticals, as described above. For CY 2014, we are proposing to continue to a pply the diagnostic radiopharmaceutical offset policy to payment for pass-through diagnostic radiopharmaceuticals. Table 21 below displays the proposed APCs to which nuclear medicine procedures would be assigned in CY 2014 and for which we expect that an APC offset could be applicable in the case of di agnostic radiopharmaceuticals with pass-through

status.CMS-1601-P 289

TABLE 21.—PROPOSED APCs TO WHICH NUCLEAR MEDICINE PROCEDURES WOULD BE ASSIGNED FOR CY 2014

Proposed CY 2014

APC Proposed CY 2014 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 sp ecifies that the tr ansitional pass-through payment amount for pass-through drugs and bi ologicals is the diffe rence between the amount paid under section 1842(o) of the Ac t and the otherwise applicable OPD fee schedule amount. There currently are no contra st agents with pass- through status under

the OPPS. As described in section V.A.3. of this proposed rule, we are proposing that new pass-through contrast agents would be paid at ASP+6 percent, while those newCMS-1601-P 290 pass-through contrast agents 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 currently no contrast agents with pass-t hrough 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 2014 in order to provide an appropriate transitional pass-through payment for new contra st agents because all of these items are packaged when they do not have pass-through status. In accordance with our standard offset methodology, we are proposing for CY 2014 to deduct from the payment for new pass-through contrast agents that are approved for pass-th rough status as a drug or biological during CY 2014, an amount that re flects the portion of the APC payment associated with predecessor cont rast agents, in order to ensure no duplicate contrast agent payment is made. In CY 2010, we established a policy to es timate the portion of each APC payment rate that could reasonably be attributed to the cost of predecessor contrast agents when considering new contrast agents for pa ss-through payment (74 FR 60482 through 60484). For CY 2014, as we did in CY 2013, we are pr oposing to continue to apply this same policy to contrast agents. Specifically, we are proposing to utilize the pol icy packaged drug offset fraction for procedural APCs, calcu lated as 1 minus the following: the cost from single procedure claims in the APC af ter removing the cost for policy packaged drugs divided by the cost from single procedur e claims in the APC. To determine the actual APC offset amount for pass-through contra st agents that takes into considerationCMS-1601-P 291 the otherwise applicable O PPS payment amount, we are proposing to multiply the policy packaged drug offset fraction by the APC pa yment 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 agen t by this amount. We are proposing to continue to apply this met hodology for CY 2014 to recognize that when a contrast agent with pass-through status is billed with any procedural APC listed in Table 22 of this proposed rule, a specific offset based on th e procedural APC would be applied to the payment for the contrast agent to ensure that duplicate payment is not made for the contrast agent. 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 dr ug amount greater than $20 that is not a

nuclear medicine APC identified in Table 21 above, and these APCs are displayed in Table 22 below. The methodology used to determine a proposed threshold cost for application of a contrast agent offset po licy is described in detail in the CY 2010 OPPS/ASC final rule with comment peri od (74 FR 60483 through 60484). For CY 2014, we are proposing to continue to recognize that when a cont rast agent with pass-through status is billed with any pr ocedural APC listed in Table 22, a specific offset based on the procedural APC would be applied to the paym ent for the contrast agent to ensure that duplicate payment is not made for the contrast agent.CMS-1601-P 292

TABLE 22.—PROPOSED AP Cs TO WHICH A CONTRAST AGENT OFFSET MAY BE APPLICABLE FOR CY 2014

Proposed CY 2014

APC Proposed CY 2014 APC Title 0080 Diagnostic Cardiac Catheterization. 0082 Coronary or Non-Coronary Atherectomy. 0083 Coronary Angioplasty, Valvulopl asty, and Level I Endovascular Revascularization. 0093 Vascular Reconstruction/Fist ula Repair without Device. 0104 Transcathether Placement of Intracoronary Stents. 0152 Level I Percutaneous Abdomi nal and Biliary Procedures. 0177 Level I Echocardiogram With Contrast. 0178 Level II Echocardiogram With Contrast. 0229 Level II Endovascular Revascular ization of the Lower Extremity. 0278 Diagnostic Urography. 0279 Level II Angiography and Venography. 0280 Level III Angiography and Venography. 0283 Computed Tomography with Contrast. 0284 Magnetic Resonance Imaging and Magnetic Resonance Angiography with Contrast. 0333 Computed Tomography without Contrast followed by Contrast. 0334 Combined Abdomen and Pelvis CT with Contrast. 0337 Magnetic Resonance Imaging and Magnetic Resonance Angiography without Contrast followed by Contrast. 0375 Ancillary Outpatient Services When Patient Expires. 0383 Cardiac Computed Tomographic Imaging. 0388 Discography. 0442 Dosimetric Drug Administration. 0653 Vascular Reconstruction/Fi stula Repair with Device. 0656 Transcatheter Placement of Intracoronary Drug-Eluting Stents. 0662 CT Angiography. 0668 Level I Angiography and Venography. 8006 CT and CTA with Contrast Composite. 8008 MRI and MRA with Contrast Composite.CMS-1601-P 293 d. Proposed Payment Offset Policy for Produc ts Packaged According to the Proposed Policy to Package Drugs, Biologicals, and Radiopharmaceuticals That Function as Supplies When Used in a Diagnostic Test or Procedure and Drugs and Biologicals That Function as Supplies or Devices When Used in a Surgical Procedure Section 1833(t)(6)(D)(i) of the Act sp ecifies that the tr ansitional pass-through payment amount for pass-through drugs and bi ologicals is the diffe rence between the amount paid under section 1842(o) of the Ac t and the otherwise applicable OPD fee

schedule amount. As discussed in section II.A.3. of this propos ed rule, as a part of our proposed policy to package drugs, biologicals , and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure and drugs and biologicals that function as supplies or devices when used in a surgical procedure, we are specifically proposing that skin substitutes and stress agen ts used in myocardial perfusion imaging (MPI) be policy packaged in CY 2014, in addition to diagnostic radiopharmaceuticals, contrast agents, and anesthesia drugs. We believe that a payment offset, similar to the offset currently in place for pass-through devices, diagnostic radiopharmaceuticals, and contrast agents, is necessary in order to pr ovide an appropriate transitional pass-through payment for drugs, biologicals, and radiopha rmaceuticals that function as supplies when used in a diagnostic test or procedure and drugs and biologica ls that function as supplies or devices when used in a surgical proce dure because all of these are packaged, or proposed to be packaged, when they do not ha ve pass-through status. In accordance with our standard offset methodology, we are pr oposing for CY 2014 to deduct from the payment for pass-through drugs , biologicals, and radiopharma ceuticals that function asCMS-1601-P 294 supplies when used in a diagnostic test or procedure and drugs and biologicals that function as supplies or devices when used in a surgical procedure an amount that reflects the portion of the APC payment associated w ith predecessor products in order to ensure no duplicate payment is made. In CY 2009, we established a policy to estimate the portion of each APC payment rate that could reasonably be attribut ed to the cost of predecessor diagnostic radiopharmaceuticals when considering a new diagnostic radiopharmaceutical for pass-through payment (73 FR 68638 through 68641). For CY 2014, we are proposing to apply this same policy to drugs, biological s, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure and drugs and biologicals that function as supplies or devices when used in a surgical procedure. Specifically, in the case of pass-through skin substi tutes, we are proposing to utilize the policy packaged drug offset fraction for skin substitute pr ocedural APCs, calculated as 1 minus the following: the cost from single procedure cl aims in the APC after removing the cost for policy packaged drugs divided by the cost fr om single procedure claims in the APC. Because policy packaged radiopharmaceuticals also would be included in the drug offset fraction for the APC to which MPI procedures are assigned, in the case of pass-through stress agents, we are proposing to utilize th e policy packaged drug offset fraction for the procedural APC, calculated as 1 minus the fo llowing: the cost from single procedure claims in the APC after removing the cost for policy packaged drugs excluding policy packaged diagnostic radiopharmaceuticals divided by the cost from single procedure

claims in the APC. To determine the act ual APC offset amount for pass-through skinCMS-1601-P 295 substitutes and pass-th rough stress agents that takes in to consideration the otherwise applicable OPPS payment amount, we are pr oposing to multiply the policy-packaged drug offset fraction by the APC payment am ount for the procedure with which the pass-through skin substitute or pass-through stress agent is used and, accordingly, reduce the separate OPPS payment for the pass-thr ough skin substitute or pass-through stress agent by this amount. Table 23 below displays the proposed APCs to which skin substitute procedures would be assigned in CY 2014 and for which we expect that an APC offset could be applicable in the case of skin s ubstitutes with pass-through status. Table 24 below displays the proposed AP C to which MPI procedures would be assigned in CY 2014 and for which we expect th at an APC offset could be applicable in the case of a stress agent with pass-through status. We are proposing to continue to post annually on the CMS Web site athttp://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html a file that contains the APC offset amounts that will be used for that year for purpos es of both evaluating cost significance for candidate pass-through device categories and drugs and biologicals and establishing any appropriate APC offset amounts. Specifically, the file will continue to provide the amounts and percentages of APC payment associ ated with packaged implantable devices, policy packaged drugs, and threshold packaged drugs and biologicals for every OPPS

clinical APC.

TABLE 23.—PROPOSED APCs TO WHICH SKIN SUBSTITUTE PROCEDURES WOULD BE ASSIGNED FOR CY 2014CMS-1601-P 296

Proposed CY 2014

APC Proposed CY 2014 APC Title 0135 Level III Skin Repair 0136 Level IV Skin Repair

TABLE 24.—PROPOSED APCs TO WHICH MPI PROCEDURES WOULD BE ASSIGNED FOR CY 2014

Proposed CY 2014

APC Proposed CY 2014 APC Title 0100 Cardiac Stress Tests 0377 Level II Cardiac Imaging.

B. Proposed OPPS Payment for Drugs, Bi ologicals, and Radiopha rmaceuticals without Pass-Through Status 1. Background Under the CY 2013 OPPS, we currently pay for drugs, biologicals, and radiopharmaceuticals that do not have pass-thro ugh status in one of two ways: as a packaged payment included in the payment for the associated service, or as a separate payment (individual APCs). We explained in the April 7, 2000 OPPS final rule with comment period (65 FR 18450) that we generally package the cost of drugs and radiopharmaceuticals into the APC payment ra te for the procedure or treatment with which the products are usually furnished. Ho spitals do not receive separate payment for packaged items and supplies, and hospitals ma y not bill beneficiaries separately for any packaged items and supplies whose costs are recognized and paid within the national OPPS payment rate for the associated pro cedure or service. (Transmittal A-01-133,CMS-1601-P 297 issued on November 20, 2001, explains in gr eater 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, pack aging the costs of items and services into the payment for the primary procedur e or service with which they are associated encourages hospital efficiencies and also enables hospita ls to manage their resources with maximum flexibility. 2. Proposed Criteria for Packaging Payment for Drugs, Biologicals, and Radiopharmaceuticals a. Background

As indicated in section V.B.1. of this proposed rule, in accordance with section 1833(t)(16)(B) of the Act, the threshold for establishing sepa rate 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 aver age Producer Price Inde x (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 quart er of CY 2007. We then rounde d the resulting dollar amount to the nearest $5 increment in order to de termine the CY 2007 threshold amount of $55. Using the same methodology as that used in CY 2007 (which is discussed in more detail in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68085 through 68086)), we set the packaging threshold for establishing se parate APCs for drugs andCMS-1601-P 298 biologicals at $60 for CYs 2008 and 2009. For CY 2010, we set the p ackaging threshold at $65; for CY 2011, we set the packaging threshold at $70; for CY 2012, we set the packaging threshold at $75; and for CY 2013, we set the packagi ng threshold at $80. Following the CY 2007 methodology, for this CY 2014 OPPS/ASC proposed rule, we used the most recently available four quarter moving average PPI levels to trend the $50 threshold forward from the third qua rter of CY 2005 to th e third quarter of CY 2014 and rounded the resulting dollar amount ($87.70) to the nearest $5 increment, which yielded a figure of $90. In performing this calculation, we used the most recent forecast of the quarterly index levels fo r the PPI for Pharmaceuticals for Human Use (Prescription) (Bureau of Labor Statistics (BLS) series code WPUSI07003) from CMS’ Office of the Actuary (OACT). (We note that we are not proposing a change to the PPI

that is used to calculate th e threshold for CY 2014; 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 the PPI for Prescription Drugs as it reflects price changes associated with the average mix of a ll 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 pa st quarters replaced forecasted amounts, the PPI estimates for prior quarters have been revised (compared with those used in the CY 2007 OPPS/ASC final rule with comment pe riod) and have been incorporated intoCMS-1601-P 299

our calculation. Based on the calculati ons described above, we are proposing a packaging threshold for CY 2014 of $90. (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, Certain Biol ogicals, and Therapeutic Radiopharmaceuticals (“ThresholdPackaged Drugs”) To determine the proposed CY 2014 p ackaging status fo r all nonpass-through drugs and biologicals that are not policy packag ed for this proposed rule, we calculated, on a HCPCS code-specific basis, the per day cost of all dr ugs, biologicals, and therapeutic radiopharmaceuticals (collectivel y called “threshold-packaged” drugs) that had a HCPCS code in CY 2012 and were paid (via packaged or separate payment) under

the OPPS. We used data from CY 2012 clai ms processed before January 1, 2013 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 dia gnostic radiopharmaceuticals, contrast agents, anesthesia drugs, and implantable biologicals that we are proposing to continue to package in CY 2014, or for the new categorie s of policy-packaged products proposed for CY 2014, as discussed in section II.A.3. of this proposed rule. In order to calculate the per day cost s for drugs, biologicals, and therapeutic radiopharmaceuticals to determ ine their proposed packaging status in CY 2014, we usedCMS-1601-P 300 the methodology that was described in de tail in the CY 2006 OPPS proposed rule (70 FR 42723 through 42724) and finalized in the CY 2006 OPPS final rule with comment period (70 FR 68636 through 70 FR 68638). For each drug and biological HCPCS code, we used an estimated paymen t rate of ASP+6 per cent (which is the payment rate we are proposing for separate ly payable drugs and biologicals for CY 2014,

as discussed in more detail in section V.B .3.b. of this proposed ru le) to calculate the CY 2014 proposed rule per day costs. We used the manufacturer submitted ASP data from the fourth quarter of CY 2012 (data th at were used for payment purposes in the physician’s office setting, effective April 1, 2013) to determine the proposed rule per day

cost. As is our standard methodology, for CY 2014, we are proposing to use payment

rates based on the ASP data from the fourth quarter of CY 2012 for budget neutrality estimates, packaging determinations, impact analyses, and completion of Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site)

because these are the most recent data availabl e for use at the time of development of this proposed rule. These data also were the basi s for drug payments in the physician’s office setting, effective April 1, 2013. 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 2012 hospital claims data to determine their per day cost. We are proposing to package items with a per day cost less than or equal to $90, and identify items with a per day cost greater than $90 as separately payable. Consistent with our past practice, we crosswalked hi storical OPPS claims data from the CY 2012CMS-1601-P 301 HCPCS codes that were repor ted to the CY 2013 HCPCS codes that we display in Addendum B of this proposed rule (which is available via the Inte rnet on the CMS Web site) for payment in CY 2014. Our policy during previous cycles of the OPPS has been to use updated ASP and

claims data to make final determinations of the packaging status of HCPCS codes for drugs, biologicals, and therapeutic radi opharmaceuticals for the OPPS/ASC final rule with comment period. We note that it is also our policy to make an annual packaging determination for a HCPCS code only when we develop the OPPS/AS C final rule with comment period for the update year. Only HCPC S codes that are identified as separately payable in the final rule with comment period will be subject to quarterly updates. For our calculation of per day costs of HCPC S codes for drugs and biologicals in the

CY 2014 OPPS/ASC final rule with comment period, we are proposing to use ASP data from the first quarter of CY 2013, 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, 2013, along with updated hospita l claims data from CY 2012. We note that we also are proposing to use these data for budget neutrality estimates and impact analyses for the CY 2014 OPPS/ASC final rule with comment period. Payment rates for HCPCS codes for sepa rately payable drugs and biologicals

included in Addenda A and B to the final ru le with comment period will be based on ASP data from the second quarter of CY 2013. Th ese data will be the basis for calculating payment rates for drugs and biologicals in the physician’s office setting using the ASP methodology, effective October 1, 2013. Thes e physician’s office payment rates wouldCMS-1601-P 302 then be updated in the January 2014 OPPS update , based on the most recent ASP data to be used for physician’s office and OPPS payment as of January 1, 2014. 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 2012 clai ms data and updated cost report information

available for the CY 2014 final rule with comm ent period to determine their final per day

cost. Consequently, the packaging status of some HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals in th is CY 2014 OPPS/ASC proposed rule may be different from the same drug HCPCS code’s packaging status determined based on the

data used for the CY 2014 OPPS/ASC 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 2014 OPPS drug packaging threshold and the drug’s payment status (pack aged or separately payable) in CY 2013. Specifically, for CY 2014, consistent with our historical practice, we are proposing to apply the following policies to these HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals whose relationship to th e drug packaging threshold changes based on the updated drug packaging threshol d and on the final updated data:

● HCPCS codes for drugs and biologicals that were paid separately in CY 2013 and that are proposed for separate payment in CY 2014, and that then have per day costs equal to or less than the CY 2014 final ru le drug packaging threshold, based on theCMS-1601-P 303 updated ASPs and hospital claims data used fo r the CY 2014 final rule, would continue to receive separate payment in CY 2014.

● HCPCS codes for drugs and biologicals that were packaged in CY 2013 and that are proposed for separate payment in CY 2014, and that then have per day costs equal to or less than the CY 2014 final ru le drug packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2014 final rule, would remain packaged in CY 2014.

● HCPCS codes for drugs and biological s for which we are proposing packaged payment in CY 2014 but then have per day co sts greater than the CY 2014 final rule drug packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2014 final rule, would receiv e separate payment in CY 2014. 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 pur poses, multiple HCPCS codes reporting different dosages for the same covered Part B drugs or biologicals in order to reduce hospitals’ administrative burden by permitting them to report all HCPCS codes for drugs and biologicals. In genera l, prior to CY 2008, the OPPS recognized for payment only the HCPCS code that described the lowest dosage of a drug or biological. We extended this recognition to multiple HCPCS codes for se veral other drugs under the CY 2009 OPPS (73 FR 68665). During CYs 2008 and 2009, we app lied a policy that as signed the status indicator of the previ ously recognized HCPCS code to the associated newly recognizedCMS-1601-P 304 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 resu lting status indicator for each HCPCS code according to the general, established HCPC S 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 dr ug or biological did not create inappropriate payment incentives for hospitals to repor t 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 cl aims data for the HCPCS codes describing different dosages of the same drug or biol ogical that were newl y 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 concer n that these data reflected claims from only a small number of hospitals, even though the drug or biolog ical 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 recogni zed HCPCS codes, we believed that adoptingCMS-1601-P 305 our standard HCPCS code-specific packaging determinations for these codes could lead to payment incentives for hospitals to repor t certain HCPCS codes instead of others, particularly because we do not currently require hospitals to report al l 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 2014, we continue to believ e that adopting the standard HCPCS code-specific packaging determin ations for these codes could lead to payment incentives for hospitals to report certain HCPCS code s for drugs instead of others. Making packaging determinations on a drug-specific ba sis eliminates these incentives and allows hospitals flexibility in choosing to report a ll 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 determ inations 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 2014. For CY 2014, in order to propose a packag ing determination that is consistent

across all HCPCS codes that describe different dosages of the same drug or biological, we aggregated both our CY 2012 claims data and our pricing information at ASP+6 percent across all of the HCPCS codes that de scribe each distinct drug or biological in order to determine the mean units per day of the drug or biological in terms of the HCPCS code with the lowest dosage descri ptor. We then multiplied the weighted average ASP+6 percent per unit payment amoun t across all dosage levels of a specificCMS-1601-P 306 drug or biological by the estimated units per da y for all HCPCS codes that describe each drug or biological from our claims data to de termine the estimated per day cost of each drug or biological at less than or equal to $90 (so that all HCPCS codes for the same drug or biological would be packaged) or greater than $90 (so that all HCPCS codes for the same drug or biological would be separately payable). Th e following drugs did not have pricing information available for the ASP methodology for th is CY 2014 OPPS/ASC proposed rule and, as is our current policy fo r determining the packaging status of other drugs, we used the mean unit cost available from the fourth quarter CY 2012 claims data to make the packaging determinations for these drugs: HCPCS codes J3471 (Injection, hyaluronidase, ovine, preservative free, pe r 1 usp unit (up to 999 usp units)); J3472 (Injection, hyaluronidase, ovine, preser vative 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 do sage regimen); Q0172 (Chlorpromazine hydrochloride, 25 mg, oral, FDA approved prescr iption 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 (P erphenazine, 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 prescr iption 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, FDACMS-1601-P 307 approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy tr eatment, 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). The proposed packaging status of each drug and biologi cal HCPCS code to which this methodology would apply is displaye d in Table 25 below.

TABLE 25.—PROPOSED HCPCS CODE S TO WHICH THE CY 2014 DRUGSPECIFIC PACKAGING DETERMINATION METHODOLOGY WOULD APPLY

Proposed CY 2014 HCPCS

Code Proposed CY 2014 Long Descriptor Proposed CY 2014 SI C9257 Injection, bevacizumab, 0.25 mg K J9035 Injection, bevacizumab, 10 mg K J1020 Injection, methylprednisolone acetate, 20 mg N J1030 Injection, methylprednisolone acetate, 40 mg N J1040 Injection, methylprednisolone acetate, 80 mg N J1070 Injection, testosterone cypionate, up to 100 mg N J1080 Injection, testosterone cypionate, 1 cc, 200 mg N J1440 Injection, filgrastim (g-csf), 300 mcg K J1441 Injection, filgrastim (g-csf), 480 mcg K J1460 Injection, gamma globulin, intramuscular, 1 cc N J1560 Injection, gamma globuli n, intramuscular over 10 cc N J1642 Injection, heparin sodium, (hep arin lock flush), per 10 units N J1644 Injection, heparin sodium, per 1000 units N J1850 Injection, kanamycin sulfate, up to 75 mg N J1840 Injection, kanamycin su lfate, up to 500 mg N J2270 Injection, morphine su lfate, up to 10 mg N J2271 Injection, morphine sulfate, 100mg N J2788 Injection, rho d immune gl obulin, human, minidose, 50 micrograms (250 i.u.) K J2790 Injection, rho d immune globulin, human, full dose, 300 KCMS-1601-P 308 Proposed CY 2014 HCPCS

Code Proposed CY 2014 Long Descriptor Proposed CY 2014 SI micrograms (1500 i.u.) J2920 Injection, methylprednisolone sodium succinate, up to 40 mg N J2930 Injection, methylprednisolone sodium succinate, up to 125 mg N J3120 Injection, testosterone enanthate, up to 100 mg N J3130 Injection, testosterone enanthate, up to 200 mg N J3471 Injection, hyaluronidase, ovine, preservative free, per 1 usp unit (up to 999 usp units) N

J3472 Injection, hyaluronidase, ovine, preservative free, per 1000 usp units N J7050 Infusion, normal saline solution , 250 cc N J7040 Infusion, normal saline solution, sterile (500 ml=1 unit) N J7030 Infusion, normal saline solution , 1000 cc N J7515 Cyclosporine, oral, 25 mg N J7502 Cyclosporine, oral, 100 mg N J8520 Capecitabine, oral, 150 mg K J8521 Capecitabine, oral, 500 mg K J9250 Methotrexate sodium, 5 mg N J9260 Methotrexate sodium, 50 mg N

Q0164 Prochlorperazine maleate, 5 mg, oral, FDA approved prescription anti-emetic, for us e as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

Q0165 Prochlorperazine maleate, 10 mg, oral, FDA approved prescription anti-emetic, for us e as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

Q0167 Dronabinol, 2.5 mg, oral, FDA approved prescription antiemetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

Q0168 Dronabinol, 5 mg, oral, FDA approved prescription antiemetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

Q0169 Promethazine hydrochloride, 12.5 mg, oral, FDA approved prescription anti-emetic, for us e as a complete therapeutic substitute for an IV antieme tic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen NCMS-1601-P 309 Proposed CY 2014 HCPCS

Code Proposed CY 2014 Long Descriptor Proposed CY 2014 SI

Q0170 Promethazine hydrochloride, 25 mg, oral, FDA approved prescription anti-emetic, for us e as a complete therapeutic substitute for an IV antieme tic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

Q0171 Chlorpromazine hydrochloride, 10 mg, oral, FDA approved prescription antiemetic, for use as a complete therapeutic substitute for an IV antieme tic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

Q0172 Chlorpromazine hydrochloride, 25 mg, oral, FDA approved prescription anti-emetic, for us e as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

Q0175 Perphenazine, 4 mg, oral, F DA approved prescription antiemetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

Q0176 Perphenazine, 8 mg, oral, F DA approved prescription antiemetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

Q0177 Hydroxyzine pamoate, 25 mg, oral, FDA approved prescription anti-emetic, for us e as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

Q0178 Hydroxyzine pamoate, 50 mg, oral, FDA approved prescription anti-emetic, for us e as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen NCMS-1601-P 310 3. Proposed Payment for Drugs and Biologica ls without Pass-Through Status That Are Not Packaged a. Proposed Payment for Specified Cove red Outpatient Drugs (SCODs) and Other Separately Payable and Packaged Drugs and Biologicals Section 1833(t)(14) of the Act de fines certain separately payable radiopharmaceuticals, drugs, and biologicals and mandates specific payments for these items. Under section 1833(t)(14 )(B)(i) of the Act, a “specified covered outpatient drug” (known as a SCOD) is defined as a covere d 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 include d in the definition of SCODs. These exceptions are—

● A drug or biological for which payment is first made on or after January 1, 2003, under the transitional pass-through payment provision in section 1833(t)(6) of the Act.

● A drug or biological for which a temporary HCPCS code has not been assigned.

● During CYs 2004 and 2005, an orphan drug (as designated by the Secretary). Section 1833(t)(14)(A)(iii) of the Ac t requires that payment for SCODs in CY 2006 and subsequent years be equal to th e average acquisition cost for the drug forCMS-1601-P 311 that year as determined by the Secretary, su bject to any adjustment for overhead costs and taking into account the hospital acquis ition cost survey data collected by the Government Accountability Office (GAO) in CYs 2004 and 2005, and later periodic surveys conducted by the Secretary as set forth in the statute. If hospital acquisition cost data are not available, the law requires that payment be equal to payment rates established under the methodology described in section 1842(o), section 1847A, or section 1847B of the Act, as calculated and adjusted by the Secretary as necessary. Most physician Part B drugs are paid at ASP+6 pe rcent pursuant to sec tion 1842(o) and section

1847A of the Act. Section 1833(t)(14)(E)(ii) of the Act provides for an adjustment in OPPS payment

rates for SCODs to take into account overh ead and related expenses, such as pharmacy services and handling costs. Section 1833(t) (14)(E)(i) of the Act required MedPAC to study pharmacy overhead and related expenses and to make recommendations to the Secretary regarding whether, and if so how , a payment adjustment should be made to compensate hospitals for overhead and relate d expenses. Section 1833(t)(14)(E)(ii) of the Act authorizes the Secretary to adju st the weights for am bulatory procedure

classifications for SCODs to take into account the fi ndings of the MedPAC study. It has been our longstanding policy to a pply the same treatment to all separately payable drugs and biologicals, which include SCODs, and drugs and biologicals that are not SCODs. Therefore, we apply the paymen t methodology in section 1833(t)(14)(A)(iii) of the Act to SCODs, as required by statute, but we also apply it to separately payable drugs and biologicals that are not SCODs, whic h is a policy determination rather than aCMS-1601-P 312 statutory requirement. In this CY 2014 OPPS/ASC proposed rule, we are proposing to apply section 1833(t)(14)(A)(iii )(II) of the Act to all separately payable drugs and biologicals, including SCODs. Although we do not distinguish SCODs in this discussion, we note that we are required to apply section 1833( t)(14)(A)(iii)(II ) of the Act to SCODs, but we also are applying this provi sion to other separately payable drugs and biologicals, consistent with our history of using the same payment methodology for all separately payable drugs and biologicals. Since CY 2006, we have attempted to establish a drug payment methodology that reflects hospitals’ acquisition costs for drugs and biologicals while ta king into account relevant pharmacy overhead and related hand ling expenses. We have attempted to collect more data on hospital overhead ch arges for drugs and biologicals by making several proposals that would re quire hospitals to change the way they report the cost and charges for drugs. None of these proposals we re adopted due to si gnificant stakeholder concern, including that hospitals stated that it would be administratively burdensome to report hospital overhead charges. We esta blished a payment policy for separately payable drugs and biologicals, authorized by section 1833(t)(14)(A)( iii)(I) of the Act,

based on an ASP+X amount that is calculate d by comparing the estimated aggregate cost of separately payable drugs and biologicals in our claims data to the estimated aggregate ASP dollars for separately payable drugs a nd biologicals, using the ASP as a proxy for average acquisition cost (70 FR 68642). We referred to this methodology as our standard drug payment methodology.CMS-1601-P 313 In CY 2010, taking into considerat ion comments made by the pharmacy stakeholders and acknowledging the limitations of the reported da ta due to charge compression and hospitals’ reporting practices , we added an “overhead adjustment” (an internal adjustment of the data) by redistributing cost fr om coded and uncoded packaged drugs and biologicals to separately payable drugs in order to provi de more appropriate payments for drugs and biologicals in th e HOPD. We continued this overhead adjustment methodology through CY 2012, and fu rther refined our overhead adjustment methodology by finalizing a policy to update th e redistribution amount for inflation and to keep the redistribution ratio constant betw een the proposed rule and the final rule. For a detailed discussion of our OPPS drug paym ent policies from CY 2006 to CY 2012, we

refer readers to the CY 2013 OPPS/ASC fina l rule with comment period (77 FR 68383 through 68385).

We noted in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68386) that application of the st andard drug payment methodology, with the overhead adjustment, has always yielded a fina lized payment rate in the range of ASP+4 percent to ASP+6 percent for nonpass-through sepa rately payable drugs. We stated that the historic ASP+4 to ASP+6 percentage ra nge is an appropriate payment rate for separately payable drugs and biologicals administered within the HOPD, including acquisition and pharmacy overhead and rela ted expenses. However, because of continuing uncertainty about the full cost of pharmacy overhead and acquisition cost, based in large part on the limita tions of the submitted hospital charge and claims data for drugs, we indicated our concern that the c ontinued use of the standard drug paymentCMS-1601-P 314 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, accura te, or appropriate as they could be.

In that final rule with comment period, we discussed that 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 adjust ment 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 adju sted by the Secretary as necessary. In the

CY 2013 OPPS/ASC final rule with comment period (77 FR 68386), we noted that section 1833(t)(14)(A)(iii)(II) of the Act authorizes the Secretary to calculate and adjust, as necessary, the average price for a drug in the year established under section 1842(o), 1847A, or 1847B of the Act, as the case may be, in determining payment for SCODs. Pursuant to sections 1842(o) and 1847A of the Act, Part B drugs are paid at ASP+6 percent when furnished in physicians’ offices . We indicated that we believe that establishing the payment rates based on the statutory default of ASP+6 percent is appropriate as it yields increased predictabil ity in payment for separately payable drugs and biologicals under the OPPS. We also noted that ASP+6 percent is an appropriate payment amount because it is consistent wi th payment amounts yielded by our drug payment methodologies over the past 7 years. Therefore, consider ing stakeholder and provider feedback, continued limitations of the hospital claims and cost data on drugs and biologicals, and Panel recommendations, in the CY 2013 OPPS/ASC final rule withCMS-1601-P 315 comment period (77 FR 68389), we finalized our proposal for CY 2013 to pay for separately payable drugs and biologi cals at ASP+6 percent based on section 1833(t)(14)(A)(iii)(II) of the Act, referred to as the statutory default. We also finalized our proposal that the ASP+6 percent paymen t amount for separately payable drugs and biologicals requires no further adjustment, a nd represents the combined acquisition and pharmacy overhead payment for drugs and biologicals and 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 ne utral weight scaler is not applied in determining payments for th ese separately paid drugs and biological for CY 2013 (77 FR 68389). b. Proposed CY 2014 Payment Policy For CY 2014, we are proposing to c ontinue our CY 2013 policy and pay for separately payable drugs and biologi cals at ASP+6 percent based on section 1833(t)(14)(A)(iii)(II) of the Act, referred to as the statutor y default. We are proposing that the ASP+6 percent payment amount for separately payable drugs and biologicals requires no further adjustment, and represen ts the combined acquisition and pharmacy overhead payment for drugs and biologicals. We also are proposing that payments for separately payable drugs and biological s are included in the budget neutrality adjustments, under the requirements in secti on 1833(t)(9)(B) of the Act, and that the budget neutral weight scaler is not applied in determining payments for these separately paid drugs and biologicals.CMS-1601-P 316 4. Proposed Payment Policy for Therapeutic Radiopharmaceuticals Beginning in CY 2010 and continuing fo r CY 2013, we established a policy to pay for separately paid therapeutic radiopharmaceuticals under the ASP methodology adopted for separately payable drugs and biol ogicals. If ASP information is unavailable for a therapeutic radiopharmaceutical, we ba se therapeutic radiopharmaceutical payment on mean unit cost data derived from hospita l claims. We believe that the rationale

outlined in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60524 through 60525) for applying the principles of separately payable drug pricing to therapeutic radiopharmaceuticals continue s to be appropriate for nonpass-through separately payable therapeutic radiopharm aceuticals in CY 2014. Therefore, we are proposing for CY 2014 to pay all nonpass-th rough, separately pa yable therapeutic radiopharmaceuticals at ASP+6 percent, base d on the statutory default described in section 1833(t)(14)(A)(iii)(II) of the Act. For a full discussion of ASP-based payment for therapeutic radiopharmaceuticals, we refer r eaders to the CY 2010 OPPS/ASC final rule with comment period (74 FR 60520 through 60521) . We also are proposing to rely on

CY 2012 mean unit cost data derived from hos pital claims data for payment rates for therapeutic radiopharmaceuticals for which A SP data are unavailable and to update the payment rates for separately payable therap eutic radiopharmaceuticals, according to our usual process for updating the payment rates for separately payable dr ugs and biologicals, on a quarterly basis if updated ASP information is available. For a complete history of the OPPS payment policy for therapeutic radi opharmaceuticals, we refer readers to the CY 2005 OPPS final rule with comment pe riod (69 FR 65811), the CY 2006 OPPS finalCMS-1601-P 317 rule with comment period (70 FR 68655), and the CY 2010 OPPS/AS C final rule with comment period (74 FR 60524). The proposed CY 2014 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 In ternet on the CMS Web site). 5. Proposed Payment for Blood Clotting Factors For CY 2013, we provided payment fo r blood clotting factors under the same methodology as other nonpass-th rough separately payable dr ugs and biologicals under the OPPS and continued paying an updated fu rnishing fee. That is, for CY 2013, we provided payment for blood clotting factors unde r the OPPS at ASP+6 percent, plus an additional payment for the furnishing fee. We note that when blood clotting factors are provided in physicians’ offices under Medicare Part B and in other Medicare settings, a furnishing fee is also applied to the paym ent. The CY 2013 updated furnishing fee was $0.188 per unit. For CY 2014, we are proposing to pay for blood clotting factors at ASP+6 percent, consistent with our propos ed payment policy fo r other nonpass-through separately payable drugs and biologicals, a nd to continue our policy for payment of the furnishing fee using an updated amount. Our policy to pay for a furnishing fee for blood clotting factors under the O PPS is consistent with the methodology applied in the physician office and inpatient hospital setting, and first articulated in the CY 2006 OPPS final rule with comment period (70 FR 68661) and later discu ssed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765). The proposed furnishing feeCMS-1601-P 318 update is based on the percentage increase in the Consumer Price Index (CPI) for medical care for the 12-month period ending with June of the previous year. Because the Bureau

of Labor Statistics releas es the applicable CPI 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 acco rdance with our policy, as finalized in the

CY 2008 OPPS/ASC final rule with comment period (72 FR 66765), we are proposing to announce the actual figure for th e percent change in the ap plicable CPI and the updated furnishing fee calculated based on that figur e through applicable pr ogram instructions and posting on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-forService-Part-B-Drugs/McrPart BDrugAvgSalesPrice/index.html

. 6. Proposed Payment for Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals with HCPCS Codes but without OPPS Hospital Claims Data The Medicare Prescription Drug, Impr ovement, and Modernization Act of 2003 (Pub. L. 108-173) did not address the OPPS pa yment in CY 2005 and subsequent years for drugs, biologicals, and radiopharmaceutical s that have assigned HCPCS codes, but that do not have a reference AWP or appr oval for payment as pass-through drugs or biologicals. Because there was no statutory provision that dictated payment for such drugs, biologicals, and radiopharmaceuticals in CY 2005, and because we had no hospital

claims data to use in esta blishing a payment rate for th em, we investigated several payment options for CY 2005 and discussed them in detail in the CY 2005 OPPS final rule with comment period (69 FR 65797 through 65799).CMS-1601-P 319 For CYs 2005 to 2007, we implemented a policy to provide separate payment for new drugs, biologicals, and radiopharmaceutical s with HCPCS codes (specifically those new drug, biological, and radiopharmaceutical HC PCS codes in each of those calendar years that did not crosswalk to predece ssor HCPCS codes) but which did not have pass-through status, at a rate that was equivalent to the payment they received in the physician’s office setting, established in accordance with the ASP methodology for drugs and biologicals, and based on charges adjust ed to cost for radiopharmaceuticals. For CYs 2008 and 2009, we finalized a policy to pr ovide payment for new drugs (excluding contrast agents and diagnostic radiopha rmaceuticals) 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 w ith the final OPPS payment methodology for other separately payable drugs and biologi cals. New therapeutic radiopharmaceuticals were paid at charges adjusted to cost ba sed 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 pa yment for new drugs (excluding contrast agents) and biologicals with HCPCS codes that do not have pass-thr ough status and are without OPPS hospital claims data at ASP+ 4 percent, consistent with the CY 2010 payment methodology for other separate ly payable nonpass-through drugs and biologicals. We also finalized a policy to extend the CY 2009 payment methodology to new therapeutic radiopharmaceutical HCPCS code s, consistent with our final policy inCMS-1601-P 320

the CY 2010 OPPS/ASC final rule with comment period (74 FR 60581 through 60526), providing separate payment for therapeutic ra diopharmaceuticals that do not crosswalk to CY 2009 HCPCS codes, do not have pass-thro ugh status, and are without OPPS hospital claims data at ASP+4 percent. This policy was continued in CYs 2011, 2012, and 2013, paying for new drugs, biologicals, and radiopharmaceuticals that do not have pass-through status, and are w ithout OPPS hospital claims data at ASP+5 percent, ASP+4 percent, and ASP+6 percent, respectivel y, consistent with the final OPPS payment methodology for other separately payable dr ugs and biological during those payment

years. For CY 2014, we are proposing to provide payment for new drugs, biologicals, and therapeutic radiopharmaceuticals that do not have pass-through status at ASP+6 percent, consistent with the proposed CY 2014 payment methodology for other separately payable nonpass-through drugs, biologicals, and therapeutic radiopharmaceuticals to pay at ASP+6 percent based on the statutory defau lt. We believe this proposed policy would ensure that new nonpass-through drugs, biolog icals and therapeutic radiopharmaceuticals would be treated like other drugs, biologi cals, and therapeuti c radiopharmaceuticals

under the OPPS. For CY 2014, we also are proposing to package payment for all new nonpass-through diagnostic radiopharmaceuticals, contrast agents, anesthesia drugs, drugs, biologicals, and radiopharmaceuticals th at function as supplies when used in a diagnostic test or procedure, and drugs a nd biologicals that function as supplies or devices when used in a surgical procedure, with HCPCS codes but without claims dataCMS-1601-P 321 (those new CY 2014 HCPCS codes that do not crosswalk to predecessor HCPCS codes). This is consistent with the proposed policy packaging all existing nonpass-through diagnostic radiopharmaceuticals, contrast agen ts, anesthesia drugs , drugs, biologicals, and radiopharmaceuticals that function as suppl ies when used in a diagnostic test or procedure, and drugs and biologi cals that function as supplies or devices when used in a surgical procedure, as discussed in more de tail in section II.A.3. of this proposed rule.

In accordance with the OPPS ASP methodology, in the absence of ASP data, for CY 2014, we are proposing to continue th e policy we implemented beginning in CY 2005 of using the WAC for the product to es tablish the initial pa yment rate for new nonpass-through drugs and biologic als with HCPCS codes, but which are without OPPS claims data and are not diagnostic radiopharm aceuticals and contrast agents. However,

we noted that if the WAC is also unavailabl e, we would make payment at 95 percent of the product’s most recent AWP. We also ar e proposing to assign status indicator “K” (for separately paid nonp ass-through drugs and biologi cals, including therapeutic radiopharmaceuticals) to HCPCS codes for new drugs and biologicals without OPPS claims data and for which we have not grante d pass-through status. With respect to new, nonpass-through drugs, biologicals, and therap eutic 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 rate s under the OPPS would be adjusted so that

the rates would be based on the ASP met hodology and set to the finalized ASP-based amount (proposed for CY 2014 at ASP+6 percent) for items that have not been granted pass-through status. This proposed policy, which utilizes the ASP methodology thatCMS-1601-P 322 requires us to use WAC data when ASP da ta are unavailable and 95 percent of AWP

when WAC and ASP data are unavail able, 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, biologicals, and therapeutic radiopharmaceuticals would be treated like ot her drugs, biologicals, and therapeutic radiopharmaceuticals under the OPPS, 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 w ithout claims data, on the WACs for these products if ASP data for these therapeutic radiopharmaceuticals are not available. If the WACs are also unavailable, we are proposing to make paym ent for new therapeutic radiopharmaceuticals at 95 percent of the products’ most recent AWP because we would not have mean costs from hospital claims data upon which to base payment. As we are proposing with new drugs and biologicals, we are proposing to continue our policy of assigning status

indicator “K” to HCPCS codes for new th erapeutic radiopharmaceuticals without OPPS

claims data for which we have not granted pass-through status. Consistent with other ASP-based pa yment, for CY 2014 we are proposing to announce any changes to the payment amounts for new drugs and bi ologicals in the CY 2014 OPPS/ASC final rule with comment pe riod and also on a quarterly basis on the CMS Web site during CY 2014 if later quarter ASP submissions (or more recent WACs or AWPs) indicate that changes to the paymen t rates for these drugs and biologicals are necessary. The payment rates for new ther apeutic radiopharmaceuticals also would beCMS-1601-P 323 changed accordingly based on later quarter ASP submissions. We note that the new CY 2014 HCPCS codes for drugs, biologicals and therapeutic radiopharmaceuticals are

not available at the time of de velopment of this proposed rule. However, these agents

will be included in Addendum B to the CY 2014 OPPS/ASC final rule with comment period (which will be available via the Internet on the CMS Web site), where they will be assigned comment indicator “NI.” This commen t indicator reflects that their interim final OPPS treatment is open to public comment in the CY 2014 OPPS/ASC final rule with comment period. There are several nonpass-through drugs and biologicals that were payable in

CY 2012 and/or CY 2013 for which we did not have CY 2012 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 cate gory. In order to determine the packaging status of these products for CY 2014, 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 separa tely 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 outpatien t 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 e qual to $90, which is the general packagingCMS-1601-P 324 threshold that we are proposing for drugs, biologicals, and therapeutic radiopharmaceuticals in CY 2014. We are proposing to pay separately for items with an estimated per day cost greater than $90 (with the exception of diagnostic radiopharmaceuticals, contra st agents, anesthesia dr ugs, drugs, biologicals, and radiopharmaceuticals that func tion as supplies when used in a diagnostic test or procedure, and drugs and biologi cals that function as supplies or devices when used in a surgical procedure, which we are proposing to package regardless of cost, as discussed in more detail in section II.A.3. of this propos ed rule) in CY 2014. We are proposing that the CY 2014 payment for separately payable items without CY 2012 claims data would be ASP+6 percent, similar to payment fo r other separately payable nonpass-through drugs and biologicals under the OPPS. In accordance with the A SP 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 pa yment rate. However, we note that if the WAC is also unavailable, we would make paym ent 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 26 below.CMS-1601-P 325

TABLE 26.— DRUGS AND BIOLOGICALS WITHOUT CY 2012 CLAIMS DATA

CY 2014 HCPCS

Code CY 2014 Long Descriptor Estimated Average Number of Units Per Day Proposed CY 2014 SI Proposed CY 2014

APC 90581 Anthrax vaccine, for subcutaneous or intramuscular use 1 K 1422 J0205 Injection, alglucerase, per 10 units 420 K 0900 J0215 Injection, alefacept, 0. 5 mg 29 K 1633 J0220 Injection, alglucosidase alfa, 10 mg, not otherwise specified 150 K 9234 J0364 Injection, apomorphine h ydrochloride, 1 mg 1 N N/A J0395 Injection, arbutamine hcl, 1 mg 20 K 1432 J0725 Injection, chorionic gonadotropin, per 1,000 usp units 1 N N/A J1324 Injection, enfuvirtide, 1 mg 216 K 1361 J1435 Injection, estrone, per 1 mg 150 K 1435 J1620 Injection, gonadorelin hydrochloride, per 100 mcg 11 N N/A J1730 Injection, diazoxide, up to 300 mg 1 N N/A J1835 Injection, itraconazole, 50 mg 80 N N/A J2724 Injection, protein c conc entrate, intravenous, human, 10 iu 1540 K 1139 J2725 Injection, protirelin, per 250 mcg 4 K 1357 J3355 Injection, urofollitropin, 75 iu 2 K 1741 J7196 Injection, antithrombin recombinant, 50 i. U. 268 K 1332 J7513 Daclizumab, parenteral, 25 mg 2 K 1612 J8562 Fludarabine phosphate , oral, 10 mg 1 N N/A J8650 Nabilone, oral, 1 mg 4 K 1424 J9216 Injection, interferon, gamma 1-b, 3 million units 1 K 0838 J9226 Histrelin implant (supprelin la), 50 mg 1 K 1142 J9300 Injection, gemtuzumab ozogamicin, 5 mg 1 K 9004 Q0515 Injection, sermorelin acetate, 1 microgram 70 K 3050

Finally, there were 11 drugs and biologicals, shown in Table 27, that were payable in CY 2012 but for which we lacked CY 2012 claims data and any other pricingCMS-1601-P 326 information for the ASP methodology for this CY 2014 OPPS/ASC proposed rule. In CY 2009, for similar items wit hout CY 2007 claims data and without pricing information for the ASP methodology, we stated that we we re unable to determine their per day cost and we packaged these items for the year, assigning these items st atus indicator “N.” For CY 2010, we finalized a policy to ch ange the status indicator for drugs and biologicals previously assigned a payable status indicator to status indicator “E” (Not paid by Medicare when submitted on outpatient claims (any outpatient bill type)) whenever we lacked claims data and prici ng 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 informati on 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 indicato r “K” and pay for them separately for the

remainder of CY 2010. We continue d this policy for CYs 2011, 2012, and 2013 (75 FR 71973, 76 FR 74334, and 77 FR 68396, respectively). For CY 2014, we are proposing to continue to assign status indi cator “E” to drugs and biologicals that lack CY 2012 claims data and pricing information for the ASP methodology. All drugs and biologicals without CY 2012 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 2014 are displayed in Table 27 below. If pricing information becomes available, we are propos ing to assign the produc ts status indicator “K” and pay for them separately for the remainder of CY 2014.

TABLE 27.— DRUGS AND BIOLOGICALS WITHOUT CY 2012 CLAIMS DATA AND WITHOUT PRICING INFORMATION FOR THE ASP METHODOLOGYCMS-1601-P 327

CY 2014 HCPCS Code CY 2014 Long Descriptor Proposed CY 2014 SI 90393 Vaccina immune globulin, human, for intramuscular use E

90644 Meningococcal conjugate vaccine, serogroups c & y and hemophilus influenza b vaccine (hib-mency), 4 dose schedule, when administered to children 2-15 months of age, for intramuscular use E

90727 Plague vaccine, for intramuscular use E J0190 Injection, biperiden lactate, per 5 mg E J0350 Injection, anistreplase, per 30 units E J1180 Injection, dyphylline, up to 500 mg E J2460 Injection, oxytetracyc line hcl, up to 50 mg E J2940 Injection, somatrem, 1 mg E J7191 Factor viii (antihemophilic f actor (porcine)), per i. U. E J9165 Injection, diethylstilbestrol diphosphate, 250 mg E J9215 Injection, interferon, alfa-n3, (human leukocyte derived), 250,000 iu E

C. Nuclear Medicine Proce dure-to-Radiolabeled Product Edits Beginning January 1, 2008, CMS implemented OPPS edits that require hospitals

to include a HCPCS code for a radiolabeled product when a separately payable nuclear medicine procedure is present on a claim. For CY 2014, we are pr oposing to no longer require the nuclear medicine procedure-to-radiolabeled pr oduct edits. Under this proposal, hospitals would still be expected to adhere to the guidelines of correct coding and append the correct radiolabeled product code to the claim when applicable. However, claims would no longer be return ed to providers when HCPCS codes for radiolabeled products do not appear on claims with nuclear medicine procedures. We believe that this is appropriate because hospitals have now had several years of experience reporting procedur es involving radiolabeled products and have grownCMS-1601-P 328 accustomed to ensuring that they code and repo rt charges so that their claims fully and appropriately reflect the cost s of those radiolabeled produc ts. Therefore, we do not believe that the burden on hospitals of adhering to the nuclear medicine procedure-to-radiolabeled produc t edits continues to be warranted. As with all other items and services recognized under the OPPS, we expect hospitals to code and report their costs appropriately , regardless of whether there are claims processing edits in place.CMS-1601-P 329 VI. Proposed Estimate of OPPS Transi tional Pass-Through Spending for Drugs, Biologicals, Radiopharmaceuticals, and Devices A. Background Section 1833(t)(6)(E) of the Act limits the total projected am ount of transitional pass-through payments for drugs, biologicals, radiopharmaceuticals, and categories of devices for a given year to an “applicable pe rcentage,” currently not to exceed 2.0 percent of total program payments estimated to be made for all covered services under the OPPS furnished for that year. If we estimate befo re the beginning of the calendar year that the total amount of pass-through payments in th at year would exceed the applicable percentage, section 1833(t)(6)(E )(iii) of the Act requires a uniform prospective reduction in the amount of each of the transitional pa ss-through payments made in that year to ensure that the limit is not exceeded. We estimate the pass-through spending to determine whether payments exceed the a pplicable percentage and the appropriate prorata reduction to the conversion factor fo r the projected level of pass-through spending in the following year to ensure that total estimated pass-through spending for 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 2014 entails estimating spending for two groups of items. Th e first group of items consists of device categories that were recently made elig ible for pass-through payment and that will continue to be eligible for pass-through payment in CY 2014. The CY 2008 OPPS/ASC final rule with comment period (72 FR 66778) describes the methodology we have usedCMS-1601-P 330 in previous years to develop the pass -through spending estimate for known device categories continuing into the applicable update year. The second group of items consists of items that we know are newly eligible, or project may be newly eligible, for device pass-through payment in the remaining quart ers of CY 2013 or beginning in CY 2014. The sum of the CY 2014 pass-thr ough estimates for these two groups of device categories would equal the total CY 2014 pass-through spendi ng estimate for device categories with pass-through status. We base the device pass-through estimated payments for each device category on the amount of payment as established in secti on 1833(t)(6)(D )(ii) of the Act, and as outlined in previous rule s, including the CY 2013 OPPS/ASC final rule with comment period (77 FR 68397). We note that, beginning in CY 2010, the pass-through evaluation process and pass-thr ough payment for implantable biologicals newly approved for pass-through payment begi nning on or after January 1, 2010, that are surgically inserted or implan ted (through a surgical incision or a natural orifice) is the device pass-through process and payment meth odology (74 FR 60476). As has been our past practice (76 FR 74335), we include an estimate of any implantable biologicals eligible for pass-through paym ent in our estimate of pass-through spending for devices. For drugs and biologicals eligible for pass-through payment, section 1833(t)(6)(D)(i) of the Act es tablishes the pass-through payment amount as the amount by which the amount authorized under section 1842(o) of the Act (o r, if the drug or biological is covered under a competitive acquisition contra ct under section 1847B of the Act, an amount determined by the Secretary equal to the average price for the drug or biological for all competitive acquisition areas and year established under such section asCMS-1601-P 331 calculated and adjusted by the Secretary) exceeds the portion of the otherwise applicable fee schedule amount that the Secretary dete rmines is associated with the drug or biological. We note that the Part B dr ug CAP program has been postponed since CY 2009, and such a program has not been proposed to be reinstated for CY 2014. Because we are proposing to pay for most nonpass-through separately payable drugs and biologicals under the CY 2014 OPPS at ASP+6 percent, as we discussed in section V.B.3. of this proposed rule, which represen ts the otherwise app licable fee schedule amount associated with most pass-through dr ugs and biologicals, and because we are proposing to pay for CY 2014 pass-through drugs and biologicals at ASP+6 percent, as we discussed in section V.A. of this propos ed rule, our estimate of drug and biological pass-through payment for CY 2014 for this gr oup of items is $0, as discussed below. Payment for certain drugs, specifica lly diagnostic radiopharmaceuticals and contrast agents, without pass-th rough status will always be p ackaged into payment for the associated procedures and these products woul d not be separately pa id. In addition, we are proposing to policy-p ackage all nonpass-through drugs, biologicals, and radiopharmaceuticals that func tion as supplies when used in a diagnostic test or procedure and drugs and biologi cals that function as supplies or devices when used in a surgical procedure for CY 2014, as discussed in section II.A.3. of this proposed rule. All of these policy-packaged drugs and biologicals with pass-through status would be paid at ASP+6 percent like other pass-through drugs and biologicals for CY 2014. Therefore, our estimate of pass-through payment for po licy-packaged drugs and biologicals with pass-through status approved prior to CY 2014 is not $0. In section V.A.4. of thisCMS-1601-P 332 proposed rule, we discuss our proposed polic y to determine if the costs of certain policy-packaged drugs or biologicals are already packaged into the existing APC structure. If we determine that a polic y-packaged drug or biological approved for pass-through payment resembles predecessor drugs or biologi cals already included in the

costs of the APCs that are a ssociated with the drug receiv ing pass-through payment, we are proposing to offset the am ount of pass-through payment for the policy-packaged drug or biological. For these drugs or biologicals, the APC offset amount is the portion of the APC payment for the specific procedure pe rformed with the pa ss-through drug or biological which we refer to as the policy- packaged drug APC offset amount. If we determine that an offset is appropriate for a specific policy-packaged drug or biological receiving pass-through payment, we are propos ing to reduce our esti mate of pass-through payments for these drugs or biologicals by this amount. Similar to pass-through estimates for de vices, the first group of drugs and biologicals requiring a pass-thr ough payment estimate consists of those products that were recently made eligible for pass-thr ough payment and that would continue to be eligible for pass-through pa yment in CY 2014. The second group contains drugs and biologicals that we know are newly eligible, or project will be newly eligible, in the remaining quarters of CY 2013 or beginni ng in CY 2014. The sum of the proposed CY 2014 pass-through estimates for these two gr oups of drugs and biologicals equals the proposed total CY 2014 pass-through spending estimate for drugs and biologicals with pass-through status.CMS-1601-P 333 B. Proposed Estimate of Pass-Through Spending We are proposing to set the applicable pass-through payment percentage limit at 2.0 percent of the total projec ted OPPS payments for CY 2014, consistent with section 1833(t)(6)(E)(ii)(II) of the Act, and ou r OPPS policy from CY 2004 through CY 2013 (77 FR 68398). For the first group of devices for pass -through payment estima tion purposes, there currently are no device categories receiving pass-through payment in CY 2013 that would continue to be eligible fo r pass-through payment for CY 201 4. As discussed in section IV.A. of this proposed rule, we finalized in the CY 2013 OPPS/ASC final rule with comment period the expiration of pass-through payment for three device categories after the end of CY 2013. Therefore, we estimat e that CY 2014 pass-th rough expenditures for the first group of pass-through device categor ies to be $0. In estimating our CY 2014 pass-through spending for device categories in the second group, we include: device categories that we knew at the time of the development of the proposed rule will be newly eligible for pass-through payment in CY 2014 (of which there are none); additional device categories th at we estimate could be appr oved for pass-through status subsequent to the development of the pr oposed rule and before January 1, 2014; and contingent projections for ne w device categories establishe d in the second through fourth quarters of CY 2014. 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 a pproving new pass-through device categories. For this proposed rule, the estimate of CY 2014 pass-through spending for this secondCMS-1601-P 334 group of device categories is $10 million. Using our establishe d methodology, we are proposing that the total estimated pass-t hrough spending for device categories for CY 2014 (spending for the first group of devi ce categories ($0) pl us spending for the second group of device categories ($10 million)) would be $10 million. To estimate CY 2014 pass-through spending fo r drugs and biologicals in the first group, specifically those drugs and biologicals recently made eligible for pass-through payment and continuing on pass-through status for CY 2014, we are proposing to utilize the most recent Medicare physician’s office da ta regarding their u tilization, information provided in the respective pass- through applications, histor ical hospital claims data, pharmaceutical industry information, and clinical information regarding those drugs or biologicals to project the CY 2014 OPPS utilization of the products. For the known drugs and biologicals (e xcluding policy-packaged diagnostic radiopharmaceuticals. contrast agents, drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a dia gnostic test or procedure, and drugs and biologicals that function as suppl ies or devices when used in a surgical procedure) that will be continuing on pass-through status in CY 2014, we estimate the pass-through payment amount as the difference between ASP+6 percent and the payment rate for nonpass-through drugs and biological s that will be separately paid at ASP+6 percent, which is zero for this group of drugs. Because payment for policy-packaged drugs and biologicals is proposed to be packaged if the product was not paid separately due to its pass-through status, we are proposing to include in th e CY 2014 pass-through estimate the difference between payment for the policy- packaged drug or biological at ASP+6CMS-1601-P 335 percent (or WAC+6 percent, or 95 percent of AWP, if ASP or WAC information is not available) and the policy-packaged drug APC offset amount, if we determined that the policy-packaged drug or biological appr oved for pass-through payment resembles predecessor drugs or biological s already included in the co sts of the APCs that are associated with the drug rece iving pass-through payment. Fo r this proposed rule, using the proposed methodology described above, we calculated a CY 2014 proposed spending estimate for this first group of drugs a nd biologicals of approximately $0.962 million. To estimate proposed CY 2014 pass-thr ough spending for drugs and biologicals in the second group (that is, drugs and bi ologicals that we knew at the time of development of the proposed rule are ne wly eligible for pass-through payment in CY 2014, additional drugs and biologicals th at we estimate could be approved for pass-through status subsequent to the development of the proposed rule and before January 1, 2014, and projections for new drugs and biologicals that could be initially eligible for pass-through paym ent in the second through fourth quarters of CY 2014), we are proposing to use utilization estimates fr om pass-through applican ts, pharmaceutical industry data, clinical information, recent trends in the per un it ASPs of hospital outpatient drugs, and projected annual change s in service volume and intensity as our basis for making the CY 2014 pass-through payment estimate. We also are proposing to consider the most recent OPPS experience in approving new pass-through drugs and biologicals. Using our proposed met hodology for estimating CY 2014 pass-through payments for this second group of drugs, we calculated a proposed spending estimate for this second group of drugs and biolog icals of approximately $0.165 million.CMS-1601-P 336

As discussed in section V.A. of th is proposed rule, radiopharmaceuticals are considered drugs for pass-through purposes. Therefore, we include radiopharmaceuticals in our proposed CY 2014 pass-through spending estimate for drugs and biologicals. Our proposed CY 2014 estimate for total pass-th rough spending for dr ugs and biologicals (spending for the first group of drugs and bi ologicals ($0.962 million) plus spending for the second group of drugs and biologi cals ($0.165 million)) equals $1.127 million. In summary, in accordance with the me thodology described above in this section, for this proposed rule, we estimate th at total pass-through sp ending for the device categories and the drugs and biologicals that are contin uing to receive pass-through payment in CY 2014 and those device categories, drugs, and biologicals that first become eligible for pass-through payment during CY 2014 would be approximately $11 million (approximately $10 million for device categorie s and approximately $1 million for drugs and biologicals), which repres ents 0.02 percent of total pr ojected OPPS payments for CY 2014. We estimate that pass-through sp ending in CY 2014 would not amount to 2.0 percent of total projected OPPS CY 2014 program spending.CMS-1601-P 337 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 (ED) visits, and critical care services, including trauma team activa tion. Historically, we have recognized the CPT and HCPCS codes describing clinic visits, Type A and Type B (ED) visits, and critical care services,

which are listed below in Table 28. We re fer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74338 through 74346) for a full discussion of our policy on OPPS payment for hospital outpatient visits for CY 2013 and prior years.

TABLE 28.—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)CMS-1601-P 338

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 th e evaluation and management of a patient (Level 1)

99282 Emergency department visit for th e evaluation and management of a patient (Level 2)

99283 Emergency department visit for th e evaluation and management of a patient (Level 3)

99284 Emergency department visit for th e evaluation and management of a patient (Level 4)

99285 Emergency department visit for th e evaluation and management of a patient (Level 5) G0380 Type B emergency department visit (Level 1) G0381 Type B emergency department visit (Level 2) G0382 Type B emergency department visit (Level 3) G0383 Type B emergency department visit (Level 4) G0384 Type B emergency department visit (Level 5) Critical Care Services HCPCS Codes

99291 Critical care, evaluation and manage ment of the critically ill or critically injured patient; first 30-74 minutes

99292 Critical care, evaluation and manage ment of the critically ill or critically injured patient; each additional 30 minutes G0390 Trauma response associated w ith hospital critical care service

B. Proposed Payment for Hospital Outpatient Clinic and Emergency Department Visits Since April 7, 2000, we have instructed hos pitals to report facility resources for clinic and ED hospital outpatient visits usi ng the CPT E/M codes and to develop internal hospital guidelines for reporting the appropria te visit level (65 FR 18451). Because a national set of hospital-specifi c codes and guidelines do not currently exist, we have advised hospitals that each hospital’s internal guidelines that determine the levels ofCMS-1601-P 339 clinic and ED visits to be reported should fo llow the intent of the CPT code descriptors, in that the guidelines should be designed to reasonably relate the intensity of hospital

resources to the different levels of effort represented by the codes. While many hospitals have advocated fo r hospital-specific na tional guidelines for visit billing since the OPPS started in 2000, and we have signaled through rulemaking our intent to develop guidelines, this comp lex undertaking has proven challenging. Our

work with interested stakehol ders, such as hospital associa tions, along with a contractor, has confirmed that no single approach c ould consistently and accurately capture hospitals’ relative costs. Public comments received on this issue, as well as our own knowledge of how clinics operate, ha ve led us to conclude that it is not feasible to adopt a set of national guidelines for reporting hospita l clinic visits that can accommodate the enormous variety of patient populations and service-mix provided by hospitals of all types and sizes throughout the country. More over, no single approach appears to be broadly endorsed by the stakeholder community. For CY 2014, we are proposing to modify our longstanding policies related to hospital outpatient clinic and ED visits. Rather than recognizing five levels of clinic and ED visits respectively, we are proposing to create three new alphanumeric Level II HCPCS codes to describe all levels of each type of clinic and ED visit, as discussed in greater detail below. We believe a policy th at recognizes a single vi sit level for clinic visits, Type A ED visits, and Type B ED visits for payment under the OPPS is appropriate for several reasons. First, the propos al is in line with our strategic goal of using larger payment bundles to maximize hos pitals’ incentives to provide care in theCMS-1601-P 340

most efficient matter as stated in section II .A.3. of this proposed rule. We believe this proposal will remove any incentives hosp itals may have to provide medically unnecessary services or expe nd additional, unnecessary reso urces to achieve a higher level of visit payment under the OPPS. S econd, we believe that it is important to consider ways in which we can reduce the administrative burden that Medicare payment policies place on hospitals, while maintaining our ability to calculate accurate payment

rates under the OPPS. We believe that replacing the 20 HCPCS codes currently recognized for clinic visits and ED visits with three new alphanumeric Level II HCPCS

codes would reduce administrative burden a nd would be easily adopted by hospitals, because the three new codes would require hospitals to distinguish only among clinic visits, Type A ED visits, and Type B ED visits. Discontinuing the use of the five levels

of HCPCS visit codes for cl inic and Type A and Type B ED visits would reduce hospitals’ administrative burden by eliminating the need for them to develop and apply their own internal guidelines to differentiate among five levels of resource use for every clinic visit and ED visit they provide, and by eliminating the need to distinguish between new and established patients. Third, our proposal allows a larg e universe of claims to be utilized for ratesetting for each of the three newly proposed alphanumeric Level II HCPCS visit codes. We believe this large vo lume of claims available for ratesetting for each of the newly proposed alphanumeric Level II HCPCS visit codes will allow us to capture a very broad spectrum of cases ra nging from extremely low complexity cases to extremely high complexity cases. We believe th is large and diverse sp ectrum of clinical complexity and resource variation within th e claims as well as the very high volume ofCMS-1601-P 341 claims that we propose to use for ratesetti ng for the newly proposed alphanumeric Level

II HCPCS visit new codes will allow us to ha ve very accurate data upon which to develop accurate and appropriate payments. Las tly, we also believe that removing the differentiation among five levels of intensity for each visit will eliminate any incentive for hospitals to “upcode” patients whose visits do not fall clearly in to one category or

another. For these reasons, for CY 2014, we are pr oposing to discontinue our longstanding policy of recognizing five distinct visit levels for clinic visits and ED visits based on the existing HCPCS E/M codes, and instead recognize three new alphanumeric HCPCS codes for each visit type. Specifically, we are proposing to create a new alphanumeric HCPCS code (GXXXC) for hospital use only representing any clinic visit under the OPPS and to assign the newly created alpha numeric clinic visit HCPCS code (GXXXC) to its own newly created APC 0634. Using CY 2012 claims data, we are proposing to develop CY 2014 OPPS payment rates for the new HCPCS code GXXXC based on the total mean cost of the levels one through five CPT E/M codes for clinic visits currently recognized under the OPPS (CPT codes 99201 through 99205 and 99211 through 99215). While we would use data for CPT codes 99201 through 99205 and 99211 through 99215

from claims billed in CY 2012 to calculate the mean cost for new APC 0634, we would no longer recognize those CPT codes when th ey appear on hospita l claims effective January 1, 2014. We also are proposing to no longer recognize a distinction between new and established patient clinic visits. Under this proposal, all clinic vis its would be reported using new HCPCS code GXXXC, regard less of whether or not the patient hasCMS-1601-P 342 been registered as an inpatient or outpatient of the hospital within the 3 years prior to a

visit. In addition, we are proposing to di scontinue our longs tanding policy of recognizing five distinct visit levels for Type A ED visits and instead are proposing to create a new alphanumeric HCPCS code ( GXXXA) for hospital use only representing any Type A ED visit under the OPPS. We are proposing to assign the newly created alphanumeric Type A ED visit HCPCS code (GXXXA) to its own newly created APC 0635. Using CY 2012 claims data, we are pr oposing to develop CY 2014 OPPS payment rates for new HCPCS code GXXXA based on the total mean cost of the levels 1 through 5 CPT E/M codes for Type A ED visits cu rrently recognized under the OPPS (CPT codes 99281 through 99285). While we would use data for CPT codes 99281 through 99285

from claims billed in CY 2012 to calculate the mean cost for new APC 0635, we would no longer recognize those CPT codes when th ey appear on hospita l claims effective January 1, 2014. Similarly, we also are propos ing to discontinue our longstanding policy of recognizing five distinct visit levels for Type B ED visits and instead are proposing to create a new alphanumeric HCPCS code (GXXX B) representing all Type B ED visits under the OPPS. We are proposing to assign the newly created alphanumeric Type B ED visit HCPCS code (GXXXB) to its own newly created APC 0636. Using CY 2012 claims data, we are proposing to devel op CY 2014 OPPS payment rates for new HCPCS code GXXXB based on the total mean cost of the levels 1 through 5 HCPCS codes for Type B ED visits currently recognize d under the OPPS (HCPCS codes G0380 through G0384). While we would use data for HC PCS codes G0380 through G0384 from claimsCMS-1601-P 343

billed in CY 2012 to calculate the mean cost for new APC 0636, we would no longer recognize those HCPCS codes for Type B ED vi sits when they app ear on hospital claims effective January 1, 2014. We note that we would use the hospital claims data for new HCPCS codes GXXXA, GXXXB, and GXXXC wh en available for future ratesetting. The proposed changes to the visit coding and payment stru cture are summarized below in Table 29. We welcome public comments on our CY 2014 pr oposal to recognize a single visit level for clinic, Type A ED, and Type B ED visits for payment under the OPPS. We believe this proposal will allow us to make accurate payments for visits broad-scale because we will be using data from the universe of hospital outpatient visits, for which we have an extremely high volume of claims representing the entire spectrum of costs incurred by hospitals. Nonetheless, we are interested inhearing from stakeholders regarding whether a different approach may be preferable to ca pture the resource utilization for extremely low complexity cases as well as extremel y high complexity cases or to otherwise recognize a difference among visit levels. Wh ile we do not believe, based on our current assessment, that it is necessary to provide additional payment levels or carve out these cases to make accurate and appropriate payments for visits, we are interested in hearing from hospitals whether there are certain cases that would not be best accommodated by a single level of payment. If such cases exist, we welcome stakeholder input into whether and how this proposal could be changed in the final rule to either make exceptions for or accommodate these special cases. If commenters provide compelling comments describing such special cases or the need for additional payment levels, should they exist,CMS-1601-P 344 and if there are alternative po licies that would more accurate ly and appropriately pay for visits, we would consider implementing a differe nt policy in the final rule. We note that, to the extent that commenters recommend that additional levels of payment or special high complexity or low complexity cases be recognized, we also would be interested in

how we should define and different iate those levels or cases.

TABLE 29.—CY 2013 CLINIC AND EMERGENCY DEPARTMENT VISIT HCPCS CODES AND APC ASSIGNME NTS COMPARED TO PROPOSED CY 2014 CLINIC AND EMERGENCY DE PARTMENT VISIT HCPCS CODES AND APC ASSIGNMENTS

CY 2013 Proposed CY 2014 Visit Type HCPCS Code APC HCPCS Code APC 99201 0604 99202 0605 99203 0606 99204 0607 99205 0608 99211 0604 99212 0605 99213 0605 99214 0606 CLINIC

VISIT

99215 0607 GXXXC 0634

99281 0609 99282 0613 99283 0614 99284 0615 TYPE A ED VISIT 99285 0616 GXXXA 0635

G0380 0626 G0381 0627 G0382 0628 G0383 0629 TYPE B ED VISIT G0384 0630 GXXXB 0636CMS-1601-P 345 C. Proposed Payment for Critical Care Services We are proposing to continue th e methodology established in the CY 2011

OPPS/ASC final rule with commen t 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 ca re CPT codes 99291 (Critical care, evaluation and management of the critic ally ill or critically injured patient; first 30-74 minutes) and 99292 (Critical care, evaluati on and management of the critically ill or critically injured patient; each additiona l 30 minutes (List separately in addition to code for primary service)) to include a wi de range of ancillary services such as electrocardiograms, chest X-rays, and pulse oximetry. As we have stated in manual instruction, we expect hospitals to repor t in accordance with CPT guidance unless we instruct otherwise. For critical care in partic ular, we instructed hospitals that any services

that the CPT Editorial Panel indicates are included in the repor ting 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 char ges for any services provided as part of the critical care services. In esta blishing 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 cr itical 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).CMS-1601-P 346 For CY 2011, the AMA CPT Editorial Panel revised its guidance for the critical care codes to specifically state that, for hosp ital reporting purposes, cr itical care codes do not include the specified anci llary services. Beginning in CY 2011, hospitals that report in accordance with the CPT guidelines should re port 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 hospita ls would have reported charges for any ancillary services provided as part of the cr itical care services, we stated in the CY 2011

OPPS/ASC final rule with comm ent period that we believed it was inappropriate to pay separately in CY 2011 for the an cillary services that hospita ls 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 ca re services and estab lished 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 conj unction 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 fo r 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 statusCMS-1601-P 347

indicated for status indica tor “Q3” in Addendum D1 to the CY 2011 OPPS/ASC final rule with comment period. The ancillary serv ices that were include d in the definition of critical care prior to CY 2011 and that are conditionally p ackaged into the payment for critical care services when provided on the same date of service as critical care services

for CY 2011 were listed in Addendum M to that final rule with comment period.

Because the CY 2012 costs for critical care servi ces were based upon CY 2010 claims data, which reflected 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 establishe d in the CY 2011 OPPS/ASC final rule with comment period of calculating a payment ra te 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 serv ices in order to avoid overpayment.

As we discussed in the CY 2013 OPPS/AS C final rule with comment period, the CY 2011 hospital claims data on which the CY 2013 payment rates are based reflect the first year of claims billed under the revised CPT guidance to allow th e reporting of all the ancillary services and their associated char ges separately when they are provided in conjunction with critical care (77 FR 68402). Because our policy to establish relative payment weights based on geometric mean co st data for CY 2013 represented a change from our historical practice to base paymen t rates on median costs, and because we now have hospital claims data for the first tim e reflecting the revised coding guidance forCMS-1601-P 348 critical care, we reviewed the CY 2011 hosp ital claims data available for the CY 2013 OPPS/ASC final rule with comment period and determined that the data showed

increases in both the mean and median line ite m costs as well as the mean and median line item charges for CPT code 99291, when compared to CY 2010 hospital claims data. Specifically, we noted that the mean and me dian line item costs increased 13 percent and 16 percent, respectively, and the mean and me dian line item charges increased 11 percent and 14 percent, respectively. Additionall y, when compared to CY 2010 hospital claims data, CY 2011 hospital claims data showed no s ubstantial change in th e ancillary services that were presented on the same claims as critical care services, and also showed continued low volumes of many ancillary services. We stated in the CY 2013

OPPS/ASC final rule with comm ent period that, had the majo rity of hospitals changed their billing practices to sepa rately 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 sa me claims. We indicate d that the lack of a substantial change in the services repo rted on critical care cl aims, along with the increases in the line item costs and charges for critical care services, strongly suggested that many hospitals did not change their billing practices for CPT code 99291 following the revision to the CPT coding guidance effective January 1, 2011. In light of not having claims data to support a significant change in hospital billing practices, we stated in the CY 2013 OPPS/ASC final rule with comment period

that we continued to believe that it is ina ppropriate to pay separately in CY 2013 for theCMS-1601-P 349 ancillary services that hospitals may now repor t in addition to critical care services. Therefore, for CY 2013, we continued our CY 2011 and CY 2012 policy to recognize the existing CPT codes for critical care servic es and establish a payment rate based on

historical claims data. We also continue d to implement claims processing edits that conditionally packaged payment for the ancillar y services that were reported on the same

date of service as critical care services in or der to avoid overpayment. We stated that we would 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. When compared to CY 2011 hospital claims data used for the CY 2013 OPPS ratesetting, CY 2012 hospital claims data us ed for the CY 2014 OPPS ratesetting show

increases in the mean line- item costs as we ll as the mean line-item charges for CPT code 99291, which continue to suggest that hospitals did not change thei r 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 2014 for the ancillary services that hosp itals may now report in addition to critical care services. Therefore, for CY 2014, we are proposing to con tinue our CY 2011, CY 2012, and CY 2013 policy to recogn ize the existing CPT codes fo r critical care services and establish a payment rate based on historic al claims data. We also are proposing to continue to implement claims processing edit s that conditionally package payment for the ancillary services that are reported on the same date of service as critical care services inCMS-1601-P 350 order to avoid overpayment. We will continue to monitor the hospital claims data for

CPT code 99291 in order to determine whethe r revisions to this policy are warranted based on changes in hosp itals’ billing practices.CMS-1601-P 351 VIII. Proposed Payment for Partial Hospitalization Services A. Background Partial hospitalization is an intensive out patient program of psychiatric services provided to patients as an alternative to i npatient psychiatric care for individuals who

have an acute mental illness. Sectio n 1861(ff)(1) of the Act defines partial hospitalization services as “the items and services described in paragraph (2) prescribed by a physician and provided under a program described in paragraph (3) under the supervision of a physician pursu ant to an individualized, written plan of treatment established and periodically reviewed by a physician (in consultation with appropriate staff participating in such pr ogram), which sets forth the phy sician’s diagnosis, the type, amount, frequency, and duration of the items and services provided under the plan, and the goals for treatment under the plan.” Section 1861(ff)(2) of the Act describes the items and services included in partial hospi talization services. S ection 1861(ff)(3)(A) of the Act specifies that a partial hospitalization program (PHP) is a program furnished by a hospital to its outpatients or by a community mental health center (C MHC) (as defined in subparagraph (B)), and “which is a distinct and organized intensiv e ambulatory treatment service offering less than 24-hour-d aily care other than in an individual’s home or in an inpatient or residential sett ing.” Section 1861(ff)(3)(B) of the Act defines a community mental health center for purposes of this benefit. Section 1833(t)(1)(B)(i) of the Act provi des the Secretary with the authority to designate the OPD services to be covered under the OPPS. The Me dicare regulations that implement this provision specify, under 42 CFR 419.21, that payments under theCMS-1601-P 352 OPPS will be made for partial hospitalizati on services furnished by CMHCs as well as

Medicare Part B services fu rnished to hospital outpatient s designated by the Secretary, which include partial hospitalizatio n services (65 FR 18444 through 18445). Section 1833(t)(2)(C) of the Act, in pe rtinent part, requires the Secretary to “establish relative payment we ights for covered OPD servic es (and any groups of such services described in subparagraph (B)) base d on median (or, 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 pertin ent part, subparagraph (B) provides that the Secretary may establish groups of covered OP D services, within a classification system developed by the Secretary for covered OPD serv ices, so that services classified within each group are comparable clinic ally and with respect to the use of resources. In accordance with these provisions, we ha ve developed the PHP APCs. Section 1833(t)(9)(A) of the Act requir es the Secretary to “review not less often than annually and revise the groups, the rela tive payment weights, and the wage and other adjustments described in paragraph (2) to take into account changes in medical practice, changes in technology, the addition of new services, new co st data, and other relevant information

and factors.” Because a day of care is the unit that defines the structure and scheduling of partial hospitalization services, we establ ished a per diem payment methodology for the PHP APCs, effective for services furnis hed on or after July 1, 2000 (65 FR 18452 through 18455). Under this methodology, the medi an per diem costs have been used to calculate the relative payment weights for PHP APCs.CMS-1601-P 353 From CY 2003 through CY 2006, the me dian per diem costs for CMHCs fluctuated significantly from year to y ear, while the median per diem costs for hospital-based PHPs remained relatively cons tant. We were concerned that CMHCs may have increased and decreased their charges in response to Medicare payment policies. Therefore, we began efforts to strengthen th e PHP benefit through extensive data analysis and policy and payment changes finalized in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66670 through 66676). We made two refinements to the methodology for computing the PHP median: th e first remapped 10 revenue codes that are common among hospital-based PHP claims to the most appropriate cost centers; and the second refined our methodology for compu ting the PHP median per diem cost by computing a separate per diem cost for each day rather than for each bill. We refer readers to a complete discussion of these refinements in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66670 through 66676). In CY 2009, we implemented several re gulatory, policy, and payment changes, including a two-tiered payment approach fo r PHP services under which we paid one amount for days with 3 services (APC 0172 Le vel I Partial Hospitalization) and a higher amount for days with 4 or more services (APC 0173 Level II Partial Hospitalization).

We refer readers to section X.B. of th e CY 2009 OPPS/ASC final rule with comment period (73 FR 68688 through 68693) for a full discussion of the two-tiered payment system. In addition, for CY 2009, we finaliz ed our policy to deny payment for any PHP claims submitted for days when fewer than 3 units of therapeutic services are provided (73 FR 68694).CMS-1601-P 354 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 under 42 CFR 424.24 to conform our regulations to our longstanding policy (73 FR 68694 through 68695) . These changes have helped to strengthen the PHP benefit. We also revise d the partial hospitalization benefit to include several coding updates. We refer readers to section X.C.3. of the CY 2009 OPPS/ASC final rule with comment period (73 FR 68695 through 68697) for a full discussion of these requirements. For CY 2010, we retained the two-tiered payment appr oach for PHP services and used only hospital-based PHP data in compu ting the APC per diem payment rates. We used only hospital-based PHP data because we were concerned about further reducing both PHP APC per diem payment rates wit hout knowing the impact of the policy and payment changes we made in CY 2009. B ecause of the 2-year lag between data collection and rulemaking, the ch anges we made in CY 2009 were reflected for the first time in the claims data that we used to determine payment rates for the CY 2011 rulemaking (74 FR 60556 through 60559). In CY 2011, in accordance with section 1301( b) of the Health Care and Education Reconciliation Act of 2010 (HCERA 2010), we am ended the description of a PHP in our regulations to specify that a PHP must be a distinct and organized intensive ambulatory treatment program offering less than 24-hour da ily care “other than in an individual’s home or in an inpatient or residential sett ing.” In addition, in accordance with section 1301(a) of HCERA 2010, we revised the defini tion of a CMHC in the regulations toCMS-1601-P 355

conform to the revised definition now set fort h under section 1861(ff)(3 )(B) of the Act. We discussed our finalized policies for th ese two provisions of HCERA 2010 in section

X.C. of the CY 2011 OPPS/ASC final ru le with comment period (75 FR 71990). In the CY 2011 OPPS/ASC final rule with comment period (75 FR 71994), we also established four separate PHP APC pe r diem payment rates, two for CMHCs (for Level I and Level II services) and two for hos pital-based PHPs (for Level I and Level II services), based on each provider’s own uni que data. As stated in the CY 2011 OPPS/ASC proposed rule (75 FR 46300) and the final rule with comment period (75 FR 71991), for CY 2011, using CY 2009 clai ms data, CMHC costs had significantly decreased again. We attributed the decrea se to the lower cost structure of CMHCs compared to hospital-based PHP providers, a nd not the impact of the CY 2009 policies.

CMHCs have a lower cost structure than hos pital-based PHP providers, in part, because the data showed that CMHCs generally provide fewer PHP services in a day and use less costly staff than hospital-based PHPs. Therefor e, it was inappropriate to continue to treat CMHCs and hospital-based providers in the same manner regarding payment, particularly in light of such disparate differences in costs. We also were concerned that paying hospital-based PHPs at a lo wer rate than their cost stru cture reflects could lead to hospital-based PHP closures and possible access problems for Medicare beneficiaries because hospital-based PHPs ar e located throughout the country and, therefore, offer the

widest access to PHP services. In contrast , CMHC-based PHPs are largely concentrated in certain geographical areas with particular pr evalence in Florida, Texas, and Louisiana. Creating the four payment rates (two for CM HCs and two for hospital-based PHPs) basedCMS-1601-P 356 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 PHP APCs Leve l I and Level II per diem costs were calculated by taking 50 percent of th e difference between the CY 2010 final hospital-based PHP median costs and the CY 2011 final CMHC median and then adding

that number to the CY 2011 final CMHC me dian. A 2-year transition under this methodology moved us in the direction of our goa l, which is to pay appropriately for PHP services based on each provider type’s data, while at the same time allowing providers time to adjust their business operations and pr otect access to care for beneficiaries. We

also stated that we would review and an alyze the data during the CY 2012 rulemaking cycle and, based on these analyses, we might fu rther refine the payment mechanism. We

refer readers to section X.B. of the CY 2011 OPPS/ASC final rule with comment period (75 FR 71991 through 71994) for a full discussion. After publication of the CY 2011 OPPS/AS C final rule with comment period, a CMHC and one of its patients filed an application for a preliminary injunction, challenging the OPPS payment rates for PHP services provided by CMHCs in CY 2011 as adopted in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71995).CMS-1601-P 357 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 deri ved 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 he ld that “based on” does not mean “based exclusively on.” On July 25, 2011, the District Court dismissed the plaintiffs’ complaint and application for a preliminary injunction fo r 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 th e 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 viola tion 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 da ta derived solely from CMHCs and the relative payment weights for hospital-based PHP services based exclusively on hospital

data. The statute is reasonabl y interpreted to allow the relative payment weights for the OPPS payment rates for PHP services provide d by CMHCs to be based solely on CMHCCMS-1601-P 358 data and relative payment weights for hos pital-based PHP services to be based exclusively on hospital data. Section 1833(t)(2)(C) of the Act requires the Secretary to “establish relative payment we ights for covered OPD servic es (and any groups of such services described in subparagraph (B)) based on . . . hospital costs.” In pertinent part, subparagraph (B) provides that “the Secret ary may establish groups of covered OPD

services . . . so that services classified w ithin each group are comp arable clinically and with respect to the use of resources.” In accordance with subparagraph (B), we developed the PHP APCs, as set forth in § 419.31 of the regulations (65 FR 18446 and 18447; 63 FR 47559 through 47562 and 47567 through 47569). As discussed above, PHP services are grouped into APCs. Based on section 1833(t)(2)(C) of the Act, we believe that the word “establish” can be interpreted as applying to APCs at the inception of the OPPS in 2000 or whenever

a new APC is added to the OPPS. In cr eating the original AP C for PHP services (APC 0033), we did “establish” the initial relative payment weight for PHP services, provided in both hospital-based and CMHC-based settings, only on the basis of hospital data. Subsequently, from CY 2003 through CY 2008, the relative payment weights for PHP services were based on a combination of hospital and CMHC data. For CY 2009,

we established new APCs for PHP servi ces based exclusively on hospital data. Specifically, we adopted a tw o-tiered APC methodology (in lieu of the original APC 0033) under which CMS paid one rate for da ys with 3 services (APC 0172) and a different payment rate for days with 4 or more services (APC 0173). These two new APCs were established using only hospital da ta. For CY 2011, we added two new APCsCMS-1601-P 359 (APCs 0175 and 0176) for PHP services provi ded by hospitals and based the relative payment weights for these APCs solely on hospital data. APCs 0172 and 0173 were designated for PHP services provided by CMHCs and were based on a mixture of hospital and CMHC data. As the Secretary argued in the Paladin case, the courts have consistently held that the phrase “based on” does not mean “based exclusively on.” Thus, the relative payment weights for the two AP Cs for PHP services provided by CMHCs in CY 2011 were “based on” hospital data, no less than the relative payment weights for the two APCs for hospital-based PHP services. Although we used hospital data to esta blish the relative payment weights for APCs 0033, 0172, 0173, 0175, and 0176 for PHP services , we believe that we have the authority to discontinue the use of hosp ital data in determining the OPPS relative payment weights for PHP services provide d by CMHCs. Other parts of section 1833(t)(2)(C) of the Act make plain that the data source for the re lative payment weights is subject to change from one period to another. S ection 1833(t)(2)(C) of the Act provides that, in establishing th e relative payment weights, “t he Secretary shall [ ] us[e] data on claims from 1996 and us[e ] data from the most recent available cost reports.” We used 1996 data (in addition to 1997 data) in determining only the original relative payment weights for 2000. In the ensuing ca lendar year updates, we continually used more recent cost report data. Moreover, section 1833(t)(9)(A ) of the Act requires the Secretary to “review not less often than annually and revise the groups, the relativ e payment weights, and the wage and other adjustments described in para graph (2) to take into account changes inCMS-1601-P 360 medical practice, changes in technology, the ad dition of new services, new cost data, and

other relevant information and factors.” For purposes of the CY 2012 update, we exercised our authority under se ction 1833(t)(9)(A) of the Act to change the data source for the relative payment weights for PHP se rvices provided by CMHCs based on “new cost data, and other relevant information and factors.”

In the CY 2013 OPPS/ASC final rule w ith comment period, we finalized our proposal to base the relative payment wei ghts that underpin the OPPS APCs, including the four PHP APCs, on geometric means rath er than on the medians. For CY 2013, we established the four PHP APC per diem pa yment rates based on geometric mean cost levels calculated using the most recent claims data for each provider type. We refer

readers to the CY 2013 OPPS/AS C final rule with comment period for a more detailed discussion (77 FR 68406 through 68412). B. Proposed PHP APC Update for CY 2014 For CY 2014, we are proposing to apply our established policie s to calculate the four PHP APC per diem payment rates based on geometric mean per diem costs using the most recent claims data for each provider type. We computed proposed CMHC PHP APC geometric mean per diem costs for Level I (3 services per day) and Level II (4 or more services per day) PHP services using only CY 2012 CMHC claims data, and proposed hospital-based PHP AP C geometric mean per diem costs for Level I and Level II PHP services using only CY 2012 hospital- based PHP claims data. These proposed geometric mean per diem costs are shown in Table 30 below.CMS-1601-P 361

TABLE 30.--PROPOSED CY 2014 GEOMETRIC MEAN PER DIEM COSTS FOR CMHC AND HOSPITAL-BA SED PHP SERVICES, BASED ON CY 2012 CLAIMS DATA

APC Group Title Proposed Geometric Mean Per Diem Costs 0172 Level I Partial Hospitalization (3 services) for CMHCs $94.51 0173 Level II Partial Hospitalization (4 or more services) for CMHCs $106.20 0175 Level I Partial Hospitalization (3 services) for hospital-based PHPs $212.85 0176 Level II Partial Hospitalization (4 or more services) for hospital-based PHPs $215.13

For CY 2014, the proposed geometric mean per diem costs for days with 3 services (Level I) is approximately $94.51 for CMHCs and approximately $212.85 for hospital-based PHPs. The proposed geometric mean per diem costs for days with 4 or more services (Level II) is approxim ately $106.20 for CMHCs and approximately $215.13 for hospital-based PHPs. Therefore, the proposed geometric mean per diem

costs for CMHCs continue to be substantia lly lower than the proposed geometric mean per diem costs for hospital-based PHPs for the same level of se rvice provided, which

indicates that there continues to be fundamental differences between the cost structures of CMHCs and hospital-based PHPs. The CY 2014 proposed geometric mean per diem costs for CMHCs calculated under the proposed CY 2014 methodology using CY 2012 claims data have remained relatively constant when compared to the CY 2013 final geometric mean per diem costs

for CMHCs established in the CY 2013 O PPS/ASC final rule with comment period (77 FR 68412), with proposed geometric mean per diem costs for Level I PHP servicesCMS-1601-P 362 increasing from approximately $87 to a pproximately $95 for CY 2014, and proposed geometric mean per diem costs for Level II PHP services decreasing from approximately $113 to approximately $106 for CY 2014. The CY 2014 proposed geometric mean pe r diem costs for hospital-based PHPs calculated under the propos ed CY 2014 methodology using CY 2012 claims data show more variation when compared to the CY 2013 final geometric mean per diem costs for hospital-based PHPs, with proposed geometri c mean per diem costs for Level I PHP services increasing from approximately $186 to approximately $213 for CY 2014, and proposed geometric mean per diem costs for Level II PHP services decreasing from approximately $235 to approximately $215 for CY 2014. In summary, the proposed CY 2014 geomet ric mean per diem costs for the PHP APCs are shown in Tables 31 and 32 below. We are inviting public comments on these proposals.

TABLE 31.--PROPOSED CY 2014 GEOMETR IC MEAN PER DIEM COSTS FOR CMHC PHP SERVICES

APC Group Title Proposed Geometric Mean Per Diem Costs 0172 Level I Partial Hospitalization (3 services) for CMHCs $94.51 0173 Level II Partial Hospitalization (4 or more services) for CMHCs $106.20CMS-1601-P 363

TABLE 32.--PROPOSED CY 2014 GEOMETR IC MEAN PER DIEM COSTS FOR HOSPITAL-BASED PHP SERVICES

APC Group Title Proposed Geometric Mean Per Diem Costs 0175 Level I Partial Hospitalization (3 services) for Hospital-based PHPs $212.85 0176 Level II Partial Hospitalization (4 or more services) for Hospital-based PHPs $215.13

C. Discussion of Possible Future Ini tiatives and Request for Public Comments We are considering a number of possible fu ture initiatives that may help to ensure the long-term stability of PHPs and furthe r improve the accuracy of payment for PHP services. Along with our broad, ongoing objec tives of ensuring stability of the PHP benefit and promoting payment accuracy for PHPs , we want to ensure that PHPs are used by individuals who are specifically in need of such services. The PHP benefit was designed to assist individuals with an acu te exacerbation of a psychiatric illness to manage debilitating symptoms and prevent the need for admission and readmission into hospitals. Accordingly, we are considering a number of possible future modifications to certain aspects of the PHP benefit. We ar e not proposing new Medi care policy in this discussion of possible future modifications. Instead, we are requesting public comments on possible future initiatives. Under the current methodology, we use the most recent claims data to compute geometric mean per diem costs for Level I (3 services per day) and Level II (4 or more services per day) PHP services for CMHC s and for hospital-based PHPs. We are interested in examining the payment structure for PHP services to determine alternativeCMS-1601-P 364 methodologies to pay for PHP services th at would reduce unnecessary care while maintaining or increasing the quality of care. We are inviting public comments on alternative payment methodologies.

One of the areas on which we would lik e to receive public comments is whether payment based on an episode of care, or a pe r diem similar to the inpatient psychiatric facility (IPF) PPS, would result in more a ppropriate payment for PH P services than the current payment structure. The IPF PPS is a per diem prospective payment system for inpatient psychiatric hospital se rvices furnished in psychiat ric hospitals, and psychiatric units in acute care hospitals and critical access hospitals. The IPF PPS base rate is adjusted to account for patient and facility characteristics that c ontribute to higher costs per day, including age, diagnos is-related group assignment, co morbidities, days of the stay, geographic wage area, rural location, teach ing status, cost of living for IPFs located in Alaska and Hawaii, and the presence of a qualifying emergency department. The IPF PPS methodology includes a payment provisi on for interrupted stays, additional payment for outlier cases, and a per treat ment payment for electroconvulsive therapy (ECT) treatments. For detailed information regarding the implementa tion of the IPF PPS, we refer readers to the FY 2005 IPF PPS final rule published in the Federal Register on November 15, 2004 (69 FR 66922). To find a dditional information about the IPF PPS,

we refer readers to the CMS Web site at: http://www.cms.hhs.gov/inpatientpsychfacilpps

. Another area on which we would like to receive public comments is on physician

certification/recertification that the individual would require inpatient psychiatric care inCMS-1601-P 365

the absence of PHP services. In order for a hospital or CMHC to be paid for partial hospitalization services on beha lf of a Medicare benefici ary, a physician must certify (and recertify when such services are furn ished over a period of time), among other things, that the individual woul d require inpatient psychiatric care in the absence of such services. In addition, an indi vidualized written plan of treatment for furnishing such

services must be established and reviewed periodically by a physician, and such services

must be furnished while the individual is unde r the care of a physician (We refer readers to 42 CFR 424.24(e)). Currently, the recertifi cation requirements specify that the physician

recertification must be signed by a physician who is treating the patient and has knowledge of the patient’s response to treatment. The recertification is required as of the

18 th day of partial hospitalization services. Subsequent recertifica tions are required at intervals established by the provider, but no le ss frequently than every 30 days. We are inviting public comments on whether the curr ent requirement under § 424.24(e)(3 )(ii) of the regulations, which requires the first recer tification by the physician to be as of the 18 th day of partial hospitalizati on services, reflects current PHP treatment practices. Specifically, we are interested in whether the first recertification da te should be changed to some other standard that accords with best practices and why. With respect to the individualized writte n plan of treatment for furnishing partial hospitalization services, as di scussed above, a physician must establish and periodically review the written plan of treatment. The written plan of treatment sets forth the physician’s diagnosis, the type, amount, duration, and frequency of the services, and theCMS-1601-P 366 treatment goals under the written plan. Th e physician determines the frequency and duration of the PHP services taking into acc ount accepted norms of me dical practice and a reasonable expectati on of improvement in the patient’s condition. (We refer readers to § 424.24(e)(2) of the regulations.) We are in terested in what requirements should be included in the written plan of treatment to better direct PH P resources toward appropriate discharge and follow-up with appr opriate support services . Specifically, we are inviting public comments on two issues: (1 ) the best way that discharge from a PHP be expedited for those individuals no l onger at risk of inpatient psychiatric hospitalization; and (2) whet her the written plan of treatment requirements under § 424.24(e)(2)(i)(C), which require that the wr itten plan of treatment set forth the treatment goals, should be revised to requi re that specific actions be taken by the physician and/or staff to assist a beneficiar y in transitioning from a PHP to a lower level of care. For example, we are interested in whether the written plan of treatment should require that, upon discharge, patients ha ve written instruct ions that include:

● A full list of their medications, do sages and any necessa ry prescriptions;

● Their next scheduled appointment with a psychiatrist or qu alified practitioner who may bill for his or her professional se rvices under Medicare Part B, including the phone number, address, and appointment date and time;

● Confirmed place to live in a stable environment with support services; and

● Other care coordination information. We also are interested in receiving p ublic feedback about quality measures for a PHP. Quality health care is a high priority for CMS. We implement quality initiatives toCMS-1601-P 367 ensure quality health care for Medicare beneficiaries through acc ountability and public disclosure. We use quality measures unde r various quality initi atives, which utilize pay-for-reporting and public reporting mechan isms. We are requesting public comments on quality measures for PHP services for future consideration. Specifically, if we were to establish quality measures for PHP services and require quality data reporting, what

should be included in those measures? In addition, should the quality measures be similar or identical to those measures established for IPFs under the IPF Quality Reporting (IPFQR) Program? We would appreciate feedback on all of these areas for future consideration. Therefore, we are inviting public comments on these issues. D. Proposed Separate Threshold for Outlier Payments to CMHCs

As discussed in the CY 2004 OPPS fina l rule with comment period (68 FR 63469 through 63470), after examining the costs, char ges, and outlier payments for CMHCs, we believed that establishing a separate OPPS outlier policy for CMHCs would be appropriate. A CMHC-specific outlier pol icy would direct OPPS outlier payments towards genuine cost of outlier cases, and address situations where charges were being artificially increased to enhance outlier paym ents. We created a se parate outlier policy that would be specific to the estimated co sts and OPPS payments provided to CMHCs. We note that, in the CY 2009 OPPS/ASC final rule with comment period, we established an outlier reconciliation policy to comprehe nsively address charging aberrations related to OPPS outlier payments (73 FR 68594 through 68599). Therefore, beginning for CY 2004, we designated a portion of the estimated OPPS outlier target amountCMS-1601-P 368 specifically for CMHCs, consistent with the percentage of projected payments to CMHCs under the OPPS each year, excluding outlier paym ents, and established a separate outlier

threshold for CMHCs. The separate outlier threshold for CMHCs resulted in $1.8 million in outlier payments to CMHCs in CY 2004, and $0.5 million in outlier payments to CMHCs in CY 2005. In contrast, in CY 2003, more than $30 million was paid to CMHCs in outlier payments. We believe that this difference in outlier payments indicates that the separate

outlier threshold for CMHCs has been successf ul in keeping outlier payments to CMHCs in line with the percentage of OPPS payments made to CMHCs. In this CY 2014 OPPS/ASC proposed rule, we are proposing to continue designating a portion of the estimated 1.0 per cent outlier target am ount specifically for CMHCs, consistent with the percentage of projected payments to CMHCs under the OPPS in CY 2014, excluding outlier payments . CMHCs are projected to receive 0.18 percent of total OPPS payments in CY 2014, excluding outlier payments. Therefore, we are proposing to designate 0.0018 percent of the estimated 1.0 percent outlier target amount for CMHCs, and establish a threshold to achieve that level of outlier payments. Based on our simulations of CMHC payments for CY 2014, we are proposing to continue

to set the threshold for CY 2014 at 3.40 times the highest CMHC PHP APC payment rate (that is, APC 0173 (Level II Partia l Hospitalization)). We con tinue to believe that this approach would neutralize the impact of infl ated CMHC charges on outlier payments and better target outlier payments to those tr uly exceptionally high-c ost cases that might otherwise limit beneficiary acce ss. In addition, we are propos ing to continue to apply theCMS-1601-P 369 same outlier payment percentage that applies to hospitals. Therefore, for CY 2014, we are proposing to continue to pay 50 percent of CMHC per diem costs over the threshold. In section II.G. of this proposed rule, for the hospital outpatie nt outlier payment 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 redi rect outlier payments by imposing a dollar threshold. Therefore, we are not proposing to set a dollar threshold for CMHC outlier payments. In summary, we are proposing to estab lish that if a CMHC’s cost for partial hospitalization services, pa id under either APC 0172 or APC 0173, exceeds 3.40 times the payment rate for APC 0173, the outlier paym ent would be calculate d as 50 percent of the amount by which the cost exceeds 3.40 tim es the APC 0173 payment rate. We are inviting public comments on these proposals. IX. Proposed Procedures That Would Be Paid Only as Inpatient Procedures A. Background

We refer readers to the CY 2012 OPPS/A SC final rule with comment period (76 FR 74352 through 74353) for a full historic al discussion of our longstanding policies on how we identify procedures that are typical ly provided only in an inpatient setting (referred to as the inpatient list) and, ther efore, will not be paid by Medicare under the OPPS; and on the criteria that we use to review the inpatient list each year to determine whether or not any procedures should be removed from the list.CMS-1601-P 370 B. Proposed Changes to the Inpatient List For the CY 2014 OPPS, we are proposing to use the same methodology (described in the November 15, 2004 final ru le with comment period (69 FR 65835)) of reviewing the current li st of procedures on the inpatient list to identify any procedures that may be removed from the list. The esta blished criteria upon which we make such a

determination are as follows: 1. Most outpatient departments are e quipped to provide the services to the Medicare population. 2. The simplest procedure described by the code may be performed in most outpatient departments. 3. The procedure is related to codes that we have already removed from the inpatient list. 4. A determination is made that the pr ocedure is being performed in numerous hospitals on an outpatient basis. 5. A determination is made that the pr ocedure can be appropriately and safely performed in an ASC, and is on the list of approved ASC procedures or has been proposed by us for addition to the ASC list. Using this methodology, we did not identif y any procedures that potentially could be removed from the inpatient list for CY 2014. Therefore, we are proposing to not remove any procedures from the inpatient list for CY 2014.CMS-1601-P 371 The complete list of codes that we ar e proposing to be paid by Medicare in CY 2014 only as inpatient procedures is in cluded as Addendum E to this proposed rule (which is available via the Internet on the CMS Web site). X. Proposed Nonrecurring Policy Changes A. Supervision of Hospital Ou tpatient Therapeutic Services 1. Enforcement Instruction for the Supervisi on of Outpatient Therapeutic Services in CAHs and Certain Small Rural Hospitals In the CY 2009 OPPS/ASC proposed rule and final rule with comment period (73 FR 41518 through 41519 and 73 FR 68702 through 68704, respectively), we clarified that direct supervision is required for hospita l outpatient therapeuti c services covered and paid by Medicare in hospitals as well as in pr ovider-based department s of hospitals, as set forth in the CY 2000 OPPS final rule with comment period (65 FR 18525). In the

CY 2010 OPPS/ASC final rule with comme nt period (74 FR 60575 through 60591), we

finalized a technical correction to the title and text of th e applicable regulations at 42 CFR 410.27 to clarify that this standard ap plies in CAHs as well as hospitals. In response to concerns expressed by the hospita l community, in particular CAHs and small rural hospitals, that they would have diffi culty meeting this st andard, on March 15, 2010,

we instructed all Medicare contractors not to evaluate or enforce the supervision requirements for therapeutic services provide d to outpatients in CAHs from January 1, 2010 through December 31, 2010, while the agen cy revisited the supervision policy during the CY 2011 OPPS/ASC rulemaking cycle.CMS-1601-P 372 Due to continued concerns expressed by CAHs and small rural hospitals, we

extended this notice of nonenf orcement (“enforcement inst ruction”) as an interim measure for CY 2011, and expanded it to appl y to small rural hospitals having 100 or fewer beds (75 FR 72007). We continued to consider the issue further in our annual OPPS notice-and-comment rulemaking, and impl emented an independent review process to obtain advice from the Hospital Outpatient Payment Panel (the Panel) on this matter (76 FR 74360 through 74371). Under this process used since CY 2012, the Panel considers and advises CMS regarding stakehol der requests for changes in the required level of supervision of indi vidual hospital outpati ent therapeutic services. We extended the enforcement instruction the past 2 year s (through CY 2012 and CY 2013) to provide hospitals with adequate opportunity to beco me familiar with the new independent review process and submit evaluation requests, and to m eet the required superv ision levels for all hospital outpatient therapeutic services (we refer reader s to 76 FR 74371 and 77 FR 68425). In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68426), we stated that we expect CY 2013 to be the fina l year that the enforcement instruction would be in effect, as during this year there woul d be additional opportunities for stakeholders to bring their issues to the Panel, and for the Panel to evaluate and provide us with

recommendations on those issues. The current enforcement instruction is available on

the CMS Web site at: http://www.cms.gov/Medicare/Me dicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html?r edirect=/HospitalOutpatientPPS/01_overvi

ew.asp

.CMS-1601-P 373 In CY 2012 and CY 2013, the Panel met and considered several requests from CAHs and other stakeholders for changes in the required level of supervision for

observation and other services. Based on th e Panel’s recommendations, we modified our supervision requirements to pr ovide that most of the se rvices considered may be furnished under general supervision, in accordan ce with applicable Medicare regulations and policies. These decisions ar e posted on the CMS Web site athttp://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/Downlo ads/CY2013-OPPS-General-Supervision.pdf

. We did not receive any requests from stake holders for evaluation of the supervision levels of any other hospital outpatient ther apeutic services at the March 2013 Panel meeting. We continue to believe that direct supervision is the most appropriate level of supervision for most hospita l outpatient therapeutic serv ices under the “incident to” provisions of section 1861(s )(2)(B) of the Act, as we discussed in the CY 2011

OPPS/ASC final rule with co mment period (75 FR 72006). We believe the independent Panel review advisory process has proved an effective means for the hospital community to identify hospital outpatient therapeutic services that can safely be furnished under general supervision, where the supervising pr actitioner does not have to be immediately available in person to provide assistance a nd direction. We encourage hospitals to continue using the Panel process for bringing services to CMS’ at tention that may not require the immediate availability of a superv ising practitioner, es pecially where it is possible to reduce the burden on the workfor ce available to small rural hospitals and CAHs while ensuring the quality and safety of patient care. We encourage hospitals andCMS-1601-P 374 CAHs to continue using the established Pane l process to request changes they believe would be appropriate in supe rvision levels for individual hospital outpatient therapeutic services. Instructions for submitting evaluation requests are available on the Panel Web

site at http://www.cms.gov/Regulations-andGuidance/Guidance/FACA/AdvisoryPanelonA mbulatoryPaymentCla ssificationGroups.ht

ml ). We believe it is appropriate to allow th e enforcement instruction to expire at the end of CY 2013, to ensure the quality a nd safety of hospital and CAH outpatient therapeutic services paid by Medicare. For CY 2014, we anticipate allowing the enforcement instruction to expire, such that all outpatient therapeutic services furnished in hospitals and CAHs would require a minimu m of direct supervision unless the service

is on the list of services that may be furnished under genera l supervision or is designated as a nonsurgical extended duration therapeutic service (the list of services is available on

the CMS Web site at http://www.cms.gov/Medicare/M edicare-Fee-for-ServicePayment/HospitalOutpatientPPS/Downlo ads/CY2013-OPPS-General-Supervision.pdf ). We are interested in receiving public co mments on any potential impacts on access to care and quality of care for specific services that may result from allowing the enforcement instruction to expire at th e end of CY 2013. We are requesting public comments on specific services for which CAHs and small rural hospitals anticipate difficulty furnishing the required direct supe rvision, including speci fic factors that may

contribute to the lack of available staff. 2. Supervision Requirements for Observation ServicesCMS-1601-P 375 In the CY 2011 OPPS/ASC final rule with comment period (75 FR 71999 through 72013), we revised the supervisi on requirements for observation services furnished in the hospital by designating observation services (HCPCS codes G0378 (Hospital observation services, per hour) and G0379 (Direct admissi on of patient for observation care)) as nonsurgical extended duration th erapeutic services (“extende d duration services”). As we provided in the CY 2011 OPPS/ASC fi nal rule with comment period and 42 CFR 410.27(a)(1)(iv)(E), extended duration serv ices require direct supervision at the initiation of the service, which may be follo wed by general supervision for the remainder

of the service at the discre tion of the supervising physic ian or appropriate nonphysician practitioner, once that practi tioner has determined that the patient is stable. The determination by the supervising physician or appropriate nonphysicia n practitioner that the beneficiary is stable and may be tran sitioned to general supervision must be documented in progress notes or in the medical record (75 FR 72011). Since we designated observation services as extended duration services, we have received several inquiries from stakehol ders regarding whethe r Medicare requires multiple evaluations of the beneficiary dur ing the provision of observation services. Specifically, stakeholders asked whether, on ce the supervising physic ian or appropriate nonphysician practitioner transi tions the beneficiary to general supervision and

documents the transition in the medical reco rd, Medicare require further assessment of the beneficiary either per hour (because obs ervation services are billed per hour) or at some other point during provision of the servi ce. We are clarifying that, for observation services, if the supervising physician or appropriate nonphysician practitioner determinesCMS-1601-P 376

and documents in the medical record that the beneficiary is stable and may be transitioned to general supervision, general s upervision may be furnished for the duration of the service. Medicare does not require an additional initiation period(s) of direct supervision during the service. We believe that this clarification will assist hospitals in furnishing the required supervision of observa tion services without undue burden on their

staff. B. Application of Therapy Caps in CAHs For outpatient physical therapy (P T), occupational therapy (OT), and speech-language pathology (SLP) (collectively, “outpatient therapy”) services covered under Medicare Part B, section 1833(g) of the Act applies annual, per beneficiary limitations on incurred expenses, commonly re ferred to as “therapy caps.” There is one therapy cap for OT services and another sepa rate therapy cap for PT and SLP services combined. In the CY 2014 Medicare Physic ian Fee Schedule (MPFS) proposed rule, we are proposing to subject outpati ent therapy services that ar e furnished by a CAH to the therapy caps, the exceptions process, and th e manual medical review process beginning on January 1, 2014. The American Taxpayer Relief Act of 2012 (Pub. L. 112-240) required that therapy services furnished by a CAH during 2013 are counted toward the therapy caps using the MPFS rate, and we are proposing to continue this methodology for 2014 and subsequent years. CAHs would stil l be paid for therapy services under the reasonable cost methodology for CAH outpatient services described at section 1834(g) of the Act. We refer readers to the CY 2014 MPFS proposed rule for detailed information about the proposed application of the thera py caps and related provisions to CAHs. We are including in this CY 2014 OPPS/ASC proposed rule a reference to this proposal as anCMS-1601-P 377

additional means to direct CAHs’ atten tion to our proposal in the CY 2014 MPFS proposed rule. We refer readers to the CY 2014 MPFS proposed rule for instructions for submitting public comments related to this propo sal to apply the ther apy cap to services furnished by CAHs. We look forward to reviewing the comments on this proposal. C. Requirements for Payment of Outpatient Therapeutic (“Incident To”) Hospital or

CAH Services

1. Overview In this section, we are proposing to am end the Medicare conditions of payment for therapeutic outpatient hospital or CAH se rvices and supplies furnished “incident to” a physician’s or nonphysician practitioner’s service (which we refer to as hospital or CAH outpatient therapeutic services) to require that individuals furnishing these services do so in compliance with applicable State law. Under current policy, we generally defer to hospitals to ensure that State scope of practice and other State rules relating to health care delivery are followed, such that these servic es are performed only by qualified personnel in accordance with all applicable laws and regulations. We are proposing to revise the existing regulations to explicitly require th at individuals who pe rform hospital or CAH outpatient therapeutic services must do so in compliance with applicable State laws and regulations as a condition of payment under Medicare Part B. In this section of this proposed rule, we are using the term “hospital” to in clude a CAH unless otherwise specified. Although the term “hospital” doe s not generally incl ude a CAH, section 1861(e) of the Act provides that the term “hospital” includes a CAH if the context otherwise requires. We believe it would be appropriate to apply our proposed policyCMS-1601-P 378 regarding compliance with applicable State law, as we do for other conditions of payment for hospital outpatient therapeutic services , to CAHs as well as other hospitals. 2. Background Section 1861(s)(2)(B) of the Act estab lishes the benefit category for hospital

“incident to” medical and other health servic es, which are paid under Medicare Part B. The statute specifies that “incident to” serv ices are “hospital services (including drugs and biological which are not usually self-administered by the patient) incident to physicians’ services rendered to outpatients and partial hospitalizati on services incident

to such services.” In the CY 2012 O PPS/ASC final rule with comment period (76 FR 74369 through 74370), we clarified that Medicare defines these services as hospital outpatient therapeutic services, wh ich are, according to our policy, furnished “incident to” a physician’ s service even when described by benefit categories other than the specific “incident to” provision in sect ion 1861(s)(2)(B) of th e Act (for example, radiation therapy services described under section 1861(s)(4) of the Act). Because hospital outpatient therapeutic services are furnished “incident to” a physician’s professional service, we believe the conditions of payment that derive from the “incident to” nature of the services pa id under section 1861(s )(2)(B) of the Act ap ply to all hospital outpatient therapeutic services, including t hose described under benefit categories other the specific “incident to” provision in section 1861(s)(2 )(B) of the Act. In addition to the requirements of the statute, the regulati on at 42 CFR 410.27 sets forth specific requirements that must be met in order for hospital to be paid under Medicare Part B for therapeutic hospital or CAH services and supplies furnished incidentCMS-1601-P 379 to a physician’s or nonphysician practitione r’s service (hospital or CAH outpatient therapeutic services). Sec tion 410.27 describes hospital or CAH services and supplies furnished incident to a physician’s or nonphysic ian practitioner’s services as therapeutic services and provides the conditions of paym ent. Specifically, § 410.27(a) provides that Medicare Part B pays for therapeutic hosp ital or CAH services and supplies furnished incident to a physician’s or nonphysician practi tioner’s service. These are defined, in part, as all services and supplies furnished to hospital or CAH outpatients that are not diagnostic services and that aid the p hysician or nonphysician practitioner in the treatment of the patient, including drugs and biologicals that cannot be self-administered, if they are furnished—

● By or under arrangements made by the participating hospital or CAH, except in

the case of a SNF resident as provided in 42 CFR 411.15(p);

● As an integral alt hough incidental part of a physician’s or nonphysician practitioner’s services;

● In the hospital or CAH or in a departme nt of the hospital or CAH, as defined in 42 CFR 413.65 [a provider-based department]; and

● Under the direct supervision (or other level of supervision as specified by CMS for the particular service) of a physician or a nonphysician practitione r. For purposes of this section, “nonphysician prac titioner,” as defined in § 410.27(g), means a clinical psychologist, licensed clinical social worker, physician assi stant, nurse practitioner, clinical nurse specialist, or certified nurse-midwife.CMS-1601-P 380 Sections 410.27(b) through (f) provide additional c onditions of payment for partial hospitalization services, drugs and biol ogicals, emergency services, and services furnished by an entity other than the hos pital (or CAH). We commonly refer to the services described in § 410.27 as “incident to” services. In recent years, we have discussed a nd refined the supervision regulations under § 410.27, which are conditions of Medicare Pa rt B payment for hospital outpatient “incident to” (“therapeutic”) services. For ex ample, we have discussed our belief that direct supervision is the most appropriate level of supervisi on for most of these services, unless personal supervision or personal performance of th e services by the physician or nonphysician practitioner is more a ppropriate, given the incident to nature of the services as an integral although incide ntal part of a physician’s or nonphysician practitioner’s services (74 FR 60584, 75 FR 72006, and 76 FR 42281). We have stat ed our historical interpretation of section 1861(s)(2 )(B) of the Act, specificall y, that “incident to” services are furnished under the order of a physicia n (or nonphysician practiti oner), the physician is involved in the management of the patient , and the physician supe rvises the provision of those services when he or she does not pr ovide them directly (75 FR 72006). This is reflected in our requirement for a minimum of direct supervision, except for a limited set of services that may be furnished under general supervision or are designated as nonsurgical extended duration th erapeutic services which re quire direct supervision initially with potential tran sition to general supervision (we refer readers to the CMS

Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/Downlo ads/CY2013-OPPS-General-Supervision.pdf ).CMS-1601-P 381 In 42 CFR 410.27(a)(1)(iv), we regulate the qualifications of physicians and nonphysician practitioners superv ising other personnel that are personally performing a service, or part of a service: “(C) Nonphys ician practitioners may provide the required supervision of services that they may persona lly furnish in accordance with State law and all additional requirements, includi ng those specified in §§ 410.71, 410.73, 410.74, 410.75, 410.76, and 410.77” and “(D) For pulmonary rehabilitation, cardiac rehabilitation, and intensive ca rdiac rehabilitation services, direct supervision must be furnished by a doctor of medicine or a doc tor of osteopathy, as specified in §§ 410.47 and 410.49, respectively.” Similarly, we provide in the Medi care Benefit Policy Manual (MBPM, Pub. 100-02) that hospital outpatient therapeutic serv ices and supplies must be furnished under the order of a physician or othe r practitioner practici ng within the extent of the Act, the Code of Federal Regulations, and State la w (Chapter 6, Section 20.5.2 of the MBPM). Section 20.5.2 of the MBPM specifies that th e services must be furnished by hospital personnel under the appropriate supervision of a physician or nonphysician practitioner in

accordance with 42 CFR 410.27 and 482.12. This does not mean that each occasion of service by a nonphysician need also be the occa sion of the actual re ndition of a personal professional service by the physician responsible for care of the patient. However, during any course of treatment rendered by auxiliar y personnel, the physic ian must personally see the patient periodically and sufficiently ofte n to assess the course of treatment and the patient’s progress and, when necessary, to change the treatment regimen. A hospital service or supply would not be considered incident to a physicia n’s service if theCMS-1601-P 382 attending physician merely wrote an order fo r the services or supplies and referred the patient to the hospital without being involved in the manage ment of that course of

treatment.

Central to the issue of services that hospitals may bill to Medicare that are not performed personally by the physician is th e assessment of the qua lifications of the

individuals to whom the services are dele gated. As medical pr actice has evolved over time, the services performed in the hospital outpatient setting have expanded to include more complicated services such as advanced surgery and a complex variety of radiation therapy. In addition, the type s of services that can be furnished “incident to” a physician’s or nonphysician practitioner’s serv ices have increased. Under current Medicare Part B payment policy, we generally defer to hospitals to ensure that State scope of practice laws are followed and that the personnel who furnish hospital outpatient therapeutic (“incident to”) services are li censed and are otherwise qualified to do so. Specifically, we have stated that, consideri ng that hospitals furnish a wide array of complex outpatient services and procedures, including surgical procedures, we would expect that hospitals have the credentiali ng procedures, bylaws, and other policies in place to ensure that hospital out patient services furnished to Medicare beneficiaries are being provided only by qualified practitioners in accordance with all applicable laws and regulations (74 FR 60584; Chapte r 6, Section 20.5.4 of the MBPM). However, our payment regulations do not cont ain restrictions on the types of auxiliary personnel that can perform hospital outpatient therapeutic (“ incident to”) servi ces, other than rules relating to supervision by a physician or qualified nonphysic ian practitioner, and do notCMS-1601-P 383 specifically require that performance of these services be in compliance with applicable State law. Over the past years, several s ituations have come to our attention where

Medicare was billed for “incident to” services that were performed by an individual who

did not meet the State standards for those serv ices in the State in which services were performed. The physician or nonphysician prac titioner billing for the services would have been permitted under State law to personally furnish the services, but the services were actually provided by other individuals who were not in compliance with State law in providing the particular services (or aspect of the services). Although we would expect that all hospita l services for which Medicare payment

is made would be furnished in accordance with State law, the Medicare requirements for hospital outpatient therapeutic services and supplies incident to a physician’s services (§ 410.27, discussed above) do not specifica lly make compliance with State law a condition of payment for services (or aspect s of services) and s upplies furnished and

billed as “incident to” services. Nor do any of the regulations regarding hospital outpatient therapeutic servi ces and supplies incident to the services of nonphysician practitioners contain this requirement. T hus, Medicare has had limited recourse when hospital outpatient therapeutic (“incident to”) services are not furnished in compliance

with State law. In 2009, the Office of the Inspector Ge neral (OIG) issued a report entitled “Prevalence and Qualifications of Nonphys icians Who Performed Medicare Physician Services” (OEI-09-06-00430) that considered, in part, the qualifica tions of auxiliary personnel providing “incident to” physician serv ices. After finding that services wereCMS-1601-P 384 being provided and billed to Medicare by auxiliary personnel “...who did not possess the required licenses or certifica tions according to State laws, regulations, and/or Medicare rules,” the OIG recommended that we revise the “incident to” rules to, among other things, “require that physicians who do not pe rsonally perform the services they bill to Medicare ensure that no persons except...nonph ysicians who have the necessary training, certification, and/or licensure pursuant to State laws, Stat e regulations, and Medicare regulations personally perform the services under th e direct supervision of a licensed physician.” We are proposing amendments to our regulations in or der to address this

recommendation. To ensure that the practitioners and ot her personnel providi ng hospital outpatient therapeutic services to Medi care beneficiaries incident to a physician’s or nonphysician practitioner’s service do so in accordance with the requirements of the State in which the services are furnished, and to ensure that Me dicare payments can be recovered when such services are not furnished in compliance with the State law, we are proposing to add a new condition of payment to the “inciden t to” regulations at § 410.27, Therapeutic outpatient hospital or CAH services and supplies incident to a physician’s or nonphysician practitioner’s servic e: Conditions. Specifically, we are proposing to add a provision under a new paragraph (a)(1)(vi) unde r § 410.27 to provide that “Medicare Part B pays for therapeutic hospital or CAH serv ices and supplies furnished incident to a physician’s or nonphysician practitioner’s servi ce... if they are furnished “In accordance with applicable State law.” The proposed pol icy would recognize the role of States inCMS-1601-P 385 establishing the licensure and other qualifications of physic ians and other health care professionals for the delivery of hospital (or CAH) outpatient therapeutic services. This proposal is consistent with other areas of the Medicare program where CMS defers to State rules regarding the delivery of hospital services. For example, the hospital conditions of participation (CoPs) at 42 CFR 482.12(c)(2) defer to State law in determining who can admit patients as inpatient s of a hospital: “Patients are admitted to the hospital only on the recommendation of a licensed practitioner permitted by the State to admit patients to a hospital.” The CoP also provides that, “If a Medicare patient is admitted by a practitioner not specified in paragraph (c)(1) of this section (that lists practitioners that must care for Medicare pa tients), that patient is under the care of a doctor of medicine or osteopathy.” Thus, in determining who may admit inpatients to a hospital, Medicare defers to State law rules. Also, as we stated in a recent rule addressing credentialing and privileging and telemedicine services under the CoPs (77 FR 29047): “CMS recognizes that practiti oner licensure laws and regulations have traditionally been, and continue to be, the provenance of individual States, and we are not seeking to preempt State authority in this matter.” We believe it is appropriate to similarly require that all hosp ital outpatient services furnishe d incident to a physician’s or nonphysician practitioner’s serv ices be furnished in accordance with State law requirements. As evidenced by these exam ples, throughout the Medicare program the qualifications required for the de livery of health care servic es are generally determined

with reference to State law. In addition to the health and safety benefits we believe would accrue to the Medicare patient population, this approach would assure that FederalCMS-1601-P 386 dollars are not expended for serv ices that do not meet the sta ndards of the States in which they are being furnished, and provides the ability for the Federal government to recover funds paid where services and supplies are not furnished in accord ance with State law. This proposal would not impose any ne w requirements on hospitals billing the Medicare program because practitioners and other personnel furnishing services in a given State would already be re quired to comply with the laws of that State. This regulatory change would simply adopt the existing requirements as a condition of payment under Medicare. Codifying this requirement would provide the Federal government with a clear basis to deny a clai m for Medicare payment when services are not furnished in accordance with applicable Stat e law, and the ability to recover funds, as well as assure that Medicare pays for servic es furnished to beneficiaries only when the services meet the requirements imposed by the States to regulate health care delivery for the health and safety of their citizens. We welcome public comments on this proposal.

3. Technical Correction In our review of § 410.27, we noted that paragraph (a) defines therapeutic hospital or CAH services and supplies furnished incident to a physician’s or nonphysician practitioner’s service as “a ll services and supplies furn ished to hospital or CAH outpatients that are not dia gnostic services and that aid the physician or nonphysician practitioner in the trea tment of the patient, including drugs and biologicals that cannot be self-administered.” Section 1861( s)(2)(B) of the Act describes these services as “hospital services (including drugs and biologicals wh ich are not usually se lf-administered by the patient) incident to physicians’ services rendered to outpatients and partial hospitalizationCMS-1601-P 387

services incident to su ch services.” The statute include s in this benefit category “drugs and biologicals which are not usually self-administered by the patient.” We are proposing to make a technical correction that would amend th e description of these drugs and biologicals at § 410.27(a) to more appr opriately reflect the statutory language. Specifically, we are proposing to delete the phrase “drugs and biol ogicals that cannot be self-administered” and replace it with the phrase “drugs and biologicals which are not usually self-administered.” Under this pr oposed technical correc tion, the language of § 410.27(a) would read, “Medicare Part B pays for therapeutic hospital or CAH services and supplies furnished incident to a physic ian's or nonphysician practitioner's service, which are defined as all services and supp lies furnished to hospital or CAH outpatients that are not diagnostic services and that ai d the physician or nonphys ician practitioner in the treatment of the patient, including drugs and biologicals which are not usually

self-administered....” D. Collecting Data on Services Furnished in Off-Campus Provider-Based Departments In recent years, the re search literature and popular press have documented the increased trend toward hospital acquisition of physician practices, integration of those practices as a department of the hospital, and the resultant increase in the delivery of physicians’ services in a hospita l setting (for example, we re fer readers to Ostrom, Carol M., “Why you might pay twice for one visit to a doctor,” Seattle Times, November 3, 2012, and O’Malley, Ann, Amelia M. Bond, and Robert Berenson, Rising hospital employment of physici ans: better quality, higher costs? Issue Brief No. 136, Center for Studying Health System Change, August 2011). When a Medicare beneficiaryCMS-1601-P 388 receives outpatient services in a hospital, the total payment amount for outpatient services made by Medicare is generally higher than the total payment amount made by Medicare when a physician furnishes those same services in a freestanding clin ic or in a physician office. As more physician practices beco me hospital-based, news articles have highlighted beneficiary liability for an addi tional “facility fee,” which is the payment

Medicare makes when services are furnished in a hospital in addition to the payment to the physician. MedPAC has questioned the appropriateness of increased Medicare payment and beneficiary cost-sharing when physicians’ offices become hospital outpatient departments and has recommende d that Medicare pay selected hospital outpatient services at the Medicare Ph ysician Fee Schedule (MPFS) rates (MedPAC March 2012 Report to Congress; “Addressing Medicare Payment Differences across Settings,” presentation to the Commission on March 7, 2013). The total payment (including both Medi care program payment and beneficiary cost-sharing) generally is hi gher when outpatient services are furnished in the hospital outpatient setting rather than a freestanding clinic or a physic ian office. Both the OPPS and the MPFS establish payment based on the re lative resources involved in furnishing a service. In general, we expect hospitals to have overall higher resource requirements than physician offices because hospitals are required to meet the conditions of participation, to maintain standby capacity fo r emergency situations, and to be available to address a wide variety of complex medical needs in a community. When services are furnished in the hospital setting such as in off-campus provider-based departments, Medicare pays the physician a lower facility payment under the MPFS, but then also paysCMS-1601-P 389 the hospital under the OPPS. The beneficiar y pays coinsurance for both the physician payment and the hospital outpatient payment. The term “facility fee” refers to this additional hospital outpatient payment. Upon acquisition of a physician practice, hospitals frequently treat the practice locations as off-campus provi der-based departments of the hospital and bill Medicare for

services furnished at those locations under the OPPS. (For further information on the provider-based regulations at § 413.65, we refer readers to http://www.gpo.gov/fdsys/pkg/CFR-2010-titl e42-vol2/pdf/CFR-2010-title42-vol2- sec413-65.pdf . Since October 1, 2002, we have not re quired hospitals to seek from CMS a determination of provider-based status for a fa cility that is locate d off campus. We also do not have a formal process for gatheri ng information on the frequency, type, and payment for services furnished in off-campus provider-based departments of the hospital. In order to better understand the growi ng trend toward hospital acquisition of physician offices and subsequent treatm ent of those locations as off-campus provider-based outpatient departments, we ar e considering collecting information that would allow us to analyze the frequency, t ype, and payment for services furnished in off-campus provider-based hospi tal departments. We have considered several potential methods. Claims-based approaches could in clude creating a HCPCS modifier that could be reported with every code for services furnished in an off-campus provider-based department of a hospital on the CMS-1500 clai m form for physician services and the UB-04 (CMS form 1450) for hospital outpatient claims. In addition, we have considered asking hospitals to break out the costs and charges for their provider-based departmentsCMS-1601-P 390 as outpatient service cost centers on the Medi care hospital cost report, form 2552-10. We note that some hospitals already break out th ese costs voluntarily or because of cost reporting requirements for the 340B Drug Disc ount Program but this practice is not

consistent or standardized. We are inv iting public comments on the best means for collecting information on the frequency, type, and payment for services furnished in offcampus provider-based departments of hospitals. XI. Proposed CY 2014 OPPS Paymen t Status and Comment Indicators A. Proposed CY 2014 OPPS Paymen t Status Indicator Definitions Payment status indicators (SIs) that we assign to HCPCS codes and APCs serve an important role in determining payment fo r services under the OPPS. They indicate whether a service represented by a HCPCS code is payable under the OPPS or another payment system and also whether particul ar OPPS policies apply to the code. The complete list of the proposed CY 2014 status indicators and their defi nitions is displayed

in Addendum D1 on the CMS Web site at: http://www.cms.gov/Me dicare/Medicare-Feefor-Service-Payment/HospitalOutpatientPPS/index.html . The proposed CY 2014 status indicator assignments for APCs and HC PCS codes are shown in Addendum A and Addendum B, respectively, on the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html . The proposed changes to CY 2014 status

indicators and their definitions are discussed in detail below. For CY 2014, we are proposing to create a new status indicator “J1” to identify HCPCS codes that are paid under a comprehens ive APC. A claim with the new proposedCMS-1601-P 391 status indicator “J1” will trigger a comp rehensive APC payment for the claim. The comprehensive APCs that we are proposing to establish are described in detail in section II.A.2.e. of this proposed rule. For CY 2014, we are proposing to delete st atus indicator “X” and assign ancillary services that are currently assigned status indi cator “X” to either stat us indicator “Q1” or “S”. First, services that are proposed to be assigned status indicator “Q1” include many minor diagnostic tests that are generally ancillary to and perf ormed with another service. However, services that are propos ed to be assigned to status indicator “Q1” also may be performed alone. Given the nature of these se rvices and their role in hospital outpatient care, we believe that when these services ar e performed with another service they should be packaged, but that they should be separate ly paid when performed alone. Therefore, we believe it is appropriate to conditionally package all ancillary services that are currently assigned to status indicator “X,” and are proposing to assign them to status indicator “Q1.” We also are proposing that preven tive services curren tly assigned status indicator “X” continue to receive separate payment in all cases and be assigned status indicator “S” for CY 2014. These proposed ch anges are discussed in greater detail in section II.A.3. of this proposed rule. In addition, we are prop osing to revise the definition of status indicator “Q1” by re moving status indicator “X” from the packaging criteria, so that codes assigned status indicator “Q 1” are STV-packaged, rather than STVXpackaged, because status indicator “X” is proposed for deletion. For CY 2014, we are proposing to revise th e definitions of status indicators “S” and “T” to remove the word “significant” from these definitions. It is no longerCMS-1601-P 392 necessary to distinguish significant procedures from ancillary services because we are proposing to delete the status indicator that describes ancillary serv ices. We also are proposing to add the word “service” to the defini tions of status indica tors “S” and “T” to indicate “procedure or service; not discounted when multiple,” as applicable to status indicator “S” and “procedure or service; multiple reduction applies,” as applicable to

status indicator “T.” In addition, we are proposing to update th e definition of status indicator “A” for CY 2014. We are proposing to remove “Rou tine Dialysis Services for ESRD Patients Provided in a Certified Dialysis Unit of a Hospital” from the list of items and services applicable for the definition of status i ndicator “A” because these services are not recognized by OPPS when submitted on an outpatie nt hospital Part B bill type and are instead assigned to status indicator “B.” B. Proposed CY 2014 Comm ent Indicator Definitions For the CY 2014 OPPS, we are proposing to use the same two comment

indicators that are in e ffect for the CY 2013 OPPS.

● “CH”—Active HCPCS codes in current a nd next calendar year; status indicator and/or APC assignment have changed or activ e HCPCS code that will be discontinued at the end of the current calendar year.

● “NI”—New code for the next calendar year or existing code with substantial revision to its code descriptor in the next calendar year as compared to current calendar year, interim APC assignment; comments will be accepted on the interim APC assignment for the new code.CMS-1601-P 393 We are proposing to use the “CH” co mment indicator in this CY 2014 OPPS/ASC proposed rule to indicate HCPCS codes fo r which the status indicator or APC assignment, or both, are proposed for change in CY 2014 compared to their assignment as of June 30, 2013. We believe that using the “CH” indicator in this proposed rule would facilitate the public’s review of th e changes that we are proposing for CY 2014.

Use of the comment indicator “CH” in associ ation with a composite APC indicates that the configuration of the composite APC is proposed to be changed in the CY 2014 OPPS/ASC final rule with comment period. We are proposing to use the “CH” co mment indicator in the CY 2014 OPPS/ASC final rule with comment period to indicate HC PCS codes for which the status indicator or APC assignment, or both, would change in CY 2014 compared to their assignment as of December 31, 2013. In addition, we are proposing that an y existing HCPCS codes with substantial revisions to the code descriptors for CY 2014 compared to the CY 2013 descriptors will

be labeled with comment indicator “NI” in Addendum B to the CY 2014 OPPS/ASC final rule with comment period. However, in order to receive the comment indicator “NI,” the CY 2014 revision to the code descri ptor (compared to the CY 2013 descriptor) must be significant such that the new c ode 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 will be open for comment as part of the CY 2014 OPPS/ASC final rule with comment period. Like all codes labeled with commentCMS-1601-P 394 indicator “NI,” we will respond to public comments and finalize their OPPS treatment in

the CY 2015 OPPS/ASC final ru le with comment period. In accordance with our usual practice, we are proposing that CPT and Level II

HCPCS codes that are new for CY 2014 also will be labeled with comment indicator

“NI” in Addendum B to the CY 2014 OPPS/ ASC final rule with comment period. Only HCPCS codes with comment i ndicator “NI” in the CY 2014 OPPS/ASC final rule with comment period will be subj ect to comment. HCPCS codes that do not appear with comment indicator “NI” in th e CY 2014 OPPS/ASC final rule with comment period will not be open to public comment, unl ess we specifically request additional

comments elsewhere in the fina l rule with comment period.

We believe that the CY 2013 definitions of the OPPS status indicators continue to be appropriate for CY 2014. Therefore, we are proposing to continue to use those

definitions without modification for CY 2014. The proposed definitions are listed in

Addendum D2 on the CMS Web site at: http://www.cms.gov/Me dicare/Medicare-Feefor-Service-Payment/HospitalOutpatientPPS/index.html

. XII. Proposed Updates to the Ambulat ory Surgical Center (ASC) Payment System A. Background 1. Legislative History, Stat utory Authority, and Prior Rulemaking for the ASC Payment System For a detailed discussion of the legisla tive history and statutory authority related to ASCs, we refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74377 through 74378) and the June 12, 1998 proposed rule (63 FR 32291 throughCMS-1601-P 395 32292). For a discussion of prior rulemaking on the ASC payment system, we refer

readers to the CY 2012 OPPS/ ASC final rule with comm ent period (76 FR 74378 through 74379) and the CY 2013 OPPS/ASC final ru le with comment period (77 FR 68434 through 68467). 2. Policies Governing Changes to the Li sts of Codes and Payment Rates for ASC Covered Surgical Procedures a nd Covered Ancillary Services Under § 416.2 and § 416.166 of the regulati ons, subject to ce rtain exclusions, covered surgical procedures in an ASC are su rgical procedures that are separately paid under the OPPS, that would not be expected to pose a significant risk to beneficiary safety when performed in an ASC, and that would not be expected to require active medical monitoring and care at midnight followi ng the procedure (“overnight stay”). We adopted this standard for defining which surg ical procedures are covered under the ASC payment system as an indicator of th e complexity of the procedure and its appropriateness for Medicare payment in ASCs. We use this standard only for purposes of evaluating procedures to determine whether or not they are appropriate to be furnished

to Medicare beneficiaries in AS Cs. We define surgical proc edures as those described by Category I CPT codes in the surgical ra nge from 10000 through 69999, as well as those Category III CPT codes and Level II HCPCS codes that directly crosswalk or are clinically similar to ASC covered surgical procedures (72 FR 42478). In the August 2, 2007 final rule, we also established our policy to make separate ASC payments for the following ancillary items and services when they are provided integral to ASC covered surgical procedur es: (1) brachytherapy sources; (2) certainCMS-1601-P 396 implantable items that have pass-through stat us under the OPPS; (3) certain items and services that we designate as contractor-p riced, including, but not limited to, procurement of corneal tissue; (4) certain drugs and biologi cals for which separate payment is allowed under the OPPS; and (5) certain radiology servic es for which separate payment is allowed under the OPPS. These covered ancillary serv ices are specified in § 416.164(b) and, as stated previously, are eligib le for separate ASC payment (72 FR 42495). Payment for ancillary items and services th at are not paid separately under the ASC payment system is packaged into the ASC payment for the covered surgical procedure. We update the lists of, and payment rate s for, covered surgic al procedures and covered ancillary services in ASCs in c onjunction with the annual proposed and final rulemaking process to update the OPPS and the ASC payment system (§ 416.173; 72 FR 42535). In addition, as discussed in deta il in section XII.B. of this proposed rule, because we base ASC payment policies fo r covered surgical procedures, drugs, biologicals, and certain other covered ancillary services on the OPPS payment policies, we also provide quarterly update change re quests (CRs) for ASC services throughout the year (January, April, July, and October). CM S releases new Level II codes to the public or recognizes the release of new CPT code s by the AMA and makes these codes effective (that is, the codes are recogni zed on Medicare claims) outside of the formal rulemaking process via these ASC quarterly update CRs . Thus, these quarterly updates are to implement newly created Level II HCPCS and Category III CPT codes for ASC payment and to update the payment rates for separate ly paid drugs and biologicals based on the most recently submitted ASP data. New Cate gory I CPT codes, except vaccine codes,CMS-1601-P 397 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 ne wly proposed for removal from the OPPS inpatient list), new procedures , and procedures for which there is revised coding, to identify any that we believe meet the crit eria for designation as ASC covered surgical procedures or covered ancill ary services. Updating the li sts of ASC covered surgical procedures and covered ancillary services, as well as their payment rates, in association with the annual OPPS rulemaking cycle is particularly important because the OPPS relative payment weights and, in some cases, pa yment rates, are used as the basis for the payment of covered surgical procedures and covered ancillary servic es under the revised ASC payment system. This joint update pro cess ensures that the ASC updates occur in a regular, predictable, and timely manner. B. Proposed Treatment of New Codes 1. Proposed Process for Recognizing New Category I and Category III CPT Codes and

Level II HCPCS Codes Category I CPT, Category III CPT, and Le vel II HCPCS codes are used to report procedures, services, items, and supplies und er the ASC payment system. Specifically,CMS-1601-P 398 we recognize the following codes on ASC clai ms: (1) Category I CPT codes, which describe surgical procedures; (2) Categor y III CPT codes, which describe new and emerging technologies, services, and procedur es; and (3) Level II HCPCS codes, which are used primarily to identify products, supplie s, 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 a nd Level II HCPCS codes that describe surgical procedures, and to make pre liminary determinations during the annual OPPS/ASC rulemaking process re garding whether or not they meet the criteria for payment in the ASC setting as covered surgical procedures and, if so, whether or not they are office-based procedures (72 FR 42533 th rough 42535). In addition, we identify new codes as ASC covered ancillary services ba sed upon the final payment policies of the revised ASC payment system. We have separated our discussion below into two sections based on whether we are proposing to solicit pub lic comments in this CY 2014 OPPS/ASC proposed rule (and respond to those comments in the CY 2014 OP PS/ASC final rule with comment period) or whether we will be soliciting public comm ents in the CY 2014 OPPS/ASC final rule with comment period (and responding to those comments in the CY 2015 OPPS/ASC final rule with comment period). We note that we sought public comment in the CY 2013 OPPS/ASC final rule with comment period on the new Category I a nd III CPT and Level II HCPCS codes that were effective January 1, 2013. We al so sought public comment in the CY 2013CMS-1601-P 399 OPPS/ASC final rule with comment period on the new Level II HCPCS codes effective October 1, 2012. These new codes, with an effective date of October 1, 2012, or January 1, 2013, were flagged with comment indicator “NI” in Addenda AA and BB to

the CY 2013 OPPS/ASC final rule with comm ent period to indicate that we were assigning them an interim payment status a nd payment rate, if applicable, which were subject to public comment following public ation of the CY 2013 OPPS/ASC final rule with comment period. We will respond to public comments and finalize the treatment of these codes under the ASC payment system in the CY 2014 OPPS/ASC final rule with comment period. 2. Proposed Treatment of New Level II HCPCS Codes and Category III CPT Codes Implemented in April 2013 and July 2013 for Which We Are Soliciting Public Comments in this CY 2014 OPPS/ASC Proposed Rule In the April 2013 and July 2013 CRs, we made effective for April 1, 2013 and July 1, 2013, respectively, a total of nine new Level II HCPCS codes and two new Category III CPT codes that describe covered ASC services that we re not addressed in

the CY 2013 OPPS/ASC final rule with co mment period. In the April 2013 ASC quarterly update (Transmittal 2662, CR 8237, dated March 1, 2013), we added one new surgical Level II HCPCS code and three new drug and biological Level II HCPCS codes to the list of covered surgical procedures and covered ancillary services, respectively.

Table 33 below lists the new Level II HCPCS codes that were implemented April 1 2013, along with their proposed pa yment indicators for CY 2014.CMS-1601-P 400 In the July 2013 quarterly update (Transmittal 2717, Change Request 8328, dated May 31, 2013), we added one new surgical Leve l II HCPCS code to the list of covered surgical procedures and, one new vaccine Level II HCPCS code, and three new drug and biological Level II HCPCS codes to the list of covered ancillary services. Table 34 below lists the new Level II HCPCS codes that were implemented July 1, 2013, along with their proposed payment indicators and proposed ASC payment rates for CY 2014. We assigned payment indicator “K2” (Dr ugs and biologicals paid separately when provided integral to a surg ical procedure on the ASC list; payment based on OPPS rate) to the six new drug and biological Level II HC PCS codes that are separately paid when provided in ASCs. We assigned paymen t indicator “L1” (Influenza vaccine; pneumococcal vaccine. Packaged item/servi ce; no separate payment made) to the new vaccine Level II HCPCS code and payment i ndicator “G2” (Non office-based surgical procedure added in CY 2008 or later; paym ent based on OPPS relative payment weight) to the two new surgical Level II HCPCS codes. We are soliciting public comment on the proposed CY 2014 ASC payment indicators and payment rates for the covered surgical procedures and covered ancillary

services listed in Tables 33 and 34 belo w. Those HCPCS codes became payable in ASCs, beginning April 1, or July 1, 2013, and are paid at the ASC rates posted for the appropriate calendar quarter on the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/ASCPayment/11_Addenda_Updates.html

.CMS-1601-P 401

The HCPCS codes listed in Table 33 ar e included in Addenda AA or BB to this proposed rule (which is availa ble via the Internet on the CMS Web site). We note that all ASC addenda are only available via the In ternet on the CMS Web site. Because the payment rates associated with the new Level II HCPCS codes that became effective July 1, 2013 (listed in Table 34 of this proposed rule) 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 paymen t indicators and pa yment 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 rate s will be included in the appropriate

Addendum to the CY 2014 OPPS/ASC final rule with comment period. Thus, the codes implemented by the July 2013 ASC quarterly update CR and their proposed CY 2014 payment rates (based on July 2013 ASP data ) that are displayed in Table 34 are not included in Addenda AA or BB to this proposed rule (which is availa ble via the Internet on the CMS Web site). The final list of AS C covered surgical procedures and covered ancillary services and the associated paym ent weights and payment indicators will be

included in Addenda AA or BB to the CY 2014 OPPS/ASC final rule with comment period, consistent with ou r annual update policy. We are soliciting public comment on thes e proposed payment indicators and the proposed payment rates for the new Level II HCPCS codes that were newly recognized as ASC covered surgical procedures or cove red ancillary services in April 2013 and July 2013 through the quarterly update CRs, as liste d in Tables 33 and 34 below. We areCMS-1601-P 402 proposing to finalize their payment indicator s and their payment rates in the CY 2014 OPPS/ASC final rule with comment period.

TABLE 33.—NEW LEVEL II HCPCS CODES FOR COVERED SURGICAL PROCEDURES OR COVERED ANCILLARY SERVICES IMPLEMENTED IN APRIL 2013

CY 2013 HCPCS

Code CY 2013 Long Descriptor Proposed CY 2014 Payment Indicator C9130 Injection, immune globul in (Bivigam), 500 mg K2 C9297 Injection, omacetaxine mepesuccinate, 0.01 mg K2 C9298 Injection, ocriplasmin, 0.125 mg K2 C9735 Anoscopy; with directed submucosal injection(s), any substance G2

TABLE 34.—NEW LEVEL II HCPCS CODES FOR COVERED SURGICAL PROCEDURES OR COVERED ANCILLARY SERVICES IMPLEMENTED IN JULY 2013

CY 2013 HCPCS

Code CY 2013 Long Descriptor Proposed CY 2014 Payment Indicator Proposed CY 2014 Payment Rate C9131 Injection, ado-trastuzumab emtansine, 1 mg K2 $29.40

C9736 Laparoscopy, surgical, radiofrequency ablation of uterine fibroid(s), including intraoperative guidance and monitoring, when performed G2 $2,010.00

Q2033 Influenza Vaccine, Recombinant Himagglutinin Antigens, for Intramuscular Use (Flublok) L1 N/A Q2050* Injection, Doxorubicin Hydrochloride, Liposomal, Not Otherwise Specified, 10 mg K2 $545.44 Q2051* Injection, Zoledronic Acid, Not Otherwise Specified, 1 mg K2 $196.42

*Note: HCPCS code Q2050 replaced code J9002 and HCPCS code Q2051 re placed HCPCS codes J3487 and J3488 beginning July 1, 2013.CMS-1601-P 403 Through the July 2013 quarterly update CR, we also implemented ASC payment for two new Category III CPT codes as AS C covered ancillary services, effective July 1, 2013. These codes are listed in Ta ble 35 below, along with their proposed payment indicators and proposed payment rates for CY 2014. Because the payment rates associated with the new Category III CPT c odes that became effective for July are not available to us in time for incorporation in to the Addenda to this OPPS/ASC proposed rule, our policy is to include the codes, th eir proposed payment indicators, and proposed payment rates in the preamble to the propos ed rule but not in the Addenda to the proposed rule. The codes listed in Table 35 of this proposed rule and their final payment

indicators and rates will be included in Addendum BB to the CY 2014 OPPS/ASC final rule with comment period. We are proposing to assign payment i ndicator “Z2” (Radiology service paid separately when provided integral to a su rgical procedure on ASC list; payment based on OPPS relative payment weight) to the two new Category III CPT codes implemented in July 2013. ASC covered ancillary services are certain items and services that are integrally related to the provision of ASC c overed surgical procedures that are paid separately under the OPPS. We are so liciting public comment on these proposed payment indicators and the payment rates fo r the new Category III CPT codes that were newly recognized as ASC covered ancillary services in July 2013 through the quarterly update CR, as listed in Table 35 below. We are proposing to finalize their payment indicators and their payment rates in th e CY 2014 OPPS/ASC final rule with comment period.CMS-1601-P 404

TABLE 35.—NEW CATEGORY III CPT CODES IMPLEMENTED IN JULY 2013 AS ASC COVERED ANCILLARY SERVICES

CY 2013 CPT Code CY 2013 Long Descriptor Proposed CY 2014 Payment Indicator Proposed CY 2014 Payment Rate 0331T Myocardial sympathetic innervation imaging, planar qualitative and quantitative assessment Z2 $212.08

0332T Myocardial sympathetic innervation imaging, planar qualitative and quantitative assessment; with tomographic SPECT Z2 $212.08

3. Proposed Process for New Level II HC PCS Codes and Category I and III CPT Codes for Which We Will Be Soliciting Public Comments in the CY 2014 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 HCPC S codes that are effective January 1 in the final rule with comment period updati ng the ASC payment system for the following calendar year. These codes are released to the public via the CM S HCPCS (for Level II HCPCS codes) and AMA Web sites (for CPT codes), and also through the January ASC quarterly update CRs. In the past, we also have released new Level II HCPCS codes that are effective October 1 through the October ASC quarterly update CRs and incorporated

these new codes in the final rule with co mment period updating the ASC payment system for the following calendar year. All of thes e codes are flagged with comment indicator

“NI” in Addenda AA and BB to the OPPS/AS C final rule with comment period to indicate that we are assigning them an interi m payment status which is subject to public comment. The payment indicator and payment rate, if applicable, for all such codesCMS-1601-P 405 flagged with comment indicator “NI” are ope n to public comment in the OPPS/ASC final rule with comment period, and we respond to these comments in the final rule with comment period for the next calendar year’s OPPS/ASC update. We are proposing to continue this process for CY 2014. Specifically, for CY 2014, we are proposing to include in Addenda AA and BB to the CY 2014 OPPS/ASC final rule with comment peri od the new Category I and III CPT codes effective January 1, 2014, that would be inco rporated in the January 2014 ASC quarterly update CR and the new Level II HCPCS codes, effective October 1, 2013 or January 1, 2014, that would be released by CMS in its October 2013 and January 2014 ASC quarterly update CRs. These codes woul d be flagged with comment indicator “NI”

in Addenda AA and BB to the CY 2014 OPPS/AS C final rule with comment period to indicate that we have assigned them an inte rim payment status. Their payment indicators and payment rates, if app licable, would be open to publ ic comment in the CY 2014 OPPS/ASC final rule with comment period and would be finalized in the CY 2015 OPPS/ASC final rule with comment period. C. Proposed Update to the Lists of ASC Covered Surgical Procedures and Covered Ancillary Services 1. Covered Surgical Procedures a. Additions to the List of ASC Covered Surgical Procedures

We conducted a review of all HCPCS c odes that currently are paid under the OPPS, but not included on the ASC list of cove red surgical procedures, to determine if changes in technology and/or medical practice affected the clinical appropriateness ofCMS-1601-P 406 these procedures for the ASC setting. Upon review, we did not identify any procedures that are currently excluded from the ASC list of procedures that met the definition of a covered surgical procedure based on our expectation that they would not pose a significant safety risk to Medi care beneficiaries or would re quire an overnight stay if performed in ASCs. Therefore, we are not proposing additions to the list of ASC covered surgical procedures for CY 2014. b. Proposed Covered Surgical Proce dures Designated as Office-Based (1) Background In the August 2, 2007 ASC final rule, we finalized our policy to designate as “office-based” those procedures that are a dded to the ASC list of covered surgical procedures in CY 2008 or late r years that we determine are performed predominantly (more than 50 percent of the time) in physic ians’ offices based on consideration of the most recent available volume and utilization data for each individual procedure code and/or, if appropriate, th e clinical characteristic s, utilization, and volum e of related codes. In that rule, we also finalized our policy to exempt all procedures on the CY 2007 ASC list from application of the office-based cl assification (72 FR 42512) . The procedures

that were added to the ASC list of covered surgical procedures be ginning in CY 2008 that

we determined were office-based were id entified in Addendum AA to that rule by payment indicator “P2” (Office-based surgic al procedure added to ASC list in CY 2008 or later with MPFS nonfacility PE RVUs; payment based on OPPS relative payment weight); “P3” (Office-based su rgical procedures added to ASC list in CY 2008 or later with MPFS nonfacility PE RVUs; payment based on MPFS nonfacility PE RVUs); orCMS-1601-P 407 “R2” (Office-based surgical procedure adde d to ASC list in CY 2008 or later without MPFS nonfacility PE RVUs; payment based on OPPS relative payment weight), depending on whether we estimated it would be paid according to the standard ASC payment methodology based on its OPPS relati ve payment weight or at the MPFS nonfacility PE RVU-based amount. 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 2014 to Cove red Surgical Procedures Designated as

Office-Based In developing this proposed rule, we followed our policy to annually review and update the surgical procedures for which ASC payment is made and to identify new procedures that may be appropriate for ASC payment, including their potential designation as office-based. We reviewed CY 2012 volume and utilization data and the clinical characteristics for all surgical pro cedures that are assigned payment indicator “G2” (Non-office-based surgical procedure ad ded in CY 2008 or later; payment based on OPPS relative payment weight) in CY 2013, as well as for those procedures assigned one of the temporary office-based payment indicat ors, specifically “P2*,” “P3*,” or “R2*” in

the CY 2013 OPPS/ASC final rule with comment period (77 FR 68444 through 68448).

Our review of the CY 2012 volume a nd utilization data resulted in our

identification of three covered surgical procedures that we believe meet the criteria forCMS-1601-P 408 designation as office-based. Th e data indicate that the pr ocedures are performed more than 50 percent of the time in physicians’ o ffices, and our medical advisors believe the services are of a level of complexity consiste nt with other procedures performed routinely in physicians’ offices. The three CPT codes we are proposing to pe rmanently designate

as office-based are listed in Table 36 below.

TABLE 36.—ASC COVERED SURGICAL PROCEDURES PROPOSED FOR PERMANENT OFFICE-BASED DESIGNATION FOR CY 2014

*Proposed payment indicators are based on a compar ison of the proposed ra tes according to the ASC standard ratesetting method ology and the MPFS proposed rates. According to the statutory formula, current law requires a negative update to the MPFS paym ent rates for CY 2014. Fo r a discussion of those rates, we refer readers to the CY 2014 MPFS proposed rule. We invite public comment on this proposal.

We also reviewed CY 2012 volume and u tilization data and other information for the eight procedures finalized for temporary office-based st atus in Table 51 and Table 53

in the CY 2013 OPPS/ASC final rule w ith comment period (77 FR 68442, 68446 through 68448). Among these eight procedures, there were very few claims data for four procedures: CPT code 0099T (Implantation of intrastromal corneal ring segments); CPT CY 2013 CPT Code CY 2013 Long Descriptor CY 2013 ASC Payment Indicator Proposed CY 2014

ASC Payment Indicator*

26341 Manipulation, palmar fascial cord (ie, dupuytren’s cord), post enzyme injection (eg, collagenase), single cord G2 P3

37761 Ligation of perforator vein(s), subfascial, open, including ultrasound guidance, when performed, 1 leg G2 R2

36595 Mechanical removal of pericatheter obstructive material (eg, fibrin sheath) from central venous device via separate venous access G2 P3CMS-1601-P 409 code 0124T (Conjunctival incision with posterior extrascleral placement of pharmacological agent (does not include supply of medication)); CPT code C9800 (Dermal injection procedure(s) for facial lipodystrophy syndrome (LDS) and provision of Radiesse or Sculptra dermal filler, incl uding all items and supplies); and CPT code 67229 (Treatment of extensive or progressive reti nopathy, one or more sessions; preterm infant (less than 37 weeks gestation at birth), performed from birt h up to 1 year of age (eg, retinopathy of prematurity), photocoagulation or cryotherapy) . Consequently, we are proposing to maintain their temporar y office-based designations for CY 2014.

The volume and utilization data for one procedure that has a temporary office-based designation fo r CY 2013, CPT code 0227T (Anoscopy, high resolution (HRA) (with magnification and chemical agen t enhancement); with biopsy(ies)), is

sufficient to indicate that th is procedure is no t performed predominantly in physicians’ offices and, therefore, should not be assigned an office-b ased payment indicator in CY 2014. Consequently, we are proposing to assign payment indica tor “G2” to this covered surgical pro cedure code in CY 2014. The three remaining procedures that have temporary office-based designations for CY 2013 are proposed to be packaged under the OPPS for CY 2014 as discussed in section II.A.3. of this propos ed rule. Consequently, we are proposing the assign payment indicator “N1” to the following three cove red surgical procedur e codes in CY 2014:

● CPT code 0226T (Anoscopy, high reso lution (HRA) (with magnification and chemical agent enhancement); diagnostic, including collection of specimen(s) by brushing or washing when performed);CMS-1601-P 410

● CPT code 0299T (Extracorporeal s hock wave for integumentary wound healing, high energy, including topical applic ation and dressing care; initial wound); and

● CPT code 0300T (Extracorporeal s hock wave for integumentary wound healing, high energy, including topical applic ation and dressing care; each additional wound (list separately in addition to code for primary procedure)). The proposed CY 2014 payment indicator de signations for the eight procedures that were temporarily designated as office- based in CY 2013 are displayed in Table 37 below. The procedures for which the pr oposed office-based designations for CY 2014 are temporary also are indicated by asterisk s in Addendum AA to this proposed rule (which is available via the Internet on the CMS Web site).

TABLE 37.—PROPOSED CY 2014 PAYMENT INDICATORS FOR ASC COVERED SURGICAL PROCEDURES DESIGNATED AS TEMPORARILY OFFICE-BASED IN THE CY 2013 OPPS/ASC FINAL RULE WITH COMMENT PERIOD

CY 2013 CPT Code CY 2013 Long Descriptor CY 2013 ASC Payment Indicator Proposed CY 2014

ASC Payment Indicator** 0099T Implantation of intrastromal corneal ring segments R2* R2*

0124T Conjunctival incision with posterior extrascleral placement of pharmacological agent (does not include supply of medication) R2* R2*

0226T Anoscopy, high resolution (HRA) (with magnification and chemical agent enhancement); diagnostic, including collection of specimen(s) by brushing or washing when performed R2* N1

0227T Anoscopy, high resolution (HRA) (with magnification and chemical agent enhancement); with biopsy(ies) R2* G2

0299T Extracorporeal shock wave for integumentary wound healing, high energy, including topical R2* N1CMS-1601-P 411

CY 2013 CPT Code CY 2013 Long Descriptor CY 2013 ASC Payment Indicator Proposed CY 2014

ASC Payment Indicator** application and dressi ng care; initial wound

0300T Extracorporeal shock wave for integumentary wound healing, high energy, including topical application and dressing care; each additional wound (list separately in addition to code for primary procedure) R2* N1

C9800 Dermal injection procedure(s) for facial lipodystrophy syndrome (LDS) and provision of Radiesse or Sculptra dermal filler, including all items and supplies R2* R2*

67229 Treatment of extensive or progressive retinopathy, one or more sessions; preterm infant (less than 37 weeks gesta tion at birth), performed from birth up to 1 year of age (eg, retinopathy of prematurity), photocoagulation or cryotherapy R2* R2*

* If designation is temporary. ** Proposed payment indicators are based on a co mparison of the proposed ra tes according to the ASC standard ratesetting method ology and the MPFS proposed rates. According to the statutory formula, current law requires a negative update to the MPFS paym ent rates for CY 2014. Fo r a discussion of those rates, we refer readers to the CY 2014 MPFS proposed rule.

We invite public comment on this proposal. c. ASC Covered Surgical Procedures Propos ed to be 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 fo r calculating the ASC payment rates for covered surgical procedures that are assigned to the subs et of OPPS device-dependent APCs with a device offset percentage greater than 50 percent of the APC cost under the OPPS, in order to ensure that payment for th e procedure is adequate to provide packaged payment for the high-cost implantable devices used in those procedures.CMS-1601-P 412 (2) Proposed Changes to List of ASC C overed Surgical Procedures Designated as

Device-Intensive for CY 2014

As discussed in section II.A.2.e of this proposed rule, for CY 2014, we are proposing to create 29 comprehensive APCs to replace 29 of the most costly device-dependent APCs under the OPPS. We are proposing to define a comprehensive APC as a classification for the provision of a primary service and all adjunctive services provided to support the delivery of the primar y service. Because a comprehensive APC

would treat all individua lly reported codes as repr esenting components of the comprehensive service, our OPPS proposal is to make a single prospective payment based on the cost of all individually reporte d codes that represent the provision of a primary service and all adjunctive services provided to support the delivery of the primary service. We are proposing to appl y our standard APC ratesetting methodology to the remaining 10 device-dependent APCs to calculate their CY 2014 OPPS payment

rates. Unlike the OPPS claims processing system that can be configured to make a single payment for the encounter-based comp rehensive service whenever a HCPCS code that is assigned to a comprehensive APC appears on the claim, the ASC claims processing system does not allow for this type of conditional packag ing. Therefore, we are proposing that all separately paid ancillary services th at are provided integral to surgical procedures that map to comprehensive APCs would continue to be separately paid under the ASC payment system instead of being packaged into the payment for the comprehensive APC as under the OPPS. In addition, to avoid duplicate payment forCMS-1601-P 413 separately paid ancillary servic es provided integral to the surgical procedure because the OPPS relative weights for comprehensive APCs include costs for ancillary services, we are proposing that the ASC pa yment rates and device offset amounts for comprehensive

APCs would be based on the CY 2014 OPPS re lative payments weights that have been calculated using the standard APC rate setting methodology instead of the relative payment weights that are based on the comprehensive service. Payment rates for ASC device-intensive procedures are based on a modified payment methodology to ensure that payment fo r the procedure is adequate to provide packaged payment for the high-cost implantab le devices used in those procedures. Device-intensive procedures are currently defi ned as those procedures that are assigned to device-dependent APCs with a device offset percentage greater th an 50 percent of the APC cost under the OPPS. Because we are proposing to create comprehensive APCs to replace 29 of the 39 device-depe ndent APCs under the OPPS, we are proposing to define ASC device-intensive procedures as those procedures that are assigned to any APC with a device offset percentage greater than 50 percent based on the standard OPPS APC ratesetting methodology. We are proposing ch anges to § 416.171(b)(2) to reflect this proposal. We also are proposing to update the ASC lis t of covered surgical procedures that are eligible for payment according to our device-intensive procedure payment methodology, consistent with this modified de finition of device-intensive procedures, reflecting the proposed APC assignments of procedures and AP C device offsetCMS-1601-P 414 percentages based on the CY 2012 OPPS claims and cost report data available for the proposed rule. The ASC covered surgical procedures that we are proposing to designate as

device-intensive and that w ould be subject to the device -intensive procedure payment methodology for CY 2014 are listed in Table 38 below. The CPT code, the CPT code short descriptor, the proposed CY 2014 AS C payment indicator (PI), the proposed CY 2014 OPPS APC assignment, the propos ed CY 2014 OPPS APC device offset percentage, and an indication if the full credit/partial credit (FB/FC) device adjustment policy would apply are also li sted in Table 38 below. A ll of these procedures are

included in Addendum AA to this proposed rule (which is av ailable via the Internet on the CMS Web site). We invite public comment on this proposal. d. Proposed Adjustment to ASC Payments for No Cost/Full Credit and Partial Credit

Devices Our ASC policy with regard to payment fo r costly devices implanted in ASCs at

no cost/full credit or partial credit as set forth in § 416.179 is c onsistent with the current OPPS policy. The established ASC policy a dopts 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 ASCCMS-1601-P 415 payment adjustment policy for no cost/full cr edit and partial credit devices (73 FR 68742 through 68744).

As discussed in section IV.B. of this proposed rule, we are proposing to modify our existing policy of reducing OPPS paymen t for specified APCs when a hospital furnishes a specified device without cost or wi th a full or partial cr edit. Currently under the OPPS, our policy is to reduce OPPS pa yment by 100 percent of the device offset amount when a hospital furnishes a specified de vice without cost or with a full credit and by 50 percent of the device offset amount when the hospital receives partial cred it in the amount of 50 percent or more of the cost for the specified device. For CY 2014, we are proposing to reduce OPPS payment for applicable APCs by the full or partial credit a provider receives for a replaced device. Although we are proposing to modify th e policy of reducing payments when a hospital furnishes a specified device without cost or with full or partial credit under the OPPS, we are proposing to maintain our cu rrent ASC policy for reducing payments to ASCs for specified device-inte nsive procedures when the AS C furnishes a device without cost or with full or partial credit. Unli ke the OPPS, there is currently no mechanism within the ASC claims processing system fo r ASCs to submit to CMS the actual amount received when furnishing a specified device at full or partial credit. Therefore, under the ASC payment system, we are proposing to continue to reduce ASC payments by 100 percent or 50 percent of th e device offset amount when an ASC furnishes a device

without cost or with full or partial credit, respectively. We also are proposing to update the list of ASC covered device-intensive pr ocedures that would be subject to the noCMS-1601-P 416 cost/full credit and partial credit device ad justment policy for CY 2014. Table 38 below displays the ASC covered device-intensive procedures that we are proposing would be subject to the no cost/full cred it or partial credit device adjustment policy for CY 2014. Specifically, when a procedure that is listed in Table 38 is subject to the no cost/full credit or partial credit device adjustment policy and is perfor med to implant a device that

is furnished at no cost or with full credit from the manufacturer, the ASC would append

the HCPCS “FB” modifier on th e 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 wh en the necessary device is furnished without

cost to the ASC or with full credit. We c ontinue to believe that the reduction of ASC payment in these circumstances is necessary to pay appropriate ly 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 38 that are subject to the no cost/full credit or partial credit device adjustment policy by one-half of the device offset amount that would be applied if a device was provided at no cost or with full cr edit, if the credit to the ASC is 50 percent or more of the cost of the new device. The ASC would append the HCPCS “FC” modifier to the HCPCS code for a surgical pro cedure listed in Table 38 that is subject to the no cost/full credit or partial credit device adjustment policy, when the facility receives a partial credit of 50 percent or more of the cost of a device. In order to report that they received a partial credit of 50 percent or mo re of the cost of a new device, ASCs would have the option of either: (1) submitting th e claim for the device replacement procedureCMS-1601-P 417 to their Medicare contractor after the proce dure’s performance but prior to manufacturer acknowledgment of credit for the device, a nd subsequently contact ing the contractor regarding a claim adjustment once the credit determination is made; or (2) holding the claim for the device implantation procedur e until a determination is made by the manufacturer on the partial credit and submitting the claim with the “FC” modifier appended to the implantation procedure HCPCS c ode if the partial cred it is 50 percent or more of the cost of the replacement device. Beneficiary coinsurance would continue to be based on the reduced payment amount.

TABLE 38.—ASC COVERED SURGICAL PROCEDURES PROPOSED FOR DEVICE-INTENSIVE DESIGNAT ION FOR CY 2014, INCLUDING ASC COVERED SURGICAL PROCEDURES FOR WHICH WE PROPOSE THAT THE NO COST/FULL CREDIT OR PART IAL CREDIT DEVICE ADJUSTMENT POLICY WOULD APPLY

CPT Code Short Descriptor Proposed CY 2014 ASC PI Proposed CY 2014

OPPS APC Proposed CY 2014DeviceDependent APC Offset Percent Proposing that FB/FC Policy Will Apply 24361 Reconstruct elbow joint J8 0425 59% Yes 24363 Replace elbow joint J8 0425 59% Yes 24366 Reconstruct head of radius J8 0425 59% Yes 24370 Revise reconst elbow joint J8 0425 59% Yes 24371 Revise reconst elbow joint J8 0425 59% Yes 25441 Reconstruct wrist joint J8 0425 59% Yes 25442 Reconstruct wrist joint J8 0425 59% Yes 25446 Wrist replacement J8 0425 59% Yes 27446 Revision of knee joint J8 0425 59% Yes 33206 Insert heart pm atrial J8 0089 68% YesCMS-1601-P 418

CPT Code Short Descriptor Proposed CY 2014 ASC PI Proposed CY 2014

OPPS APC Proposed CY 2014DeviceDependent APC Offset Percent Proposing that FB/FC Policy Will Apply 33207 Insert heart pm ventricular J8 0089 68% Yes 33208 Insrt heart pm atrial & vent J8 0655 72% Yes 33212 Insert pulse gen sngl lead J8 0090 67% Yes 33213 Insert pulse gen dual leads J8 0654 69% Yes 33214 Upgrade of pacemaker system J8 0655 72% Yes 33221 Insert pulse gen mult leads J8 0654 69% Yes 33224 Insert pacing lead & connect J8 0655 72% Yes 33227 Remove&replace pm gen singl J8 0090 67% Yes 33228 Remv&replc pm gen dual lead J8 0654 69% Yes 33229 Remv&replc pm gen mult leads J8 0654 69% Yes 33230 Insrt pulse gen w/dual leads J8 0107 80% Yes 33231 Insrt pulse gen w/mult leads J8 0107 80% Yes 33240 Insrt pulse gen w/singl lead J8 0107 80% Yes 33249 Nsert pace-defib w/lead J8 0108 82% Yes 33262 Remv&replc cvd gen sing lead J8 0107 80% Yes 33263 Remv&replc cvd gen dual lead J8 0107 80% Yes 33264 Remv&replc cvd gen mult lead J8 0107 80% Yes 33282 Implant pat-active ht record J8 0680 74% Yes 37227 Fem/popl revasc stnt & ather J8 0319 52% No 37231 Tib/per revasc stent & ather J8 0319 52% No 53440 Male sling procedure J8 0385 63% Yes 53444 Insert tandem cuff J8 0385 63% Yes 53445 Insert uro/ves nck sphincter J8 0386 70% Yes 53447 Remove/replace ur sphincter J8 0386 70% Yes 54400 Insert semi-rigid prosthesis J8 0385 63% Yes 54401 Insert self-contd prosthesis J8 0386 70% Yes 54405 Insert multi-comp penis pros J8 0386 70% Yes 54410 Remove/replace penis prosth J8 0386 70% Yes 54416 Remv/repl penis contain pros J8 0386 70% Yes 55873 Cryoablate prostate J8 0674 55% NoCMS-1601-P 419

CPT Code Short Descriptor Proposed CY 2014 ASC PI Proposed CY 2014

OPPS APC Proposed CY 2014DeviceDependent APC Offset Percent Proposing that FB/FC Policy Will Apply 61885 Insrt/redo neurostim 1 array J8 0039 86% Yes 61886 Implant neurostim arrays J8 0315 88% Yes 62361 Implant spine infusion pump J8 0227 81% Yes 62362 Implant spine infusion pump J8 0227 81% Yes 63650 Implant neuroelectrodes J8 0040 54% Yes 63655 Implant neuroelectrodes J8 0061 65% Yes 63663 Revise spine eltrd perq aray J8 0040 54% Yes 63664 Revise spine eltrd plate J8 0040 54% Yes 63685 Insrt/redo spine n generator J8 0039 86% Yes 64553 Implant neuroelectrodes J8 0040 54% Yes 64555 Implant neuroelectrodes J8 0040 54% Yes 64561 Implant neuroelectrodes J8 0040 54% Yes 64565 Implant neuroelectrodes J8 0040 54% Yes 64568 Inc for vagus n elect impl J8 0318 87% Yes 64569 Revise/repl vagus n eltrd J8 0040 54% Yes 64575 Implant neuroelectrodes J8 0061 65% Yes 64580 Implant neuroelectrodes J8 0061 65% Yes 64581 Implant neuroelectrodes J8 0061 65% Yes 64590 Insrt/redo pn/gastr stimul J8 0039 86% Yes 65770 Revise cornea with implant J8 0293 64% No 69714 Implant temple bone w/stimul J8 0425 59% Yes 69715 Temple bne implnt w/stimulat J8 0425 59% Yes 69717 Temple bone implant revision J8 0425 59% Yes 69718 Revise temple bone implant J8 0425 59% Yes 69930 Implant cochlear device J8 0259 84% Yes 0282T Periph field stimul trial J8 0040 54% Yes 0283T Periph field stimul perm J8 0318 87% Yes 0308T Insj ocular telescope prosth J8 0351 85% Yes 0316T Replc vagus nerve pls gen J8 0039 86% Yes 0319T Insert subq defib w/eltrd J8 0107 80% YesCMS-1601-P 420

CPT Code Short Descriptor Proposed CY 2014 ASC PI Proposed CY 2014

OPPS APC Proposed CY 2014DeviceDependent APC Offset Percent Proposing that FB/FC Policy Will Apply 0321T Insert subq defib pls gen J8 0107 80% Yes

We invite public comment on these proposals. e. ASC Treatment of Surgical Proce dures Proposed for Removal from the OPPS Inpatient List for CY 2014

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 possi ble inclusion on the ASC list of covered surgical procedures. There are no proce dures proposed for removal from the OPPS inpatient list for CY 2014, so we are not proposing any proce dures for possible inclusion on the ASC list of covered surgical procedures under this section. 2. Covered Ancillary Services Consistent with the established ASC pa yment system policy, we are proposing to update the ASC list of covered ancillary servic es to reflect the proposed payment status

for the services under the CY 2014 OPPS. Maintaining consistency with the OPPS may result in proposed changes to ASC payment indicators for some covered ancillary items

and services because of ch anges that are being proposed under the OPPS for CY 2014. For example, a covered ancillary service that was separately paid under the revised ASCCMS-1601-P 421 payment system in CY 2013 may be proposed for packaged status under the CY 2014 OPPS and, therefore, also under the ASC payment system for CY 2014. More specifically, as discussed in section II.A.3 of this proposed rule, we are proposing to package the following categories of ancillary or adjunctive services under the OPPS for CY 2014: drugs, biologicals, and radiopharm aceuticals that function as supplies when used in a diagnostic test or procedure; drugs and biologicals that function as supplies or devices when used in a surgical procedur e; clinical diagnost ic laboratory tests; procedures described by add-on codes; an cillary services (status indicator “X”); diagnostic tests on the bypass lis t; and device rem oval procedures. To maintain consistency with the OPPS, we are proposing that these services would be also packaged under the ASC payment system for CY 2014. Comment indicator “CH,” discussed in section XII.F. of the 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 ch ange in the OPPS treatment of the service

for CY 2014. Except for the Level II HCPCS codes a nd Level III CPT codes listed in Table 34 and Table 35 of this proposed rule, all ASC covered ancillary servic es and their proposed payment indicators for CY 2014 are included in Addendum BB to this proposed rule. We invite public comment on this proposal.CMS-1601-P 422 D. Proposed ASC Payment for Covered Surg ical Procedures and Covered Ancillary

Services 1. Proposed ASC Payment for Covered Surgical Procedures a. Background Our ASC payment policies for covered su rgical procedures under the revised ASC payment system are fully described in the CY 2008 OPPS/AS C final rule with comment period (72 FR 66828 through 66831). Under our established policy for the revised ASC payment system, the ASC sta ndard ratesetting methodology of multiplying the ASC relative payment weight for the pro cedure by the ASC conversion factor for that same year is used to calcul ate the national unadjusted payment rates for procedures with payment indicators “G2” and “A2.” Payment indicator “A2” was developed to identify procedures that were included on the list of ASC covered surgical procedures in CY 2007 and were, therefore, subject to transiti onal payment prior to CY 2011. Although the 4-year transitional peri od has ended and payment indicator “A2” is no longer required to identify surgical procedures subject to transitional payment, we retained payment

indicator “A2” because it is used to id entify procedures that are exempted from application of the office-based designation.

The rate calculation established for de vice-intensive procedures (payment indicator “J8”) is structured so that the p ackaged device payment amount is the same as under the OPPS, and only the service portion of the rate is subject to the ASC standard ratesetting methodology. In the CY 2013 OPPS /ASC final rule with comment period (77 FR 68434 through 68467), we updated the CY 2012 ASC payment rates for ASCCMS-1601-P 423 covered surgical procedures with payment indicators of “A2,” “G2,” and “J8” using CY 2011 data, consistent with the CY 2013 OPPS update. Payment rates for device-intensive procedures also were updated to incorporate the CY 2013 OPPS device offset percentages. Payment rates for office-based procedures (payment indicators “P2,” “P3,” and “R2”) are the lower of the MPFS nonfacility PE RVU-base d amount (we refer readers to the CY 2014 MPFS proposed rule) or the amount calculated using the ASC standard ratesetting methodology for the procedure. In the CY 2013 OPPS/ASC final rule with comment period, we updated the payment amoun ts for office-based procedures (payment indicators “P2,” “P3,” and “R2”) using the most recent available MPFS and OPPS data. We compared the estimated CY 2013 rate fo r each of the office-based procedures, calculated according to the ASC standa rd ratesetting met hodology, to the MPFS nonfacility PE RVU-based amount to determin e which was lower and, therefore, would be the CY 2013 payment rate for the proce dure according to the final policy of the revised ASC payment system (§ 416.171(d)). b. Proposed Update to ASC Covered Surgic al Procedure Payment Rates for CY 2014 We are proposing to update ASC paymen t rates for CY 2014 using the established rate calculation methodologi es under § 416.171 and using our proposed modified definition for device-intensive procedures as discussed above. Because the proposed OPPS relative payment weights are based on geometric mean costs for CY 2014, the ASC system will use geometric means to determine proposed relative payment weights under the ASC standard methodology. We are proposing to continue to use the amountCMS-1601-P 424

calculated under the ASC standard ratese tting methodology for procedures assigned payment indicators “A2” and “G2.” We are proposing that payment rates for office-based procedures (payment indicators “P2,” “P3,” and “R2”) and device -intensive procedures (payment indicator “J8”) be calculated according to our es tablished policies, incorporating the device-intensive procedure methodology as a ppropriate. Thus, we are proposing to update the payment amounts for device-in tensive procedures, using our proposed modified definition of device intensive pr ocedures, based on the CY 2014 OPPS device offset percentages that have been calcul ated using the standard APC ratesetting methodology, and to make payment for office-ba sed procedures at the lesser of the proposed CY 2014 MPFS nonfacility PE RVU-ba sed amount or the proposed CY 2014 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 s ection 1833(b)(1) of the Act waive the coinsurance and the Part B deductible for those preventive services under section 1861(ddd)(3)(A) of the Act as described in section 1861(ww)(2) of th e Act (excluding electrocardiograms) that are recommended by the United States Preventi ve Services Task Force (USPSTF) with a grade of A or B for any indication or popul ation and that are appropriate for the individual. Section 1833(b) of the Act also waives the Part B deductible for colorectal cancer screening tests that become diagnostic. In the CY 2011 OPPS/ASC final rule with comment period, we finalized our policies with respect to these provi sions and identifiedCMS-1601-P 425 the ASC covered surgical procedures and cove red 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 categories of 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 categories of serv ices for CY 2014. We identify the specific services with

a double asterisk in Addenda AA and BB to this proposed rule. d. Proposed Payment for Cardiac Re synchronization Therapy Services Cardiac resynchronization therapy (CRT) us es electronic devices to sequentially pace both sides of the heart to improve its output. CRT utilizes a pacing electrode implanted in combination with either a p acemaker or an implantable cardioverter defibrillator (ICD). CRT perf ormed by the implantation of an ICD along with a pacing

electrode is referred to as “CRT–D.” In the CY 2012 OPPS/ASC final rule with comment period, we finalized our proposal to establish the CY 2012 ASC payment rate for CRT-D services based on the OPPS payment rate applicable to APC 0108 when procedures described by CPT codes 33225 (Inser tion of pacing electrode, cardiac venous system, for left ventricular pacing, at time of insertion of pacing car dioverter-def ibrillator or pacemaker pulse generator (eg, for upgrade to dual chamber system) (list separately in addition to code for primary procedure )) and 33249 (Insertion or replacement of permanent pacing cardioverter-def ibrillator system with tran svenous lead(s), single or dual chamber) are performed on the same date of service in an AS C. ASCs use the corresponding HCPCS Level II G-code (G0448) for proper reporting when theCMS-1601-P 426 procedures described by CPT codes 33225 a nd 33249 are performed on the same date of service. For a complete discussion of our policy regarding paymen t 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). For CY 2014, CPT code 33249, the primary code for CRT-D services, is proposed for continue d assignment to APC 0108 but CPT code 33225 is proposed to be packaged under the OPPS. Consequently, we are proposing that CPT code 33225 would also be packaged under the ASC payment system for CY 2014. Because CPT code 33225 is proposed to be packaged under the ASC payment system and, therefore, would not receive separate payment, it would no longer be necessary th at ASCs use the HCPCS Level II G-code (G0448) for proper reporting when the pro cedures described by CPT codes 33225 and 33249 are performed on the same date of servic e. Therefore, we are proposing that the ASC payment rate for CRT-D services (p rocedures described by CPT codes 33249 and 33225) would be based on the OPPS relative payment weight for APC 0108 for CY 2014 and that ASCs would no longer be require d to assign HCPCS code G0448 when the procedures described by CPT codes 33225 a nd 33249 are performed on the same date of

service. We invite public comment on these proposals. e. Payment for Low Dose Rate (LDR ) Prostate Brachytherapy Composite LDR prostate brachytherapy is a treatm ent for prostate cancer in which hollow

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

radioactive sources into the prostate through the needles/ca theters. At least two CPTCMS-1601-P 427 codes are used to report the treatment serv ice because there are separate codes that describe placement of the needles/catheter s and the application of the brachytherapy sources: CPT code 55875 (Transperineal placemen t of needles or catheters into prostate for interstitial radioelement application, with or without cystoscopy); and CPT code 77778 (Interstitial radiation sour ce application; complex). Generally, the component services represented by both codes are provi ded in the same operative session on the

same date of service to the Medicare bene ficiary being treated with LDR brachytherapy for prostate cancer.

In the CY 2013 OPPS/ASC final rule w ith comment period, we finalized our proposal to establish the CY 2013 ASC paymen t rate for LDR prostate brachytherapy services based on the OPPS relative payment weight applicable to APC 8001 when CPT codes 55875 and 77778 are performed on the same da te of service in an ASC. ASCs use the corresponding HCPCS Level II G-code (G0458) for proper reporting when the procedures described by CPT codes 55875 a nd 77778 are performed on the same date of service, and therefore receive the appropria te LDR prostate brachytherapy composite payment. When not performed on the same day as the service described by CPT code 55875, the service described by CPT code 77778 w ill 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 co ntinue to be assigned to APC 0163. For a complete discussion of our policy regardi ng payment for LDR prostate brachytherapy services in ASCs, we refer readers to th e CY 2013 OPPS/ASC final rule with commentCMS-1601-P 428 period (77 FR 68457). We are not proposing a ny changes to our current policy regarding ASC payment for LDR prostate br achytherapy services for CY 2014. 2. Proposed Payment for Covered Ancillary Services a. Background Our final payment policie s under the revised ASC payment system for covered ancillary services vary according to the part icular type of servi ce and its payment policy under the OPPS. Our overall policy provides se parate ASC payment for certain ancillary items and services integrally related to the provision of ASC covere d surgical procedures that are paid separately under the OPPS a nd provides packaged ASC payment for other ancillary items and services that are p ackaged or conditionally packaged (status indicators “N,” “Q1,” and “Q2”) under the OPPS. In the CY 2013 OPPS/ASC proposed rule (77 FR 45169), we furthe r clarified our policy regard ing 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 pr ovided with a significant procedure but is separately paid when the service appears on the claim without a signi ficant procedure. Because ASC services always include a su rgical procedure, HCPCS codes that are conditionally packaged under the OPPS are alwa ys packaged (payment indictor “N1”) under the ASC payment system. Thus, our final policy generally aligns ASC payment bundles with those under the OPPS (72 FR 42495) . In all cases, in order for those ancillary services also to be paid, ancillary items and services must be provided integralCMS-1601-P 429 to the performance of ASC covered surgical procedures for which the ASC bills

Medicare. Our ASC payment policies provide separa te payment for drugs and biologicals that are separately paid under the OPPS at the OPPS rates. We generally pay for separately payable radiology services at the lower of the MPFS nonfacility PE RVU-based (or technical component) amount or the rate calculated ac cording 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 ra diology services that are pa id separately when provided integral to a surgical procedure on the ASC lis t are set to “Z2” so that payment is made based on the ASC standard ratesetting methodol ogy rather than the MPFS nonfacility PE RVU amount, regardless of which is lower. This modification to the ASC payment methodology for ancillary serv ices was finalized in response to a comment on the CY 2011 OPPS/ASC proposed rule that sugg ested it is inappropriate to use the MPFS-based payment methodology for nuclear medicine procedures because the associated diagnostic radiopharmaceutical, although packaged under the ASC payment system, is separately paid under the MPFS (42 CFR 416.171(d)(1)). We set the payment

indicator to “Z2” for these nuclear medici ne procedures in the ASC setting so that payment for these procedures would be ba sed on the OPPS relative payment weight rather than the MPFS nonfacility PE RVU-base d amount to ensure that the ASC will be compensated for the cost associated with the diagnostic radiopharmaceuticals.CMS-1601-P 430 In addition, because the same issue ex ists for radiology procedures that use contrast agents (the contrast agent is packaged under th e ASC payment system but is separately paid under the MPFS), we finalized in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74429 through 74430) to set the payment indicator to “Z2” for radiology services that use cont rast agents so that payment for these procedures will be based on the OPPS relative payment weight and will, therefore, include the cost for the contrast agent (42 CFR 416.171(d)(2)). ASC payment policy for brachytherapy sources mirrors the payment policy under the OPPS. ASCs are paid for brachytherapy sources provided integral to ASC covered surgical procedures at prospective rates adopted under the OPPS or, if OPPS rates are unavailable, at contractor-priced rates (72 FR 42499). Since December 31, 2009, ASCs have been paid for brachytherapy sources pr ovided integral to ASC covered surgical procedures at prospective rates adopted under the OPPS. 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 a ccording to the final policies of the revised ASC payment system (72 FR 42502 a nd 42508 through 42509; 42 CFR 416.164(b)). Under the revised ASC payment system, corn eal tissue acquisition is paid based on the invoiced costs for acquiring the corneal tissu e for transplantation. Devices that are eligible for pass-through pa yment under the OPPS are separately paid under the ASC payment system. Currently, the three devices that are eligible for pass-through payment in the OPPS are described by HCPCS c ode C1830 (Powered bone marrow biopsyCMS-1601-P 431 needle), HCPCS code C1840 (Lens, intraocu lar (telescopic)), and HCPCS code C1886 (Catheter, extravascular tissu e ablation, any modality (inser table)). Payment amounts for HCPCS codes C1830, C1840, and C1886 under the ASC payment system are contractor priced. In the CY 2013 OPPS/ ASC final rule with commen t period, we finalized the expiration of pass-through payment fo r HCPCS codes C1830, C1840, and C1886, which will expire after December 31, 2013 ( 77 FR 68353). Therefore, after December 31, 2013, the costs for devices described by HCPCS codes C1830, C1840, and C1886, will be packaged into the costs of th e 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 2014. b. Proposed Payment for Covered Ancillary Services for CY 2014 For CY 2014, we are proposing to upda te the ASC payment rates and make changes to ASC payment indicators as necessa ry to maintain consistency between the OPPS and ASC payment system regarding the pa ckaged or separately payable status of services and the proposed CY 2014 OPPS and ASC payment rates. The proposed CY 2014 OPPS payment methodologies for br achytherapy 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 propos ing to set the CY 2014 ASC payment rates for those services equal to the proposed CY 2014 OPPS rates. Consistent with established ASC pa yment policy (72 FR 42497), the proposed CY 2014 payment for separately payable covered radiology services is based on a comparison of the CY 2014 proposed MPFS nonfacility PE RVU-based amounts (weCMS-1601-P 432 refer readers to the CY 2014 MPFS proposed rule) and the proposed CY 2014 ASC payment rates calculated according to the ASC standard ratesetting methodology and then set at the lower of the two amounts (exc ept as discussed below for nuclear medicine procedures and radiology servic es 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 serv ice 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 serv ices are based on the MPFS nonfacility PE

RVU-based amount or the ASC standard ra tesetting methodology, or whether payment for a radiology service is packaged into th e payment for the covere d surgical procedure (payment indicator “N1”). Radiology services that we are proposing to pay based on the ASC standard ratesetting methodology are as signed payment indicator “Z2” (Radiology service paid separately when provided inte gral to a surgical procedure on ASC list; payment based on OPPS relative payment we ight) and those for which the proposed payment is based on the MPFS nonfacility PE RVU-based amount are assigned payment indicator “Z3” (Radiology servic e paid separately when provided integral to a surgical procedure on ASC list; payment ba sed on MPFS nonfacility PE RVUs).

As finalized in the CY 2011 OPPS/AS C final rule with comment period (75 FR 72050), payment indicators for all nucle ar medicine procedures (defined as CPT codes in the range of 78000 through 78999) that are designated as radi ology services that are paid separately when provided integral to a surgical procedure on the ASC list are set to “Z2” so that payment for these procedures will be based on the OPPS relative paymentCMS-1601-P 433 weight (rather than the MPFS nonfacility PE RVU-based amount, regardless of which is lower) and, therefore, will include the cost for the diagnostic radiopharmaceutical. We are proposing to continue this modificati on to the payment methodology in CY 2014 and, therefore, set the payment indicator to “Z2” for nuclear medicine procedures.

As finalized in the CY 2012 OPPS/AS C final rule with comment period (76 FR 74429 through 74430), payment indicators fo r radiology services that use contrast agents are set to “Z2” so that payment for these procedures will be based on the OPPS relative payment weight and, therefore, will in clude the cost for the contrast agent. We are proposing to continue this modificati on to the payment methodology in CY 2014 and, therefore, set the payment indicator to “Z2” for radiology services that use contrast agents. Most covered ancillary services and th eir proposed payment i ndicators are listed in Addendum BB to this proposed rule (which is available via th e Internet on the CMS Web site). We invite pub lic comment on these proposals. E. New Technology Intraocular Lenses (NTIOLs) 1. NTIOL Application Cycle Our process for reviewing applications to establish new classes of new technology intraocular lenses (NTIOLs) is as follows:

● Applicants submit their NTIOL request s for review to CMS by the deadline. For a request to be considered complete, we require submission of the information that is found in the guidance document entitled “Application Process and Information Requirements for Requests for a New Cla ss of New Technology Intraocular LensesCMS-1601-P 434 (NTIOLs) or Inclusion of an IOL in an existing NTIOL Class” posted on the CMS Web

site at: http://www.cms.gov/Medicare/ Medicare-Fee-for-ServicePayment/ASCPayment/NTIOLs.html.

● We announce annually in the proposed rule updating the ASC and OPPS payment rates for the following calendar year , a list of all requests to establish new NTIOL classes accepted for review during th e calendar year in wh ich the proposal is published. In accordance with section 141(b )(3) of Pub. L. 103-432 and our regulations at § 416.185(b), the deadline for receipt of public comments is 30 days following publication of the lis t of requests in the proposed rule.

● In the final rule updating the ASC and OPPS payment rates for the following calendar year, we—

○ Provide a list of determinations made as a result of our review of all new NTIOL class requests and public comments;

○ When a new NTIOL class is created, we identify the predominant characteristic of NTIOLs in that class that sets them apar t from other IOLs (inc luding those previously approved as members of other expired or activ e NTIOL classes) and that is associated with an improved clinical outcome.

○ The date of implementation of a paymen t adjustment in the case of approval of

an IOL as a member of a new NTIOL class woul d be set prospectively as of 30 days after publication of the ASC payment update fina l rule, consistent with the statutory requirement.CMS-1601-P 435

○ Announce the deadline for submitting requests for review of an application for a new NTIOL class for the following calendar year. 2. Requests to Establish Ne w NTIOL Classes for CY 2014 We did not receive any requests for revi ew to establish a new NTIOL class for CY 2014 by the March 1, 2013, the due date published in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68461). 3. Payment Adjustment The current payment adjustment for a 5-year period from the implementation date of a new NTIOL class is $50 per lens. Since implementation of the process for adjustment of payment amounts for NTIOLs in 1999, we have not revised the payment adjustment amount, and we are not proposing to revise the payment adjustment amount

for CY 2014. F. Proposed ASC Payment and Comment Indicators 1. Background In addition to the payment indicators that we introduced in the August 2, 2007 final rule, we also created final comment indicators for the ASC payment system in the

CY 2008 OPPS/ASC final rule with comme nt period (72 FR 66855). We created Addendum DD1 to define ASC payment indi cators that we use in Addenda AA and BB to provide payment information regarding covered surgical procedures and covered ancillary services, respectively, under the revised ASC payment system. The ASC payment indicators in Addendum DD1 are intended to capture policy relevant characteristics of HCPCS codes that may recei ve packaged or separate payment in ASCs,CMS-1601-P 436 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 identif y, for the revised ASC payment system, the status of a specific HCPCS code and its paym ent indicator with respect to the timeframe when comments will be accepted. The comment indicator “NI” is used in the OPPS/ASC final rule with comment period to indicate ne w codes for the next calendar year for which the interim payment indicator assigned is subject to comment. The comment indicator “NI” is also assigned to existi ng codes with substantial revisi ons to their descriptors such that we consider them to be describing new services, as discussed in the CY 2010 OPPS/ASC final rule with comment peri od (74 FR 60622). In the CY 2014 OPPS/ASC final rule with comment period, we will re spond to public comments and finalize the

ASC treatment of all codes that are labeled with comment indicator “NI” in Addenda AA

and BB to the CY 2013 OPPS/ASC fi nal rule with comment period.

The “CH” comment indicator is used in Addenda AA and BB to this proposed rule (which are available vi a the Internet on the CMS Web site) to indicate that the payment indicator assignment has changed for an active HCPCS code in current year and next calendar year; an active HC PCS code is newly recognized as payable in ASCs; or anCMS-1601-P 437

active HCPCS code is disconti nued at the end of the curren t calendar year. The “CH” comment indicators that are published in the fi nal 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 th e definitions of the ASC payment and

comment indicators for CY 2014. We refer re aders to Addenda DD1 and DD2 to this proposed rule (which are available via th e Internet on the CM S Web site) for the complete list of ASC payment and comment indicators proposed for the CY 2014 update. G. Calculation of the Proposed ASC Conve rsion Factor and the Proposed ASC Payment

Rates 1. Background In the August 2, 2007 final rule (72 FR 42493), we established our policy to base ASC relative payment weights and payment ra tes under the revised ASC payment system on APC groups and the OPPS relative payment we ights. Consistent with that policy and the requirement at section 1833(i) (2)(D)(ii) of the Act that th e revised payment system be implemented so that it would be budget neut ral, the initial ASC conversion factor (CY 2008) was calculated so that estimated total Medicare payments under the revised ASC payment system in the first year w ould be budget neutral to estimated total Medicare payments under the prior (CY 2007) ASC payment system (the ASC conversion factor is multiplied by the rela tive payment weights calculated for many ASC services in order to establish payment rates) . That is, application of the ASC conversionCMS-1601-P 438 factor was designed to result in aggregate Medicare expenditures under the revised ASC payment system in CY 2008 equal to aggreg ate Medicare expenditu res that would have

occurred in CY 2008 in the ab sence of the revised system, taking into consideration the cap on ASC payments in CY 2007 as require d 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 “e xpenditures” in the context of the budget neutrality requirement under se ction 1833(i)(2)(D)(ii) of the Act to mean expenditures

from the Medicare Part B Trust Fund. We do not consider expe nditures to include beneficiary coinsurance and copayments. Th is distinction was important for the CY 2008 ASC budget neutrality model that considered payments across the OPPS, ASC, and MPFS payment systems. However, because co insurance is almost always 20 percent for ASC services, this interpretation of expend itures has minimal impact for subsequent budget neutrality adjustments calculated w ithin the revised ASC payment system. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66857 through 66858), we set out a step-by-step illustration of the final budget neutrality adjustment calculation based on the methodology fina lized in the August 2, 2007 final rule (72 FR 42521 through 42531) and as applied to updated data available for the CY 2008

OPPS/ASC final rule with co mment period. The application of that methodology to the

data available for the CY 2008 OPPS/ASC final rule with comment period resulted in a budget neutrality adjustment of 0.65.CMS-1601-P 439 For CY 2008, we adopted the OPPS relative payment weights as the ASC relative payment weights for most services and, consiste nt with the final polic y, we calculated the CY 2008 ASC payment rates by multiplying th e ASC relative payment weights by the final CY 2008 ASC conversion factor of $41.401. For covered office-based surgical procedures and covered ancillary radiology services (excluding covered ancillary radiology services involving certa in nuclear medicine procedur es or involving the use of contrast agents, as discussed in section XII. D.2.b. of this proposed rule), the established policy is to set the payment rate at the lower of the MPFS unadjusted nonfacility PE

RVU-based amount or the amount calculate d using the ASC standard ratesetting methodology. Further, as discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66841 through 66843), we also adopted alternative ratesetting methodologies for specific types of services (f or example, device-intensive procedures). As discussed in the August 2, 2007 fi nal rule (72 FR 42517 through 42518) and as codified at § 416.172(c) of the regulations, the revised ASC payment system accounts for geographic wage variation when calculati ng individual ASC payments by applying the pre-floor and pre-reclassified hospital wage indices to the labor-related share, which is 50 percent of the ASC payment amount base d on a GAO report of ASC costs using 2004 survey data. Beginning in CY 2008, CMS acc ounted for geographic wage variation in labor cost when calculating individual AS C payments by applying the pre-floor and pre-reclassified hospital wage index values that CMS calculates for payment, using updated Core Based Statistical Areas (CBSAs) issued by OMB in June 2003. The reclassification provision pr ovided at section 1886(d)(10) of the Act is specific toCMS-1601-P 440 hospitals. We believe that using the most recently available raw pre-floor and prereclassified hospital wage indices results in the most appropriate ad justment to the labor portion of ASC costs. In addition, use of the unadjusted hospital wage data avoids

further reductions in certai n rural statewide wage inde x values that result from

reclassification. We continue to believe that the unadjusted hospita l wage indices, which are updated yearly and are used by many other Medicare payment systems, appropriately account for geographic variati on 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 met hodology to ASCs located in CBSA 25980 (Hinesville-Fort Stewart, GA). 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 inde x 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 av erage of the wage indices for CBSAs (orCMS-1601-P 441 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 2014 and Future Years We update the ASC relative payment weight s 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 neut ral (72 FR 42533). Consistent with our established policy, we are proposing to scal e the CY 2014 relative payment weights for ASCs according to the following method. Holding ASC utilization and the mix of services constant from CY 2012, we are pr oposing to compare the total payment using the CY 2013 ASC relative payment weights with the total payment using the CY 2014 relative payment weights to take into account the changes in the OPPS relative payment weights between CY 2013 and CY 2014. We are proposing to use the ratio of CY 2013 to CY 2014 total payment (the weight scaler) to scale the ASC relative payment weights for CY 2014. The proposed CY 2014 ASC scal er is 0.8961 and scaling would apply to the ASC relative payment weights of the c overed surgical procedures and covered ancillary radiology services for which the AS C payment rates are based on OPPS relative payment weights. Scaling would not apply in the case of ASC payment for separately payable covered ancillary services that have a pr edetermined national payment amount (that is, their national ASC payment amounts are not based on OPPS relative payment weights),CMS-1601-P 442 such as drugs and biologicals that are separately paid or services that are contractor-priced or paid at reasonable cost in ASCs. Any service with a predetermined national payment amount would be included in the ASC budget neutrality comparison, but scaling of the ASC relative payment wei ghts would not apply to those services. The ASC payment weights for those services without predetermined national payment amounts (that is, those services with nationa l payment amounts that would be based on OPPS relative payment weights) would be scal ed to eliminate any di fference in the total payment between the current year and the update year. For any given year’s ratesetting, we t ypically use the most recent full calendar year of claims data to model budget neutrality adjustments. We currently have available 98 percent of CY 2012 ASC claims data. To create an analytic file to support ca lculation of the weight scaler and budget neutrality adjustment for the wage index (discussed below), we summarized available CY 2012 ASC claims by ASC and by HCPCS c ode. We used the National Provider Identifier for the purpose of identifying uni que ASCs within the CY 2012 claims data. We used the supplier zip code reported on th e claim to associate State, county, and CBSA with each ASC. This file, available to the public as a supporting data file for the proposed rule, is posted on the CMS Web site at: http://www.cms.gov/ResearchStatistics-Data-and-Systems/Files-for-Ord er/LimitedDataSets/ASCPaymentSystem.html

. 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, toCMS-1601-P 443

the conversion factor. Consistent with our final ASC payment policy, for the CY 2014 ASC payment system, we are proposing to calculate and apply a budget neutrality adjustment to the ASC conversion factor for supplier level changes in wage index values for the upcoming year, just as the OPPS wa ge index budget neutrality adjustment is calculated and applied to the OPPS conversi on factor. For CY 2014, we calculated this proposed adjustment for the ASC payment system by using the most recent CY 2012 claims data available and estimating the difference in total payment that would be created by introducing the proposed CY 2014 pre-floor and pre-reclassified hospital wage indices. Specifically, holding CY 2012 ASC utilization and service-mix and the proposed CY 2014 national payment rates after a pplication of the weight scaler constant, we calculated the total adjusted payment usi ng the CY 2013 pre-floor and pre-reclassified hospital wage indices and the total adju sted payment using the proposed CY 2014 pre-floor and pre-reclassifi ed 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 th e CY 2013 pre-floor and pre-reclassified hospital wage indices to the total adjust ed payment calculated with the proposed CY 2014 pre-floor and pre-reclassified hospita l wage indices and a pplied the resulting ratio of 1.0004 (the proposed CY 2014 ASC wage index budget neutrality adjustment) to

the CY 2013 ASC conversion factor to calcu late the proposed CY 2014 ASC conversion factor. We note that, on February 28, 2013, OMB issued OMB Bulletin No. 13-01 announcing revisions to the deli neation of Metropolitan Sta tistical Areas, Micropolitan Statistical Areas, and Combined Statistic al Areas. The pr oposed pre-floor andCMS-1601-P 444 pre-reclassified hospital wage indices for FY 2014 do not reflect OMB’s new area delineations. Because the ASC wage indice s are the pre-floor and pre-reclassified hospital wage indices, the FY 2014 ASC wage indices will not reflect the OMB changes. Section 1833(i)(2)(C)(i) of the Act requi res that, “if the Secretary has not updated

amounts established” under the revised ASC payment system in a calendar year, the payment amounts “shall be increased by the perc entage increase in the Consumer Price Index for all urban consumers (U.S. city aver age) as estimated by the Secretary for the 12-month period ending with the midpoint of the year involved.” The statute, therefore, does not mandate the adoption of any particular update mech anism, but it requires the payment amounts to be increased by the CPI-U in the absence of any update. Because the Secretary updates the AS C payment amounts annually, we adopted a policy, which we codified at 42 CFR 416.171(a)(2)(ii), to update the ASC conversion factor using the CPI-U for CY 2010 and subsequent calendar year s. Therefore, the annual update to the ASC payment system is the CPI-U (refe rred to as the CPI-U update factor). Section 3401(k) of the Affordable Care Act amended section 1833(i)(2)(D) of the Act by adding a new clause (v) which require s that “any annual update under [the ASC payment] system for the year, after applica tion of clause (iv), shall be reduced by the productivity adjustment described in secti on 1886(b)(3)(B)(xi) (II)” of the Act effective with the calendar year beginning January 1, 2011. The statute defines the productivity adjustment to be equal to the 10-year moving average of changes in annual economy-wide private nonfarm business multif actor productivity (MFP) (as projected by the Secretary for the 10-year period ending with the applicab le fiscal year, year, costCMS-1601-P 445 reporting period, or other annual period) (the “MFP adjustment”) . Clause (iv) of section 1833(i)(2)(D) of the Act authorizes the Secret ary to provide for a reduction in any annual update for failure to report on quality measures . Clause (v) of section 1833(i)(2)(D) of the Act states that applica tion of the MFP adjustment to the ASC payment system may result in the update to the ASC payment system being less than zero for a year and may result in payment rates under the ASC paymen t system for a year being less than such payment rates for the preceding year. In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74516), we finalized a policy that ASCs begin submitting data on quality measures for services beginning on October 1, 2012 for the CY 2014 payment determination under the ASCQR Program. In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68499 through 68500), we finalized a methodology to calculate reduced national unadjusted payment rates using the ASCQR Program redu ced update conversion factor that would apply to ASCs that fail to meet their qua lity reporting require ments for the CY 2014 payment determination and subsequent years. The application of th e 2.0 percentage point reduction to the annual update factor, which currently is the CPI-U, may result in the update to the ASC payment syst em being less than zero for a year for ASCs that fail to meet the ASCQR Program requirements. We amended §§ 416.160(a)(1) and 416.171 to reflect these policies.

In accordance with section 1833(i)(2)(C)(i) of the Act, before applying the MFP adjustment, the Secretary first determines the “percentage increase” in the CPI-U, which we interpret cannot be a negativ e percentage. Thus, in the instance where the percentageCMS-1601-P 446 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 years, under section 1833(i)(2)(D )(iv) of the Act, we would reduce the annual update by 2.0 percentage points for an ASC that fails to submit quality information under the rules established by the Secretary in accordance with section 1833(i)(7) of the Act. Section 1833(i)(2)(D)(v) of the Act, as adde d by section 3401(k) of the Affordable Care Act, requires that the Secretar y reduce the annual update fact or, after application of any quality reporting reduction, by th e MFP adjustment, and states that application of the MFP adjustment to the annual update factor after application of any quality reporting reduction may result in the update being less th an zero for a year. If the application of the MFP adjustment to the annual update factor after application of any quality reporting reduction would result in an MFP-adjusted upd ate factor that is less than zero, the resulting update to the ASC payment rate s would be negative and payments would decrease relative to the prior year. Illust rative 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 comm ent period (75 FR 72062 through 72064). For this proposed rule, based on IHS Global Insight (IGI) 2013 first quarter forecast with historical data through 2012 f ourth quarter, for the 12-month period ending with the midpoint of CY 2014, the CPI-U update is projected to be 1.4 percent. Also based on IGI’s 2013 first quarter forecast, the MFP adjustment for the period ending with the midpoint of CY 2014 is projected to be 0.5 percent. IGI is a nationally recognized economic and financial forecasting firm that contracts with CMS to forecast theCMS-1601-P 447 components of CMS’ market baskets as we ll as the CPI-U and MFP. The methodology for calculating the MFP adjustment was 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). Because the ASCQR Program affects payment rates beginning in CY 2014, there would be a 2.0 percentage point

reduction to the CPI-U for ASCs that fail to meet the ASCQR Program requirements. We are proposing to reduce the CP I-U update of 1.4 percent by the MFP adjustment of 0.5 percentage point, resulting in an MFP-adjusted CPI-U update factor of 0.9 percent for ASCs meeting the quality repo rting requirements. Therefore, we are proposing to apply a 0.9 percent MFP-adjusted CPI-U update factor to the CY 2013 ASC conversion factor for ASCs meeting the quality reporting requirements. We are proposing to reduce the CPI-U update of 1.4 percent by 2.0 percentage points for ASCs that do not meet the quality reporting require ments and then apply the 0.5 percentage point MFP reduction. Therefore, we are proposing to apply a -1.1 percent quality reporting/MFP-adjusted CPI-U update factor to the CY 2013 ASC conversion factor for ASCs not meeting the quality re porting requirements. We also are proposing that if more recent data are subsequently available (for example, a more recent estimate of the CY 2014 CPI-U update and MFP adjustment), we would use such data, if appropriate, to determine the CY 2014 ASC update for th e final rule with comment period. For CY 2014, we also are proposing to adjust the CY 2013 ASC conversion factor ($42.917) by the wage adjustment for budget neutrality of 1.0004 in addition to the MFP-adjusted update factor of 0.9 percent di scussed above, which results in a proposedCMS-1601-P 448 CY 2014 ASC conversion factor of $43.321 fo r ASCs meeting the quality reporting requirements. For ASCs not meeting th e quality reporting requirements, we are proposing to adjust the CY 2013 ASC c onversion factor ($42.917) by the wage adjustment for budget neutrality of 1.0004 in addition to the quality reporting/MFP-adjusted update f actor of -1.1 percent discussed above, which results in a proposed CY 2014 ASC conversion factor of $42.462. We invite public comment on these proposals. 3. Display of Proposed CY 2014 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 2014 for covered surgical procedures and covered anci llary services, respectively. These addenda contain several types of information relate d to the proposed CY 2014 payment rates. Specifically, in Addendum AA, a “Y” in the column titled “Subject to Multiple Procedure Discounting” indicates that the su rgical 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 lowerpaying procedure when more than one pro cedure is performed in a single operative session. Display of the comment indicator “CH” in the column titled “Comment

Indicator” indicates a cha nge in payment policy for th e item or service, including identifying discontinued HCPCS codes, desi gnating items or services newly payable under the ASC payment system, and identifying items or services with changes in theCMS-1601-P 449 ASC payment indicator for CY 2014. Displa y of the comment indi cator “NI” in the

column titled “Comment Indicator” indicates that the code is new (or substantially revised) and that the payment indicator assignment is an inte rim assignment that is open to comment in the final rule with comment period. The values displayed in the column titled “CY 2014 Payment Weight” are the proposed relative payment weights for each of the listed services for CY 2014. The payment weights for all covered surgical pr ocedures and covered ancillary services whose ASC payment rates are based on OPPS re lative 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 cove red 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 2014 paym ent rate displayed in the “CY 2014 Payment” column, each ASC payment weight in the “CY 2014 Payment Weight” column was multiplied by the proposed CY 2014 conve rsion factor of $43.321. The conversion factor includes a budget neutrali ty adjustment for changes in the wage index values and the annual update factor as reduced by th e productivity adjustment (as discussed in section XII.H.2.b. of this proposed rule). In Addendum BB, there are no relative payment weights displayed in the “CY 2014 Payment Weight” column for items a nd services with predetermined nationalCMS-1601-P 450 payment amounts, such as separately pa yable drugs and biologicals. The “CY 2014 Payment” column displays the proposed CY 2014 national unadjusted ASC payment rates for all items and services. The pr oposed CY 2014 ASC payment rates listed in Addendum BB for separately payable drugs a nd biologicals are based on ASP data used for payment in physicians’ offices in April 2013. XIII. Hospital Outpatient Qu ality Reporting Program Updates A. Background

1. Overview CMS has implemented quality measure reporting programs for multiple settings of care. These programs promote higher qualit y, more efficient health care for Medicare beneficiaries. The quality data reporting program for hospital outpatient care, known as the Hospital Outpatient Quality Reporti ng (Hospital OQR) Program , formerly known as the Hospital Outpatient Quality Data Reporting Program (HOP QDRP), has been generally modeled after the qual ity data reporting program for hospital inpatient services known as the Hospital Inpatient Quality Re porting (Hospital IQR) Program (formerly known as the Reporting Hospital Quality Da ta 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 meas ure reporting programs for other settings of care and for certain pr ofessionals, including:CMS-1601-P 451

● Care furnished by physicians and ot her eligible profe ssionals, under the Physician Quality Reporting System (PQRS, formerly referred to as the Physician Quality Reporting Program Initiative (PQRI));

● Inpatient rehabilitation facilities, under the Inpatient Reha bilitation Facility Quality Reporting Program (IRF QRP);

● Long-term care hospitals, under th e Long-Term Care Hospital Quality Reporting (LTCHQR) Program;

● PPS-exempt cancer hospitals, under th e PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program;

● Ambulatory surgical centers, under the Ambulatory Surgical Center Quality Reporting (ASCQR) Program;

● Inpatient psychiatric facilities, under the Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program;

● Home health agencies, under the Home Health Quality Reporting Program (HH QRP); and

● Hospices, under the Hospice Quality Reporting Program. Finally, CMS has implemented a Hospita l Value-Based Purchasing Program and an end-stage renal disease (ESRD) Qualit y Incentive Program that link payment to performance. In implementing the Hospital OQR Program and other quality reporting programs, we have focused on measures th at have high impact and support national priorities for improved quality and efficien cy of care for Medicare beneficiaries asCMS-1601-P 452 reflected in the National Qua lity Strategy, as well as conditions for which wide cost and treatment variations have been reported, desp ite established clinical guidelines. To the extent possible under various aut horizing statutes, our ultimate goal is to align the clinical quality measure requirements of the Hospita l OQR Program and various other programs, such as the Hospital IQR Program, the ASCQ R Program, and the Me dicare and Medicaid Electronic Health Record (EHR) Incentiv e Programs, authorized by the Health Information Technology for Economic and Clinic al Health Act, so that the burden for reporting will be reduced. As appropriate, we will consider the adoption of measures with electronic specifications, to enable the co llection of this information as part of care delivery. Establishing such an alignment will require interoperability between EHRs, and CMS data collection systems, with data being calculated and submitted via certified EHR technology; additional infrastruc tural 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 activ ities 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

that relate to the specific characteris tics of each program:

● Our overarching goal is to support th e National Quality Strategy’s goal of

better health care for individuals , better health for populations , and lower costs for health care. The Hospital OQR Program will help achieve these goals by creating transparencyCMS-1601-P 453 around the quality of care at hospital outpatient departments to support patient decision-making and quality improvement. Gi ven the availability of well validated

measures and the need to balance breadth w ith minimizing burden, measures should take into account and address, as fully as possibl e, 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; Sa fety; Efficiency and cost reduction; Care coordination; and Community/population hea lth. More information regarding the National Quality Strategy can be found at: http://www.healthcare.gov/law/resources/reports/ . HHS engaged a wide range of stakeholders to develop the National Quality Strategy, as required by the Affordable Care

Act.

● Pay-for-reporting and public reporting should rely on a mix of structural, processes, outcomes, efficiency, and patient experience of care measures, including

measures of care transitions and ch anges in patient functional status.

● To the extent possible and recognizing differences in payment system maturity and statutory authorities, m easures should be aligned acr oss Medicare and Medicaid public reporting and incentive payment syst ems 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 provide r category that reflects the level of care and the most important areas of service a nd 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 Ho spital OQR Program. The collection ofCMS-1601-P 454 information burden on providers should be minimi zed 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 ce rtified EHR technology with minimal burden.

We also seek to use measures based on alte rnative sources of data that do not require

chart abstraction or that utilize data alr eady being reported by many hospitals, such as data that hospitals report to clinical data re gistries, or all-payer claims databases. In recent years we have adopted measures that do not require chart abstraction, including

structural measures and claims-based measur es that we can calculate using other data

sources.

● To the extent practicable and feasible , and recognizing differe nces in statutory authorities, measures used by CMS should be endorsed by a national, multi-stakeholder organization.

● We take into account the views of multi-stakeholder groups. Section 3014 of

the Affordable Care Act added section 1890A of the Act, establishing a pre-rulemaking process, which, among other steps, requires the Secretary to take into consideration input from multi-stakeholder groups in selecting ce rtain categories of quality and efficiency measures described in section 1890(b)(7)(B) of the Act. As part of the pre-rulemaking process, the consensus-based entity that CMS must contract with under section 1890 of the Act (currently the National Quality Fo rum (NQF)), convened the multi-stakeholder groups referred to as the Measure Applica tions Partnership (MAP). The MAP is a public-private partnership created for the primary purpose of providing input to HHS on the selection of the categories of measures in section 1890(B)(7)(B) of the Act, whichCMS-1601-P 455 include measures for use in certain specific Medicare programs, measures for use in reporting performance information to the publ ic, and measures for use in health care programs other than for use under the Act. Information about the MAP can be found at http://www.qualityforum.org/Setting_Prioritie s/Partnership/Measure_Applications_Partn ership.aspx

● Measures should be developed with th e input of providers , purchasers/payers, consumers, and other stakeholders. Measur es 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 Am ericans. HHS accomplishes its mission through programs and initiatives. Every 4 years HHS updates its Strategic Pl an 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 Scientif ic Knowledge and I nnovation; Advance the Health, Safety, and Well-Being of the American People; Increase Efficiency, Transparency, and Accountability of HHS Pr ograms; and Strengthen the Nation’s Health

and Human Services Infras tructure and Workforce ( http://www.hhs.gov/about/FY2012budge t/strategicplandetail.pdf ). HHS prioritizes policy and program interventions to address th e leading causes of death and disability in the United States, including heart disease, cancer, stroke, chroni c lower respiratory diseases, unintentional injuries and preventabl e behaviors. Initiatives such as the HHSCMS-1601-P 456

Action Plan to Reduce Healthcare-associated In fections (HAIs) in clinical settings and the Partnership for Patients exemplify these programs.

● CMS strives to ensure that quality measures for the Medicare, Medicaid, and the Children’s Health Insurance Programs are aligned with priority quality goals, that measure specifications are aligned across settings, that outcome measures are used, and that quality measures are collected from EHRs as appropriate. Quality goals are embedded in the CMS Strategy. In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74451 through 74452), we responded to public comment on many of these principles. In the CY 2013 OPPS/ASC final rulemaking (77 FR 68467 through 68469), with a few minor differences, we generally applied the same pr inciples for our considerations for future

measures. 2. Statutory History of the Hospital Outp atient Quality Reporting (Hospital OQR) Program

We refer readers to the CY 2011 OPPS/A SC final rule with comment period (75 FR 72064) for a detailed discussion of th e statutory history of the Hospital OQR Program. 3. Measure Updates and Data Publication a. Process for Updating Quality Measures Technical specifications fo r the Hospital OQR Program measures are listed in the Hospital OQR Specifications Manual, which is posted on the CMS Qu alityNet Web site

at:CMS-1601-P 457 http://www.qualitynet.org/dcs/ContentSer ver?c=Page&pagename=QnetPublic%2FPage %2FSpecsManualTemplate&cid=1228772438492

. We maintain the technical specifica tions for the measures by updating this Hospital OQR Specifications Manual and includ ing detailed instruc tions and calculation algorithms. In some cases where the specifi cations 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 subreg ulatory process for making updates to the measures we have adopted for the Hospital OQR Program. We believe that a measure can be updated through this subregulatory proces s provided it is a nonsubstantive change. We expect to make the determination of what constitutes a substantive versus a nonsubstantive change on a case-by-case basis. Examples of nonsubstantive changes to measures might include updated diagnosis or procedure codes, medication updates for categories of medications, broadening of age ranges, and exclusions for a measure (such as the addition of a hos pice exclusion to the 30-day mortality measures). We believe that non-substantive changes may include updates to NQF-endorsed measures based upon changes to guidelines upon which the measures are based. We will revise the Specifica tions Manual so that it clearly identifies the updates and provide links to where a dditional information on the updates can be found. As stated in CY 2009 OPPS/ASC, we also will post the updates on the QualityNet

Web site at https://www.QualityNet.org . We will provide sufficient lead time forCMS-1601-P 458 facilities to implement the changes where ch anges to the data collection systems would be necessary. We generally release the Hospital OQR Specifications Manual every 6 months and release addenda as necessary. Th is release schedule provides at least 3

months of advance notice for nonsubstantive changes such as changes to ICD-9, CPT, NUBC, and HCPCS codes, and at least 6 mont hs of advance notice for changes to data elements that would require significant systems changes. We will continue to use rulemaking to adopt substantive updates made by the NQF to the endorsed measures we have adopted for the OQR Program. Examples of changes that we might consider to be subs tantive would be those in which the changes are so significant that the measure is no longer the same measure, or when a standard of performance assessed by a measure becomes mo re stringent (for example: changes in acceptable timing of medication, procedure/process, or test administration). Another example of a substantive change would be where the NQF has extended its endorsement of a previously endorsed measure to a new se tting, such as extending a measure from the inpatient setting to hospice. We believe that the policy finalized in the CY 2009 OPPS/ASC final rule adequately balances our need to in corporate non-substantive NQF updates to NQF-endorsed Hospital OQR Program measur es in the most expeditious manner possible, while preserving the public’s ability to comment on updates that so fundamentally change an endorsed measure that it is no longer the sa me measure that we originally adopted. We also note that the NQF process inco rporates an opportunity for public comment and engagement in the meas ure maintenance process. These policiesCMS-1601-P 459 regarding what is considered substantive versus non-substant ive apply to all measures in the Hospital OQR Program. b. Publication of Hospital OQR Program Data Section 1833(t)(17)(E) of th e 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 th at a hospital has the oppor tunity 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 hospi tals for a preview period via QualityNet, and then are usually displayed on our Hospital Compare Web site, http://www.hospitalcompare.medicare.gov , following the preview period, although we might use other Web sites, as discussed below. The Hospital Compare Web site is an

interactive Web tool that assists benefi ciaries by providing information on hospital quality of care. We believe this informati on 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 CMS Certification Number (CCN), and indicate instances where data from two or more hospitals are combined to form the publicly reported measures on the Hospital Compare Web site. That is, in a situation in which a larger hospital has taken over ownership of a smaller hospital, the smaller hospital’s CCN will be replaced by the larger hospital’sCMS-1601-P 460 CCN (the principal CCN). For data display purposes, we will only display data received under the principal CCN. If both hospitals are submitting data, those data are not distinguishable in the warehouse; and the data is calculated togeth er as one hospital. Consistent with our current policy, we make Hospital IQR and Hospital OQR data publicly available whether or not the data have been validated for payment purposes. The Hospital Compare Web site currently displays info rmation covering process of care measures, outcome of care measures, outpatient imaging efficiency measures and

HCAHPS data. In general, we strive to display hos pital quality measure data on the Hospital Compare Web site as soon as possible after measur e data have been submitted to CMS. However, if there are unresolved display i ssues or pending design considerations, we may

make the data available on other CMS Web sites such as : http://www.cms.hhs.gov/HospitalQualityInits/ or https://data.medicare.gov/ . Publicly reporting the information in this manne r, although not on the Hospital Compare Web site, allows us to meet the requirement under sec tion 1833(t)(17)(E) of th e Act for establishing procedures to make quality data submitted available to the public following a preview period. When we display hospital quality in formation on non-interactive CMS Web sites, affected parties will be notified via CM S listservs, CMS e-mail blasts, memoranda, Hospital Open Door Forums, national provi der calls, and QualityNet announcements regarding the release of preview reports fo llowed by the posting of data on a Web site other than Hospital Compare

.CMS-1601-P 461 We also require hospitals to complete and submit an online registration form (“participation form”) in order to partic ipate 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. Process for Retention of Hospital OQR Program Measures Adopted in Previous Payment Determinations In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68471), for the purpose of streamlining the rulemaking proc ess, we finalized a policy that, beginning with the CY 2013 rulemaking, 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 years payment determinations unless we propose to remove, suspend, or replace the measures. 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 rulema king, we finalized a process for immediate retirement of Hospital IQR Progr am 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 imme diate measure retirement policy for the Hospital OQR Program in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60634).CMS-1601-P 462 In previous Hospital IQR Program rulema kings, 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 Pr ogram 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/progr ams 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 final rule (77 FR 53506 through 53507) that we will use the term “remove” rather than “retire” to refe r to the action of no longer including a measure in the Hospita l IQR Program. In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68472 through 68473), we adopted the same terminology of “removal” in the Hospital OQR Program to indicate our action of discontinuing a measure in the Hospital OQR Program.

In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50185), we finalized a set of criteria to use when determining whether to remove Hospital OQR Program measures. These criteria are: (1) measure performan ce among hospitals is so high and unvarying that meaningful distinctions and improveme nts in performance can no longer be made (“topped out” measures); (2) performance or improvement on a measure does not result in better patient outcomes; (3) a measure does not align with current clinical guidelines or practice; (4) the availability of a more broa dly applicable (across settings, populations, or conditions) measure for the topic; (5) the availa bility of a measure th at is more proximal in time to desired patient outcomes for the pa rticular topic; (6) th e availability of a measure that is more strongly associated with desired patient outcomes for the particularCMS-1601-P 463 topic; and (7) collection or public reporting of a measure leads to negative unintended consequences such as patient harm. Thes e criteria were sugges ted by commenters during Hospital IQR Program rulemaking, and we de termined that these criteria are also applicable in evaluating Hospital OQR Program quality measures for removal. In the

CY 2013 OPPS/ASC final rule with comme nt period (77 FR 68472 through 68473), we finalized our proposal to a pply these measure removal cr iteria in the Hospital OQR Program as well. In addition to these criteria, we take into account the views of the MAP in the

evaluation of measure removal. Furthermore, for efficiency and streamlining purposes, we strive to eliminate redundancy of similar measures. 2. Proposed Removal of Two Chart-Abstr acted Measures from the Hospital OQR Program In this rulemaking, we are proposing to remove two measures from the Hospital OQR Program for the CY 2016 payment determination and subsequent years: (1) OP-19: Transition Record with Speci fied Elements Received by Discharged ED Patients and (2) OP-24: Ca rdiac Rehabilitation Measure: Patient Referral from an Outpatient Setting. The rationales for these proposals are discussed below. a. Proposed Removal of OP-19: Transition Record with Specified Elements Received by Discharged ED Patients We previously adopted measure OP- 19 for the Hospital OQR Program for the CY 2013 payment determination with data collection beginning with January 1, 2012

encounters in the CY 2011 OPPS/ASC final rule with comment period. Shortly after dataCMS-1601-P 464 collection for this measure began in January 2012, hospitals raised concerns about the measure specifications, including potential priv acy issues related to releasing certain

elements of the transition r ecord to either the patient being discharged from an emergency department or the patient’s caregi ver. Some examples provided by hospitals

are the release of sensitive lab results or ra diological findings to a parent, spouse, or guardian of a minor patient, or to the res ponsible party for a phys ically incapacitated patient. In order to address the safety concerns related to confidentiality as raised by the industry in the above discussion, in Apr il 2012, we took immediate action to suspend OP-19. On April 12, 2012, we released a Memorandum entitled SDPS 12-100-OD,“Revised: Temporary Suspension of Hospital Outpatient Quality Reporting Measure OP19: Transition Record with Specified Elem ents Received by Discharged Patients” to make clear our intent not to use any data submitted on this measure for payment determinations, public reporting, or data valid ation. This memorandum can be located at http://qualitynet.org ) under the option “E-mail Notifications” within the “Hospitals – Outpatient” drop down menu found at the top of the page. In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68474 through 68476) for the CY 2014 payment determination a nd subsequent years, we confirmed that we suspended the collection of data for th e measure OP-19: Transition Record with Specified Elements Received by Discharged ED Patients, which specified that either patients or their caregivers (emphasis added) receive a transi tion record at the time of ED discharge.CMS-1601-P 465 We chose to suspend this measure rather than to immediately remove the measure from the program because the probability of harm occurring was relatively low; any potential harm that occurred would not be th e direct result of pa tient care rendered at facilities; and the measure steward, the American Medical Association Physician Consortium for Performance Improvement (AMA -PCPI), believed that the measure could be quickly re-specified in a manner that w ould mitigate the concerns raised by hospitals

and stakeholders. In the CY 2013 OPPS/ASC final rule with comment period, we noted that the measure steward was working to revi se the measure specifications to address the concerns raised by affected parties. We al so noted that the measure was scheduled for NQF maintenance review in 2013. We stat ed that after completion of the NQF maintenance process, we anticipated that normal program operations for this measure could resume once we updated the Hospita l OQR Specifications Manual and made any necessary changes to our data collection infrastructure. In addition, we stated that we would notify hospitals of changes in the susp ension status of the measure for the Hospital OQR Program via e-mail blast. However, we in dicated that if we determined that these concerns cannot be adequately addressed by measure specifications, we would propose to

remove this measure in a future OPPS/ASC rule.

We have determined that the measure ca nnot be implemented with the degree of specificity that would be needed to fully a ddress the concerns of stakeholders without being overly burdensome. The measure stewar d resolved the safety issue by refining the measure, but the refinement has made data abstraction more subjective because individual hospitals can determine which inform ation should be includ ed in the transitionCMS-1601-P 466 record in order to comply with this measur e. In the absence of standardized data elements, we were not able to resolve this issue of data abstr action for common data elements, and therefore, could not ensure c onsistency of data submission and accuracy of

measure results. We also learned that all aspects for this transition record measure are currently required to meet the Medicare EHR Incentive Program’s meaningful use (MU) core objective for eligible hospitals and critical access hospitals (CAHs) to provide patients the ability to view online, download, a nd transmit information about a hospital admission. This MU core objective provides patients discharged from the inpatient department or Emergency Department (ED) onl ine access to their visit data. These ED visit data are the specified data elements included in the OP-19 Transition Record measure. This means that if we were to keep this measure, hospitals would need to submit this data for both the Hospital OQR Program using chart-abstraction and via attestation for the MU core objective. Th erefore, to reduce dup licative requirements among programs and measurement burden, we are proposing to remove this measure from the Hospital OQR Program. We invite public comment on the proposed removal of this measure from the Hospital OQR Program. b. Proposed Removal of OP-24: Cardiac Re habilitation Measure: Patient Referral from an Outpatient Setting In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68476), we

deferred data collection for this measure to January 1, 2014 encounters. This was due to the unavailability of detailed abstraction inst ructions for data collection in time for theCMS-1601-P 467 July 2012 release of the Hospital OQR Speci fications Manual which was needed for chart-abstraction beginning on January 1, 2013. We also indicated that this measure would be applied to the CY 2015 payment determination. We are proposing to remove this meas ure from the Hospital OQR Program due to continued difficulties with defining the measur e care setting. The measure specifications provided by the measure steward, the Ameri can College of Cardiology (ACC), identify the applicable care setting as a ‘Clinician Office/Clinic’ and not as a hospital outpatient setting. In developing the specifications for th is measure for a hospital outpatient setting, several issues arose. First, it is difficult to accurately identify the purpose of hospital outpatient visits, such as for evaluation and management purposes, using solely HOPD claims data. Second, it is difficult for hospitals to determine which pa rticular clinic visit

resulted in a cardiac rehabilitation referral fo r any given patient. Therefore, given the difficulties in accurately applying the measur e to the hospital outpatient setting, we are proposing to remove OP-24 from the Hospital OQR Program. We invite public comment on this proposal to remove this measure from the Hospital OQR Program. Proposed Hospital OQR Program Measures to be Removed for the CY 2016 Payment Determination and Subsequent Years NQF# Measure

0649 OP-19: Transition Record with Specified Elements Received by Discharged ED Patients 0643 OP-24: Cardiac Rehabilitation Me asure: Patient Referral from an Outpatient SettingCMS-1601-P 468 D. Quality Measures Previously Adopted for the CY 2014 and CY 2015 Payment Determinations and Subsequent Years

The table below lists 25 measures that we previously adopted and retained for the CY 2014 and CY 2015 payment determinations and subsequent years under the Hospital OQR Program. This list includes measures we are proposing to remove in this proposed

rule. Hospital OQR Program Measures for the CY 2014 and CY 2015 Payment Determinations and Subsequent Years NQF# Measure Name 0287 OP-1: Median Time to Fibrinolysis 0288 OP-2: Fibrinolytic Thera py Received Within 30 Minutes 0290 OP-3: Median Time to Transfer to Another Facility for Acute Coronary Intervention 0286 OP-4: Aspirin at Arrival 0289 OP-5: Median Time to ECG 0270 OP-6: Timing of Antibiotic Prophylaxis 0268 OP-7: Prophylactic Antibiotic Selection for Surgical Patients 0514 OP-8: MRI Lumbar Spine for Low Back Pain

-- OP-9: Mammography Follow-up Rates -- OP-10: Abdomen CT – Us e of Contrast Material 0513 OP-11: Thorax CT – Us e of Contrast Material 0489 OP-12: The Ability for Providers wi th HIT to Receive Laboratory Data Electronically Directly into their ONC -Certified EHR System as Discrete Searchable Data 0669 OP-13: Cardiac Imaging for Preopera tive Risk Assessment for Non Cardiac Low Risk Surgery

-- 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* 0491 OP-17: Tracking Clinical Results between Visits 0496 OP-18: Median Time from ED Arriva l to ED Departure for Discharged ED Patients 0649 OP-19: Transition Record with Specified Elements Received by Discharged ED PatientsCMS-1601-P 469 Hospital OQR Program Measures for the CY 2014 and CY 2015 Payment Determinations and Subsequent Years -- OP-20: Door to Diagnostic Evaluati on by a Qualified Medical Professional 0662 OP-21: Median Time to Pain Management for Long Bone Fracture

-- OP-22: ED- Patient Left Without Being Seen 0661 OP-23: ED- Head CT or MRI Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who Received Head CT or MRI Scan Interpretation Within 45 minutes of Arrival 0643 OP-24: Cardiac Rehabilitation Patien t Referral From an Outpatient Setting

-- OP-25: Safe Surgery Checklist Use

-- OP-26: Hospital Outpatient Volume on Selected Outpatient Surgical Procedures** * Public reporting for OP-15 continues to be deferred at the time of this CY 2014 OPPS/ASC proposed rule. ** OP-26 Procedure categories and corres ponding HCPCS codes are located at : http://qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1228889963089&blobhe ader=multipart%2Foctet-stre am&blobheadername1=ContentDisposition&blobheadervalue1=attachment%3Bfilename%3D1r_OP26MIF_v+6+0b.pdf&blobcol=urldata &blobtable=MungoBlobs

E. Proposed Quality Measures for the CY 2016 Payment Determination and Subsequent

Years In this rulemaking, we are proposing to adopt five new measures for the Hospital OQR Program for the CY 2016 payment determ ination and subsequent years. These

measures include one HAI measure – Influe nza Vaccination Coverage among Healthcare Personnel (NQF #0431), currently collected by the Centers for Disease Control and Prevention (CDC) via the National Healthcar e Safety Network (NHSN) – and four

chart-abstracted measures. The chart-abstract ed measures are: (1) Complications within 30 Days Following Cataract Surgery Requi ring Additional Surgical Procedures (NQF #0564), (2) Endoscopy/Poly Surveillanc e: Appropriate follow-up interval for normal colonoscopy in average risk pa tients (NQF #0658), (3) Endoscopy/PolyCMS-1601-P 470 surveillance: Colonoscopy Interv al for Patients with a Hist ory of Adenomatous Polyps – Avoidance of Inappropriate Use (NQF #0659) , and (4) Cataracts: Improvement in Patient’s Visional Function within 90 Days Following Cataract Surgery (NQF #1536). The proposed measures were included on a publicly available document entitled

“List of Measures Under Consideration fo r December 1, 2012” on the NQF Web site at: http://www.qualityforum.org/Setting_Prioritie s/Partnership/Measure_Applications_Partn ership.aspx in compliance with section 1890A(a)(2) of the Act. They were reviewed by the MAP in its “MAP Pre-Rulemaking Re port: 2013 Recommendations on Measures Under Consideration by HHS,” which has been made available on the NQF Web site at: http://www.qualityforum.org/Setting_Prioritie s/Partnership/Measure_Applications_Partn ership.aspx . We considered the input and r ecommendations provided by the MAP in selecting measures to propos e for the Hospital OQR Program. All five of the proposed measures are NQF-endorsed, and therefore meet the requirements that measures selected for th e program “reflect consensus among affected parties and, to the extent feas ible and practicable, that thes e measures include measures set forth by one or more national cons ensus building ent ities” under section 1833(t)(17)(C)(i) of the Act. Fu rthermore, the services target ed in the proposed measures are services commonly provide d to patients who visit hosp ital outpatient departments and, for this reason, we believe that these proposed measures are appropriate for the measurement of quality of care furnished by hospitals in outpatient settings as required under section 1833(t)(17)(C )(i) of the Act.CMS-1601-P 471 We are proposing to collect aggreg ate data (numerators, denominators, exclusions) for the four chart-abstracted meas ures via an online, Web-based tool that will be made available to HOPDs via the QualityNet Web site, just as we do for OP-22. This Web-based tool is currently in use in the Hospital OQR Pr ogram to collect structural

measure information. More information regarding this proposed method of collection is provided in section XIII.H.2. of this proposed rule. To enhance our efforts to collect high quality data for the Hospital OQR measures while minimizing burden for HOPDs, we also seek public comment on whether we should collect patient-level data via certified EHR tec hnology on the four proposed measures excluding the Influenza Vaccina tion Coverage among Healthcare Personnel measure, and the potential timing for doing so. Collecting patient-leve l data, as we do for other Hospital OQR Program measures such as OP-1 through OP-7, would allow CMS to validate the accuracy of the data and also link data for patients over time to assess patient

outcomes of care related to treatment. The proposed measures are descri bed in greater detail below. 1. Influenza Vaccination Coverage Among Healthcare Personnel (NQF #0431) This proposed measure assesses the per centage of healthca re personnel (HCP)

who have been immunized for influenza. Ra tes of serious illness and death resulting from influenza and its complications are in creased in high-risk populations such as persons over 50 years or under four years of age, and persons of any age who have underlying conditions that put them at an incr eased risk. HCP can acquire influenza fromCMS-1601-P 472 patients and can transmit influenza to patient s and other HCP. Many HCP provide care for, or are in frequent cont act with, patients with influen za or patients at high risk for complications of influenza. The involvemen t of HCP in influenza transmission has been a long-standing concern. 1,2,3 Vaccination is an effective preventive m easure against influenza, and can prevent many illnesses, deaths, and losses in productivity. 4 HCP are consider ed a high priority for expanding influenza vaccine use. Achieving and sustaining high influenza vaccination coverage among HCP is intended to help protect HCP and their patients and

reduce disease burden and healthcare costs. Due to the significant impact of HCP influenza vaccination on patient outcomes, we believe this measure is appropriate for measuring the quality of care in hospital outpatient departments. We are proposing to adopt this process measure for the CY 2016 payment determination and subsequent years. We ar e also proposing that Hospital OPDs use the NHSN infrastructure and prot ocol to report the measure for Hospital OQR program purposes. The measure numerator is: HC P in the denominator population who during the time from October 1 (or when the vaccine became available) through March 31 of the following year: (a) received an influenza v accination administered at the healthcare facility, or reported in writ ing (paper or electronic) or provided documentation that

1 Maltezou, H.C., Drancourt, M.: Nosocomial influen za in children. Journal of Hospital Infection 2003; 55:83-91. 2 Hurley, J.C., Flockhart, S.: An influenza outbreak in a regional residential facility. Journal of Infection Prevention 2010; 11:58-61. 3 Salgado, C.D, Farr, B.M., Hall, K.K., Hayden, F.G. : Influenza in the acute hospital setting. The Lancet Infectious Diseases 2002; 2:145-155. 4 Wilde, M.A., McMillan, J.A., Serwin t, J., Butta, J., O’Riordan, M.A., Steinhoff, M.C.: Effectiveness of influenza vaccine in health care professionals; a rand omized trial. The Journal of the American Medical Association 1999;281:908-913.CMS-1601-P 473 influenza vaccination was received elsewhere; (b) were determined to have a medical

contraindication/condition of se vere allergic reaction to eggs or to other component(s) of the vaccine, or history of Guillain-Barre Syndrome within 6 weeks after a previous influenza vaccination; (c) d eclined; or (d) persons with unknown vaccination status or who do not otherwise meet any of the defi nitions of the above-mentioned numerator categories. The measure denominator is: the number of HCP who are working in the healthcare facility for at least 1 working day between October 1 and March 31 of the influenza season, regardless of clinical responsibility or patient contact. The specifications for this measure are available at http://www.qualityforum.org/QPS/Q PSTool.aspx?Exact=false&Keyword=0431

. In its 2013 Pre-Rulemaking Report, ( http://www.qualityforum.or g/Publications/2013/02/MAP_Pre-Rulemaking_Report_- _February_2013.aspx ), the MAP supported inclusion of this measure in the Hospital OQR Program and noted that the measure w ould address a measure type that is not adequately represented in the program measure set. Furthe rmore, the adoption of this measure will align with both the Hospital IQR Program, which adopted the measure for the FY 2015 payment determination and subs equent years, and the ASCQR Program, which adopted the measure for the CY 2016 payment determination and subsequent

years. In the CY 2012 OPPS/ASC proposed rule (76 FR 42323 through 42324), we proposed this measure for the CY 2015 paym ent determination. However, in the

CY 2012 OPPS/ASC final rule with comme nt period (76 FR 74470 through 74472), weCMS-1601-P 474

decided not to finalize the m easure (76 FR 74472) and, instead , decided to propose it in future rulemaking for the CY 2016 payment dete rmination and subsequent years in order

to address measure refinements in the denom inator and operational issues. We believe

that these refinements have been made and th at the operational issues have been resolved. We have learned that many States are proactively aligning their reporting requirements for this measure to mirror the fe deral requirements in an effort to reduce burden on providers and suppliers. We also recently learned that the measure may soon be undergoing some minor updates and review by NQF. Consistent with our policy to use a subregulatory process to adopt nonsubsta ntive changes to measures arising out of the NQF process (73 FR 68766 through 68767), we would use this process to adopt the upcoming NQF revisions for this measure, if the revisions are nonsubstantive. We refer readers to section XIII.H.2. of this proposed rule for a detailed

discussion of data collection. We i nvite public comment on this proposal. 2. Complications Within 30 Days Followi ng Cataract Surgery Requiring Additional Surgical Procedures (NQF #0564) This proposed measure assesses the per centage of patients aged 18 years and older with a diagnosis of uncomplicated catar act who had cataract su rgery and had any of a specified list of surgical procedures in the 30 days following cataract surgery which would indicate the occurrence of any of the following major complications: retained nuclear fragments, endophthalmitis, dislocated or wrong power intraocular lens (IOL), retinal detachment, or wound dehiscence.CMS-1601-P 475 Although complications that may result in a permanent loss of vision following cataract surgery are uncomm on, this outcome measure seeks to identify those complications from surgery that can reasonably be attributed to the surgery. It focuses on patient safety and monitoring for events that, while uncommon, can signify important issues in the care being provided. Advances in technology and surgical skills over the last 30 years have rendered cataract surgery sa fer and more effective. An analysis of Managed Care Organization data demonstrated that the rate of complications for this measure were 1 to 2 percent. However, with an annual volume of 2.8 million cataract surgeries in the United States, many of wh ich are performed in hospital surgical outpatient departments, a 2-percent rate is a significant number of surgeries associated with complications. 5 The measure numerator is: patients w ho had one or more specified operative procedures for any of the following majo r complications within 30 days following cataract surgery: retained nuclear fragment s, endophthalmitis, dislocated or wrong power IOL, retinal detachment, or wound dehiscence. The measure denominator is: all patients aged 18 years and older who ha d cataract surgery and no signif icant pre-operative ocular conditions impacting the surgical complication ra te. This measure excludes patients with certain comorbid conditions impacting the surg ical complication rate. The specifications

for this measure are available at http://www.qualityforum.org/QPS/0564

. In its 2013 Pre-Rulemaking Report, ( http://www.qualityforum.or g/Publications/2013/02/MAP_Pre-Rulemaking_Report_-

5 National Quality Measures Clearing House. Agency for Healthcare Research and Quality. Available at http://qualitymeasures.ahrq.gov/content.aspx?id=2798 1&search=complications+within+30+days+followin g+cataract+surgery

.CMS-1601-P 476 _February_2013.aspx ), the MAP supported this measure a nd noted that the measure addresses a high impact condition that is no t adequately addressed in the Hospital OQR measure set. Currently the NQF endorsement is time-limited. We refer readers to section XIII.H.2. of this proposed rule for a detailed

discussion of data collection. We i nvite public comment on this proposal. 3. Endoscopy/Poly Surveillance: Appropr iate Follow-up Interval for Normal Colonoscopy in Average Risk Patients (NQF #0658) This proposed measure assesses the per centage of patients aged 50 years and older receiving screening colonoscopy without biopsy or polypectomy who had a recommended follow-up interval of at least 10 years for repeat colonoscopy documented in their colonoscopy report. In the average-risk population, colonosc opy screening is recommended in current guidelines at 10-year intervals. 6 Our analysis indicated that about 25 percent of surgeries/procedures performed in HOPDs and ASCs are colonoscopies. Performing colonoscopy too frequently in creases patients’ exposure to procedural harm. This measure aims to assess whether average risk patients with normal colonoscopies receive a recommendation to receive a repeat colonoscopy in an interval that is less than the recommended amount of 10 years. The measure numerator is: patients who had a recommended follow-up interval of at least 10 years for repeat colonoscopy documented in their colonoscopy report. The

6 Davila RE, Rajan E, Baron TH, Adler DG, Egan JV, Faigel DO, Gan SI, Hirota WK, Leighton JA, Lichtenstein D, Qureshi WA, Shen B, Zuckerman MJ , VanGuilder T, Fanelli RD , Standards of Practice Committee, American Society for Gastrointestinal Endoscopy. ASGE guideline: colorectal cancer screening and surveillance. Gastrointest Endosc 2006 Apr;63(4):546-57. http://www.ncbi.nlm.nih.gov/pubmed/16564851?dopt=Abstract

.CMS-1601-P 477 measure denominator is: all patients ag ed 50 years and older receiving screening colonoscopy without biopsy or polypectomy. This measure excludes patients with documentation of medical reason(s) for reco mmending a follow-up interval of less than 10 years (for example, an above-average ri sk patient or inadequate prep). The specifications for this measure are available at: http://www.qualityforum.org/QPS/0658

. In its 2013 Pre-Rulemaking Report, ( http://www.qualityforum.or g/Publications/2013/02/MAP_Pre-Rulemaking_Report_- _February_2013.aspx ), the MAP supported the direction of the measure. Currently the NQF endorsement is time-limited. We refer readers to section XIII.H.2. of this proposed rule for a detailed

discussion of data collection. We i nvite public comment on this proposal. 4. Endoscopy/Poly Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps – Avoidance of Inappropriate Use (NQF #0659) The proposed Endoscopy/Poly Surveillan ce: Colonoscopy Interval for Patients with a History of Adenomatous Polyps – Avoidance of Inappropriate Use measure assesses the percentage of patients aged 18 years and ol der receiving a surveillance colonoscopy, with a history of a prior co lonic polyp in previous colonoscopy findings who had a follow-up interval of 3 or more years since their last colonoscopy documented in the colonoscopy report. Colonoscopy is the recommended method of surveillance after the removal of adenomatous polyps, because it has been shown to significantly reduce subsequent

colorectal cancer incidence. The timing of follow-up col onoscopy should be tailored toCMS-1601-P 478 the number, size, and pathologic findings of the adenomatous polyps removed. A randomized trial of 699 patients showed that after newly diagnosed adenomatous polyps have been removed by colonoscopy, follow-up colonoscopy at 3 years detects important colonic lesions as effectively as follo w-up colonoscopy at both 1 and 3 years. 7,8 The measure numerator for this proposed measure is: patients who had an interval of 3 or more years since their last colonoscopy. The measure denominator is: all patients aged 18 years and older receiving a surveillance colonoscopy with a history of a prior colonic polyp in a prev ious colonoscopy. This measure excludes patients with: (1) documentation of medical reason(s) for an in terval of less than 3 years since the last colonoscopy (for example, last colonoscopy in complete, last colonoscopy had inadequate prep, piecemeal removal of adenomas, or last colonoscopy found greater than 10 adenomas); or (2) documentation of a syst em reason(s) for an interval of less than 3 years since the last colonoscopy (for exam ple, unable to locate previous colonoscopy report, previous colonoscopy re port was incomplete). The sp ecifications for this measure

are available at http://www.qualityforum.org/QPS/0659

. In its 2013 Pre-Rulemaking Report, ( http://www.qualityforum.or g/Publications/2013/02/MAP_Pre-Rulemaking_Report_- _February_2013.aspx ), the MAP supported the direction of the measure. Currently the NQF endorsement is time-limited.

7 National Quality Measures Clearing House. Agency for Healthcare Research and Quality. Available at http://qualitymeasures.ahrq.gov/content.aspx?id=2798 1&search=complications+within+30+days+followin g+cataract+surgery

. 8 Davila RE, Rajan E, Baron TH, Adler DG, Egan JV, Faigel DO, Gan SI, Hirota WK, Leighton JA, Lichtenstein D, Qureshi WA, Shen B, Zuckerman MJ , VanGuilder T, Fanelli RD , Standards of Practice Committee, American Society for Gastrointestinal Endoscopy. ASGE guideline: colorectal cancer screening and surveillance. Gastrointest Endosc 2006 Apr;63(4):546-57. http://www.ncbi.nlm.nih.gov/pubmed/16564851?dopt=Abstract

.CMS-1601-P 479 We refer readers to section XIII.H.2. of this proposed rule for a detailed

discussion of data collection. We i nvite public comment on this proposal. 5. Cataracts – Improvement in Patient’s Visual Function Within 90 Days Following Cataract Surgery (NQF #1536) This proposed measure assesses the per centage of patients aged 18 years and older who had cataract surgery and had improve ment in visual function achieved within 90 days following th e cataract surgery. Cataract surgery is performed to im prove a patient’s vision and associated functioning. This outcome is achieved cons istently through carefu l attention to the accurate measurement of axial length and corn eal power and the appr opriate selection of an IOL. Failure to achieve improved visual functioning after surg ery in eyes without comorbid ocular conditions that could imp act the success of the surgery would reflect care that should be assessed for opportunitie s for improvement. Evidence suggests that visual improvement occurs in about 86 – 98 percent of surgeries in eyes without comorbid conditions. However, with an a nnual volume of 2.8 milli on cataract surgeries in the United States, many of which are performed in hospital outpatient surgical departments, the impact could affect a significant number of patients per year. 9 We are proposing to adopt this measure for the CY 2016 payment determination and subsequent years. The measure numerato r is: patients 18 years and older (with a diagnosis of uncomplicated cataract) in a sa mple who had improvement in visual function achieved within 90 days following cataract surgery, based on completing a pre-operative

9 National Quality Measures Clearing House. Agency for Healthcare Research and Quality. Available at http://www.qualitymeasures.ahrq. gov/content.aspx?id=27982.CMS-1601-P 480 and post-operative visual func tion instrument. The measure denominator is: all patients aged 18 years and older in sample who had cat aract surgery. There are no exclusions. The specifications for this measure are available at http://www.qualityforum.org/QPS/1536 . Additional information for the measure specifications can be found in the NQ F Measure Evaluation available at http://www.qualityforum.org/WorkArea/li nkit.aspx?LinkIdentifier=id&ItemID=68317

. In its 2013 Pre-Rulemaking Report, ( http://www.qualityforum.or g/Publications/2013/02/MAP_Pre-Rulemaking_Report_- _February_2013.aspx ), the MAP supported the inclusion of the measure in the Hospital OQR Program and noted that the measur e addresses a high impact condition not adequately addressed in the program measure set. The MAP added that this measure, which addresses outcomes, falls under a cate gory of measures inadequately represented in the program measure set. Currently the NQF endorsement is time-limited. We refer readers to section XIII.H.2. of this proposed rule for a detailed

discussion of data collection. We i nvite public comment on this proposal. The proposed measure set for the Hospital OQR Program for the CY 2016 payment determination and subsequent y ears is listed in the table below.

Proposed Hospital OQR Program Measure Set for the CY 2016 Payment Determination and Subsequent Years NQF# Measure Name 0287 OP-1: Median Time to Fibrinolysis 0288 OP-2: Fibrinolytic Thera py Received Within 30 Minutes 0290 OP-3: Median Time to Transfer to Another Facility for Acute Coronary Intervention 0286 OP-4: Aspirin at ArrivalCMS-1601-P 481 Proposed Hospital OQR Program Measure Set for the CY 2016 Payment Determination and Subsequent Years 0289 OP-5: Median Time to ECG 0270 OP-6: Timing of Antibiotic Prophylaxis 0268 OP-7: Prophylactic Antibiotic Selection for Surgical Patients 0514 OP-8: MRI Lumbar Spine for Low Back Pain

-- OP-9: Mammography Follow-up Rates -- OP-10: Abdomen CT – Us e of Contrast Material 0513 OP-11: Thorax CT – Us e of Contrast Material 0489 OP-12: The Ability for Providers wi th HIT to Receive Laboratory Data Electronically Directly into their ONC -Certified EHR System as Discrete Searchable Data 0669 OP-13: Cardiac Imaging for Preopera tive Risk Assessment for Non Cardiac Low Risk Surgery

-- 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* 0491 OP-17: Tracking Clinical Results between Visits 0496 OP-18: Median Time from ED Arriva l to ED Departure for Discharged ED Patients -- OP-20: Door to Diagnostic Evaluati on by a Qualified Medical Professional 0662 OP-21: Median Time to Pain Management for Long Bone Fracture

-- OP-22: ED- Patient Left Without Being Seen 0661 OP-23: ED- Head CT or MRI Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who Received Head CT or MRI Scan Interpretation Within 45 minutes of Arrival -- OP-25: Safe Surgery Checklist Use

-- OP-26: Hospital Outpatient Volume on Selected Outpatient Surgical Procedures** 0431 OP-27: Influenza Vaccination Cove rage among Healthcare Personnel*** 0564 OP-28: Complications within 30 days Following Cataract Surgery Requiring Additional Surgical Procedures*** 0658 OP-29: Endoscopy/Poly Surveillance: Appropriate follow-up interval for normal colonoscopy in average risk patients*** 0659 OP-30: Endoscopy/Poly Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps – Avoidance of Inappropriate Use*** 1536 OP-31: Cataracts – Improvement in Patie nt’s Visual Function within 90 Days Following Cataract Surgery***CMS-1601-P 482

* Public reporting for OP-15 continues to be deferred at the time of this CY 2014 OPPS/ASC proposed rule. ** OP-26: Procedure categories and corres ponding HCPCS codes are located at : http://qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1228889963089&blobhe ader=multipart%2Foctet-stre am&blobheadername1=ContentDisposition&blobheadervalue1=attachment%3Bfilename%3D1r_OP26MIF_v+6+0b.pdf&blobcol=urldata &blobtable=MungoBlobs

. *** New measures proposed for the CY 2016 payment determination and subsequent years.

F. Possible Hospital OQR Program Meas ure Topics for Future Consideration The current measure set for the Hospita l OQR Program includes measures that assess process of care, imaging efficiency patterns, care transitions, ED throughput efficiency, the use of HIT care coordination, patient safety, and volume. We anticipate that as EHR technology evolves and more infrastructure is put into place, we will have the capacity to accept electronic reporting of ma ny clinical chart-abstracted measures that are currently part of the Hospital OQR Program using certified EHR technology. We are working diligently toward this goal. We believe that this progress, at a near future date, would significantly reduce the administrati ve burden on hospitals under the Hospital OQR Program to report chart-abstracted measur es. We recognize that considerable work needs to be done by measure owners and develope rs to make this possible with respect to the clinical quality measures targeted for e-specifications. This includes completing electronic specifications for measures, pilot testing, reli ability and valid ity testing, and implementing such specifications into certifi ed 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-maki ng and quality improvement in the hospital outpatient setting. Therefore, through futu re rulemaking, we intend to propose newCMS-1601-P 483 measures that help us further our goal of achieving better health care and improved health

for Medicare beneficiaries who receive h ealth care in hospital outpatient settings, including partial hospitali zation programs (PHPs) th at are part of HOPDs. We are considering the following measure domains for future measures: clinical quality of care; care coordination; patient sa fety; 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 programs such as the Ho spital IQR Program and the ASCQR Program. We invite public comment on this appr oach and on our suggestions and rationale for possible measure topics for future c onsideration in the Hospital OQR Program. In addition, we are soliciting comm ents on the following potential quality measure topics for PHPs in HOPDs: Poly-the rapy with antipsychotic medications; Postdischarge of continuity of care; Alcohol sc reening; Alcohol and drug use; Tobacco use assessment; and Follow-up after hospitalization for mental illness. These topics would align measurement of PHPs in HOPDs with that of the IPFQR Program. XIII. Hospital Outpatient Qu ality Reporting Program Updates G. Proposed Payment Reduction for Hospita ls That Fail to Meet the Hospital OQR Program Requirements for the CY 2014 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 andCMS-1601-P 484 manner, and at a time, required by the S ecretary will incur a 2.0 percentage point reduction to their Outpatient De partment (OPD) fee schedule in crease factor; that is, the annual payment update factor. Section 1833(t)( 17)(A)(ii) of the Act specifies that any reduction applies only to the payment year i nvolved and will not be taken into account in computing the applicable OPD fee schedule increase factor for a subsequent payment

year. The application of a reduced OPD fee sc hedule increase factor results in reduced national unadjusted payment rates that apply to certain outpatient items and services provided by hospitals that are re quired to report outpatient qual ity data in order to receive the full payment update factor and that fail to meet the Hospital OQR Program requirements. All other hospitals paid under the OPPS that meet the reporting requirement receive the full OPPS payment update without the reduction. For a more detailed discussion of how the payment reducti on for failure to meet the administrative, data collection, and data submission requi rements of the Hospital OQR Program was initially implemented, we refer readers to the CY 2009 OPPS/AS C final rule with comment period (73 FR 68769 through 68772). The national unadjusted payment rates for many services paid under the OPPS equal the product of the OPPS c onversion factor and the scal ed relative weight for the APC to which the service is assigned. Th e 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 with comment period, which is available via the Internet on the CMS WebCMS-1601-P 485 site): “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “V,” or “U.” We note that we are proposing to delete status indi cator “X” as described in sec tions II.A.3. and XI. of this proposed rule. We also note that we are pr oposing to develop status indicator “J1” as part of the proposed comprehensive APC disc ussed in section II.A.2.e. of this proposed rule. Payment for all services assigned to th ese status indicators will be subject to the reduction of the national unadjusted payment rates for applicable hospitals, with the exception of services assigned to New Tec hnology APCs with assigned status indicator

“S” or “T”. We refer readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68770) for a discussion of this policy.

The OPD fee schedule increas e factor is an input into the OPPS conversion factor, which is used to calculate OPPS payment rate s. 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), a nd a reduced market basket conversion factor (that is, the reduced conversion factor). We then calculate a reduc tion ratio by dividing the reduced conversion factor by the full conve rsion factor. We re fer to this reduction ratio as the “reporting ratio” to indicate that it applies to paym ent for hospitals that fail to meet their reporting requirements. Applyi ng this reporting ratio to the OPPS payment amounts results in reduced national unadjuste d payment rates that are mathematically equivalent to the reduced national unadjust ed payment rates that would result if we multiplied the scaled OPPS relative weight s by the reduced conversion factor. To determine the reduced national unadjusted paym ent rates that applied to hospitals thatCMS-1601-P 486 failed to meet their quality reporting requi rements for the CY 2010 OPPS, we multiplied the final full national unadjusted paymen t rate found in Addendum B of the CY 2010 OPPS/ASC final rule with comment period by the CY 2010 OPPS fina l reporting ratio of 0.980 (74 FR 60642). In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68771 through 68772), we established a policy that the Me dicare beneficiary’s minimum unadjusted copayment and national unadjusted copayment fo r a service to which a reduced national unadjusted payment rate applies would each equal the product of th e reporting ratio and the national unadjusted copayment or the mini mum unadjusted copayment, as applicable, for the service. Under this policy, we a pply the reporting ratio to both the minimum unadjusted copayment and national unadjusted c opayment for those hospitals that receive the payment reduction for failure to meet the Hospital OQR Program reporting requirements. This application of the re porting ratio to the national unadjusted and minimum unadjusted copayments is calcula ted according to § 419.41 of our regulations, prior to any adjustment for a hospital’s fa ilure to meet the quality reporting standards according to § 419.43(h). Beneficiaries and secondary payers thereby share in the reduction of payments to these hospitals. In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68772), we established the policy that all other applicab le adjustments to the OPPS national unadjusted payment rates apply in those cases when the OPD fee schedule increase factor is reduced for hospitals that fail to meet th e requirements of the Hospital OQR Program. For example, the following standard adjustme nts apply to the redu ced national unadjustedCMS-1601-P 487 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 wit hout cost. We believe that these adjustments continue to be equally applicable to payments for hospitals that do not meet the Hospital OQR Program requirements. Similarly, OPPS outlier payments made for high cost and complex procedures wi ll continue to be made when the criteria are met. For hospitals that fail to meet the quality data reporting requirements, the hospitals' costs are compared to the reduced pa yments for purposes of outlier eligibility and payment calculation. This policy confor ms to current practice under the IPPS. We established this policy in the OPPS beginni ng in the CY 2010 OPPS/AS C final rule with comment period (74 FR 60642). For a comp lete discussion of the OPPS outlier calculation and eligibilit y criteria, we refer readers to se ction II.G. of this proposed rule. 2. Proposed Reporting Ratio Application and Associated Adjustment Policy for CY 2014 We are proposing to continue our estab lished policy of applyi ng the reduction of

the OPD fee schedule increase factor through the use of a reporting ratio for those hospitals that fail to meet the Hospital OQR Program requirements for the full CY 2014 annual payment update factor. For the CY 2014 OPPS, the proposed reporting ratio is 0.980, calculated by dividing the proposed re duced conversion factor of $71.273 by the proposed full conversion factor of $72.728. We are proposing to continue to apply the reporting ratio to all services calculated using the OPPS conversion factor. For the CY 2014 OPPS, we are proposing to apply the reporting ratio, when applicable, to all HCPCS codes to which we have assigned stat us indicators “P,” “Q1,” “Q2,” “Q3,” “R,”CMS-1601-P 488 “S,” “T,” “V,” and “U” (other than new technology APCs to which we have assigned status indicators “S” and “T”). We note that we are proposing to delete status indicator

“X” as described in sections II.A.3. and XI. of this proposed rule. We also note that we are proposing to develop status indicator “J 1” as part of the proposed comprehensive APC discussed in section II.A.2.e. of this propo sed rule and to apply the reporting ratio to the comprehensive APCs. We are proposing to continue to exclude services paid under New Technology APCs. We are proposing to co ntinue 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 hospi tals that fail to meet the reporting requirements. We invite public comment on these proposals. H. Proposed Requirements for Reporting of Hospital OQR Data for the CY 2015 Payment Determination and Subsequent Years 1. Administrative Requirements for the CY 2015 Payment Determination and Subsequent Years To participate successfully in the Hospital OQR Program, hospitals must meet administrative, data collection and submi ssion, and data validation requirements (ifCMS-1601-P 489 applicable). Hospitals that do not meet Hosp ital OQR Program require ments, as well as hospitals not participating in the program a nd hospitals that withdraw from the program,

will not receive the full O PPS payment rate update. Instead, in accordance with section 1833(t)(17)(A) of the Act, thos e hospitals will recei ve a reduction of 2.0 percentage points to their OPD fee sche dule increase factor for the applicable payment year. We established administrative require ments for the payment determination requirements for the CY 2013 payment update and subsequent years in the CY 2012 OPPS/ASC final rule with comment pe riod (76 FR 74479 through 74487). In the

CY 2013 OPPS/ASC final rule with comme nt period (77 FR 68480 through 68481), we modified these requirements by extending the deadline for certain hospitals to submit a participation form. For the CY 2014 payment determination and subsequent years, we modified the deadline for hospitals that are not currently particip ating in the Hospital OQR Program and wish to participate, provi ded they have 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, and we are referring to an acceptance date before Ja nuary 1, 2013. The hospitals must submit a participation form by July 31 rather than March 31 of the year prior to the affected annual payment update in order to participate in the Hospital OQR Program for purposes of the CY 2014 payment update. In the example, the deadline would be July 31, 2013. The Hospital OQR Program procedural re quirements are unchanged from those adopted in the CY 2013 O PPS/ASC final rule with comment period (77 FR 68480CMS-1601-P 490 through 68481). We are proposing to codify these procedural requirements at § 419.46(a). To participate in the Hospital OQR Program, a hospital – as defined in section 1886(d)(1)(B) of the Act and that is reimbursed under the OPPS – must:

● Register with QualityNet before beginning to report data.

● Identify and register a QualityNet s ecurity administrator as part of the registration process located on the QualityNet Web site ( http://www.QualityNet.org );

● Complete and submit an online participation form available at the QualityNet Web site if this form has not been previ ously completed, if a hospital has previously withdrawn, or if the hospita l acquires a new CMS Certification Number (CCN). For Hospital OQR Program purposes, hospitals th at share the same CCN are required to complete a single online participation form. Once a hospital has submitted a participation form, it is considered to be an active Hospital OQR Program participant until such time

as it submits a withdrawal form to CMS or no longer has an eff ective Medicare provider agreement. Deadlines to submit the notice of par ticipation form are based on the date identified as a hospital’s Medicare acceptance date:

● If a hospital has a Medi care acceptance date before January 1 of the year prior to the affected annual payment update, the hos pital must complete and submit to CMS a completed Hospital OQR Notice of Participa tion Form by July 31 of the calendar year prior to the affected annual payment update.

● If a hospital has a Medi care acceptance date on or after January 1 of the year prior to the affected annual payment upda te, the hospital must submit a completedCMS-1601-P 491 participation form no later than 180 days fr om the date identified as its Medicare acceptance date. Hospitals may withdraw from participating in the Hospital OQR Program and the procedural requirements for this are unc hanged from those adopted in the CY 2012

OPPS/ASC final rule with co mment period (76 FR 77480). We are proposing to codify these procedural requirements at § 419.46(b). Under these procedures, a participating hospital may withdraw from the Hospital OQR Program by submitting to CMS a

withdrawal form that can be found in the secu re portion of the QualityNet Web site. The hospital may withdraw any time from January 1 to November 1 of th e year prior to the affected annual payment update. A withdrawn ho spital will not be able to later sign up to participate in that payment update, is subj ect to a reduced annual payment update as specified under § 419.43(h), and is required to submit a new pa rticipation form in order to participate in any future ye ar of the Hospital OQR Program. We invite public comment on this proposal. 2. Form, Manner, and Timing of Data Submitted for the Hospital OQR Program a. Background We refer readers to the following OPPS/ ASC final rules with comment period for a history of measures adopted for the Ho spital OQR Program, including lists of:

11 measures finalized for the CY 2011 payment determination (74 FR 60637); 15 measures finalized for the CY 2012 pa yment determination (75 FR 72083 through 72084); 23 measures finalized for the CY 2013 payment determination (75 FR 72090);

26 measures finalized for the CY 2014 and CY 2015 payment determinationCMS-1601-P 492 (76 FR 74469 and 74473) and no additional measures finalized for the CY 2015 payment determination (77 FR 68476 through 68478). In the CY 2013 OPPS/ASC final rule with comment period, we confirmed the removal of one measure for the CY 2013 payment determination and subsequent years (77 FR 68473 through 68474), confirmed the suspension of one measure for the CY 2014 payment determination (77 FR 68474 through 68476), and finalized the deferre d data collection for one measure (77 FR 68476). b. Effects of Proposed Changes on Data Submission for CY 2015 and CY 2016 Payment Determinations and Subsequent Years For the CY 2015 payment determination a nd subsequent years, we are proposing

to remove OP-19 as discussed in section XIII.C. 2.a. of this proposed rule. Effective with January 1, 2013 encounters, we previously suspended OP-19 and have not used OP-19 data to meet requirements for any payment determination under the Hospital OQR Program or in public reporting. Therefore, our proposal to remove OP-19 from the Hospital OQR Program would not require a par ticipating hospital to take any new action. For the CY 2015 payment determination a nd subsequent years, we are proposing to remove OP-24 from the Hospital OQR progr am, as discussed in section XIII.C.2.b. of this proposed rule. To date, we have not re quired hospitals to s ubmit data for OP-24. Based on this proposal, hospitals would not be required to take any new action; that is, they would continue having no requirement to abstract or submit data for OP-24. For the CY 2016 payment determination and subsequent years, in section XIII.E. of this proposed rule we are proposing to add five additiona l measures to the program.CMS-1601-P 493 We would require hospitals to submit data fo r these measures annually via an online tool

located on either the NHSN Web site or th e QualityNet Web site depending on the measure. We discuss proposed data collection for each of these new measures by mode of data submission in the following sections of this proposed rule. The proposed new measures are:

● OP-27: Influenza Vaccination C overage among Healthcare Personnel;

● OP-28: Complications within 30 Da ys Following Cataract Surgery Requiring Additional Surgical Procedures;

● OP-29: Endoscopy/Poly Surveillance: Appropriate follow-up interval for normal colonoscopy in average risk patients;

● OP-30: Endoscopy/Poly Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps – A voidance of Inappropriate Use; and

● OP-31: Cataracts – Improvement in Pa tient’s Visual Functi on within 90 Days Following Cataract Surgery. c. General Requirements The proposed Hospital OQR Program pr ocedural requirements are unchanged from those discussed and adopted in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74480 through 74482). We are propos ing to codify the policy that, to be eligible to receive the full OPD fee sc hedule increase factor for any payment determination, hospitals that participate in the Hospital OQR Program must submit to

CMS data on measures selected under secti on 1833(17)(C) of the Act in a form and manner, and at a time specified by CMS. This means that hospitals must comply withCMS-1601-P 494 our submission requirements for chart-abst racted data, population and sampling data, claims-based measure data, and Web-based qua lity measure data. We are proposing to codify these general submi ssion requirements at § 419.46(c). Submission deadlines by m easure and data type are posted on the QualityNet Web site. In general, deadlines for patient-lev el data submitted directly to CMS would be approximately 4 months after the last day of each calendar quarter. For example, the

submission deadline for data for services fu rnished during the firs t quarter of CY 2014 (January - March 2014) would be on or around August 1, 2014. We are proposing to codify language at § 419.46( c)(2) stating our practice of posting actual submission deadlines by measure an d by data type on the QualityNet Web site ( http://www.QualityNet.org ). We are proposing to codify our policie s for initial data co llection periods and submission deadlines for a hospital that did not participate in the previous year’s Hospital OQR Program in § 419.46(c)(3) of our regulations . We refer readers to our previously finalized policy in the CY 2013 OPPS/A SC final rule with comment period (77 FR 68481) to establish da ta collection and submission requirements for the CY 2014 payment determination and subsequent years. To determine when a hospital that did not participate in a previous year’s paymen t determination must begin collecting and submitting data to meet Hospital OQR Program requirements for a full annual payment update, we continue to use the January 1 Me dicare acceptance date. If a hospital has a Medicare acceptance date before January 1 of the year prior to the affected annual payment update, the hospital must collect data beginning with encounters occurringCMS-1601-P 495 during the first calendar quarter of the year prior to the affected annual payment update, in addition to submitting a completed Hospital OQR Notice of Participation Form. If a hospital has a Medicare acceptance date on or after January 1 of th e year prior to the affected annual payment update, the hospital mu st collect data for encounters beginning with the first full quarter following submissi on of the completed Hospital OQR Notice of Participation Form. Hospitals with a Medicare acceptance date before or after January 1 of the year prior to an affected annual payment update must follow data submission deadlines as specified on the QualityNet Web site. We invite public comment on these proposals. d. Proposed Chart-Abstracted Measure Requirements for the CY 2015 and CY 2016 Payment Determinations and Subsequent Years The following chart-abstracted measures in the Hospital OQR Program require data submission for the CY 2015 payment determination and subsequent years:

● OP-1: Median Time to Fibrinolysis;

● OP-2: Fibrinolytic Thera py 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 Se lection for Surgical Patients;CMS-1601-P 496

● OP-18: Median Time from ED Arriva l to ED Departure for Discharged ED Patients;

● OP-20: Door to Diagnostic Evalua tion 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; and

● OP-23: ED – Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who Received Head CT Scan Interp retation Within 45 Minutes of Arrival.

The form and manner for submission of one of these measures, OP-22: ED Patient Left Without Being Seen, is unique, and is detailed in section XV.G.2.f. of the

CY 2013 OPPS/ASC final rule with comment period (77 FR 68484). As discussed above, we are not proposing any new chart-abst racted measures where patient-level data is submitted directly to CMS in this proposed rule. e. Proposed Claims-Based Measure Da ta Requirements for the CY 2015 Payment Determination and Subsequent Years

The table in section XIII.D. of this proposed rule includes measures that the Hospital OQR Program collects by accessing electronic Medicare claims data submitted by hospitals for reimbursement. We are not proposing new claims-based measures in this proposed rule. Therefore, the following 6 claims-based measures will be included for the CY 2015 payment determination and subsequent years:

● OP-8: MRI Lumbar Spine for Low Back Pain;

● OP-9: Mammography Follow-Up Rates;CMS-1601-P 497

● OP-10: Abdomen CT – Us e of Contrast Material;

● OP-11: Thorax CT – Use of Contrast Material;

● OP-13: Cardiac Imaging for Preopera tive Risk Assessment for Non-Cardiac Low Risk Surgery; and

● OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus Computed Tomography (CT). We deferred the public reporting of OP-15, a claims-based measure (76 FR 74456). We are not proposing any chan ge to this policy. Public reporting for OP-15 continues to be deferred, and this deferral has no effect on any payment

determinations at this time. We will continue our policy of calculating the measures using the hospital’s Medicare claims data as specified in the Hospital OQR Specificati ons Manual; therefore,

no additional data submission is required for hospitals. In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74483), we stated that for the CY 2014 payment update, we will use paid Medicare FFS claims for services furnished from January 1, 2011 to December 31, 2011. In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68482 through 68485), for the CY 2015 payment determination, we finalized our proposal to use paid

Medicare FFS claims for services from a 12 month period from July 1, 2012 through June 30, 2013 for the calculation of the claims-based measures. This is a departure from the traditional 12 month calendar year period we have used for these measures. As stated in that final rule with comment period, we adopt ed this period in orde r to align the dataCMS-1601-P 498 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 claims-based measures on the Web site. Under our polic y prior to the CY 2013 final rule, the time period would have been January 1, 2011 to December 31, 2011, whereas, under the policy finalized in that final rule with comment period, the time period is July 1, 2012 to June 30, 2013. For the CY 2016 payment determination a nd subsequent years, we are proposing to continue this approach and to use pa id Medicare FFS claims for services from a 12 month period from July three years before the payment determination through June of the next year. For CY 2016, this 12 month period would be from July 1, 2013 through June 30, 2014 for the calculation of the claims-based measures. We invite public comment on this proposal. f. Proposed Data Submission Requirements for Measure Data Submitted via Web-Based Tool for the CY 2016 Payment Determination and Subsequent Years In previous rulemaking, we have referred to measures where data are submitted

via a Web-based tool on a CMS Web site under our quality data re porting programs as structural measures (measures concerned with attributes of where care occurs, such as material resources, human resour ces, and organizational structure. 10 For example, the Hospital OQR Measure OP-12: The Ability for Providers with HIT to Receive Laboratory Data Electronically Directly into their ONC-Certified EHR System as

Discrete Searchable Data is a structural meas ure. However, because measures where data

10 Maintz, J. Defining and Classify ing Clinical Indicators for Quality Improvement, Inter J Quality Health Care (2003) 15(6), 523-530).CMS-1601-P 499 is submitted in this manner may or may not be structural, for example, the Hospital IQR chart-abstracted, process of care measure PC-01: Elective Delivery Prior to 39 Completed Weeks Gestation, we have refined our termi nology and now refer to the mode of data

submission as Web-based. Thus, the previously finalized Web-base d measures where data is entered on a CMS Web site that we require for the CY 2015 payment determination and subsequent years are listed below:

● OP-12: The Ability for Providers w ith 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-22: ED Patient Left Without Being Seen;

● OP 25: Safe Surger y Check List Use; and

● OP 26: Hospital Outpatient Volume on Selected Outpatient Surgical

Procedures. In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68483 through 68484), we finalized that, for the CY 2014 paym ent determination, hosp itals are required to submit data on all Web-based measures between July 1, 2013 and November 1, 2013 with respect to the time period from Ja nuary 1, 2012 to December 31, 2012. This schedule also applies to th e encounter periods and dead lines to submit data for OP-22: ED Patient Left Without Being Seen. While patient-level data for this measure is collected via chart-abstraction, aggregate data is submitted using an online tool.CMS-1601-P 500

We also finalized in the CY 2013 OPPS/ ASC final rule with comment period for the CY 2015 payment determination, that hosp itals are required to submit data on all Web-based measure data between July 1, 2014 and November 1, 2014 with respect to the time period from January 1, 2013 to December 31, 2013. We are proposing to apply a similar schedule for the CY 2016 payment determination and subsequent years. For the CY 2016 payment determination and subsequent years, we are proposing that hos pitals would be required to submit data between July 1 and November 1 of the year pr ior to a payment determination with respect to the time period of January 1 to Decem ber 31 of two years prior to a payment determination year. Thus, for example, for the CY 2016 payment determination, hospitals would be required to submit da ta between July 1, 2015 and November 1, 2015 with respect to the time period of January 1, 2014 to December 31, 2014. We are also proposing to apply the same mode of data collection and deadlines to the following proposed measures:

● OP-28: Complications within 30 days Following Cataract Surgery Requiring Additional Surgical Procedures;

● OP-29: Endoscopy/Poly Surveillance: Appropriate follow-up interval for normal colonoscopy in average risk patients;

● OP-30: Endoscopy/Poly Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps – A voidance of Inappropriate Use; and

● OP-31: Cataracts – Improvement in Pa tient’s Visual Functi on within 90 Days Following Cataract Surgery.CMS-1601-P 501 Specifically, for data collection, we are proposing that hospitals submit aggregatelevel data through the CMS Web-based tool (t he QualityNet Web site). As with OP-22, hospitals would submit all the data required for a particular program year once annually during the data submission window we are proposing above, and would do so via the Outpatient section on the QualityNet secure Web site. While we are proposing submission deadlines with an annual frequency, the data input forms on the QualityNet Web site for such submission will require hospi tals to submit aggregate data represented by each separate quarter. We are proposing to both use the Web-based collection tool and collect aggregate-level data because we believe these options are less burdensome to hospitals than patient -level reporting. While this proposal applies to the CY 2016 payment determination and subsequent years, we summarize below, for ch art-abstracted measures collected via the Web-based tool, the proposed and finalized measures, data collection periods, and deadlines for just the CY 2016 payment determination.

Proposed and Finalized Chart-Abstracted Measures with Data Collection by Web-Based Tool: CY 2016 Payment Determination Measure Hospital OQR Program Status Encounter Dates Data Submission Timeframe OP-22: ED Patient Left Without Being Seen Finalized January 1, 2014 – December 31, 2014 July 1, 2015 – November 1, 2015 OP-28: Complications within 30 days Following Cataract Surgery Requiring Additional Surgical Procedures Proposed January 1, 2014 – December 31, 2014 July 1, 2015 – November 1, 2015 OP-29: Endoscopy/poly Surveillance: Appropriate Proposed January 1, 2014 – December 31, July 1, 2015 – November 1,CMS-1601-P 502 Proposed and Finalized Chart-Abstracted Measures with Data Collection by Web-Based Tool: CY 2016 Payment Determination Measure Hospital OQR Program Status Encounter Dates Data Submission Timeframe follow-up interval for normal colonoscopy in average risk patients 2014 2015

OP-30: Endoscopy/poly surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps – Avoidance of Inappropriate Use Proposed January 1, 2014 – December 31, 2014 July 1, 2015 – November 1, 2015

OP-31 -- Cataracts – Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery Proposed January 1, 2014 – December 31, 2014 July 1, 2015 – November 1, 2015

We recognize that aggregate-level repor ting has the potential to result in less accurate measure rates than patient-level re porting. However, to reduce burden for hospitals, we believe that an aggregate da ta submission approach is the preferable approach at this time. We invite public comment on these proposals. g. Proposed Data Submission Requirements for a Measure Reported via NHSN for the CY 2016 Payment Determination and Subsequent Years As discussed above, we are proposing to add the measure OP-27: Influenza Vaccination Coverage among Healthcare Pe rsonnel to the Hospital OQR Program measure set. We are also proposing to use the data submission and reporting standard procedures set forth by CDC for NHSN partic ipation in general and for submission of

this measure to NHSN. We refer readers to the CDC’s NHSN Web siteCMS-1601-P 503 ( http://www.cdc.gov/nhsn ) for detailed data submission and reporting procedures. We believe that these procedures are feasible because they are already widely used by over 4,000 hospitals reporting HAI data using NHSN. Our proposal seeks to reduce hospital burden by aligning our data submission and re porting procedures with NHSN procedures currently used by hospitals who participate in the reporting requirements for the Hospital IQR Program as well as hospitals in the 30 St ates and the District of Columbia that mandate HAI reporting via NHSN. We are proposing to adopt the NHSN HAI measure data collection timeframe of October 1 through March 31 st , as previously finalized in the Hospital IQR Program (76 FR 51631 through 51633), which links data collection to the tim e period in which

influenza vaccinations are administered duri ng the influenza season. Because data for this measure would be collected seasonally, we are proposing that hospitals submit their data for this measure to NHSN for purpos es of the Hospital OQR Program by May 15th of the calendar year in which the vaccina tion season has ended. For example, for vaccinations given from October 1, 2014 (or when the vaccine becomes available) to March 31, 2015, the submission deadline woul d be May 15, 2015. This data submission deadline for this measure corresponds to that proposed by the Hospital IQR Program (78 FR 27700). We invite public comment on these proposals.CMS-1601-P 504 h. Population and Sampling Data Requirements for the CY 2015 Payment Determination and Subsequent Years In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68484), for the CY 2014 payment determination and subseque nt years, we continued our policy that hospitals may submit voluntarily on a quarterly basis, aggregate population and sample

size counts for Medicare and non-Medicare en counters 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, an d 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 744 83) for discussions of these policies. We are not proposing any changes to this policy. 3. Hospital OQR Program Validation Requireme nts for Chart-Abstracted Measure Data Submitted Directly to CMS for the CY 2015 Payment Determination and Subsequent

Years a. Selection of Hospitals for Data Validation of Chart-Abstracted Measures for the CY 2015 Payment Determination and Subsequent Years

We refer readers to the CY 2012 a nd CY 2013 OPPS/ASC final rules with comment period (76 FR 74484 through 74487 and 77 FR 68484 through 68487) for a discussion of finalized policies regardi ng our sampling methodology, including sampleCMS-1601-P 505 size, eligibility for validation selection, and encounter minimums for patient-level data

for measures where data is obtained from chart abstraction and submitted directly to CMS from selected hospitals. We are not proposing any changes to these policies. We are, however, proposing to codify at § 419.46(e) of our regulations the existing policy that we may validate one or more measures selected under section 1833(17)(C) of the Act by reviewing documen tation of patient encounters submitted by selected participating hospitals. Upon written request, a hospital must submit to CMS or its contractor supporting medical record documentation that the hospital used for purposes of data submission under the program. The specific sample that a hospital must submit will be identified in the written request. A hospital must submit the supporting

medical record documentation to CMS or its contractor within 45 days of the date identified on the written request, in the form and manner specified in the written request. A hospital meets the validation requirement with respect to a fiscal year if it achieves at least a 75-percent reliability sc ore, as determined by CMS. We invite public comment on our pr oposal to codify these requirements. b. Targeting Criteria for Data Valida tion Selection for the CY 2015 Payment Determination and Subsequent Years

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68485 through 68486) for a discussion of our targeting crit eria. We are not proposing any changes to this policy.CMS-1601-P 506 c. Methodology for Encounter Selection for the CY 2015 Payment Determination and Subsequent Years

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68486) for a discussion of our methodol ogy for encounter selection. We are not proposing any changes to this policy. d. Medical Record Documentation Reque sts for Validation and Validation Score Calculation for the CY 2015 Payment Determination and Subsequent Years

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68486 through 68487) for a discussion of our procedures for requesting medical

record documentation for validation and va lidation score calculation. We are not proposing any changes to our procedures regarding medical record requests. However, we are proposing to codify these procedures at §§ 419.46(e)(1) and (e)(2) as summarized below:

● CMS may validate one or more meas ures selected under section 1833(17)(C) of the Act by reviewing documentation of patient encounters submitted by selected participating hospitals.

● Upon written request by CMS or its c ontractor, a hospital must submit to CMS supporting medical record documentation that the hospital used for purposes of data submission under the program. The specific sample that a hospital must submit will be identified in the written request. A hosp ital must submit the supporting medical record

documentation to CMS or its contractor with in 45 days of the date identified on the written request, in the form and manner specified in the written request.CMS-1601-P 507

● A hospital meets the validation requiremen t with respect to a fiscal year if it achieves at least a 75-percent reliabil ity score, as determined by CMS. We invite public comment on our pr oposal to codify these procedures. I. Proposed Hospital OQR Reconsiderati on and Appeals Procedures for the CY 2015 Payment Determination and Subsequent Years

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68487) for a discussion of our reconsid eration and appeals pr ocedures. We are proposing one change to the reconsideration requ est procedures to ensu re our deadline for reconsideration requests will always fall on a business day. We also are proposing to codify the process, including our proposal to change the deadline by which participating hospitals may submit requests for reconsid eration at § 419.46(f) of our regulations. Under the proposed change to our proce dures, a hospital seeking reconsideration would submit to CMS, via the QualityNet Web site, a Reconsideration Request form that will be made available on the QualityNet Web site. Where we have required that this form must be submitted by February 3 of the affected payment year (for example, for the CY 2014 payment determination, the request was required to be submitted by February 3, 2014), we are proposing to modify this re quirement so that the Reconsideration Request form would be required to be submitted on the first business day in February of the affected payment year. If this proposal is finalized, the Reconsideration Request form for the CY 2014 payment determination woul d be required on February 3, 2014, which is a Monday, and the form for the CY 2015 paym ent determination would be required on February 2, 2015, which is also a Monday. We note that while we use the CY 2014 andCMS-1601-P 508 2015 payment determinations as examples, we are proposing this policy for the CY 2014 payment determination and subsequent years. The other requirements of the form would remain unchanged. We request public comment on this proposal. We also are proposing to codify this pr ocess by which particip ating hospitals may submit requests for reconsideration including ou r proposal to change the reconsideration request deadline at § 419.46(f). Under thes e proposed procedures, the hospital must submit to CMS via QualityNet, a reconsidera tion request via the QualityNet Web site, no

later than the first business da y of the month of February of the affected year containing the following information:

● The hospital’s CMS Cert ification Number (CCN);

● The name of the hospital;

● The CMS-identified reason for not mee ting the requirements of the affected payment year’s Hospital OQR Program as provided in any CMS notification to the hospital;

● The hospital’s basis for requesting rec onsideration. The ho spital must identify its specific reason(s) for belie ving it should not be subject to the reduced annual payment update;

● The hospital-designated personnel c ontact information, including name, e-mail address, telephone number, and mailing address (must include physical address, not just a post office box).

● The hospital-designated personnel’s signature;CMS-1601-P 509

● A copy of all materials that the hospital submitted to comply with the requirements of the affected Hospital OQR Program payment determination year; and

● If the hospital is requesting recons ideration on the basis that CMS has determined it did not meet an affected payment determination year’s validation requirement set forth in paragraph (e)(1) of this section, 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 are eligible to be reconsidered. We also are proposing to codify language at § 419.46(f)(3) sta ting that a hospital

that is dissatisfied with a decision made by CMS on its reconsideration request may file an appeal with the Provider Reimbursement Review Board. While we are not proposing to codify the following process, we note that, after receiving a request for reconsideration, CMS--

● Provides an e-mail acknowledgement, using the contact information provided in the reconsideration request, to the desi gnated hospital personne l notifying them that the hospital’s request has been received.

● Provides a formal response to the hospital-designated pe rsonnel, using the contact information provided in the reconsid eration request, notifying the hospital of the outcome of the reconsideration process.

● Applies policies regarding the scope of our review when a hospital requests

reconsideration because it fail ed our validation requirement. These policies are as follows:CMS-1601-P 510

● If a hospital requests reconsideration on the basis that it disagrees with a

determination that one or more data elemen ts were classified as mismatches, we only consider the hospital’s request if the hosp ital 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 reco rd 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), t hus resulting in a zer o validation score for the encounter(s), our review is initially limited. We will review only to determine whether the medical documentation submitted in response to the designated CMS contractor’s request was the correct and complete documentation. If we determine that the hospital did submit correct and complete me dical documentation, we abstract the data elements and compute a new validation score for the encounter. If we conclude that the hospital did not submit 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 reque sted medical record documentation to the CMS contractor within the proposed 30 calenda r day timeframe, our re view is initially limited to determining whether the CMS contract or received the requested medical record documentation within 30 calendar days, and whether the hospital received the initial medical record request and reminder notice. If we determine that the CMS contractorCMS-1601-P 511 timely received copies of the requested medi cal record documentation, we abstract data elements from the medical record documentation submitted by the hospital and compute a validation score for the hospita l. If we determine that the hospital received two letters requesting medical documentation but did not submit the requested documentation within the 30 calendar day period, we do not furt her consider the hospital’s request. If a hospital is dissatisfied with th e 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 these proposals. J. Extraordinary Circumstances Extens ion or Waiver for the CY 2014 Payment Determination and Subsequent Years In our experience, there have been times when facilities have been unable to submit information to meet program require ments due to extraordinary circumstances

that are not within their contro l. It is our goal to not pe nalize such entities for such circumstances and we do not want to unduly increase their burden during these times.

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68489) for a complete discussion of our extraordinary circumstances extension or waiver process under the Hospital OQR Program. We are proposing one change to our pro cess 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 circumst ances beyond the control of the hospital. Specifically, we are proposing that we may grant a waiver or ex tension to hospitals if we determine that aCMS-1601-P 512 systemic problem with one of our data collect ion systems directly or indirectly affected the ability of hospitals to submit data. Becau se we do not anticipate that such systemic errors will happen often, we do not anticipate granting a waiver or extension on this basis frequently. We also are proposing to codify langua ge for the general requirements for our extension or waiver process including the pr oposal for systemic errors at § 419.46(d) as

described below: CMS may grant an extension or waiver of one or more data submission deadlines and requirements in the event of extraordin ary circumstances beyond the control of the hospital such as when an act of nature affect s an entire region or locale or a systemic problem with one of CMS’ data collection sy stems directly or indirectly affects data submission. CMS may grant an extension or waiver as follows:

● Upon request by the hospital. Specif ic requirements for submission of a request for an extension or waiver ar e available on the QualityNet Web site.

● At the discretion of CMS. CMS may gr ant waivers or extensions to hospitals that have not requested them when CMS determines that an extraordinary circumstance

has occurred. For the hospital to request considerati on for an extension or waiver of the requirement to submit quality data or medi cal record documentation for one or more quarters, a hospital would follow specific re quirements for submission of a request available on QualityNet. While we are not pr oposing to codify the following process, we note that, the following information must appear on the request form:CMS-1601-P 513

● Hospital CCN;

● Hospital Name;

● CEO or other hospital-designated pe rsonnel contact information, including name, e-mail address, telephone number, and mailing address (must include a physical address, a post office box address is not acceptable);

● Hospital’s reason for request ing an extension or waiver;

● Evidence of the impact of the extrao rdinary circumstances, including but not limited to photographs, newspaper and other media articles; and

● A date when the hospital believes it would again be able to submit Hospital OQR data and/or medical record documentati on, and a justification for the proposed date. The request form must be signed by the hospital’s designated contact, whether or not that individual is the CEO. A request fo rm is required to be submitted within 45 days

of the date that the extrao rdinary circumstance occurred. Following receipt of such a request, CMS would— (1) Provide an e-mail acknowledgement using the contact information provided in the request notifying the designated cont act that the hospital’s request has been received; (2) Provide a formal response to th e hospital’s designated contact using the contact information provided in the reque st notifying them of our decision; and (3) Complete our review and communicate our response within 90 days following our receipt of such a request.CMS-1601-P 514 We can also grant waivers or extensions to hospitals that have not requested them when we determine that an extraordinary circum stance, such as when an act of nature (for example, hurricane) affects an entire region or locale or a systemic problem with one of our data collection systems direc tly or indirectly affects data submission. If we make the determination to grant a waiver or extension to hospitals in a region or locale, we would communicate this decision to hospitals and vendors through routine communication channels, including but not limited to e-mails and notices on the QualityNet Web site. We invite public comment on these proposals. XIV. Hospital Value-Based Purchasing (VBP) Program Updates A. Background Section 1886(o) of the Act, as added by section 3001(a)(1) of the Affordable Care Act, requires the Secretary to establish a hospital value-ba sed purchasing program (the Hospital Value-Based Purchasing (VBP) Pr ogram) under which va lue-based incentive payments are made in a fiscal year to hospitals that meet performance standards established for a performance period for su ch fiscal year. Both the performance standards and the performance period for a fi scal year are to be established by the Secretary. B. Proposal for Additional CMS Appeals Review Process 1. Statutory Basis Section 1886(o)(11)(A) of the Act requires the Secretar y to establish a process by which hospitals may appeal the calculation of a hospital’s performance assessment withCMS-1601-P 515 respect to the performance st andards (section 1886(o)(3)(A) of the Act) and the hospital performance score (section 1886(o)(5) of the Act). Under section 1886(o)(11)(B) of the Act, there is no administrative or judicial

review under section 1869 of th e Act, section 1878 of the Act, or otherwise of the following: (1) the methodology used to de termine the amount of the value-based incentive payment under section 1886(o)(6) of the Act and the determination of such amount; (2) the determination of the amount of funding available for the value-based incentive payments under sect ion 1886(o)(7)(A) of the Act and the payment reduction under section 1886(o)(7)(B)(i) of the Act; (3) the estab lishment of the performance standards under section 1886( o)(3) of the Act and the pe rformance period under section 1886(o)(4) of the Act; (4) the measures specifi ed under section 1886(b)(3 )(B)(viii) of the

Act and the measures selected under sect ion 1886(o)(2) of the Act; (5) the methodology developed under section 1886(o )(5) of the Act that is us ed to calculate hospital performance scores and the calculation of su ch scores; or (6) th e validation methodology specified in section 1886(b )(3)(B)(XI) of the Act.

In the FY 2013 IPPS/LTCH PPS final ru le (77 FR 53581), we finalized an administrative appeals process and codi fied that proce ss at 42 CFR 412.167. 2. Independent CMS Review Proposal In this proposed rule, for the Hosp ital VBP Program, we are proposing to implement an independent CMS review that will be an additi onal appeal process available to the hospitals, beyond the ex isting review and corrections process (77 FR 53578 through 53581 and 76 FR 74544 through 74547) and appeal processCMS-1601-P 516

codified at 42 CFR 412.167. We are proposing that a hospital would be able to request this additional independent CMS review only if it first completes the appeal process at 42 CFR 412.167(b) and is dissatis fied with the result. We believe that our proposal to require hospitals to complete the existing appeal process at 42 CFR 412.167(b) before they can request an additional independent CMS review will faci litate the efficient resolution of many disputed issues, thus decreasing the number of independent CMS reviews that are requested. We intend to provide hospitals with our independent review decision within 90 calendar days following the receipt of a hospital’ s independent review request. We also are proposing to codi fy this policy in our regulations at 42 CFR 412.167 by redesignating the existing pa ragraph (c) as paragraph (d), and inserting a new paragraph (c). We are i nviting public comments on these proposals. C. Proposed Performance and Baseline Peri ods for Certain Outcome Measures for the FY 2016 Hospital VBP Program

As described in the FY 2014 IPPS/ LTCH PPS proposed rule (78 FR 27610 through 27611), we have proposed to adopt CLABSI, CAUTI, and SSI, which are measures reported to CDC’s National Heal thcare Safety Network (NHSN), for the FY 2016 Hospital VBP Program. However, when we published that proposed rule, we inadvertently did not make FY 2016 performan ce and baseline period proposals for these proposed measures. We are proposing to adopt FY 2016 performance and baseline periods for these measures in this proposed ru le so that we have enough time to consider and respond to public comments before the pr oposed start of the performance periods.CMS-1601-P 517

In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53597 through 53598), we finalized an 11-month performance period for the CLABSI meas ure for the FY 2015 Hospital VBP Program (February 1, 2013 through December 31, 2013), with a corresponding baseline period of January 1, 2011 through December 31, 2011. While we adopted an 11-month performance period fo r the CLABSI measure for FY 2015 based on its posting date on the Hospital Compare Web site, beginning with FY 2016, we are proposing to align the NHSN measures’ perf ormance and baseline periods with other domains’ performance and base line periods, where possible, and with the calendar year. As we have stated with regard to other domains, a 12-month performance period provides us more data on which to score hospital perfor mance, which is an important goal both for

CMS and for stakeholders. Therefore, we are proposing to adopt CY 2014 (January 1, 2014 through December 31, 2014) as the performance period for the CLABSI, CAUTI, and SSI measures for the FY 2016 Hospital VBP Program, with CY 2012 (January 1, 2012 through December 31, 2012) as the baseline period. We are inviting public comments on these proposals. The proposed performance and baseline periods for the CAUTI, CLABSI, and SSI measures for the FY 2016 Hospital VBP Program appear in the following table.CMS-1601-P 518 Proposed Performance and Baseline Periods for CAUTI/CLABSI/SSI under the FY 2016 Hospital VBP Program Domain Baseline Period Performance Period Outcome

• CAUTI / CLABSI / SSI • January 1, 2012 – December 31, 2012 • January 1, 2014 – December 31, 2014

XV. Proposed Requirements for the Ambulatory Surgical Center Quality Reporting (ASCQR) Program A. Background

1. Overview

We refer readers to section XIII.A.1. of th is proposed rule for a general overview of our quality reporting programs. 2. Statutory History of 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. Regulatory 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 co mment period (73 FR 68780), the CY 2010 OPPS/ASC final rule with comment peri od (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 th at 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 implemen ting new quality reporting requirements.CMS-1601-P 519 However, in these rules, we indicated that we intended to implement a quality reporting program for ASCs in the future. In prepar ation for proposing a quality reporting program for ASCs, in the CY 2011 OPPS/ASC proposed rule (75 FR 46383), we solicited public

comment on 10 measures. In addition to CMS preparing to pro pose 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 th e Act for ASCs, and submitted a report to Congress entitled “Medicare Ambulatory Su rgical Center Value-Based Purchasing Implementation Plan” that details this plan. The plan and the report to Congress were required under section 3006(f) of the Afford able Care Act as added by section 10301(a)

of the Affordable Care Act. The re port is found on the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/ASCPayment/Dow nloads/C_ASC_RTC-2011.pdf . Currently, we do not have express statutory authority to implement an ASC VBP program. 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 determinations and subsequent 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 the updating of measures, publication of ASCQR Program data, and, for the CY 2014 payment determination, data collection and submi ssion requirements for the claims-basedCMS-1601-P 520

measures. For a discussion of these final policies, we refer readers to the CY 2012

OPPS/ASC final rule with comm ent 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 issu e proposals for administrative re quirements, data validation and completeness requirements, and recons ideration and appeals processes in the FY 2013 IPPS/LTCH PPS proposed rule, rath er than in the CY 2013 OPPS/ASC proposed rule, because the FY 2013 IPPS/LTCH PPS proposed rule was scheduled to be finalized earlier and pr ior to data collection for th e CY 2014 payment determination, which was to begin with services furnished on October 1, 2012. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53636 thr ough 53644), we issued final policies for administrative requirements, data comp leteness requirements, extraordinary circumstances waiver or extension requests, and a reconsideration process. For a complete discussion of these policies, we refer readers to the FY 2013 IPPS/LTCH PPS

final rule. In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68492 through 68500), we issued final policies regarding our approach to selecti ng quality measures, reporting requirements, and payment reductions for ASCs that fail to meet the ASCQR Program requirements.CMS-1601-P 521 B. ASCQR Program Quality Measures

1. Considerations in the Selection of ASCQR Program Quality Measures

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68493 through 68494) for a detailed disc ussion of the consider ations we use for the selection of ASCQR Pr ogram quality measures. 2. ASCQR Program Qualit y Measures Adopted in Previous Rulemaking In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74492 through 74517), we finalized our proposal to implement the ASCQR Program beginning with the CY 2014 payment determination and adopted measures for the CY 2014, CY 2015, and CY 2016 payment determinations. In an effort to streamline the rulemaking process, we also finalized our policy that , when we adopt measures for the ASCQR Program, these measures are automatically adopted for all subsequent years payment determinations unless we propose to remove, suspend, or replace the measures (76 FR 74494, 74504, 74509, and 74510). The quality measures that we have previously adopted are listed below.

ASC Program Measurement Set Adopted in Previous Rulemaking ASC-1: Patient Burn* ASC-2: Patient Fall* ASC-3: Wrong Site, Wrong Side, Wrong Pati ent, Wrong Procedure, Wrong Implant* ASC-4: Hospital Transfer/Admission* ASC-5: Prophylactic Intravenous (IV) Antibiotic Timing* ASC-6: Safe Surgery Checklist Use**CMS-1601-P 522 ASC Program Measurement Set Adopted in Previous Rulemaking ASC-7: ASC Facility Volume Data on Selected ASC Surgical Procedures** Procedure categories and correspondi ng HCPCS codes are located at: http://qualitynet.org/dcs/Cont entServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1 2 ASC- 8: Influenza Vaccination C overage 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. Proposed Additional ASCQR Program Qu ality Measures for the CY 2016 Payment Determination and Subsequent Years We are proposing quality measures fo r the CY 2016 payment determination and subsequent years based on our approach for future measure selection and development

finalized in the CY 2013 O PPS/ASC final rule with comment period (77 FR 68493 through 68494), which includes, among othe r considerations, aligning the ASCQR Program measures with our efforts in other c linical care settings and taking into account

the views of the MAP.

We believe that ASCs and HOPDs are si milar in their delivery of surgical and related nonsurgical services. Th erefore, we seek to propose qua lity measures that can be applied to both HOPDs and ASCs to the extent possible because many of the same surgical procedures are performed in both of these settings. Measure harmonization assures that quality of care for similar serv ices is measured in a comparable manner across settings. This approach would provi de meaningful information for Medicare

beneficiaries to make informed decisions.

Section 3014 of the Affo rdable Care Act added s ection 1890 A of the Act establishing a pre-rulemaking process, which, among other st eps, requires the Secretary to take intoCMS-1601-P 523 consideration the input from multi-stakeholde r groups in selecting certain categories of quality and efficiency measures described in section 1890(b)(7)(B) of the Act. As part of the pre-rulemaking process, the consensus-ba sed entity that CMS must contract with under section 1890 of the Act (currently NQF ), convened the multi-stakeholder groups, referred to as the MAP. The MAP is a public -private partnership created for the primary purpose of providing input to HHS on the sel ection of the categories of measures in section 1890(b)(7)(B), which in cludes measures for use in certain specific Medicare programs, measures for use in reporting pe rformance information to the public, and measures for use in health care progr ams other than for use under the Act. After we selected quality measures that we might propose for the ASCQR Program based on our established policies regarding the appro ach to selecting quality measures in CY 2013 OPPS/ASC final rule with comment period (7 7 FR 68493 through 6849 4), we included the measures in a publicly available document entitle d “List of Measures Under Consideration for December 1, 2012” in compliance with section 1890A (a)(2) of the Act, and they were reviewed by the MAP in its “MAP Pre-Rulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS,” which has been made available on the NQF Web site at: http://www.qualityforum.org/Publications /2013/02/MAP_Pre-Rulemaking_Report_- _February_2013.aspx . We considered the input and recommendations provided by the MAP in selecting measures to propose for the ASCQR Program. In addition, in its 2013 Pre-Rulema king Report, the MAP also supports: (1) HHS’ efforts to move toward greater alignment across the Hospital OQR and ASCQR Programs; and (2) the inclusion of ASCs within a broader approach to measuring performance and improving care that is aligne d across health care settings (page 35, MAPCMS-1601-P 524 Pre-Rulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS). For the CY 2016 payment determination a nd subsequent years, we are proposing to adopt four measures for the ASCQR Program, all of which were reviewed by the MAP and three of which are NQF-endorsed for the ASC setting: (a) Complications within 30 Days following Cataract Surgery Requir ing Additional Surgical Procedures; (b) Endoscopy/Poly Surveillance: Appropriate follow-up interval for normal colonoscopy in average risk patients (NQF #0658); (c ) Endoscopy/Poly Surveillance: Colonoscopy

Interval for Patients with a Hi story of Adenomatous Polyps – Avoidance of Inappropriate Use (NQF #0659); and (d) Cataracts: Improveme nt in Patient’s Visual Function within 90 Days Following Cataract Surgery (NQF #1536). For purposes of the ASCQR Program, sections 1833(i)(7)(B) and 1833(t)(17)(C)(i) of the Act, r ead together, require the Secr etary, except as the Secretary may otherwise provide, to develop measures appropriate for the measurement of the quality of care (including medication errors ) furnished by ASCs, that reflect consensus among affected parties and, to the extent feas ible and practicable, that include measures set forth by one or more national consensus bui lding entities. As stated in the CY 2012 OPPS/ASC final rule with comment peri od (76 FR 74465 and 74505), we believe that consensus among affected parties can be reflected through mean s other than NQF endorsement, including consensus achieved during the measure development process; consensus shown through broad acceptance and use of measures; and consensus through public comment. The proposed measures are described in greater detail below.CMS-1601-P 525 We are proposing that data collection for these four measures would begin in

CY 2014. We refer readers to section XV.D. of this proposed rule for detailed discussion

of data collection and submission time frames . We are proposing to collect aggregate data (numerators, denominators, and excl usions) on all ASC patie nts for these four proposed chart-abstracted measures via an online Web-based tool that would be made available to ASCs via the QualityNet Web site . This online Web-based tool is currently in use in the ASCQR Program to collect m easure information for ASC-6 (Safe Surgery Checklist Use) and ASC-7 (ASC Facility Volume Data on Selected ASC Surgical Procedures). We invite public comment on th ese proposals. More information regarding this proposed method of collec tion is provided in section XV. D.5.c. of this proposed rule. To advance our efforts to collect high quality data on all ASC patients for the ASCQR measures while minimi zing burden for ASCs, we also seek public comment on

alternative data collec tion strategies for these four propos ed measures. In particular, we seek comment on collection of patient-level da ta through registries or other third party data aggregators, and via certified EHR t echnology, along with the potential timing for doing so. a. Complications within 30 Days Follo wing Cataract Surger y Requiring Additional Surgical Procedures It is uncommon to have complications that may result in a permanent loss of vision following cataract surgery. Cataract su rgery has become safer and more effective due to advances in technology and surgical skills over the last 30 years. Based on an analysis of Managed Care Organization data, it is estimated that the annual volume forCMS-1601-P 526 cataract surgeries is 2.8 million in the U.S with the rate of cataract surgery complications being 1 to 2 percent. However, with an a nnual volume of 2.8 million cataract surgeries in the United States, a 2 percent rate is signi ficant and translates to over 36,000 surgeries associated with complications. 11 Thus, for the CY 2016 payment determination and subsequent years, we are proposing to adopt the Complications with in 30 Days Following Cataract Surgery Requiring Additional Surgical Procedures measure, which assesses the “[p]ercentage of patients aged 18 years and older with a dia gnosis of uncomplicated cataract who had cataract surgery and had any of a specified li st of surgical proce dures in the 30 days following cataract surgery whic h would indicate the occurrenc e of any of the following major complications: retained nuclear frag ments, endophthalmitis, dislocated or wrong power IOL retinal detachment, or wound dehi scence.” This outcome measure seeks to identify those complications from surgery that can reasonably be attributed to the surgery. It focuses on patient safety and monitoring for events that, while uncommon, can signify important issues in the care being provided. Th e numerator for this measure is the number of “[p]atients who had one or more specified operative procedures for any of the following major complications within 30 days following cataract surgery: retained nuclear fragments, endophthalmitis, dislocated or wrong power IOL, retinal detachment,

or wound dehiscence.” The denominator fo r this measure is the total number of “[p]atients aged 18 years and older who had cataract surgery and no significant preoperative ocular conditions impacting the su rgical complication rate.” This measure

11 National Quality Measures Clearing House. Agency for Healthcare Research and Quality. Available at http://qualitymeasures.ahrq.gov/content.aspx?id=2798 1&search=complications+within+30+days+followin g+cataract+surgery

.CMS-1601-P 527 excludes “[p]atients with certain comorb id conditions imp acting the surgical complication rate.” The measure specifications can be found at: http://www.qualityforum.org/QPS/0564 . This measure has been endorsed by NQF for the “Ambulatory Care: Clinic” setting ( NQF #0564) but, currently, is not NQF-endorsed for the ASC setting. We believe this measure meets the statutory requirements discussed above. This measure is not NQF-endorsed in the ASC setting and we could not find any other comparable measure that is specifically endorsed for the ASC setting. However, we believe that this measure is appropriate for the measurement of quality of care furnished by ASCs because this procedure is commonl y performed in ASCs and, as discussed above, can signify important issues in the ca re being provided in ASCs. Further, this measure reflects consensus among affected pa rties as it has been endorsed by NQF for the “Ambulatory Care: Clinic” setting. We beli eve that this consensus also applies to the same surgeries that are performed in other ambulatory settings, such as ASCs and HOPDs. Given the high volume of cataract surgeries performed in ambulatory care settings and the potential 2 per cent complication rate, we believe it is important for us to include this measure in the ASCQR Program meas ure set, and that this is an appropriate application of NQF #0564 to the ASC setting. We note that section 1833(t)(17) of the Act does not require that each measure we adopt be endorsed by a national consensus bu ilding entity. Furthe r, section 1833(i)(7)(B)

of the Act states that sect ion 1833(t)(17) of the Act a pplies to the ASCQR program, except as the Secretary may otherwise provide . Under this provision, the Secretary hasCMS-1601-P 528 further authority to adopt non-endorsed measures. In its 2013 Pre-Rulemaking Report, the MAP supported inclusion of this measure in the ASCQR Pr ogram and noted that this measure “[a]ddresses a high impact condition not adequately addre ssed in the program measure set.” Currently, the NQF endorse ment for this measure is time-limited. We invite public comment on this proposal. b. Endoscopy/Poly Surveillance: Appropr iate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients (NQF #0658) The American Cancer Society’s cu rrent guidelines recommend colonoscopy screening at 10-year intervals 12 for the average risk population ( http://www.cancer.org/cancer/colonandrec tumcancer/moreinformation/colonandrectumc ancerearlydetection/colorectal-can cer-early-detection-acs-recommendations ). For the CY 2016 payment and subsequent years, we are proposing to adopt the Endoscopy/Poly Surveillance: Appropriate fo llow-up interval for normal colonoscopy in average risk patients measure, which assesses the “[p]ercentage of patients aged 50 years and older receiving screening colonoscopy without biopsy or polypectomy who had a recommended follow-up interval of at least 10 years for repeat colonoscopy documented in their colonoscopy report.” Performi ng colonoscopy too frequently increases a patients’ exposure to procedural harm. This measure aims to assess whether average risk patients with normal colonoscopies receive a recommendation to receive a repeat colonoscopy in an interval th at is less than the recommended amount of 10 years. This

12 Davila RE, Rajan E, Baron TH, Adler DG, Egan JV, Faigel DO, Gan SI, Hirota WK, Leighton JA, Lichtenstein D, Qureshi WA, Shen B, Zuckerman MJ , VanGuilder T, Fanelli RD , Standards of Practice Committee, American Society for Gastrointestinal Endoscopy. ASGE guideline: colorectal cancer screening and surveillance. Gastrointest Endosc 2006 Apr;63(4):546-57. http://www.ncbi.nlm.nih.gov/pubmed/16564851?dopt=Abstract

.CMS-1601-P 529 measure is NQF-endorsed for the ASC setting. The numerator for this measure is the number of “[p]atients who had a recommended follow-up interval of at least 10 years for repeat colonoscopy documented in their col onoscopy report.” The denominator for this

measure is the total number of “[p]atients aged 50 years and older receiving screening colonoscopy without biopsy or polypectomy.” The measure excludes patients whose medical records contain reason(s) for reco mmending a follow up interval of less than 10 years. The specifications for this measure can be found at: http://www.qualityforum.org/QPS/0658

. We believe this measure meets the statutory requirements discussed above. This measure is appropriate for the measurement of quality of care furnished by ASCs because colonoscopy screening is commonly performed in ASCs and this measure was developed to specifically measure quality of care furnished by ASCs. We also believe it meets the consensus requirement and the requirement th at it be set forth by a national consensus building entity because it is NQF-endorsed for the ASC setting. In its 2013 Pre-Rulemaking Report, the MAP supported the di rection of this measure. Currently, the NQF endorsement for this measure is time-limited. We invite public comment on this proposal. c. Endoscopy/Poly Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps – Avoidance of Inappropriate Use (NQF #0659) According to the American Cancer Society, in patients with increased or high risk of colorectal cancer, colonosc opy screening is recommended ba sed on risk factors. One such factor is a history of adenomatous pol yps. The frequency of colonoscopy screeningCMS-1601-P 530 varies depending on the size and amount of polyps found; however, the general recommendation is a 3 year follow-up ( http://www.cancer.org/cancer/colonandrec tumcancer/moreinformation/colonandrectumc ancerearlydetection/colorectal-can cer-early-detection-acs-recommendations ). A randomized trial of 699 patients showed that after newly diagnosed adenomatous polyps have been removed by colonoscopy, fo llow-up colonoscopy at 3 years detects important colonic lesions as effectively as follow-up col onoscopy at both 1 and 3 years. 13 For the CY 2016 payment determination a nd subsequent years, we are proposing to adopt the Endoscopy/Poly Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps – Avoidan ce of Inappropriate Use measure, which assesses the “[p]ercentage of patients aged 18 years and ol der receiving a surveillance colonoscopy, with a history of a prior co lonic polyp in previous colonoscopy findings who had a follow-up interval of 3 or more years since their last colonoscopy documented in the colonoscopy report” This measure is NQF-endorsed for the ASC setting. The

numerator for this measure is th e number of “[p]atients who ha d an interval of 3 or more years since their last colonoscopy.” The denomin ator for this measure is the total number of “[p]atients aged 18 years a nd older receiving a surveillanc e colonoscopy with a history of a prior colonic polyp in a previous col onoscopy.” This measure excludes patients with: (1) documentation of medical reason(s) for an interv al of less than 3 years since the last colonoscopy (for example, last co lonoscopy incomplete, last colonoscopy had

13 Davila RE, Rajan E, Baron TH, Adler DG, Egan JV, Faigel DO, Gan SI, Hirota WK, Leighton JA, Lichtenstein D, Qureshi WA, Shen B, Zuckerman MJ , VanGuilder T, Fanelli RD , Standards of Practice Committee, American Society for Gastrointestinal Endoscopy. ASGE guideline: colorectal cancer screening and surveillance. Gastrointest Endosc 2006 Apr;63(4):546-57. http://www.ncbi.nlm.nih.gov/pubmed/16564851?dopt=Abstract

.CMS-1601-P 531 inadequate prep, piecemeal removal of aden omas, or last colonoscopy found greater than 10 adenomas); or (2) documentation of a syst em reason(s) for an interval of less than 3 years since the last colonoscopy (for exam ple, unable to locate previous colonoscopy report, previous colonoscopy re port was incomplete). The sp ecifications for this measure

can be found at: http://www.qualityforum.org/QPS/0659

. We believe this measure meets the statutory requirements discussed above. This measure is appropriate for the measurement of quality of care furnis hed by ASCs because colonoscopy is commonly performed in ASCs and this measure was developed to specifically measure quality of care furnishe d by ASCs. We also believe it meets the consensus requirement and the requirement th at it be set forth by a national consensus building entity because it is NQF-endorsed for the ASC setting. In its 2013 Pre-Rulemaking Report, the MAP supported the di rection of this measure. Currently, the NQF endorsement for this measure is time-limited. We invite public comment on this proposal. d. Cataracts: Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery (NQF #1536) Cataract surgery is performed to im prove a patient’s vision and associated functioning. This outcome is achieved consisten tly with careful atten tion to the accurate measurement of axial length and corneal power and the appropriate selection of an IOL lens. Failure to achieve improved visual functioning after surger y in eyes without comorbid ocular conditions that could imp act the success of the surgery would reflect care that should be assessed for opportunitie s for improvement. Evidence suggests thatCMS-1601-P 532 visual improvement occurs in about 86 to 98 percent of surger ies in eyes without comorbid conditions. However, with an a nnual volume of 2.8 milli on cataract surgeries in the U.S., an improvement rate from 86 to 98 percent could impact a significant number of patients per year. 14 For the CY 2016 payment determination a nd subsequent years, we are proposing to adopt the Cataracts: Impr ovement in Patient’s Visual Function within 90 Days Following Cataract Surgery measure, which a ssesses the “[p]ercentage of patients aged 18 years and older who had cataract surgery and had improvement in visual function achieved within 90 days following the catarac t surgery.” This m easure is NQF-endorsed for the ASC setting. The measure numerator is the number of “[p] atients 18 years and older in sample who had improvement in visual function achieved within 90 days following cataract surgery, base d on completing a pre-operativ e and post-operative visual

function instrument.” The measure denominator is the total number of “[p]atients aged 18 years and older in sample who had catarac t surgery.” There are no exclusions. The specifications for this measure are available at: http://www.qualityforum.org/QPS/1536

. Additional information for the measure specif ications can be found in the NQF Measure

Evaluation available at http://www.qualityforum.org/WorkArea/li nkit.aspx?LinkIdentifier=id&ItemID=68317

. We believe this measure meets the statutory requirements discussed above. This measure is appropriate for the measurement of quality of care furnished by ASCs because cataract surgery is commonly performed in ASCs and this measure was developed to

14 National Quality Measures Clearing House. Agency for Healthcare Research and Quality. Available at http://www.qualitymeasures.ahr q.gov/content.aspx?id=27982

.CMS-1601-P 533 specifically measure quality of care furnishe d by ASCs.” We believe it also meets the consensus requirement and the requirement th at it be set forth by a national consensus building entity because it is NQF-endorsed for the ASC setting. In its 2013 Pre-Rulemaking Report, the MAP supported the in clusion of this measure in the ASCQR Program and noted that this measure “[a]ddresses a high-impact condition not adequately addresse d in the program measure set.” We invite public comment on this proposal. In summary, we are proposing to ad opt four new measures for the ASCQR Program for the CY 2016 payment determina tion and subsequent years, with data collection beginning in CY 2014, as discussed in section XV.D.7.of th is proposed rule. We are proposing to collect aggregate data (numerators, denominators, and exclusions) on all ASC patients for these four proposed chart-abstracted measures via an online

Web-based tool that will be made available to ASCs via the QualityNet Web site. The proposed new measures for the CY 2016 paymen t determination and subsequent years for the ASCQR Program are listed in the table below.

Proposed New ASC Program Measure Set for the CY 2016 Payment Determination and Subsequent Years NQF # Measure Name 0564* Complications within 30 Days following Cataract Surgery Requiring Additional Surgical Procedures 0658 Endoscopy/Poly Surveillance: Appropr iate follow-up interval for normal colonoscopy in average risk patients 0659 Endoscopy/Poly Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps – Avoidance of Inappropriate Use 1536 Cataracts: Improvement in Patien t’s Visual Function within 90 Days Following Cataract Surgery *This measure has not been NQF endorsed for the ASC setting.CMS-1601-P 534

4. ASCQR Program Measure Topi cs for Future Consideration We seek to develop a comprehensive set of quality measures to be available for widespread use for informed decision-ma king and quality improvement in the ASC setting. Through future rulemaking, we inte nd to propose new measures that address clinical quality of care, patient safety, car e coordination, patient experience of care, surgical outcomes, surgical complications, complications of anesthesia, and patient reported outcomes of care. We invite pub lic comment on these measurement topics. 5. Technical Specification U pdates and Data Publication

In the CY 2012 OPPS/ASC final rule w ith comment period, we finalized our proposal to follow the same process for upda ting the ASCQR Program measures that we adopted for the Hospital OQR Program meas ures (76 FR 74513 through 74514). In the

CY 2009 OPPS/ASC final rule with comme nt period (73 FR 68766 through 68767), we established an additional subregulatory pro cess for making updates to the measures we have adopted for the Hospital OQR Program. We believe that a measure can be updated through this subregulatory pro cess provided it is a nonsubstan tive change. We expect to make the determination of what constitutes a substantive versus a nonsubstantive change on a case-by-case basis. Examples of nonsubstantive changes to measures might include updated diagnosis or procedure codes, medication updates for categories of medications, broadening of age ranges, and exclusions for a measure (such as the addition of a hos pice exclusion to the 30-day mortality measures). We believe that non-substantive changes may include updates to NQF-endorsed measures based upon changes to guidelines upon which theCMS-1601-P 535 measures are based. We will revise the Specifica tions Manual so that it clearly identifies the updates and provide links to where a dditional information on the updates can be

found. As stated in CY 2009 OPPS/ASC fina l rule with comment period, we also will post the updates on the QualityNet Web site at: https://www.QualityNet.org . We will provide sufficient lead time for facilities to implement the changes where changes to the data collection systems would be necessar y. We generally release the Hospital OQR Specifications Manual every 6 months and rele ase addenda as necessary. This release schedule provides at least 3 months of adva nce notice for nonsubstantive changes such as changes to ICD-9, CPT, NUBC, and HCPCS c odes, and at least 6 months of advance notice for changes to data elements that would require significant systems changes. We will continue to use rulemaking to adopt substantive updates made by the NQF to the endorsed measures we have adopted for the Hospital OQR Program. Examples of changes that we might consider to be substantive would be those in which the changes are so significant th at the measure is no longer th e same measure, or when a standard of performance assessed by a meas ure becomes more stringent (for example, changes in acceptable timing of medication, proc edure/process, or test administration). Another example of a substantive change would be where the NQF has extended its endorsement of a previously endorsed meas ure to a new setting, such as extending a measure from the inpatient setting to hospice. We believe that the policy finalized in the CY 2009 OPPS/ASC final rule with comment period adequately balances our need to incorporate non-substantive NQF updates to NQF-endorsed Hospital OQR Program measures in the most expeditiousCMS-1601-P 536 manner possible, while preserving the public’s ability to comment on updates that so fundamentally change an endorsed measure thatit is no longer the sa me measure that we originally adopted. We also note that the NQF endorsement process incorporates an opportunity for public comment and engagement in the measure maintenance process. These policies regarding what is considered substantive versus non-substantive apply to all measures in the Hospital OQR Program.

In the CY 2012 OPPS/ASC final rule w ith comment period, we finalized our proposal to follow the same process for upda ting the ASCQR Program measures that we adopted for the Hospital OQR Program m easures (76 FR 74513 through 74514) and, in

the CY 2013 OPPS/ASC final rule with comment period, we provided additional clarification regarding the ASCQR Program policy in the context of the previously finalized Hospital OQR program policy. We refer readers to the CY 2013 OPPS/ASC final rule with comment period for a disc ussion of the process for updating the ASCQR Program quality measures (77 FR 68496 through 68497). In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74514 through 74515), we also finalized a policy to make data that an ASC submitted for the ASCQR program publicly available on a CMS Web site after providing an ASC an opportunity to review the data to be made public. These data will be displayed at the CCN level. We are not proposing any changes to these policies.CMS-1601-P 537 C. 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 meas ures in accordance with paragraph (7).” Paragraph (7) contains subparagraphs (A) a nd (B). Subparagraph (A) of paragraph (7) states the Secretary may provide that an AS C that does not submit “data required to be submitted on measures selected under this pa ragraph with respect to a year” to the Secretary in accordance with this paragraph wi ll 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 a nnual increase factor for a subsequent year. Subparagraph (B) of paragra ph (7) makes many of the pr ovisions 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 (i v) [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 st ates that the “application of the preceding sentence may result in such update being less than 0.0 for a year, and may result inCMS-1601-P 538 payment rates under the [revised ASC payment system] for a year being less than such payment rates for the preceding year.” 2. Reduction to the ASC Payment Rates for ASCs That Fail to Meet the ASCQR Program Requirements for the CY 2015 Payment Determination and Subsequent 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 conversi on factor calculated for the previous year updated by the MFP-adjusted CPI-U update factor , which is the adjustment set forth in section 1833(i)(2)(D)(v) of the Act. The MFP-adjusted CPI-U update factor is the

Consumer Price Index for all urban consumer s (CPI-U), which curre ntly is the annual update for the ASC payment system, minus th e MFP adjustment. As discussed in the CY 2011 MPFS final rule with comment period (75 FR 73397), if the CPI-U is a negative number, the CPI-U would be held to zer o. Under the ASCQR Program, any annual update would be reduced by 2.0 percentage points for ASCs that fail to meet the reporting requirements of the ASCQR Program. This reduction would apply beginning with the CY 2014 payment rates. For a complete discussion of the calculation of the ASC conversion factor, we refer readers to section XII.G. of this proposed rule. In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68499 through 68500), in order to implement the requirement to reduce the annual update for ASCs that fail to meet the ASCQR Program requirements, we finalized our proposal that we would

calculate two conversion fact ors: a full update convers ion factor and an ASCQRCMS-1601-P 539 Program reduced update conversion factor. We finalized our proposal to calculate the reduced national unadjusted payment rates using the ASCQR Program reduced update

conversion factor that would apply to ASCs that fail to meet their quality reporting requirements for that calendar year payment determination. We finalized our proposal that application of the 2.0 percentage point reduction to the annual update may result in the update to the ASC payment system being less than zero prior to th e application of the MFP adjustment.

The ASC conversion factor is used to cal culate the ASC payment rate for services with the following payment indicators (lis ted in Addenda AA and BB to this proposed rule, which are available via the Internet on the CMS Web site): “A2,” “G2,” “P2,” “R2,” “Z2,” as well as the service portion of devi ce- intensive procedures identified by “J8.” We finalized our proposal that payment for al l services assigned the payment indicators listed above would be subject to the reducti on of the national unadjusted payment rates for applicable ASCs using the ASCQR Pr ogram reduced update conversion factor.

The conversion factor is not used to calculate the ASC payment rates for separately payable services that are assi gned status indicators other than payment indicators “A2,” “G2,” “J8,” “P2,” “R2,” and “Z2.” These services include separately payable drugs and biologicals, pass-thr ough devices that are contractor-priced, brachytherapy sources that are paid base d on the OPPS payment rates, and certain office-based procedures and ra diology services where payment is based on the MPFS PE RVU amount and a few other specific services that receive cost-based payment. As a result, we also finalized our proposal that the ASC payment ra tes for these services wouldCMS-1601-P 540 not be reduced for failure to meet the ASCQR Program requirements because the payment rates for these services are not cal culated using the ASC conversion factor and, therefore, not affected by reductions to the annual update. Office-based surgical procedures (perform ed more than 50 percent of the time in physicians’ offices) and separately paid radi ology services (excluding covered ancillary radiology services involving certa in nuclear medicine procedur es or involving the use of contrast agents, as discussed in section XII. C.1.b. of this proposed rule) are paid at the lesser of the MPFS non-facility PE RVU-base d amounts and the standard ASC ratesetting methodology. We finalized our proposal that the standard ASC ra tesetting methodology for this comparison would use the ASC conversi on factor that has been calculated using the full ASC update adjusted for productivity. This is necessary so that the resulting ASC payment indicator, based on the comparison, a ssigned to an office-based or radiology procedure is consistent for each HCPCS code regardless of whether payment is based on the full update conversion factor or th e reduced update conversion factor.

For ASCs that receive the reduced ASC payment for failure to meet the ASCQR Program requirements, we believe that it is both equitable and appropriate that a reduction in the payment for a service should result in proportionately reduced copayment liability for beneficiaries. Ther efore, we finalized our proposal in the

CY 2013 OPPS/ASC final rule with comment period (77 FR 68500) that the Medicare beneficiary’s national unadjusted copayment for a service to which a reduced national unadjusted payment rate applies would be based on the reduced national unadjusted payment rate.CMS-1601-P 541 We finalized our proposal that all ot her applicable adju stments 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 adjustme nts would apply to the reduced national unadjusted payment rates: the wage index adjustment, the multiple procedure adjustment, the interrupted procedure adju stment, and the adjustment for devices furnished with full or partial credit or without cost. We be lieve that these adjustments continue to be equally app licable to payment for ASCs that do not meet the ASCQR Program requirements. We are not proposing any changes to these policies. D. Administrative Requirements 1. Proposed Requirements Regarding Quality Net Account and Security Administrator a. Background for the CY 2014 and CY 2015 Payment Determinations A QualityNet account is required to submit quality measure data to the QualityNet Web site via a Web-based tool and, in accordance with CMS policy, a QualityNet security administrator is necessary to set-up such an account for the purpose of submitting this information to the QualityNet Web site. In previous rulemaking, we referred to this role as the QualityNet administ rator; we are referring to this role in this rulemaking as the QualityNet security admi nistrator, which emphasizes its security function and aligns terminology for the AS CQR Program with the Hospital IQR and OQR Programs. While the main purpose of a QualityNet security administrator is to serve as a point of contact for security purposes for quality reporting programs, weCMS-1601-P 542 believe from our experience that a QualityNet security administrator typically fulfills a variety of tasks related to quality repo rting, such as creati ng, approving, editing, and terminating QualityNet user accounts within an organization, and monitoring QualityNet usage to maintain proper security and c onfidentiality measures. Thus, we highly recommend that ASCs have and maintain a QualityNet security administrator.

In the FY 2013 IPPS/LTCH PPS final ru le (77 FR 53638 through 53639), we did not require that ASCs do so for the CY 2014 payment determination because ASCs are not required to submit data directly to the quality da ta warehouse for the CY 2014 payment determination (76 FR 74504) and we do not want to unduly burden ASCs by requiring ASCs to have a QualityNet security administrator. We note that a QualityNet account is not necessary to access information that is posted to the QualityNet Web site, such as specifications manuals and educational materials.

As finalized in the CY 2012 OPPS/AS C final rule with comment period (76 FR 74504 through 74509), for the CY 2015 payment determination, we require ASCs to submit some quality measure data via an online tool located on the QualityNet Web page. As set forth in the FY 2013 I PPS/LTCH PPS final rule (77 FR 53638 through 53639), to enter these data into our data sy stem, we require that ASCs identify and register a QualityNet security administrato r who follows the registration process located on the QualityNet Web site and submits the information as specified on this site.

Because submission of these data is not required until the July 1, 2013 to August 15, 2013 time period, we require that ASCs have a QualityNet security

administrator at the time ASCs submit We b-based measure data in 2013 for the CY 2015CMS-1601-P 543 payment determination, which is no later than August 15, 2013. ASCs may have a QualityNet security administrator prior to th is date, but we do not require that ASCs do

so. We noted that there are necessary maili ng and processing proce dures that must be completed in order to have a QualityNet secu rity administrator which are separate from completion of the forms by the ASC that can re quire significant time to complete. We strongly cautioned ASCs to not wait un til the deadline to apply; instead, we recommended allowing a minimum of 2 w eeks, and strongly suggested allowing additional time prior to the deadline to submit required documentation in case of

unforeseen issues. Because ASCs will need a QualityNet security administrator only to have the ability to set up a user account for the purpose of submitting such measure data once a year, we do not require that ASCs ma intain a QualityNet security administrator after the entry of their data via an online tool located on th e QualityNet Website in 2013 for the CY 2015 payment determination. We also note that QualityNet users mu st complete a user enrollment process, which is part of the registration process, to ensure access to the Secure QualityNet Portal beginning July 1, 2013. Portal access will be required for ASCs submitting data under the ASCQR Program using an online tool located on the QualityNet Web site. b. Proposed Requirements for the CY 2016 Payment Determination and Subsequent

Years For the CY 2016 payment determination a nd subsequent years, we are proposing that, similar to the requirement for the CY 2015 payment determination, ASCs would beCMS-1601-P 544 required to have a QualityNet security admi nistrator for the purposes of setting up a QualityNet account for the purpose of entering data via an online tool located on the QualityNet Web site if this had not been completed previously or no current user

accounts were available. If an ASC does not already have a QualityNet account, the facility would need to iden tify and register a QualityNet security administrator who follows the registration process located on the QualityNet Web site and submits the information as specified on this site. A Qua lityNet security administrator is not required for submitting data, a QualityNet security administrator is required to set up user accounts and for security purposes; a current us er account is required for submitting data. Thus, an ASC would need to acquire a Qu alityNet security administrator only if no current QualityNet account existed for the ASC. An ASC would be required to have an active account by any specified data entry dead line. For example, the deadline would be August 15, 2014 for the CY 2016 payment determination. Although we highly recommend that ASCs have and maintain a Qu alityNet security administrator, we believe that requiring an ASC to maintain a Qua lityNet administrator throughout the year would unnecessarily increase burden on ASCs. As noted previously, there are necessa ry mailing and processing procedures for having a QualityNet security administrator as signed by CMS separate from completion of the forms by the ASC that can require signi ficant time to complete and we strongly caution ASCs to not wait until any data entry deadline to apply. While we previously recommended allowing a minimum of 2 weeks, based upon recent experience, we strongly suggest allowing 4 to 6 weeks prio r to any data submission deadline to submitCMS-1601-P 545 required documentation for processing and in case of unforeseen issues. Also, QualityNet users must complete a user enrollment process, which is part of the registration process, to ensure access to the Secure QualityNet Portal. Portal access will be required for ASCs submitting data unde r the ASCQR Program to meet CMS IT security requirements. The legislative sour ce for this requirement originates in the Federal Information Security Manageme nt Act of 2002 which was amended by the Cybersecurity Act of 2012. The Document Library on the http://www.idmanagement.gov Web site contains documen tation related to identity management including the Federal Iden tity, Credential and Access Management (FICAM) Roadmap and Implementati on Guidance (version 2, 12/08/2011). We invite public comment on these proposals. 2. Proposed Requirements Regard ing Participation Status a. Background for the CY 2014 Payment Determination and Subsequent Years We finalized in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74516) a policy to consider an ASC as participating in the ASCQR Program for the CY 2014 payment determination if the ASC includes Quality Data Codes (QDCs) specified for the ASCQR Program on their CY 2012 claims relating to the finalized

measures. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53639 through 53640), we stated that once an ASC submits any quality measure data, it would be considered to be participating in the ASCQR Program. Further, once an ASC submits any quality measure

data and is considered to be participating in the ASCQR Program, an ASC wouldCMS-1601-P 546 continue to be considered participating in the ASCQR Program, regardless of whether the ASC continues to submit quality measure data, unless the ASC withdraws from the Program by indicating on a partic ipation form that it is withdrawing, as discussed below. For example, if an ASC includes any QDCs on its claims for the CY 2014 payment determination, it would be considered participating in the ASCQR Program for the CY 2014 payment determination and for each subsequent year’s payment determination

unless the ASC withdraws. Likewise, if an ASC did not s ubmit any QDCs for the CY 2014 payment determination, but submitted quality m easure data for the CY 2015 payment determination, the ASC would be consider ed participating in the ASCQR Program starting with the CY 2015 payment determin ation and continuing for each subsequent year’s payment determination unless the ASC withdraws from the ASCQR Program. We considered whether to require that an ASC complete and submit a notice of participation form for each year’s payment determination to indicate that the ASC is participating in the ASCQR Program as we re quire for hospitals, but decided against this approach because we were concerned about the burden on ASCs. We believe these requirements will reduce burden on ASCs wh ile accomplishing the purpose of notifying us of an ASC’s participa tion in the ASCQR Program. We stated that any and all quality measure data submitted by the ASC while participating in the ASCQR Program could be made publicly available. This policy allows us to provide information on th e quality of care provided to Medicare beneficiaries which promotes transparency.CMS-1601-P 547 Once an ASC submits quality measure da ta indicating its participation in the ASCQR Program, an ASC must complete and submit an online form indicating

withdrawal in order to withdraw from the ASCQR Program. This fo rm will be located on the QualityNet Web site star ting in July 2013. We also re quire that an ASC indicate on the form the initial payment determination ye ar to which the withdr awal applies. We established a different process for ASCs to w ithdraw from participa tion than the process we established for an ASC to participate in the ASCQR Program because of the payment implications of withdrawal. We stated th at, in withdrawing from the ASCQR Program, the ASC would incur a 2.0 percentage point reduction in its annua l payment update for that payment determination year and any subsequent payment determinations in which it

is withdrawn. We stated that we will not make quality measure data publicly available for that payment determination year and any subseque nt payment determinations for which the ASC is withdrawn from the ASCQR Program.

We established that an ASC would continue to be deemed withdrawn unless the ASC starts submitting quality measure data again. Once an ASC starts submitting quality measure data, the ASC would be considered participating unless the ASC withdraws, as

discussed above. We believe that these policies reduce the burden on ASCs by not having to notify us as to wh en they are participating.

We established that an ASC can withdr aw from the ASCQR Program at any time up to August 31, 2013 for the CY 2014 payment dete rmination. We antic ipated that this will be the latest date possible to allo w an ASC to withdraw before paymentCMS-1601-P 548 determinations affecting CY 2014 payment are made. We established that an ASC can withdraw from the ASCQR Program at a ny time up to August 31, 2014 for the CY 2015 payment determination. We clarify here that these deadlines include August 31 st for each respective year. We stated that these program requirement s would apply to all ASCs designated as open in the CASPER system before January 1, 2012 for the CY 2014 payment

determination. Because ASCs were not required to include QDCs on claims until October 2012 for the CY 2014 payment determin ation, an ASC designated as open in the CASPER system before January 1, 2012 was operating for at least 10 months before having to report any data. We believe this is a sufficient amount of time for ASCs to be established to report qu ality data for the CY 2014 payment determination. For the CY 2015 payment determina tion, we established that program requirements would apply to all ASCs designa ted as open in the CASPER system for at least 4 months prior to January 1, 2013. We believe that this date and length of operations experience would provide new ASCs sufficient time before having to meet quality data reporting requirements after the ASCQR Program’s initial implementation

year. b. Proposed Requirements for the CY 2016 Payment Determination and Subsequent

Years For the CY 2016 payment determination a nd subsequent years, we are proposing that an ASC can withdraw from the ASCQ R Program at any time up to and including August 31 of the year preceding a payment determ ination. We anticipate that this will beCMS-1601-P 549 the latest date possible to allow an ASC to withdraw before payment determinations affecting the next calendar ye ar’s payment are made. Thus, for example, for the CY 2016 payment determination, an ASC would be able to withdraw from the ASCQR Program at any time up to and including August 31, 2015. Once an ASC has withdrawn for any payment determination year, it would have a 2.0 percentage point reduction in their annual payment update and it would not be possi ble to reinstate part icipation status for that year. For the CY 2016 payment determination a nd subsequent years, we are proposing that all program requirements would apply to all ASCs designated as open in the CASPER system at least 4 mont hs prior to the beginning of data collection for a payment determination. Thus, for the CY 2016 paymen t determination, data collection begins with January 1, 2014 services; these program requirements would apply to all ASCs designated as open in the CASPER system for at least 4 months prior to January 1, 2014 (that is, an open date of September 1, 2013 or earlier). We believe that this date and length of operations experience would provi de any new ASCs sufficient time before having to meet quality data reporting requirements. We invite public comment on these proposals. 3. Requirements Regarding Data Processing and Collection Periods for Claims-Based Measures for the CY 2014 Payment Determination and Subsequent Years In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74496 through 74511), we adopted five claims-based meas ures for the CY 2014, CY 2015, and CY 2016 payment determinations and subsequent years. We also finalized that, to be eligible forCMS-1601-P 550 the full CY 2014 ASC annual payment update, for the claims-based measures, an ASC must submit complete data on individual quality measures through a claims-based reporting mechanism by submitting the appropriate QDCs on the ASC’s Medicare claims (76 FR 74515 through 74516). Further, we fina lized the data collection period for the CY 2014 payment determination, as the Medi care fee-for-service ASC claims submitted

for services furnished between Octobe r 1, 2012 and December 31, 2012. ASCs will add the appropriate QDCs on thei r Medicare Part B claims, using the Form CMS-1500 or associated electronic data set 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/ASCTransmittals-Items/ASC-CR7754-R2425CP.html ). Details on how to use these codes for submitting numerator and denominator informa tion are available in the ASCQR Program Specifications Manual located on the QualityNet Web site ( https://www.QualityNet.org ).

In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53640), we adopted a policy that claims for services furnished between October 1, 2012 and December 31, 2012 would have to be paid by the administrativ e contractor by April 30, 2013 to be included in the data used for the CY 2014 payment determ ination. We believe that this claim paid

date allows ASCs sufficient time to subm it claims while allowing sufficient time for CMS to complete required data analysis and processing to make payment determinations and to supply this information to administrativ e contractors.CMS-1601-P 551 In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68497 through 68498), we finalized a data collection and processing period for the CY 2015 payment determination and subsequent years. For the CY 2015 payment determination and subsequent years, an ASC must submit comple te data on individual claims-based quality measures through a claims-based reporti ng mechanism by submitting the appropriate QDCs on the ASC’s Medicare claims. The data collection period for such claims-based quality measures is the calendar year 2 years prior to a payment determination year. The

claims for services furnished in each calendar year have to be paid by the administrative contractor by April 30 of the following year of the ending data co llection time period to be included in the data used for the paymen t determination year. Thus, for example, for the CY 2015 payment determination, the data co llection period is 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 are not proposing any changes to these policies. 4. Proposed Minimum Threshold, Minimum Ca se Volume, and Data Completeness for Claims-Based Measures Using QDCs a. Background for the CY 2014 Payment Determination and Subsequent Years In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74516), we finalized our proposal that da ta 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 appropr iate QDCs with the number of claims thatCMS-1601-P 552 would meet measure specifications, but di d not have the appropriate QDCs on the

submitted claims.

In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53641), we finalized our policy for the CY 2014 and CY 2015 payment determin ation years that the minimum threshold for successful reporting be that at leas t 50 percent of claims meeting measure specifications contain QDCs. We believe that 50 percent is a reasonable minimum threshold for the initial implementation year s of the ASCQR Program because ASCs are not familiar with how to report quality data under the ASCQR Program and because many ASCs are relatively small and may need mo re time to set up reporting systems. We

stated in that final rule th at we intend to propose to in crease this percentage for subsequent years’ payment determinations as ASCs become more familiar with reporting requirements for the ASCQR Program.

In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53641), we stated that, because private payers would not have QDCs in their required HCPCS data files until January 1, 2013, claims with QDCs received pr ior to January 1, 2013 could be rejected for invalid codes. Because it is not po ssible for ASCs to submit differing codes on primary versus secondary payer claims for at least some payers, we specified that only claims where Medicare is the primary payer-- not the secondary payer --will be used in the calculation of data completeness for the CY 2014 payment determination. We also finalized our proposal in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68498 through 68499) that data completeness for claims-based quality measures for the CY 2015 payment de termination and subsequent years will beCMS-1601-P 553 determined by comparing the number of Medicare claims (where Medicare is the primary or secondary payer) meeting measure specifi cations that contain the appropriate QDCs with the number of Medicare claims (where Medicare is the primar y or secondary payer) that would meet measure specifications, but did not have the a ppropriate QDCs on the submitted claims for the CY 2015 payment determination and subsequent years. We made this change based on the fact that private payers had QDCs in their required HCPCS data files beginning January 1, 2013. b. Proposed Requirements for the CY 2016 Payment Determination and Subsequent

Years For the CY 2016 payment determination a nd subsequent years, we are proposing to continue our policy that the minimum thres hold for successful reporting be that at least 50 percent of claims meeting measure specifi cations contain QDCs. We believe that 50 percent is a reasonable minimum threshold for the initial implementation years of the ASCQR Program. Because ASCs cannot re-sub mit claims for the sole purpose of adding QDCs (such claims are rejected by administra tive contractors as duplicate claims), we believe maintaining this minimum as the prog ram matures is reasonable. We intend to propose to increase this percentage for fu ture payment determinations as ASCs, administrative contractors, and billing clearing houses become more familiar with reporting requirements for the ASCQR Program and the program itself becomes more

established.

As finalized in the FY 2013 IPPS/LTCH PPS final rule, data completeness for claims-based quality measures will be dete rmined by comparing the number of MedicareCMS-1601-P 554 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 sec ondary 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 years. In our initial implementation of claims-based measures, we determined that some ASCs have relatively small numbers of Medicare claims. Thus, for the CY 2016 payment determination and subsequent year s, we are proposing a minimum case volume of 240 Medicare claims (primary plus secondary payer) per year (which is an average of 60 per quarter). ASCs that have fewer th an 240 Medicare claims per year during a reporting period for a payment determination year would not be require d to participate in the ASCQR Program for the subsequent repo rting period for that subsequent payment determination year. For example, if an ASC had 200 Medicare claims during the calendar year of January 1, 2013 to Decem ber 31, 2013 (data submitted on claims during this year would be applied to CY 2015 paym ent determinations), the ASC would not be required to participate in the ASCQR Progr am for the CY 2016 payment determination (which would use data submitted on claims during the January 1, 2014 to December 31, 2014 calendar year). We are proposing a minimum case threshold to exempt smaller facili ties where program implementation can be overly burdensome. We have selected 240 Medicare claims per year because 10 percent of ASCs have less than 240 Medicare claims per year so this polic y would exempt only those ASCs with the

fewest number of Medicare claims. If an ASC exceeds this 240 Medicare claimCMS-1601-P 555 threshold in any given calendar year, the ASC would be required to participate in the ASCQR Program the subsequent calendar year and would be subject to all program requirements. We invite public comment on this proposal. 5. Proposed Requirements for Data Submitted Via a CMS Online Data Submission Tool a. Background for the CY 2015 Payment Determination and Subsequent Years

In the CY 2012 OPPS/ASC final rule w ith comment period, we finalized two measures with data submission required us ing an online measure submission Web page

available at http://www.qualitynet.org beginning with the CY 2015 payment determination: Safe Surgery Checklist Us e and ASC Facility Volume Data on Selected ASC Surgical Procedures (76 FR 74509). In that final rule with comment period, we finalized that, for the CY 2015 payment determ ination, ASCs would report data for these two measures between July 1, 2013 and Augus t 15, 2013 for services furnished between January 1, 2012 and December 31, 2012. b. Proposed Requirements for the CY 2016 Payment Determination and Subsequent Years for Measures Currently Finalized For the CY 2016 payment determination a nd subsequent years, we are proposing for the Safe Surgery Checklist Use and ASC Facility Volume Data on Selected ASC Surgical Procedures for which data will be submitted via a using an online data

submission tool available on http://www.qualitynet.org , that the data collection time periods would be for services furnished duri ng the calendar year two years prior to the payment determination year and that data would be submitted during the January 1 toCMS-1601-P 556 August 15 time period in the year prior to the payment determination. Thus, for the CY 2016 payment determination, the data co llection time period for these measures would be calendar year 2014 (January 1, 2014 to December 31, 2014) and the data submission time period would be January 1, 2015 to August 15, 2015. We are proposing these changes to increase the timeframe for allowing data submission for these measures and to align the data collection time peri ods for the claims-based and Web-based measures. This alignment has the additional benefit of providing more current data for these Web-based measures for a payment dete rmination and would prevent the need for retrospective data collection by ASCs which can be burdensome. Under this proposal, no data would be collected for calendar year 2013 (January 1, 2013 to December 31, 2013) for the Safe Surgery Checklist Use and ASC Facility Volume Data on Selected ASC Surgical Procedures because the CY 2015 payment determination will use data from services performed in the January 1, 2012 to December 31, 2012 time period and, under our proposal, th e CY 2016 payment determination would use data from services performed in January 1, 2014 to December 1, 2014. We invite public comment on these proposals. c. Proposed Requirements for the CY 2016 Payment Determination and Subsequent Years for Proposed New Measures with Da ta Submission via a CMS Web-Based Tool We are proposing to adopt four additi onal chart-abstracted measures for the ASCQR Program and proposing that aggregat e data (numerators, denominators, and exclusions) on all ASC patients would be coll ected via an online Web-based tool that

would be made available to ASCs via the QualityNet Web site.CMS-1601-P 557 These measures are: (1) Complicati ons within 30 Days following Cataract Surgery Requiring Additional Surgical Pro cedures; (2) Endoscopy/Poly Surveillance: Appropriate follow-up interval for normal colonoscopy in average risk patients; (3) Endoscopy/Poly Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps – Avoidance of Inappropria te Use; and (4) Cataracts: Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery. We describe our timeframes and process for measure spec ifications in section XV.B.5. of this proposed rule. We wish to clarify that, while we have referred to measures where data are

submitted via a Web-based tool on a CMS We b site under our quality data reporting programs by the type of measure, that is, st ructural measures (measures concerned with attributes of where care occurs, such as material resources, human resources, and organizational structure 15 ), not all quality measures where data are submitted via a Webbased tool on a CMS Web site are structural measures. For example, the four proposed new measures proposed are not structural measures. T hus, we have refined our terminology and now refer to the mode of da ta submission, Web-based, rather than the type of measure. We are proposing that data collectio n and reporting for these measures would begin with the CY 2016 payment determination. Additionally, we are propos ing for these measures, and any future measures for the ASCQR Program where data is submitted via a using an online measure submission

15 Maintz, J. Defining and Classifying Clinical Indicat ors for Quality Improvement, Inter J Quality Health Care (2003) 15(6), 523-530.CMS-1601-P 558 Web page available on http://www.qualitynet.org , that beginning with the CY 2016 payment determination:

● The data collection time period woul d be the calendar year (January 1 to December 31) 2 years prior to the affect ed payment determination year, and;

● Data collected would be submitted during the time period of January 1 to August 15 in the year prior to the a ffected payment determination year. Thus, for the CY 2016 payment determin ation, the data collection time period would be January 1, 2014 to December 31, 2014 and the data submission time period for the collected data would be January 1, 2015 to August 15, 2015. These proposals are in alignment with proposals in section XV.D.5. of this pr oposed rule regarding data

collection and submission time frames for measures already adopted for the ASCQR Program where data is submitted via an online data submission tool available on http://www.qualitynet.org

. We invite public comment on these proposals. 6. Proposed Data Submission Requirements for a Measure Reported via the National Healthcare Safety Network (NHSN) for the CY 2016 Payment Determination a. Background for the CY 2016 Payment Determination For the CY 2016 payment determinati on, we finalized the adoption of the Influenza Vaccination Coverage among Health care Personnel (NQF #0431), a process of care, healthcare-associated infection (HA I) measure, in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74510). We specified that data collection for theCMS-1601-P 559

influenza vaccination measure would be vi a the NHSN from October 1, 2014 to March 31, 2015 and that details for data submissi on would be made in future rulemaking. b. Proposed Requirements for the CY 2016 Payment Determination We are proposing to use the data subm ission and reporting standard procedures that have been set forth by CDC for NHSN part icipation in general and for submission of this measure to NHSN. We refer readers to the CDC’s NHSN Web site (for detailed enrollment ( http://www.cdc.gov/nhsn/ambulatory-surgery/enroll.html ), set-up ( http://www.cdc.gov/nhsn/ambul atory-surgery/setup.html ), and reporting ( https://sdn.cdc.gov ; data certificate required for this s ite) procedures. We believe that

ASCs would know and be comfortable with th ese procedures because these procedures are already used by many ASCs to fulfill State-mandated reporting of HAI data through

the NHSN in at least 17 States. We are proposing that ASCs would have until August 15, 2015 to submit their

2014-2015 influenza season data to NHSN. We are proposing an August 15, 2015

deadline because this date is the latest date possible for data entr y that will provide sufficient time for CMS to make the CY 2016 payment determinations. Further, this date aligns the data entry deadline with the deadline for the measures entered via the CMS

online tool. We believe this data submissi on deadline allows ASCs to have sufficient time to collect and compile the necessar y data while taking into account ASCQR Program considerations. We invite public comment on these proposals.CMS-1601-P 560 7. ASCQR Program Validation of Claims -Based and CMS Web-Based Measures In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53641 through 53642), consistent with other CMS quality reporting pr ograms, we did not require validation of claims-based measures (beyond the usual cl aims validation activities conducted by our administrative contractors) or structural (W eb-based) measures for the ASCQR Program. We also do not require validation of clai ms-based or Web-based measures under the Hospital IQR and OQR Programs. We noted that with regard to the curr ent ASCQR Program claims-based measures, the number of events expected to be reported is small because most of the measures are

for adverse or rare events. In this situa tion, any random selection of cases would require a burdensome sample size. Further, we exp ect the accuracy for reported adverse events to be high. We stated that, because we do not believe at this time that any results that could be obtained justify the burden associat ed with a data validation process which would necessitate an independent validation effort, we also are not requiring a data validation process for our current claims-based measures, and we continue to believe so. We stated that as we gain more e xperience with the ASCQR Program, we will reassess whether a data validation proce ss for claims-based and measures where aggregate data is reported via an online tool is needed. At this time, we believe that it would be overly burdensome to validate the re ported data given the inexperience that ASCs have with reporting quality data to CM S coupled with the low incidence of cases

for the claims-based measures.CMS-1601-P 561 8. Extraordinary Circumstances Extensi ons or Waivers for the CY 2014 Payment Determination and Subsequent Years a. Background In our experience, there have been times when facilities have been unable to submit information to meet program require ments due to extraordinary circumstances

that are not within their contro l. It is our goal to not pe nalize such entities for such circumstances and we do not want to unduly increase their burden during these times. Therefore, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53642 through 53643), we established procedures for extraordinary circ umstance extension or waiver requests for the submission of information required under th e ASCQR Program. We refer readers to that rule for a complete discussion of the process. b. Proposed Additional Criterion for Extraord inary Circumstance Waivers or Extensions

for CY 2014 We are proposing that starting in CY 2014 we may grant a waiver or extension to ASCs for data submission requirements if we determine that a systematic problem with one of our data collection system s directly or indirectly aff ected the ability of ASCs to submit data. Because we do not anticipate that such systematic errors will happen often, we do not anticipate granting a waiver or extens ion on this basis frequently. If we make the determination to grant a waiver or exte nsion, we are proposing to communicate this decision through listserv notice and pos ting via our QualityNet Web site ( https://www.qualitynet.org ) as we have done in the past with CMS-issued waivers where a geographic location was affected by adverse weather.CMS-1601-P 562 We invite public comment on this proposal. 9. ASCQR Program Reconsideration Procedures for the CY 2014 Payment

Determination and Subsequent Years We have established similar processes by which participating hospitals can submit requests for reconsideration of quality reporti ng program payment determinations for the Hospital IQR Program and the Hospital OQR Pr ogram. We believe these reconsideration processes have been effective in the hos pital quality reporting programs and such a process would be effective for ASC quality reporting. Therefore, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53643 th rough 56344), we adopted an informal reconsideration process for the ASCQR Progr am for the CY 2014 payment determination and subsequent years modeled after the rec onsideration processes we implemented for the Hospital IQR and Hospital OQR Programs. We refer readers to that rule for a complete discussion of our procedures. We are not proposing any changes to this informal reconsideration process. However, we want to clarify some aspects of the informal reconsideration review process

that we established in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53643 to 53644). As we stated in that rule, we intend to complete any reconsideration reviews and

communicate the results of these determina tions within 90 days following the deadline for submitting requests for reconsideration. Fo r those ASCs that submit a reconsideration request, the reconsideration determination would be the final ASCQR Program payment

determination. For those ASCs that do not submit a reconsideration request or do not submit a reconsideration request as specifi ed in the FY 2013 IPPS/LTCH PPS final ruleCMS-1601-P 563 (77 FR 53643 through 53644), for example, the request was not submitted by the deadline, the CMS determination would be the final payment determination. There would be no appeal of any final AS CQR Program payment determination. XVI. Proposed Changes to the Conditions for Coverage (CfCs) for Organ Procurement Organizations (OPOs) (42 CFR Part 486, Subpart G) A. Background The Organ Procurement Organization Ce rtification Act of 2000 (section 701 of Pub. L. 106-505) amended section 371(b)(1 ) of the Public Health Service Act (42 U.S.C. 273(b)(1)) and directed the Secret ary to establish regulations governing the

certification and/or recertifi cation of Organ Procurement Organizations (OPOs). Among other things, section 371(b)(1)(D )(ii) of the Public Health Service Act, as amended by section 701 of Pub. L. 106-505, requires that regulations be established for the

certification and/or recertif ication process, which (1) “rely on outcome and process performance measures that are based on empi rical evidence obtained through reasonable efforts, of organ donor potential and other rela ted factors in each se rvice area of qualified organ procurement organizations,” and (2) “use multiple outcome measures as part of the certification process.” Payment under the Medicare and Medicai d programs for organ procurement costs may only be made if, among other requirements, the OPO is certified or recertified as meeting the standards to be a qualified OPO under section 371(b) of the Public Health Service Act and meets the perf ormance-related standards prescribed by the Secretary, as provided for in section 1138(b) of the Social Security Act.CMS-1601-P 564 The final rules implementing these stat utory requirements and setting out the Conditions for Coverage (CfCs) for OP Os (OPO CfCs) were published in the Federal Register on May 31, 2006 (71 FR 30982). The OPO Cf Cs are codified at 42 CFR Part

486 and set forth the certifica tion and recertification pro cesses for OPOs. OPOs are required to meet their CfCs, which incl ude both outcome and process performance measures. We refer readers to 42 CFR 486.316 for the compliance requirements for

recertification and 42 CFR 486.318 fo r the three outcome measures. In general, with the exception of OPOs operating exclusively in noncontiguous States, Commonwealths, Territories, or possess ions, the three outcome measures are: (1) a donation rate of el igible donors as a percentage of eligible deaths; (2) an observed donation rate as compared to the expected donation rate; and (3) a yield measure, which requires that two of the follo wing three outcome measures be met: (i) the number of organs transplanted per standa rd criteria donor, (ii) the numbe r of organs transplanted per expanded criteria donors, and (iii) the number of organs us ed for research per donor. For OPOs that operate exclusively in nonconti guous States, Commonwealth s, Territories, and possessions, the three outcome measures are: (1) a donati on rate of eligible donors as a percentage of eligible deaths ; (2) an observed donation rate as compared to the expected donation rate; and (3) a yield measure, whic h requires that two of the following three outcome measures be met: (i) the number of kidneys transplanted per standard criteria donor; (ii) the number of kidneys transplanted per expanded criteria donors; and (iii) the number of organs used for research per donor. All of the yield measures include pancreata used for islet cell tr ansplantation as required by section 371(c) of the PublicCMS-1601-P 565 Health Service Act (42 U.S.C. 273(c)). The first and third outcome measures are compared to a national mean. The sec ond outcome measure is calculated by the Scientific Registry of Tran splant Recipients (SRTR). B. Proposed Regulatory Changes We are proposing to modify the requ irements in §§ 486.316(a)(1) and (b) and the introductory text of §§ 486.318(a) and (b) of the regulations so that all of the OPOs must

meet two out of the three outcome measures to be recertified. We have become concerned about the requirement to automatica lly decertify OPOs if they fail to meet all

three of the outcome measures. We now be lieve that the requirement that each OPO

meet all three outcome measures as set fort h in § 486.318 is unnecessarily stringent. For that reason, we are proposing to modify the outcome measure requirement so that OPOs would be required to meet two of the three outcome measures. The majority of all of the OPOs are m eeting all three of the outcome measures. From our experience with OP Os, we have observed that many of the OPOs that are failing to meet all three outcome measures ar e meeting two of the three measures and are in compliance with all of the other requirements in the OPO CfCs; that is, the process performance measures set forth at §§ 486.320 through 486.348. We believe these OPOs are performing satisfactorily and should not be decertified based solely on their failure to

meet one outcome measure. This belie f is based not only on our observation and monitoring of these OPOs’ performance, but also on some concerns with the outcome

measures.CMS-1601-P 566

From the feedback we have received from the OPO community, there may be

some variance in how OPOs are determini ng the “eligible deaths” in their donation service area (DSA), which is the denominato r in the first outcome measure. Various members of the OPO community have indicate d that the same donor could be counted as an eligible donor by one OPO, but not anot her OPO. This is apparently due to differences in how the definition of “eligible death” is being clinically interpreted and implemented. Another reason for this variance could be how the determination is made. One member of the OPO community stated that , in one OPO, that determination may be made by a group of clinical staff, while in a nother, it is made by the data entry person. Therefore, we are concerned that this appa rent variance may be a dversely affecting the performance of some OPOs on the outcome measures.

We also are concerned that the curren t measures may not be accurately allowing for adjustment of various factors. OPOs’ DSAs vary substantially in their demographics. For example, the first of the possible three yield outcome measures involves standard criteria donors. However, many individuals in the OPO community have indicated that

there is a considerable difference between standard criteria d onors (SCDs) around the country and that this could expl ain at least some of the diffe rences in some of the OPOs’ yield measures. Because a SCD is anyone who meets the eligibility criteria for an eligible donor and does not meet the criteria to be an expand ed criteria donor or a donor after cardiac death, the demographics of an OPO’s DSA could have a significant impact on the organ yield that could reasonably be e xpected in that DSA. For example, if a particular DSA has an older potential donor popul ation or one that is typically not asCMS-1601-P 567 healthy, this could significantl y impact the organ yield in that DSA as compared to a DSA with a population of generally more healthy individuals. We also have received anecdotal repo rts that OPOs may be making clinical

decisions based on their assessment of their own performance on the outcome measures. In particular, there may have been cases when OPOs did not pursue certain potential donors with multiple comorbidities because they believed that they would only be able to procure one or two organs from that potentia l donor. If an OPO is concerned about its performance on the yield measures specifi ed under §§ 486.318(a)(3) and (b)(3), it may be advantageous to its performance on the yield measures to forgo a potential donor rather than procure only one organ and worsen its performance on the yield measures. This would result in not only one potentially transplantable organ being averted, but consequently a potential transplant recipient not receiving a transplant . This could have a significant impact on the potential transplant re cipient waiting for transplants nationwide. This is especially problematic in the case of extra-renal organs for which there is no viable alternative to an organ transplant. We are proposing to hold the OPOs accountable for meeti ng two out of three

current outcome measures. We believe this will avoid the automatic decertification of OPOs that are performing satisfactorily. Therefore, we are proposing to revise paragraphs (a)(1) and (b) of §§ 486.316 and the introductory text of paragraphs (a) and (b) of § 486.318 of the regulations to require that OPOs meet at least two out of the three outcome measures instead of the requirem ent to meet all three outcome measures.CMS-1601-P 568 In addition to soliciting public comment s on the proposals we discuss above, we are soliciting public comments on the current outcome measures in the OPO CfCs, as well as public comments on any other potential empirically based outcome measures for OPOs that might be used in the future. We would especially appreciate public comments on the new yield measure that is produced by the SRTR and is being used by the Organ Procurement and Transplantation Network (O PTN). The OPTN recently adopted this new yield measure that calculat es the expected number of or gans transplanted for each donor based on multiple donor risk factors. The measure uses more extensive risk factors that mitigate the differences in the donor pool of the each DSA. This allows an OPO’s performance to be measured in terms of the expected outcomes for the DSA based upon the expected outcomes for individual donors wi thin the DSA and not against a national

average. When comparing OPOs currently identif ied to be below expected performance levels by the OPTN matrix and the OPOs identified as below expected performance levels by the CMS measures, we have noted th at the lists are not the same. If the new

OPTN measure is a more accurate reflection of performance as measured by the organs transplanted for each donor in each indivi dual DSA (as is accepte d by the HRSA and the OPO community), this could mean that we may take inappropriate enforcement action when using the current yield measure. Ther efore, we are specifi cally soliciting public comments on this new OPTN yield measure. Specific details on the risk adjustment

models used for this measure are located on the SRTR Web site at: http://www.srtr.org/csr /current/Tech_notes.aspx

.CMS-1601-P 569 In summary, we are proposing to revise §§ 486.316 and 486.318 of our regulations by modifying the cu rrent outcome measures requirement to require that OPOs

must meet two out of the three outcome meas ures instead of all three outcome measures.CMS-1601-P 570 XVII. Proposed Revisions of the Qu ality Improvement Organization (QIO) Regulations A. Legislative History The Utilization and Quality Control P eer Review Program was originally established by sections 142 and 143 of the Ta x Equity and Fiscal Responsibility Act (TEFRA) of 1982 (Pub. L. 97–248). The name of the individual organizations covered under the program was “Peer Review Organiza tions.” In a final rule with comment period published in the Federal Register on May 24, 2002 (67 FR 36539), we revised the regulatory references to these organizatio ns to “Quality Improvement Organizations” (QIOs)--without changing the definition or functions of the QIOs--to reflect the program’s shift from a compliance-oriented focus to one emphasizing quality improvement. There have been a number of amendments to the QIO statute over the years, but they have not result ed in any substantial changes in how the program operates. However, in section 261 of the recently enac ted Trade Adjustment Assistance Extension Act of 2011 (TAAEA) (Pub. L. 112-40), Congress authorized numerous changes to the original legislation to mode rnize and improve the QIO Program and included additional flexibility for the Secretary in the administ ration of the QIO Program. This legislation also updated the nomenclature from the Peer Review Organization Program to the QIO Program and included amendments to update the terminology of the program (replacing “peer review organization” and “utilization and quality contro l peer review organization” with “quality improvement organization” in relevant provisions of the Act.)CMS-1601-P 571 Specifically, section 261 of the TAAEA incr eased the flexibility available to the Secretary by updating the statutory definition of the organizations that can contract with CMS as QIOs (as described in section 1152 of the Act), changing certain contract terms and processes by which the Secretary contract s with QIOs (as described in section 1153 of the Act), and broadening the Secretary’s au thority to delineate the scope of work for QIOs (as described in section 1154 of the Act). The regulations that implement sections 1152 and 1153 of the Act are codified at 42 CFR Part 475; Subpart C of Part 475 include s provisions that spec ifically govern the types of organizations eligible to become QI Os. The regulations that implement section 1154 of the Act and much of the work performed by QIOs are codified at 42 CFR Part

476. Section 1154 of the Act states that much of the work QIOs will perform is subject

to the terms of their contracts with CMS. We note that, consistent wi th this provision, the contracts and requests for proposals used to co ntract with QIOs include significant detail on the work performed by the QIOs. B. Basis for Proposals

Section 261 of the TAAEA eliminated certa in limitations specified in sections 1152 and 1153 of the Act that appear in severa l existing provisions in Part 475. In order to eliminate these limitations in the regulations and fully utilize the flexibility provided as a result of the statutory changes, we are proposing regulatory changes to implement the statutory amendments. These changes involve, among other things, changing the eligibility standards for an entity to be awarded a QIO contract and defining specific terms that will be used to describe QIOs and their quality improvement work. We areCMS-1601-P 572 proposing to change the terminology related to the geographic area in which a QIO must perform its different functions. As the stat ute authorizes, the QIO area can now be any geographic area CMS believes will be most effective in accomplishing its goals for the QIO contract. We also are proposing to revi se provisions regarding the eligibility of a health care facility associat ion to be a QIO and to elim inate an obsolete provision at § 475.106 regarding the eligibility of payor organizations to be QIOs. The statutory amendments also include a change in the c ontract period for a QIO, extending it from 3 to 5 years. Although we did not previously update this regulation with a prior statutory change in the QIO contract term from 2 year s to 3 years, we are now including the 5-year time period in the proposed rule as a technical correction in order to bring the regulations up to date with the amended statutory timefra me. We believe that these changes would be instrumental in improving aspects of the QIO’s review activities and would enable us to improve the program by ensuring that QIOs are better able to meet the needs of

Medicare beneficiaries. Th e specific proposed changes and corrections are explained in more detail in the following sections. QIOs work at the grassroots level of American health care delivery systems in all 50 States, the District of Colu mbia, and most U.S. Territories in order to improve care for Medicare beneficiaries. QI Os originally reviewed Medicare services to determine whether they were reasonable and medically necessary, met professionally recognized standards of care, and were provided in th e appropriate setting. However, the QIO

contract has evolved over the course of the years as the literatur e supports the concept that defects in the health care process are rarely related to th e performance of oneCMS-1601-P 573 individual but to a system of care with mu ltiple opportunities for fa ilure. Attempts to improve quality through inspection methods, that is, by performing one chart review at a time, are less likely to yield the systemic improvements in care for Medicare beneficiaries that can come from analyzing data in order to identify problems, developing a plan of action, monitoring the result through data dr iven processes, and making changes as

needed based on those results. The qualifications and expertise required to execute these quality improvement initiatives have evolved to now include expe rtise from disciplines such as physicians, nurses, other clinicians, health care leaders, ex perts in statistics and health care system reengineering, and many othe r kinds of professionals. We intend to interpret our proposed regulation so as not to prohibit th e use of professionals in the health care industry that are not licen sed physicians or certif ied practitioners. We recognize/anticipate that these ot her professionals may offer va luable insight to QIOs on ways to enhance the performance of their QI O functions, as well as provide services designed to help QIOs maximize their impact . We propose to adopt this approach to further our goal that the regulations unde r 42 CFR Part 475 reflect a multidisciplinary approach to the performance of QIOs. Ther efore, the proposed standards here would not be a barrier to the inclusion of any other nonphysician or nonpractiti oner professional that CMS or the QIO deems appropriate for the successful performance of QIO functions. Patients and their families also play a critic al role in the success of quality improvement

initiatives. Amendments to the Act made by the TAAEA would accommodate the evolution of quality improvement and woul d allow CMS the flexibility to expand theCMS-1601-P 574 types of organizations eligible to provide multi-disciplinary support in quality improvement. We seek with this proposal to ensure that the regul ations governing QIO eligibility reflect the increased flexibility afforded by the TAAEA. This will help us ensure that we can administer the QIO Progr am in a manner that reflects contemporary practices and allows us to in clude the appropriate individua ls and entities in working toward improving care processes.

As described in section 1154 of the Ac t, QIOs perform many specific review functions that are necessary to ensure the quality of care provided to Medicare

beneficiaries. The addition to sectio n 1154 of subparagraph (a)(18) by the TAAEA explicitly provides the Secretary with the br oad authority to require that QIOs perform any additional activities the Secretary determ ines may be necessary for the purposes of improving the quality of Medicare services. Based on this authority, QIOs will, as a general matter, be required to represent CMS as “change agents” that work at local levels in their individual QIO geographic areas. Through the contracting process, different QIOs might now be required to work on one or more different tasks; that is, all QIOs might no longer be required to handle the co mplete and broad range of QIO activities within their geographic areas bu t to focus on particular tasks of QIO work. For example, QIOs might be required to offer to a variet y of stakeholders the knowledge and resources for improving health quality, efficiency, and value designed to improve the care provided to Medicare beneficiaries. Stakeholders might include providers, practitioners, patients, and others who are interested in improving care.CMS-1601-P 575 As under the current program, QIOs will be required to base their work on clinical evidence and some may be require d to generate reliable data a bout clinical performance. QIOs may also serve as independent, objectiv e, and collaborative partners that support CMS’ mission to improve health care quality in the Medicare progr am (which, in turn, has the potential to greatly benefit the broa der health care commun ity) by leveraging the best efforts of all health care stakeholders, including patients and their families. While the goal of the QIOs is to benefit Medicare be neficiaries, the work of the QIOs may also, as a secondary matter, benefit other patients and residents who receive medical care. In this context, we are seeking to ensure that the regulations governing QIO eligibility reflect contemporary practices a nd include those that can help to improve care processes for Medicare beneficiaries. We are proposi ng to do so by removing restrictions that are no longer statutorily mandated a nd including requirements that reflect the current goals of the QIO program. One such contemporary practice is the inclusion of patients and families in health care quality improvement. As a result, we have added to the QIO requirements a new focus on patient and family engagement and patient and family inclusion in quality improvement initiatives. We believe that the TAAEA legislation allo ws us a great deal of flexibility in how we restructure the work that QIOs perform and the types of orga nizations qualified to perform that work. We intend to conti nually examine methods for providing care to beneficiaries in a way that maximizes effi ciency, eliminates waste, decreases harm, lowers costs through improvement, and engage s patients more effectively. One way toCMS-1601-P 576 continue improving the quality, efficacy, and efficiency of ca re in the Medicare program is to reconsider how QIOs provide services to determine whether the current longstanding contract structure and eligibility requiremen ts best fit the conti nually evolving science related to driving quality improvement. Th e changes we are proposing are intended to ensure that we have the flexibility we need to reconsider certain aspects of the QIO program structure in response to experience and changes in research findings and the health care community’s appro ach to quality improvement. The regulatory proposals here focus on the primary functional re sponsibilities of a QIO as a basis for determining eligibility. These are case review (which includes the statutory minimum standards) and quality impr ovement initiatives. We believe that the proposed eligibility and contracting standard s for QIOs focus on the necessary minimum requirements for successful operation of the QIO Program. C. Proposed Changes to the Nomenclature and Regulations under 42 CFR Parts 475 and

476 In this proposed rule, we set forth pr oposals for updating the nomenclature and the definition of physician in both 42 CFR Parts 475 and 476 and for the partial deletion and revision of the regulations under 42 CFR Parts 475. Currently, Part 475 includes definitions and standards governing eligibility and the award of contracts to QIOs. We are proposing to replace nomenclature that ha s been amended by the TAAEA, revise the existing definition in Part 475, Subpart A and Part 476, Subpart A of the term “physician”, add new definitions to Part 475, Subpart A as necessary to support proposedCMS-1601-P 577 new substantive provisions in Part 475, S ubpart C, and revise, add, and replace some substantive provisions in Part 475, Subpart C. 1. Proposed Nomenclature Changes In order to conform the regulations to the nomenclature changes made by section 261 of the TAAEA, we are proposing nomenclature changes where necessary in 42 CFR Part 475. We are, for example, proposin g to revise the heading of Subpart C of Part 475 to read “Subpart C—Quality Improve ment Organizations” and to replace the term “peer review” with “quality improvement .” In each proposed provision in Part 475, Subpart C, we use the new no menclature where appropriate. In addition, Part 476 is currently en titled “Utilization and Quality Control Review,” and Subpart C of Part 476 is enti tled “Review Responsibil ities of Utilization and Quality Control Quality Improvement Orga nizations (QIOs),” both of which reflect the terminology used before enactment of the TAAEA. In order to reflect the nomenclature changes made by the TAAEA, we are proposing to revise the title of Part 476 to read: “Part 476—Quality Improvement Organization Review” and the title of Subpart C of Part 476 to read: “Subpart C—Review Responsibilities of Quality Improvement Organizations (QIOs).” 2. Proposals to Add and Revise Definitions We are proposing changes to §§ 475.101 through 475.107 to reflect new eligibility standards for an en tity to be awarded a QIO cont ract and to use specific terms that will be used to describe QIOs and th eir quality improvement work. In connection with these changes, we are proposing to a dd definitions of “case review”, and “QIOCMS-1601-P 578 area,” add cross-references to definitions in § 476.1 of “practitioner” and “quality improvement initiative,” and revise the definition of “physician” under § 475.1 and § 476.1, as discussed below. We are solic iting public comments on our proposed

definitions. We are proposing to define “case reviews” to mean “the different types of reviews that QIOs are authorized to perform. Such reviews include, but are not limited to: (1) beneficiary complaint reviews; (2) general quality of care reviews; (3) Emergency Medical Treatment and Labor Act (EMTALA) reviews; (4) medical necessity reviews, including appeals and DRG validation re views; and (5) admission and discharge reviews.” We are providing this list to illustrate the rang e and scope of case reviews but note that the Act and other provisions in Chapter IV of Title 42 of the Code of Federal Regulations require additional reviews and that the Secretary, pursuant to section 1154(a)(18) of the Act, may require additi onal reviews under the contracts awarded to QIOs. We are proposing to expand the defin ition of “physician” beyond its existing definition under § 475.1 and § 476.1 to reflect th e definition in section 1861(r) of the Act,

as well as to cover several additional characte ristics that are unique to the QIO Program. We are proposing the following definition of physician for both Parts 475 and 476: A physician is “(1) A doctor of medicine or oste opathy, a doctor of dental surgery or dental medicine, a doctor of podiatry, a doctor of opt ometry, or a chiroprac tor as described in section 1861(r) of the Act; (2) An intern, re sident, or Federal Government employee authorized under State or Federal law to prac tice as a doctor as desc ribed in paragraph (1)CMS-1601-P 579 above; and (3) An individual licensed to practi ce as a doctor as described in paragraph (1) above in any Territory or Commonwealth of th e United States of America.” We believe these revisions are necessary to eliminate re ferences in paragraphs (1) and (2) of the definition in § 475.1 to physicians licensed in the State in which the QIO is located, in

order to reflect the fact that a QIO’s contract area may no longe r be limited to one State. In addition, we are proposing to amend paragr aph (3) of the definition in § 475.1 so that it no longer applies to just American Samoa, the Northern Mariana Islands, and the Trust Territory of the Pacific Islands. We are proposing to enlarge this part of the definition to apply to physicians licensed to practice in all U.S. Territories and Commonwealths to more closely align with the Secretary’s flex ibility in awarding QIO contracts granted by the TAAEA. We are soliciting public comme nts on whether our proposed definition is sufficiently inclusive and appr opriate to achieve these goals . We also are proposing to define the term “practitioner” and “quality improvement initiative” for purposes of Part 475 by cross-referencing the existing definitions at 42 CFR 476.1. In connection with our proposal to revise the requirements that an entity must meet to serve as a QIO, we also are proposing to define, in § 475.1, the terminology related to the geographic area in which a QI O must perform its di fferent functions. Currently, the regulations in Part 475 do not define this area, bu t do refer to a QIO’s “review area” in a number of places in existing text at §§ 475.102 and 475.103 and “QIO area” in §§ 475.1, 475.105(a), and 475.107(a) and (d). The term “review area” was used to refer to the geographic area in which each QIO performs its review functions under its contract with CMS while the term “QIO area” was used to refer to the geographic areaCMS-1601-P 580 covered by the contract. We are proposing to define and use the term “QIO area” to mean “the defined geographic area, such as the State(s), region(s), or community(ties), in which the CMS contract directs the QIO to perform.” Our addition of this proposed definition is meant to reflect the flexibility afforded to us by the TAAEA to establish a QIO area as the geographic area we believe w ill be most effective in accomplishing the goals of a particular QIO contract. In a ddition, the change in terminology from “QIO review area” to “QIO area” is intended to emphasize that the term can encompass more than just “review” functions. With this ch ange, we intend to not only broaden the scope for choosing an appropriately sized geographic area, but also to identify capability and functionality as the primary way to identif y the appropriate organization to perform specific QIO contract functions. 3. Proposals Relating to Scope and App licability of Subpart C of Part 475 We believe that the scope and applic ability provision for 42 CFR 475, Subpart C should reflect that the statutory authority for the QIO program was amended by the TAAEA, in particular the definition of a QIO and the eligibility and contracting standards. We are proposing to replace the regulatory language in § 475.100 with new language that explicitly acknowledges that the regulations in Subpart C implement sections 1152 and 1153(b) and (c) of the Act as amended by section 261 of the TAAEA. In addition, we are proposing to include the reference to section 1153(c) of the Act to reflect our proposal, in § 475.107(c) , to include the 5-year cont ract term that now appears in amended section 1153(c)(3) of the Act. The proposed revisions to §§ 475.101 through 475.107 are intended to allow organizations that currently perform QIO work to competeCMS-1601-P 581 for new QIO contracts ,while expanding eligib ility to additional entities under the new authority granted by the TAAEA. As the program evolves, we will focus contract determinations on the ability of organizations to perform QIO functions as stated in the Request for Proposal (RPF). We are soliciti ng public comments on whether our proposed regulation text for Subpart C of Part 475 sufficiently meet s this goal as well as our explained goal to implement the flexib ility provided by Congress in the TAAEA

amendments. 4. Proposals Relating to Eligibility Requirements for QIOs (§§ 475.101 through 475.106) Prior to the TAAEA amendments, secti on 1152 of the Act defined a QIO as an entity that: (1) is composed of a substant ial number of licensed doc tors of medicine and osteopathy engaged in the practice of medicine or surgery in the area where the QIO will perform or has available the services of a sufficient num ber of licensed doctors of medicine or osteopathy engaged in the ar ea where the QIO will perform to assure adequate review of the services provi ded by various medical specialties and subspecialties; (2) is able, in the judgment of the Secretary, to pe rform review functions

in a manner consistent with the efficient a nd effective administrati on of the QIO statute and to perform reviews of the pattern of quality of care in an area of medical practice where actual performance is measured agai nst objective criteria which define acceptable and adequate practice; and (3) has at least one individual who is a representative of consumers on its governing body. In section 261 of the TAAEA, Congress replaced the first two of these requirements with requirement s that a QIO: (1) be able, as determinedCMS-1601-P 582 by the Secretary, to perform QI O functions in a manner consis tent with the efficient and

effective administration of Part B of Title XI and Title XVIII of the Act; and (2) have at

least one individual who is a representative of health ca re providers on its governing body. Congress left unchanged the third requirem ent in section 1152(3) of the Act that a QIO have at least one individual represen ting consumers on its governing body. We have interpreted and the regulations in Part 475 implement the statutory definition in section 1152 of the Act as setting mini mum eligibility requirements fo r an entity to hold a QIO contract. Our regulatory proposal in this pr oposed rule would implement the changes in the QIO eligibility standards made by the TAAEA. We recognize the vital role of physicians in the work of the QIOs and also believe that some of the functions of the QIOs neces sitate a multidisciplinary approach to quality improvement, inclusive of expertise from a wide breadth of disciplines. With the elimination of the requirement that a QIO be sponsored by or have access to physicians in a specific organization structure, we are proposing to delete th e eligibility requirements in §§ 475.101 through 476.104 related to the concepts of “physician-sponsored organization” and “physician-access organi zation.” In light of the current multidisciplinary approach to QIO activities , we believe that expanding the existing eligibility requirements beyond “physician- sponsored organizations” and “physicianaccess organizations” will both better reflect the flexibility Congress provided in the

TAAEA amendments to section 1152 of the Ac t and be inclusive of the multidisciplinary approach that currently exists in contemporary quality improvement.CMS-1601-P 583 In addition, to implement the language added by section 261 that a QIO must be able, as determined by the Secretary, to pe rform the functions under the Act consistent with the purposes of the QIO program a nd the Medicare program, we are proposing language in §§ 475.101 through 475.103 to distinguish the requirements for QIOs to be able to perform case reviews from the requirements for QIOs to be able to perform quality improvement initiatives. We are soliciting public comments on our focus on these primary QIO functions and how this func tional approach will ensure that QIOs are appropriately selected for c ontract award. We are propos ing to vacate and reserve existing §§ 475.104 and 475.106. a. Eligibility to be Award ed a QIO Contract (§ 475.101) As proposed here, revised § 475.101 would no longer reference “physician-sponsored organizations” and “phys ician-access organizations,” would retain the requirement that the gove rning body of the QIO include at least one consumer representative, and would include new eligib ility standards for an organization to be awarded a QIO contract based on the TAAEA amendments to section 1152 of the Act. First, in paragraph (a), we are proposing that a QIO must have a governing body that includes at least one represen tative of health care providers and one representative of consumers as required by section 1152(2) and (3) of the Act as amended by the TAAEA. Second, in paragraph (b), we are proposi ng to interpret and implement the amended language in section 1152(1) of the Act that an organization awarded a QIO contract must be able, as determined by the Secretary, to perform the functions under the Act consistent with the purposes of the QIO program and the Medicare program by requiring that anCMS-1601-P 584 organization demonstrate the ability to meet eligibility requirements and perform the functions of a QIO. Our proposal characterizes the functions of a QI O as the contractual requirements for QIOs to perform activities that are built into th e request for proposals used to award QIO contracts and the ability to perform case reviews and/or quality improvement initiatives as described in th ese regulations. In our view, these broad categories encompass the work QIOs are re quired to perform unde r section 1154 of the Act. Our proposal reflects a different approa ch to structuring the QIO requirements than the current rule; we are proposing to focus on the functions the organization performs under the QIO contract instead of the structure of the organization itse lf. As discussed in

more detail below in connection with proposed §§ 475.102 and 475.103, this functionfocused approach also reflects both th e important role of physicians and a multidisciplinary approach for the two primary functions of the QIO contracts: (1) case reviews and (2) quality improvement initiative s. These two primary functions are based on the statutory requirements for the functi ons QIOs must perform and our current approach of using quality improvement initiat ives to improve the quality of care provided to Medicare beneficiaries. By referencing th e contractual requirements set forth in the requests for proposals, we are proposing to inco rporate the flexibility provided in section 1154(a) to require a QIO to perf orm one or more of the listed QIO functions and section 1154(a)(18) of the Act for the inclusion of a dditional activities for QIOs to perform when we determine that they are necessary to improve the quality of care for Medicare

beneficiaries.CMS-1601-P 585 Finally, in paragraph (c), we are prop osing that a QIO must demonstration the ability to actively engage beneficiaries, fam ilies, and consumers, as applicable, in case reviews and quality improvement initiatives. Although this is not a sp ecifically required qualification for a QIO under sections 1152 a nd 1153 of the Act, we are proposing this requirement because it reflects the multidisciplinary and multistakeholder approach to QIO functions that we intend to establish. Health care costs have doubled as a share of the economy over the past three decades, causing stress on beneficiaries, families, employers, and government budgets. We believe that motivating beneficiaries to become involved in their own health care may redu ce waste and ultimately improve the quality and efficiency of health care. One importa nt way to accomplish this is by educating beneficiaries, their families, providers, and the public about the importance of identifying and pursuing value in health care. Value repr esents the best possibl e quality of health care at the most reasonable cost. A majo r component of a succe ssful value initiative depends on a QIO’s understanding of patient an d family goals, expectations, motivations, and aspirations. Our inclusion of the requi rement that a QIO have the ability to understand the needs of beneficiaries, familie s, and consumers and actively engage them in health care decisions emphasizes our commit ment to patient and family engagement as an essential component of the QIO program. We are soliciting public comments on whether our proposal sufficiently incorporates the statutory flexibility, identifies the goals of the QIO eligibility requirements, and provides guidance on how organizations will be determined eligible for QIO contracts.CMS-1601-P 586 b. Eligibility Requirements for QIOs to Perform Case Reviews (§ 475.102) In this proposed rule, we are proposing to list the type of factors CMS will use to determine that an organization has demonstrated its ability to perfor m case reviews. We do not consider this list to be comprehensive, but an indication of wh at we intend to focus on. The list of factors emphasizes the impor tance of QIOs having access to qualified physicians and practitioners for this purpos e. In paragraph (a) of § 475.102, we are proposing that CMS will determine that an or ganization has demonstrated the ability to perform case reviews based on factors related to how the QIO work will be performed and the underlying capabilities necessary for performing well. Under our proposal, CMS will consider such factors as (1) the orga nization’s proposed processes, capabilities, quantitative and/or qualitative performan ce objectives, and case review methodology; (2) the organization’s proposed involvem ent of and access to physicians and practitioners in the QIO area wi th appropriate expertise and specialization in the areas of health care related to case reviews; (3) the organization’s ability to take into

consideration urban versus ru ral and regional characteristics in the health care setting where the care under review was provided; (4) the organization’s ability to take into

consideration evidence-based na tional clinical guidelines and professionally recognized standards of care; and (5) the organization’ s access to qualified information technology (IT) expertise. In this pa ragraph, we intend to propos e these general factors and standards CMS may use to establish the mi nimum level of resources and skills the organization must have in order to demons trate that its processes and capabilities are satisfactory and meet the purposes of the QIO program.CMS-1601-P 587 In paragraph (b) of § 475.102, we are proposing that CMS may consider characteristics such as the geographic location, size and prio r experience of an organization in order to determine whether th e organization has the ca pability to perform case reviews. In terms of prior experien ce, we are proposing that CMS will gauge the significance of an organization’s experience base d on how relevant it is to the tasks that CMS intends to include in the QIO contract and the goals CMS intends to accomplish. While we intend to emphasize the importance of prior experience, we do not intend to limit the evidence an organization may present to us to demonstrate its capability to perform case reviews. Therefore, we have included language in proposed § 475.102(b) to indicate that CMS can consider a variety of factors, as indicated in section 1153(b)(4) of

the Act. Finally, we are proposing to include in paragraph (c) of § 475.102 clarifications to

the text that reflect the existing regulatory text at § 475.104(d), with some minor modifications. The existing provision states that a State government that operates a Medicaid program will be considered incapable of performing utilization and quality review functions in an effective manner, unless the State demonstrates to CMS’

satisfaction that it will act with complete independence and objectivity. As proposed, the provision at § 475.102(c) maintains the substa nce of the existing rule while making it clear that the scope of its review will be lim ited to case reviews. In order to do this, we have proposed to replace the term “utilization and quality review functions” with the term “case reviews.” In addition, we are proposing to revise the language to clarify that the objectivity and independence mentioned in th e existing regulation relate to objectivityCMS-1601-P 588 and independence from the Medicaid program, as we believe there is an inherent conflict

of interest that arises from the State’s financial interest in the administration of that

program. Our proposal at § 475.102 implements the statutory responsibility for the Secretary to determine whether an organi zation can perform the QIO function of case

reviews in a manner that is consistent with the efficient and effective operation of the QIO Program and the Medicare Program. We are soliciting public comments on whether the regulation text should incorporate the st andards for QIOs that we propose to use and

the factors we intend to cons ider when determining whether those standards have been

met. We are proposing to delete and reserve all of § 475.104 in light of our proposed changes to § 475.102. We believe that aspect s of § 475.104 that we have not proposed to incorporate into § 475.102 are obsolete due to the revisions in the TAAEA legislation. c. Eligibility Requirements for QIOs to Conduct Quality Improvement Initiatives (§ 475.103)

Case reviews are concerned with care that was provided, or should be provided, based on the facts of a particular case, c oncerning a particular episode of care or concerning a particular beneficiary, or both. By contrast, the vast majority of quality improvement initiatives are not initiated in the same manner as case reviews. Rather, quality improvement initiatives are based on pa tterns of care that reveal problems that are more systematic in nature, such as those that result in inefficiency, waste, or high cost, or that could potentially harm beneficiaries. Th ese patterns of care can reflect problems thatCMS-1601-P 589 might impact large segments of the populat ion, or single episodes of care where the impact might affect fewer people, but the QIO is concerned about the health and safety of the public due to the severity of the quality of care issue. We are proposing under revised § 475.103(a) that CMS will determine if an or ganization is capable of performing quality improvement initiatives using factors similar to those listed for QIOs that will perform case reviews. In paragraph (a), we are proposing a list of the type of factors CMS will use to determine that an organization has demonstrated its ability to perform quality improvement initiatives. We do not consider this list to be comprehensive, but an

indication of what we intend to focus on. Specifically, in revised paragraph § 475.103(a), we are proposing that CMS will determine that an organization has demonstrated the ability to perform quality improvement initia tives based on factors tied to how the QIO work will be performed and the underlying cap abilities necessary for performing well. Under our proposal, CMS will consider such factors as (1) the organization’s proposed processes, capabilities, quantitative and/ or qualitative performa nce objectives, and methodology to perform quality improvement in itiatives; (2) the or ganization’s proposed involvement of and access to physicians a nd practitioners in the QIO area with appropriate expertise and specialization in the areas of health care concerning the quality improvement initiative; and (3) the organiza tion’s access to professionals with requisite knowledge of quality improvement methodologie s and practices as well as qualified information technology and technical expertise. We plan to use these factors, and others as necessary, to determine if an organizati on has satisfactory capabi lities and sufficient resources to initiate, follow up on, and follo w through to completion quality improvementCMS-1601-P 590 initiatives that it agrees to undertake. We consider a ppropriate quality improvement resources to include a multidisciplinary team that is comprised of appropriate health care professionals to perform quality improvement in itiatives as well as the administrative, IT and technical staff necessary to accomplish the quality improvement initiatives. In paragraph (b), we are proposing that CMS may consider characteristics such as the geographic location, size, and prior expe rience of an organization in order to determine whether the organization has the capability to perform quality improvement initiatives. In terms of prior experience, we are proposing that CMS will gauge the significance of an organization’s experience base d on how relevant it is to the tasks that CMS intends to include in the QIO contract and the goals CMS intends to accomplish. While we intend to emphasize the importance of prior experience, we do not intend to limit the evidence an organization may present to us to demonstrate its capability to perform quality improvement initiatives. We are proposing to include language in proposed § 475.103(b) to indicate that CMS can also consider a variety of other factors,

as indicated in section 1153(b)(4) of the Act. Finally, we are proposing to in clude in paragraph (c) clarif ications to the text that reflect the existing regulatory text at § 475.104(d), with some minor modifications. The current provision states that a State governme nt that operates a Medicaid program will be considered incapable of performing utiliza tion and quality review functions in an effective manner, unless the State demonstrates to CMS’ satisfaction that it will act with complete independence and objectivity. As proposed, the provision at § 475.103(c) maintains the substance of the existing rule while making it clear that the scope of itsCMS-1601-P 591 review will be limited to quality improvement initiatives. In order to do this, we have proposed to replace the term “utilization and quality review functions” with the term “quality improvement initiatives.” In additi on, we are proposing to revise the language to clarify that the objectivity and independence me ntioned in the existing regulation relate to objectivity and independence from the Medica id program, as we believe there is an

inherent conflict of interest that arises from the State’s financial interest in the administration of that program. Our proposal at § 475.103 implements the statutory responsibility for the Secretary to determine whether an organiza tion can perform the QIO function of quality improvement initiatives in a manner that is consistent with the efficient and effective operation of the QIO Program and the Medi care Program. We solicit comment on whether the regulation text s hould incorporate the standards for QIOs that we propose to

use and the factors we intend to consider wh en determining whether those standards have

been met. d. Prohibitions on Eligibility as a QIO (§ 475.105) We are proposing revisions to § 475.105(a)(2) to eliminate the prohibition against

an association of health care facilities being awarded a QIO contract, to reflect a TAAEA amendment deleting this restri ction from section 1153(b)(3) of the Act. We also are proposing to move the existing provision coveri ng the exclusion of health care facility affiliates in paragraph (a)(3) to paragraph (a )(2), and to create a revised paragraph (a)(3) that would include payor orga nizations as excluded entitie s unless they meet certain exception requirements identified in section 1153(b)(2)(B) of the Ac t. Prior to theCMS-1601-P 592 TAAEA amendment, the statute imposed two prohibitions on CMS contracting with a payor organization to perfo rm QIO functions: a prohi bition applicable before November 15, 1984 and a prohibition with exceptions for periods of time after November 15, 1984. After November 15, 1984, a payor organization could perform as a QIO if the Secretary determined that there we re no other entities available for a QIO area. These restrictions were implemented in th e existing regulations codified at §§ 475.105(b)

and 475.106. The TAAEA amendments left uncha nged the prohibition in effect for the period of time before November 15, 1984, but revised section 1153(b)(2 )(B) of the Act to add exceptions to the prohibition appl icable after November 15, 1984. Section 1153(b)(2)(B) of the Act, as amended, permits the award of a QIO contract to a payor organizations not only when the Secretary de termines that there is no other entity available for an area, but also when the S ecretary determines that there is a more qualified entity to perform one or more of th e functions in section 1154(a) of the Act, if the entity meets all other requirements and sta ndards in the QIO statut e. We read this provision to mean that when the Secretary de termines that a payor organization is more qualified than a nonpayor organi zation in the QIO area to pe rform one or more of the functions in section 1154(a) of the Act, that payor entity can qualify as a QIO so long as all other eligibility criteria are met. We have reflected this interpretation in the proposed rule as § 475.105(a)(3). The existing paragraph (b) prohibits payor organizations from being QIOs prior to November 15, 1984. Since that date has long pa ssed, we believe this paragraph should be eliminated. We are proposing to delete and reserve paragraph (b) of §475.105 in itsCMS-1601-P 593 entirety. Paragraph (c) would remain larg ely unchanged except for a minor terminology update to clarify in the regulat ion text that the term “fac ility” is meant to refer to a “health care facility” and to ch ange the term “conduct any review activities” to “perform any case review activities” to indicate our separation of case review functions from quality improvement initiatives. We do not believe that these changes affect the underlying prohibitions. As noted above, we are proposing to dele te and reserve all of § 475.106 in light of our proposed changes to § 475.105. We believe that aspects of § 475.106 that we have not proposed to incorporate into § 475.105 ar e obsolete due to the passage of time. 5. Proposals Relating to QIO Contract Awards (§ 475.107) The existing regulations at 42 CFR Part 475 also include requirements related to the establishment of QIO contracts and th e assignment of bonus points. We are proposing to delete the portions of existing § 475.107(c) pertaining to the assignment of up to 10 percent of available bonus points to physician-sponsored organizations, and the assignment of points in connection with the structure of the organization as “physician-sponsored” or “physician-access.” These provisions are obsolete in light of the changes to section 1152( 1) of the Act and our propos als above relating to the eligibility standards for an organization awarded a QIO cont ract. We also are proposing to use cross-references in § 475.107(a) and (b ) to the revised standards we are proposing in §§ 475.101 through 475.103. We are proposing to retain the regulatory language that requires CMS to identify proposals that m eet the requirements of § 475.101 (proposed § 475.107(a)) and to identify thos e proposals that set forth mi nimally acceptable plans inCMS-1601-P 594 accordance with the requirements of § 475.102 or § 475.103, or both as applicable (proposed § 475.107(b)). The existing § 475.107(d) stat es that the contract fo r a given QIO area to the selected organization cannot exceed 2 years, which is inconsistent with the current statutory provision at section 1153(c)(3) of the Act. We are proposing here to redesignate this provision as paragraph (c) a nd to provide for a 5-ye ar contract term as required by section 1153(c)(3) of the Act, as amended by section 261 of the TAAEA.

XVIII. Medicare Fee-for-Service Electro nic Health Record (EHR) Incentive Program A. Incentive Payments for Eligible Profe ssionals (EPs) Reassigning Benefits to Method

II CAHs Section 1848(o)(1)(A) of the Act, as amended by section 4101(a) of the HITECH Act, establishes the Medicare EHR Incentive Program, which provides for incentive payments to eligible professionals (EPs) who are meaningful users of certified EHR technology during the relevant EHR reporting periods. Section 1848(o)(1)(A)(i) of the Act provides that EPs who are meaningful EHR users during the relevant EHR reporting period are entitled to an incentive payment am ount, subject to an annual limit, equal to 75 percent of the Secretary's estimate of the Medicare allowed charges for covered professional services furnished by the EP during the relevant payment year. Under section 1848(o)(1)(B)(ii) of the Act, an EP is entitled to an incentive payment for up to 5 years. In addition, in accordance with sec tion 1848(o)(1)(A)(ii) of the Act, there shall be no incentive payments made w ith respect to a year after 2016.CMS-1601-P 595 1. Background for Definition of EPs and EHR Incentive Payments to EPs In accordance with section 1848(o)(5)(C) of the Act, in the final rule for Stage 1 of the EHR Incentive Program (75 FR 44442), we established a definition of the term “eligible professional” in the regulations at 42 CFR 495.100 to mean a physician as defined under section 1861(r) of the Act. Section 1861(r) of the Act defines the term “physician” to mean the following five type s of professionals, each of which must be legally authorized to practice their profession under State law: a doctor of medicine or osteopathy; a doctor of dental surgery or dental medicine; a doctor of podiatric medicine; a doctor of optometry; or a chiropractor. As also discussed in th at final rule (75 FR 44439), in accordance with sec tion 1848(o)(1)(C) of the Act, hospital-based EPs are not eligible for an EHR incentive payment. Th e term “hospital-based EP” is defined in § 495.4 of the regulations as “Unless it meets the requirements of § 495.5 of this part, a hospital-based EP means an EP who furnishes 90 percent or more of his or her covered professional services in site s of service identified by th e codes used in the HIPAA standard transaction as an inpatient hosp ital or emergency room setting in the year preceding the payment year, or in the case of a payment adjustment year, in either of the 2 years before such payment adjustment year .” Paragraphs (1)(i) and (1)(ii) of the definition specify how the percen tage of covered professional services is calculated for Medicare for purposes of the payment years a nd payment adjustment years, respectively. We note a discrepancy between the regulation te xt for this definition and the final policy we established in the preamble of the EHR Incentive Program Stage 2 final rule (77 FR 54102). Under the policy we finalized in that rule, we determine whether an EP isCMS-1601-P 596 hospital-based for a payment adjustment year us ing either of the following Federal fiscal year’s (FY) data: (1) the fiscal year before the year that is 1 year prior to the payment adjustment year (for example, FY 2013 data for payment adjustment year 2015); or (2) the fiscal year before the year that is 2 years prior to the payment adjustment year (for example, FY 2012 data for payment adjustment year 2015). If the data from either year result in a hospital-based determination, th e EP would not be subject to the payment adjustments for the relevant year. In th e definition under § 495.4 of the regulations, however, paragraph (1)(ii) incorrectly refers to the fiscal year preceding the payment adjustment year and the fiscal year 2 years before the pa yment adjustment year. The introductory text of the definition also incorrect ly references either of the 2 years before such payment adjustment year. We are taking this opportunity to make a technical correction to paragraph (1)(ii) and the introductory text ofthe definition of “hospitalbased EP” at § 495.4 to conform to the polic y stated in the preamble of the EHR Incentive Program Stage 2 final rule ( 77 FR 54102). We are proposing to revise paragraph (1)(ii)(A) of the defi nition to read “The Federal fi scal year 2 years before the payment adjustment year; or” and paragraph (1)(ii)(B) of the defi nition to read “The Federal fiscal year 3 years before the paymen t adjustment year.” We also are proposing to revise the introductory text of the definition to referen ce, in the case of a payment adjustment year, either of the 2 years before the year preceding such payment adjustment year. Section 1848(o)(5)(A) of the Act define s covered professional services as having the same meaning as in section 1848(k)(3) of the Act; that is, services furnished by an eligible professional for which payment is made under, or is based on, the MedicareCMS-1601-P 597 Physician Fee Schedule (MPFS). In accordance with section 1848(a)(1 ) of the Act, the Medicare allowed charge for covered professi onal services is the lesser of the actual charge or the MPFS amount established in section 1848 the Act. As specified under section 1848(o)(1)(A)(i) of the Act, the Secretary’s estimate of allowed charges for EHR incentive payments is based on claims submitted to Medicare no later than 2 months following the end of the relevant payment year. Section 1848(o)(1)(B)(i) of the Act sets forth the annual limits on the EHR incentive payments to EPs. Specifically, s ection 1848(o)(1)(B) of the Act provides that the incentive payment for an EP for a give n payment year shall not exceed the following

amounts:

• For the EP’s first payment year, fo r such professional, $15,000 (or $18,000, if the EP’s first payment year is 2011 or 2012);

• For the EP’s second payment year, $12,000;

• For the EP’s third payment year, $8,000;

• For the EP’s fourth payment year, $4,000;

• For the EP’s fifth payment year, $2,000; and

• For any succeeding year, $0. Under section 1848(o)(1)(B)(i v) of the Act, for EPs who predominantly furnish services in a geographic HPSA (as de signated by the Secretary under section 332(a)(1)(A) of the Public H ealth Service Act), the incen tive payment limitation amounts for each payment year are increased by 10 perc ent. Section 1848(o)(1)(B)(iii) of the Act also provides for a phased reduction in pa yment limits for EPs who first demonstrateCMS-1601-P 598 meaningful use of certified EHR technology after 2013. Section 1848( o)(1)(D)(i) of the Act, as amended by section 4101(a) of th e HITECH Act, provides that the incentive payments may be disbursed as a single conso lidated payment or in periodic installments as the Secretary may specify. We make a si ngle, consolidated, a nnual incentive payment to EPs. Payments are made on a rolling basi s, as soon as we ascer tain that an EP has demonstrated meaningful use for the applicab le reporting period (tha t is, 90 days for the first year or a calendar year for subseque nt years), and reached the threshold for maximum payment. Section 1848(o)(1)(A) of the Act prov ides that “with respect to covered professional services provided by an eligible professional,” the incentive payment “shall be paid to the eligible professional (or to an employer or facility in the cases described in clause (A) of section 1842( b)(6)).” Section 1842(b)(6)(A) of the Act allows for reassignment of payments to an employer or entity with which the physician has a valid contractual arrangement allowing the entity to bill for the physician’s services. Therefore, we provided that EPs would be allo wed to reassign their incentive payments to their employer or an entity that they have a valid employment agreement or contract providing for such reassignment, consistent with all rules governi ng reassignments (75 FR 44445). Section 495.10(f) of the regulations permits EPs to reassign their incentive payments to an employer or to an entity w ith which they have a contractual arrangement, consistent with all rules governing reassignmen ts, including 42 CFR Part 424, Subpart F. Section 495.10(f) also precludes an EP from reassigning the incentiv e payment to more than one employer or entity. To implement this requirement, we use the EP’s MedicareCMS-1601-P 599

enrollment information to determine whether an EP belongs to more than one practice (that is, whether the EP’s National Provider Iden tifier (NPI) is associat ed with more than one practice). In cases where an EP is asso ciated with more than one practice, the EP would select one tax identification number to receive any applicable EHR incentive payment. 2. Special Circumstances of EPs Re assigning Benefits to Method II CAHs Since we implemented the EHR Incen tive Program, we have received many requests from CAHs billing under Method II (Method II CAHs), members of Congress, and hospital associations reque sting that we make it possible for EPs who assign their reimbursement and billing to a Method II C AH to participate in the program. Under section 1834(g)(2) of the Act, a CAH may elect to receive a cost-based payment for the facility costs of providing outpatient serv ices, plus 115 percent of the fee schedule amount for professional services included with in outpatient CAH services. CAHs that elect to receive both a facility payment and a professional payment for outpatient services are commonly referred to as Method II C AHs. The statute also provides that, as a condition for applying this provision, the Secr etary may not require that each physician or other practitioner providing pr ofessional services in a CAH must assign billing rights for such services to the CAH. Physicians a nd other practitioners who do not assign such rights to their Method II CAH c ontinue to receive payment fo r their professional services directly under the appropriat e professional fee schedule. Since the inception of the EHR Incentiv e Program, we have been unable to account for the services furnished by EPs in Method II CAH outpatient departmentsCMS-1601-P 600 (including emergency department s) due to limitations in our information systems. Specifically, our information systems have not been capable of receiving and storing linelevel rendering EP identifying information fo r these Method II CAH claims for services furnished by EPs in outpatient departments. These claims are billed by the CAH on behalf of the EPs furnishing the services us ing the institutional clai m form UB-04 or its electronic counterpart, the X12 837I format. Until a rece nt information systems change was implemented, we were unable to identify the NPI of the EP furnishing the service at

the service line-level on the claim. While the information systems received and stored NPIs from each claim, the NPIs were not ti ed to the specific services furnished on the claim. This limitation made it impossible to ta ke into account the services furnished by EPs in Method II CAH outpatient settings wh en we annually determined the hospitalbased status of each EP for each payment year for purposes of the EHR Incentive Program. In addition, for those EPs who were determined to be not hospital-based and who successfully demonstrated meaningful use, we were unable to take into account such services in calculating the am ount of an EP’s EHR incentive payment for a payment year.

Because the limitations in our information systems prevented us from identifying the

NPIs of the EPs who furnished the servic es on the Method II CAH claims, we were unable to include those claims for purposes of the hospital-based determinations and EHR incentive payment calculations. However, it is important to note that these EPs could still participate in th e EHR Incentive Program and qualify for an incentive payment

based on their non-Method II CAH claims.CMS-1601-P 601 We began soon after the implementation of the EHR Incentive Program to develop the requisite changes so that our information system s would be able to receive and store line-level rendering EP identifying information for these Method II CAH claims. We were able to implement thes e information systems changes effective for claims submitted on or after October 1, 2012 (in other words, on or after the start of FY 2013). Under the existing regul ations at § 495.4, we determ ine an EP’s hospital-based status for a payment year based on claims data from the fiscal year preceding the payment year. Thus, for purposes of the 2013 payment year, we determine whether an EP is hospital-based using claims data from FY 2012. However, as noted above, we are

unable to take into account Method II CAH claims prior to the start of FY 2013. As a result, under the existing regulations, the hospi tal-based determinations for EPs for the 2013 payment year are based on FY 2012 claims data that do not in clude Method II CAH

claims. The earliest that we would be able to include such claims under the existing regulations would be for the hospital-base d determinations for the 2014 payment year,

which are based on FY 2013 claims data. We want to avoid further delay in taki ng into account the services furnished by EPs in Method II CAH outpatient settings. Therefore, we are proposing to add a provision to the definition of “hospital-based EP” at § 495.4 under new paragraph (3) to provide a special methodology for making hosp ital-based determinations for the 2013 payment year for EPs with services bille d by Method II CAHs. We are making this proposal solely in order to take into account the special circumstan ces of those EPs as described above. Under this proposal, we w ould be able to take into account Method IICMS-1601-P 602 CAH claims when making hospital-based de terminations for payment year 2013, one year before we would be able to do so under the existing regulations. Specifically, we are proposing that, for payment year 2013 only, we would use a two-step process to make hospital-based determinations for EPs who fu rnish covered professional services billed by Method II CAHs. First, after we have accumulated the Method II CAH claims with the line-level furnishing EP identifyi ng information for FY 2013 (October 1, 2012 through September 30, 2013), we would use that data to identify which EPs had Method II CAH service billings during that year, and we would ma ke a special hospital-based determination for that subset of EPs for pa yment year 2013. Any EP determined to be nonhospital-based on the basis of FY 2013 claims data would be eligible to demonstrate meaningful use for the relevant EHR reporti ng period and potentially qualify for an EHR incentive payment for payment year 2013. An EP who believes that he or she would be determined to be nonhospital-based under this proposed provision and wishes to qualify for the EHR incentive payment for payment year 2013 should not wait for the determination to implement Certified EHR T echnology and begin meaningful use for an EHR reporting period in 2013. To qualify for an EHR incentive payment for payment year 2013, an EP will need to demonstrate meaningful use of Certified EHR Technology for an EHR reporting period in 2013. As is th e case with other EPs that reassign their EHR incentive payments to another entity, these EPs may reassign their EHR incentive payments to the Method II CAH that bills on their behalf if the CAH is an employer or they have a contractual arrang ement, consistent with the rules governing reassignments. Second, in the case of an EP determined to be hospital-based on the basis of FY 2013CMS-1601-P 603 claims data, we would check the hospital-base d determination we have already for that EP under the existing regulat ion using the FY 2012 file. Any EP found to be nonhospital-based on the basis of the FY 2012 cl aims data (which do not include Method II CAH claims) would be held harmless to th e determination made on the basis of FY 2013 claims data and considered nonhospital- based for payment year 2013. We believe that this second step of the proposed met hodology is important to protect EPs who were initially determined nonhospita l-based at the beginning of payment year 2013 under theexisting regulation. We do not believe those EPs who were determined nonhospitalbased under the existing regulation should have those determinations reversed by later (although more complete) FY 2013 claims da ta. This hold-harmless provision would preserve the prospectivity of nonhospital-ba sed determinations for payment year 2013

that were made under the existi ng regulation and maintain the eligibility of those EPs to receive EHR incentive payments for payment y ear 2013. At the same time, the first step of our proposal would provide an opportuni ty for EPs who were determined to be hospital-based for payment year 2013 on th e basis of FY 2012 data, which did not

include the Method II CAH claims for their se rvices, to establish their nonhospital-based status on the basis of the more complete FY 2013 data. It is important to note that, due to the systems limitations described above, we ar e unable to propose any special method for making EHR incentive payments and hospital- based determinations for the payment years prior to payment year 2013. We lack the ability to retrieve line-level furnishing EP identifying information for Method II CAH claims during the years prior to FY 2013. We are inviting public comments on this proposal.CMS-1601-P 604 B. Cost Reporting Periods for Interim and Final EHR Incentive Payments to Eligible Hospitals 1. Background In the July 28, 2010 final rule for St age 1 of the EHR Incentive Program, we established the cost report periods from which we would dr aw the requisite data (for example, hospital acute care inpatient disc harges and Medicare Part A acute care inpatient days) for determining interim and final EHR incentive payments to eligible hospitals (75 FR 44450). We specified in § 495.104(c)(2) of the regulations that we would use discharge and other relevant data from the hospital’s most recently submitted 12-month cost report in order to determine preliminary hospital EHR incentive payments. Similarly, we specified in § 495.104(c)(2) th at we would make final EHR incentive payments to hospitals based on discharge and ot her relevant data from the hospital’s first 12-month cost reporting period th at begins on or after the firs t day of the payment year. (For purposes of EHR incentive payments for eligible hospitals, a payment year is a Federal fiscal year.) As we noted in the final rule (75 FR 44450 through 44451), section 1886(n)(2)(C) of the Act requir es that a “12-month period se lected by the Secretary” be employed for purposes of determining the discha rge related amount. As we also stated in that final rule (77 FR 44452), we believe th at the requirement for using 12-month cost reporting periods for purposes of determin ing preliminary and final payments is important to avoid the use of nonstandard co st reporting periods, which are often quite short (for example, 3 months) and therefore are “not likely to be truly representative of aCMS-1601-P 605 hospital’s experience, ev en if methods were to be adopt ed for extrapolating data over a full cost reporting period.” 2. Special Circumstances Since the publication of the EHR Incen tive Program final rule for Stage 1, we

have become aware of circumstances in which the only cost reporting period for an eligible hospital that begins on or after the first day of a payment year is a nonstandard cost reporting period. For example, a hosp ital may be merging with another hospital under an arrangement in which its CCN, and th erefore its existence as an identifiable hospital for Medicare EHR Incen tive Program purposes, will not survive the merger. In such circumstances, the last cost reporting pe riod for the hospital after its final payment year and prior to its merger into the survivi ng hospital may be a short period. In order to accommodate these situations, we are proposing to revise § 495.104(c)(2) of the regulations to provide that, in cases where there is no 12-mont h cost reporting period that begins on or after the beginning of a payment year, we will use the most recent 12-month cost reporting period av ailable at the time of final settlement in order to determine final EHR incentive payments for the hospital. We understand that, under this proposal, the last available cost reporting period that we would use for the final determination of EHR incentive payments may be the same 12-month cost reporting period that had been used for purposes of determining th e hospital’s interim EHR incentive payments. We believe that this result is preferable to resorting to a nonstandard cost reporting period because a 12-month period is required by the statute to determine the discharge related amount and such periods tend, for reasons discussed in the EHR Incentive Program Stage 1 final rule,CMS-1601-P 606 to be unrepresentative of the hospital’s e xperience. We are inviting public comments on this proposal. XIX. Medicare Program: Provider Reim bursement Determinations and Appeals A. Matters Not Subject to Ad ministrative or Judicial Review (§ 405.1804) 1. Background Section 1878(a) of the Act addresse s appeals of certain Medicare payment

determinations to the Provider Reimbursement Review Board (the “Board”). Below we briefly discuss the prospectiv e payment system (PPS) under which payments for certain Medicare inpatient hosp ital services are made. The Social Security Amendments of 1983 (Pub. L. 98-21) added section 1886(d) to the Act, which changed the method of pa yment for inpatient hospital services under

Medicare Part A for short-term acute care hospitals. The method of payment for these hospitals was changed from a cost-based retros pective reimbursement system to a system based on prospectively set payment rates; that is, a PPS. Under Medicare’s hospital inpatient prospective payment system (the hospital IPPS), payment is made at a predetermined rate for e ach hospital discharge. The Social Security Amendments of 1983 also added section 1886(e)(1) to the Act, which required that, for cost repor ting periods beginning in FYs 1984 and 1985, the IPPS result in aggregate program reimburse ment equal to “what would have been payable” under the reasonable cost-based re imbursement provisions of prior law; that was, for FYs 1984 and 1985, the IPPS would be “budget neutral.” Section 1886(e)(1)(A) of the Act required that the pr ojected aggregate payments fo r the hospital-specific portionCMS-1601-P 607 should equal the comparable share of estimat ed reimbursement under prior law. Section 1886(e)(1)(B) of the Act requir ed that projected aggregate reimbursement for the Federal portion of the prospective payment rates eq ual the corresponding share of estimated amounts payable prior to the pa ssage of Pub. L. 98-21. In the 1983 IPPS interim final rule published in the Federal Register on September 1, 1983, we explained how the adjustment of the Federal portion of the pr ospective payment rate was determined, as well as the resulting adjustment factors for FY 1984 (48 FR 39887).

Under section 1878 of the Act and the re gulations at Subpart R of 42 CFR Part 405, the Board has the authority to adjudi cate certain reimbursement appeals by providers. The Board’s decisi ons are subject to review by the Administrator of CMS under section 1878(f)(1) of the Act, as impl emented by § 405.1875 of the regulations. A final decision of the Board, or any reversal, affirmance, or modification of a final Board decision by the Administrator, may be subject to review by a United Stat es District Court. 2. Proposed Technical Conforming Change Certain matters affecting payment to hos pitals under the IPPS are not subject to administrative or judicial review. For exam ple, section 1886(d)(7) of the Act precludes administrative and judicial review of the budge t neutrality adjustment effected pursuant to section 1886(e)(1) of the Act. This preclus ion of review is also reflected in section 1878(g)(2) of the Act (which states that “det erminations and other de cisions described in section 1886(d)(7) sh all not be reviewed by the Board or any other court . . . .”). The existing regulatory text at § 405.1804(a) prov ides that there is no administrative or judicial review of “any budget neutrality adju stment in the prospective payment rates.”CMS-1601-P 608 The language of § 405.1804(a) was promul gated as part of the implementing regulations (48 FR 39785 and 39835) for th e hospital IPPS. Section 405.1804(a) was codified pursuant to section 1886(d)(7) of the Act. At the time of promulgation, section 1886(d)(7) of the Act specified only the budget neutrality adjustment in section 1886(e)(1) of the Act. Additional budget neutrality adjustments under the IPPS were added by law and were not precluded from ad ministrative or judi cial review. For example, section 4410 of the Balanced Budget Act of 1997 (the BBA), Pub. L. 105-33, established the rural floor wage index budget neutrality adjustment, and did not preclude administrative or judicial review in the statute for this adjustment. We recognize that the language of the regulation at § 405.1804(a) is overly broad

because it states that there is no administ rative or judicial review of “any” budget neutrality adjustment in the prospective payment rates, and its terms are not limited to the budget neutrality adjustment specified in se ction 1886(e)(1) of the Act. We understand that the Board has relied on § 405.1804(a) to deny jurisdiction in appeals relating to budget neutrality adjustments other than the ad justment in section 1886(e)(1) of the Act. To the extent that the existing § 405.1804(a) refers to “any” budget neutrality adjustment, we believe that this regulatory text is not consistent with th e current statute. Therefore, we are proposing to make a technical conf orming change to § 405.1804(a) to conform the regulation to the current statute. This proposed technical conforming change would clarify that there is no admi nistrative or judicial review with respect to the budget neutrality adjustments enumerated in section 1886(e)(1) of the Act, a nd this preclusion of review does not apply to other budget neutrality adjustments under the IPPS.CMS-1601-P 609 B. Clarification of Reopening of Predicate Facts in Intermediary Determinations of Provider Reimbursement (§ 405.1885) A provider must submit an annual cost repo rt to a fiscal intermediary (currently

referred to as a Medicare Admi nistrative Contractor (MAC)), as specified in regulations at §§ 413.20(b) and 413.24(f). Through its re view and settlement process, the intermediary determines the total amount of reimbursement due a provider for its cost reporting period. This constitutes an “inter mediary determination,” as defined in § 405.1801(a). In accordance with § 405.1803, an in termediary determination is set forth in a notice of program reimbursement (NPR), which explains the intermediary’s final determination of the total amount of program reimbursement due the provider for the cost reporting period in question. Section 405.1803(b) requires that the NP R explain any differences between the intermediary determination and the amount of program reimbursement claimed by the provider. Such differences may be attribut able to specific provisions of the Medicare statute, regulations, CMS rulings, or program instructions. In addi tion, the intermediary determination may reflect specif ic findings of fact by the intermediary that differ from the provider’s understa nding of the facts. The factual underpinnings of a speci fic determination of the amount of reimbursement due a provider sometimes first arise in, or are determined for, the same fiscal period as the cost reporting period under review. For example, the determination of whether a hospital subject to the inpatient prospective payment system (IPPS) should receive a payment adjustment for serving a significantly dispropor tionate share of lowCMS-1601-P 610 income patients under section 1886(d)(5)(F) of the Act and § 412.106 of the regulations in a given fiscal period depends on the number of the hospital’s patien t days for the same period. However, the factual underpinnings of a specific determination of the amount of reimbursement due a provider may first arise in, or be determined for, a different fiscal period than the cost reporting period unde r review. We refer to these factual determinations as “predicate f acts.” For example, the determination of an IPPS-exempt hospital’s target amount (that is, per-discharge (case) lim itation) or rate -of-increase ceiling under section 1886(b) of the Act and regulations at § 413.40 depends on: (1) the hospital’s allowable net inpatien t operating costs for a base period of at least 12 months before the first cost reporting period subject to the rate-of-increase ceiling; or (2) for later cost reporting periods, the target amount for the preceding 12-month cost reporting period. The hospital’s allowabl e costs for its base period are “predicate facts” with respect to the first cost reporting period that is subject to the target amount because such base period costs figure in the determination of the hospital’s first target amount. The target amount for each cost reporting pe riod after the base period then becomes a “predicate fact” for the next cost reporting period. We refer readers to section 1886(b)(3)(A) of the Act (for the first period, the target am ount is calculated using “allowable operating costs of inpatient hospi tal services for the preceding 12-month cost reporting period;” the target amount for later co st reporting periods is calculated using the target amount for the preceding 12-mont h cost reporting period, increased by an applicable update factor).CMS-1601-P 611 A provider may challenge an intermedia ry determination by filing an appeal within 180 days of the NPR to the Boar d (under section 1878(a ) of the Act and regulations at § 405.1835) or, if the amount in controversy is at least $1,000 but less than $10,000, to the intermediary hearing office r(s) (under § 405.1811). Alternatively, in accordance with § 405.1885, the provider may reque st that the intermediary reopen its NPR. In addition, the intermediary ma y reopen the NPR on its own motion. Under § 405.1885(b), reopening must be requested by the provider, or initiated on the intermediary’s own motion, within 3 years of the NPR, although there is no time limit for the reopening of an intermediary determina tion that was procured by fraud or similar fault of a party to such determination. Appeal and reopening of an intermediary determination are both “issue-specific.” In order to meet the jurisdictional require ments for appeal to the Board or to the intermediary hearing officer(s), the provider must establish its dissatisfaction with each specific matter at issue in the intermediary determination. We refer readers to section 1878(a) of the Act and regulations at § 405.1835(a)(1) and (b) (Board appeals) and § 405.1811(a)(1) and (b) (intermediary hear ing officer appeals). Similarly, § 405.1885(a)(1) provides that the intermediary determination may be reopened “for findings on matters at issue in a determin ation.” We also re fer readers to § 405.1887, which provides that a notice of reopening a nd any revised intermediary determination must specify the findings on matte rs at issue to be reopened a nd the particular findings to be revised through reopening, respectivel y, and § 405.1889(b), which specifies that aCMS-1601-P 612 provider’s appeal rights after re opening are limited to the specific matters altered in the revised intermediary determination. In many instances, a factual matter arises i n, or is determined for, the same fiscal period as the cost reporting period at issue, and such a factual determination may be appealed or reopened as part of that period’s intermediary de termination. For example, if an IPPS hospital challenges the patient day count used to determine its DSH payment adjustment for its 2010 cost reporting period, the hospital must appeal its DSH patient day count within 180 days of the NPR for the 2010 cost reporting period (and meet the other jurisdictional requirements for appeal to the Board or to the intermediary hearing officer(s), as applicable). Similarly, th e hospital would have to request, or the intermediary would have to initiate on its own motion, the reopening of the hospital’s 2010 DSH patient day count within 3 year s of the NPR for the 2010 cost reporting period. When the specific matter at issue is a pr edicate fact that first arose in, or was determined for, a different fiscal period th an the cost reporting period in question, our longstanding interpretation and pr actice is that the pertinent provisions of the statute and regulations provide for review and potential redetermination of such predicate fact only by a timely appeal or reopening of the NPR fo r the cost reporting period in which the predicate fact first arose or the NPR for the pe riod for which such predicate fact was first determined by the fiscal intermediary. For example, assuming base period costs calculated for the period consisting of the 12 months prior to the hospital’s 2002 cost reporting period, if an IPPS-exempt hospital ch allenges the determination of its 2008 costCMS-1601-P 613 reporting period target amount, the hospital c ould not appeal the determination of the base period predicate facts unless it was within 180 days of the NPR for the base period. Similarly, the hospital would have to request, or the intermediary would have to initiate on its own motion, the reopening of the determin ation of the hospital’s base period costs within 3 years of the NPR for the base y ear cost reporting period. In addition, the hospital could appeal the determination of the 2008 cost reporting period target rate within 180 days of the NPR for the 2008 cost reporting period and, similarly, could request the reopening of the determination of it s 2008 cost reporting period target amount within 3 years of the NPR for the 2008 cost reporting period. There are no additional periods subject to appeal and reopening of su ch predicate fact unless the predicate facts

are redetermined at a later time through an appeal or reopening. Thus, if the same hospital’s allowable base period costs or 2008 cost reporting period’ s target amount was redetermined on appeal or reopening, the hos pital could appeal such redetermination within 180 days of the revised NPR for the rede termination of its base period costs or the

revised NPR for the redetermination of th e 2008 cost reporting pe riod’s target amount, respectively. The reopening of such a redeterm ination (in this example, of the hospital’s base period costs or its 2008 cost reporti ng period’s target am ount) also could be available within 3 years of the revised NPR fo r the base period or the 2008 cost reporting period, respectively. Many reimbursement formulas require th e use of predicate facts, where the factual underpinnings of a specific dete rmination of the amount of provider reimbursement first arise in, or are determined for, a different fiscal period than the costCMS-1601-P 614 reporting period under review. As discussed above, we believe that predicate facts should be subject to change only through a timely appeal or reopening for the fiscal period in which the predicate fact first arose or the fiscal period in which such fact was first determined by the intermediary. In so me instances, a predicate fact from a prior fiscal period is used in a later period with additional info rmation, which is not found in the original cost report or NP R. We believe this kind of determination may be reviewed and redetermined through a timely appeal or reopening of the NPR for the cost reporting period in which the predicate fact was first used (or applied) by the intermediary to determine the provider’s reimbursement. Ho wever, we recognize exceptions when a particular legal provision (of the Medicare statute, regulations, or CMS rulings) authorizes, as part of a specific reimbursemen t rule, the review and revision of a predicate fact after the expiration of the 3-year reopening period. For example, the reaudit regulation in § 413.77(a), promulgated to implem ent section 1886(h)(2) of the Act (which

is related to the determination of the aver age per-resident amount used to calculate reimbursement for graduate medical education (GME) costs), authorizes intermediaries to modify base-period costs solely for purposes of computing the per-resident amount after the hospital’s base-period cost report is no longer subjec t to reopening under § 405.1885.

We refer readers to the decision in Regions Hospital v. Shalala , 522 U.S. 448 (1998),

which sustained the lawfulness of the reaudit regulation (then designated as § 413.86(e)(1)).

We believe that the above-described in terpretation of our rules regarding the appeal or reopening of predicate facts furthe rs the interests of both providers and theCMS-1601-P 615 agency in maintaining the finality of interm ediary determinations. The alternative, of allowing appeal and reopening of a predicat e fact after the expi ration of the 3-year reopening period, may result in inconsiste nt intermediary determinations on a reimbursement matter recurring in different fi scal periods for the same provider. An alternative approach of allo wing appeal and reopening of a predicate fact beyond the 3-year reopening period could also result in intermediary determinations that are contrary to Medicare law and policy regarding a speci fic reimbursement matter. As with the target amount example discussed above, reim bursement for various items is premised on a base period cost determination that coul d affect reimbursement for a given item for many cost reporting periods thereafter. If a provider disputes such a base period cost determination, it can appeal or request re opening of the NPR for the base period. However, unless such an appeal or reopening results in a different finding as to the predicate fact in question, reimbursement for a given provider cost should not be based on one finding about a predicate fact in the base period and a diffe rent finding about the same predicate fact for purposes of determ ining reimbursement in later fiscal periods. Under our longstanding interpretation a nd practice, once the 3-year reopening period has expired, neither the provider nor th e intermediary is allowed to revisit a predicate fact that was not changed through the appeal or reopening of the cost report for the fiscal period where such predicate fact fi rst arose or for the fi scal period for which such fact was first determined by the intermedia ry. Further, the application of such facts is subject to change only through a timely app eal or reopening of the cost report for the fiscal period where the predicate fact was fi rst used (or applied) by the intermediary toCMS-1601-P 616 determine the reimbursement for the provide r cost in question. Accordingly, we are proposing to revise § 405.1885 to clarify that, absent a specific statute, regulation, or other legal provision permitting reauditing, revising, or similar actions changing, predicate facts: (1) a predicat e fact is subject to change only through a timely appeal or reopening for the fiscal period in which the pred icate fact first arose or the fiscal period for which such fact was first determined by the intermediary; and (2) the application of the predicate fact is subject to change onl y through a timely appeal or reopening of the cost report for the fiscal peri od in which it was first used (or applied) by the intermediary to determine the prov ider’s reimbursement.

We note that a recent court decision conflic ts with our settled interpretation of the regulations for provider appeals and cost report reopening. In Kaiser Foundation Hospitals v. Sebelius , 708 F.3d 226 (D.C. Cir. 2013), the co urt held that providers could appeal predicate facts used to determine thei r reimbursement in late r fiscal periods even though such predicate facts were not timely appealed or reop ened for the periods when they first arose or were determined by the intermediary nor was the application of those facts to the periods when those facts were first used by the intermediary to determine the providers’ reimbursement. The predicate fact s at issue in this case were the teaching hospitals’ resident full-time equivalent (F TE) counts for their 1996 cost reporting periods, which, as required by section 1886(h)(4)(F)(i) of the Act, were used to calculate the statutory cap on residents for GME cost reimbur sement for the first time in the hospitals’ 1998 cost reporting periods. The providers co uld have challenged their resident FTE counts through timely appeals or reopening of their 1996 fiscal period NPRs, and theyCMS-1601-P 617 could have challenged the cal culation of their resident caps through timely appeals or reopening of their 1998 fiscal period NPRs, the first time the caps were applied. Instead, the hospitals appealed their resident caps as applied to later cost reporting periods. The

court held that the definition of “inter mediary determination” under § 405.1801(a)(1), which is incorporated in th e reopening rules at § 405.1885(a)(1 ), did not include factual findings, standing alone, where the providers made no attempt to challenge their GME

cost reimbursement for their 1996 or 1998 fiscal periods due to the expiration of the 180- day appeal period and the 3-year period for reopening. Because the providers were not challenging the total amount of program reimbur sement paid for their 1996 or 1998 fiscal periods, the court concluded that the intermed iary determinations for those periods were not at issue and thus the 3-year lim itation on reopening was not applicable. We disagree with the court’s decisio n, which we believe is contrary to our reopening regulations at § 405.1885(a), and the correspond ing appeals regulations (discussed above), and which necessitates our proposed clarification of the regulations. As noted above, we are proposing to revi se § 405.1885 to clarify that the specific

“matters at issue in a determination” that ar e subject to the reopening rules include factual findings for one fiscal period that are predicate facts for later fiscal periods. The general 3-year reopening period applies to findings a bout such predicate facts and the reopening period is calculated separately for each finding about a predi cate fact. We note that this proposed revision of § 405.1885 would apply to all Medicare reimbursement determinations, and not only to GME payment, which was the particular issue in Kaiser Foundation Hospitals v. Sebelius . Because this proposed re vision clarifies longstandingCMS-1601-P 618 agency policy, we are proposing that it be e ffective for any intermediary determination

issued on or after the effective date of the fi nal rule, and for any a ppeals or reopenings (or requests for reopening) that are pending on or after the effective date of the final rule, even if the intermediary determination (at issu e in such an appeal or reopening) preceded

the effective date of the final rule. We be lieve the proposed revision is not impermissibly retroactive in effect because the proposal si mply clarifies longstanding agency policy and practice, and is procedural in nature . We refer readers, for example, to Heimmermann v. First Union Mortgage Corp. , 305 F.3d 1257, 1260-61 (11th Cir. 2002) (a rule clarifying the law, especially in an unsettled or conf using area of the law, is not a substantive change in the law, and thus the rule may apply to matters that preceded issuance of the rule). However, if the proposed revisi on to § 405.1885 were deemed a retroactive application of a substantive change to a regulation, section 1871( e)(1)(A) of the Act permits retroactive application of a substant ive change to a regula tion if the Secretary determines that such retroactive applicati on is necessary to comply with statutory requirements or that failure to apply the cha nge retroactively would be contrary to the public interest. We have determined that re troactive application of the proposed revision to § 405.1885 is necessary to ensure complian ce with the 3-year limit on reopening and with various statutory payment provisions such as the target amount (under section 1886(b) of the Act) and the cap on residents for GME cost reimbursement (under section 1886(h)(4)(F)(i) of the Act). We have furthe r determined that it w ould be in the public interest to apply the propos ed revision to intermediary determinations, appeals, and reopenings (including requests fo r reopening) that are pending on or after the effectiveCMS-1601-P 619 date of the final rule. Not applying the proposed revisions to pending intermediary determinations, appeals, and reopenings would undermine the 3-year limit on reopening and the interests of both the Medicare program and Medicare providers in the finality of reimbursement determinations, and would be inconsistent with the statutory scheme. Finally, although we have provided proposed revisions only to § 405.1885, in order to clarify our regulati ons in accordance with this proposal, we are considering making similar changes regarding predi cate facts to the regulations governing intermediary appeals at § 405.1811 and app eals to the Board at § 405.1835. We are requesting public comments with respect to amending the language of these additional regulations for appeals before the intermediary and the Board.

XX. Files Available to th e Public via the Internet We are proposing to create new Addendum P--Proposed OPPS Items and Services That Will Be Packaged for CY 2014. The Addenda of the proposed rules and the final rules with comment period will be published and available only via the Internet on the CM S Web site. To view the Addenda of this proposed ru le pertaining to the proposed CY 2014 payments under the OPPS, go to the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/HospitalOutpatientPPS/ Hospital-Outpatient-Regulations-andNotices.html and select “1601-P” from the list of regulations. All Addenda for this proposed rule are contained in the zipped folder entitled “2014 OPPS 1601-P Addenda” at the bottom of the page.CMS-1601-P 620 To view the Addenda of this propose d rule pertaining to the proposed CY 2014 payments under the ASC payment system, go to the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee- for-Service-Payment/ASCPayment/ASCRegulations-and-Notices.html and select “1601-P” from th e list of regulations. All Addenda for this proposed rule are containe d in the zipped folder entitled “Addendum AA, BB, DD1 and DD2,” and “Addendum EE” at the bottom of the page. XXI. Collection of Information Requirements A. Legislative Requirement s for Solicitation of Comments Under the Paperwork Reduction Act of 1995, we are required to provide 30-day

notice in the Federal Register and to solicit public commen t before a collection of information requirement is submitted to the Office of Management and Budget (OMB) for review and approval. In order to fairly evaluate whether an information collection should be approved by OMB, section 3506(c)(2 )(A) of the Paperwork Reduction Act of 1995 requires that we solicit comment on the following issues:

● The need for the information collecti on and its usefulness in carrying out the proper functions of our agency.

● The accuracy of our estimate of the information collection burden.

● The quality, utility, and clarity of the information to be collected.

● Recommendations to minimize the information collection burden on the affected public, including auto mated collection techniques. In this proposed rule, we are soliciting public comments on each of the issues outlined above for the information collection requirements discussed below.CMS-1601-P 621 B. Requirements in Regulation Text 1. Proposed Changes to the Outcome Measure Requirement for OPOs In section XVI. Of this proposed rule, we discussed our proposal to modify the outcome measures requirement for OPOs se t forth at § 486.318. Currently, OPOs are required to meet all three outcome measures in that section or they are automatically decertified. We are proposing to modify that requirement so that OPOs will meet the outcome measures requirement if they meet two out of the three outcome measures. Based on our experience with OPOs a nd historical data concerning how many OPOs typically fail to meet one of the outcome measures, we believe that there would be

about five OPOs that would fail to meet one of the outcome measures. Our proposal would result in those five OPOs meeting the outcome measures requirement and not being automatically de-certified. Therefore, these five OPOs would not have to perform the ICRs under this section, which would be the time and resources needed to go through the appeals process in an attempt to s ecure a reversal of the decertification.

The ICRs that an OPO would be re quired to expend would depend upon how it

chose to handle the decertification. An OP O may choose to not engage in the appeals process and merge with another OPO prior to th e effective date of the decertification. Other OPOs would likely choose to take adva ntage of the appeals process, which would begin with reconsideration at the regional admi nistrator level. It is likely that an OPO would expend considerable resources duri ng the reconsiderati on and, if that was unsuccessful, a hearing before a CMS heari ng officer. We believe both would require

considerable time and other resources from th e OPO’s senior staff a nd legal counsel. WeCMS-1601-P 622

also believe that those OPOs that went onto a hearing w ould expend considerably more

resources than those that received a reversal of their decertific ation at the reconsideration.

While we do not have a reliable estimate on how much these OPOs would save due to the numerous unknown variables, we are confid ent that these OPOs would sustain a significantly positive effect from not being automatically de-certified as is currently required under the OPO CfCs. In additi on, under 5 CFR 1320.3(c) , a “collection of information”' does not include requirements imposed on fewer than 10 entities. Therefore, the requirements of this section are not subject to the PRA. 2. Proposed Changes to the Medicare Fee-for-Service EHR Incentive Program In section XVIII. of this proposed rule, we are proposing to revise 42 CFR 495.4 to provide a special method for making hosp ital-based determinations for 2103 only in the cases of those EPs who reassign their be nefits to Method II CAHs. We also are proposing a minor clarification to the regul ations at § 495.104(c)(2) concerning the cost reporting period to be used in determining final EHR payments for hospitals. We refer readers to the Stage 1 (75 FR 44536 ff) and Stage 2 (77 FR 54126 ff) final rules for the Medicare EHR Incentive Program for the disc ussions of the burden of the information collection requirements of the Medicare Fe e-for-Service EHR Incentive Program. Our proposals in this rule do not modify or in crease the information collection requirements of the program in any way.CMS-1601-P 623 C. Associated Information Collections Not Specified in Regulatory Text In this proposed rule, we make refere nce 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 we stated in section XIV. of the CY 2012 OPPS/ASC final rule with comment period, the Hospital OQR Program has been ge nerally modeled after the quality data reporting program for the Hospital IQR Progr am. We refer readers to the CY 2011 OPPS/ASC final rule with comment pe riod (75 FR 72111 through 72114), the CY 2012

OPPS/ASC final rule with comment period (76 FR 74549 through 74554) and the

CY 2013 OPPS/ASC final rule with comme nt period (77 FR 68527 through 68532) for detailed discussions of the Hospital OQR Program information collection requirements we have previously finalized. a. Hospital OQR Program Requirements fo r the CY 2015 Payment Determination and Subsequent Years

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68531) for a discussion on the burden of the information collection requirements of the previously adopted Hospital OQR Program measures for the CY 2015 payment determination. We are not proposing to add any additional measures for the CY 2015 payment determination and subsequent years, so there will be no change in our previous

burden estimate.CMS-1601-P 624 We note that we had previously suspe nded data collection for the OP-19 measure

and deferred data collection for the OP-24 measure. In addition, we are proposing to codi fy existing policies related to program participation and withdrawal, data submissi on, program waivers, data validation, and the reconsideration process. Because we are only codifying existing policies, we do not anticipate any additional burde n to hospitals based on this proposal affecting the CY 2015 payment determination or subsequent years. b. Web-based Measures for the CY 2016 Paym ent Determination and Subsequent Years For the CY 2016 payment determination a nd subsequent years, we are proposing to add five measures to the program with data collection begi nning during CY 2014. We are soliciting public comment on the impact of adding these measures and requiring data submission of aggregate data via a Web-based tool for four chart-abstracted measures. Hospitals will vary greatly as to the numb er of cases per HOPD due to specialization. However, we estimate based on our past experi ences with chart-abstracted measures that each participating hospital will spend 35 minutes per case to collect and submit the data,

and that the estimated burden associated w ith there being one case per hospital would be 1,924 hours (3,300 hospitals x 0.583 hours per hospital). In addition, HOPDs will incur a financial burden associated w ith chart abstraction and data submission for these four proposed measures. We estimate the burden associated with there being one case pe r hospital would be $57,717 (3,300 hospitals x $30.00 per hour x 0.583 hours).CMS-1601-P 625 For the CY 2016 payment determination, the burden associat ed with Hospital OQR Program procedures is the time and effo rt associated with collecting and submitting

the data on the measures. For the chart-abstra cted measures where patient-level data is submitted directly to CMS, we estimate that there will be approximately 3,300 respondents per year. For hospitals to collect and submit this information, we estimate it will take 35 minutes per submitted case. Based upon the data submitted for the CY 2012 and CY 2013 payment determinations, we estimate there will be a total of 1,679,700 cases per year, approximately 509 cases per year per hospital. Therefore, the estimated annual hourly burden associated with the af orementioned data submission requirements for the chart-abstracted data is 979,265 hours (1,679,700 cases per year x 0.583 hours per case). In addition, HOPDs will incur a financial burden associated w ith chart abstraction and data submission where patient-level data are submitted directly to CMS. We estimate

the burden associated with these meas ures is $29,377,953 (1,679,700 cases per year x $30.00 per hour x 0.583 hours per case).

For the measures where data is submitt ed to CMS via a Web-based online tool (OP-12, 17, 22, 25, 26, 28, 29, 30, 31) located on a CM S Web site, we estimate that each participating hospital would sp end 10 minutes per year to collect and submit the data, making the estimated annual burden associat ed with these measures 4,960 hours (3,300 hospitals x 0.167 hours per measure x 9 measures per hospital) in CY 2015. In addition, HOPDs will incur a financial burden associated w ith chart abstraction

and data submission for these 9 measures. We estimate that the financial burdenCMS-1601-P 626

associated with these measures woul d be $148,797 (3,300 hospitals x $30.00 per hour x 0.167 hours per measure x 9 measures).

For the NHSN HAI measure: Influen za Vaccination Covera ge among Healthcare Personnel, we estimate that the total annual bur den associated with this measure for an HOPD for data submission would be 27,555 hours (3,300 hospitals x 0.167 hour per response for 50 workers per hospital). In addition, HOPDs will incur a financial burden associated w ith data submission

for this measure. We estimate that the fina ncial burden associated with these measures would be $826,650 ($30.00 per hour x 27,555 hours). We invite public comment on the burden associated with these information collection requirements. c. Hospital OQR Program Validation Requirements for the CY 2015 Payment Determination and Subsequent Years We are not proposing to make any change s to our validation procedures. As a result, the burden associated with the va lidation procedures for the CY 2015 payment determination as proposed is the same as previously finalized for CY 2014 in the

CY 2013 OPPS/ASC final rule with comment period (77 FR 68531) and 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 approxi mately 12 hours to comply with these data submission requirements. To comply with the requirements, we estimate each hospital would submit up to 48 cases for the affected year for review. All selected hospitals must comply with these requirements each year, wh ich would result in a total of up to 24,000CMS-1601-P 627 charts being submitted by the sampled hospita ls (500 selected hospitals x 48 cases per hospital). The estimated annual burden associat ed with the data valid ation process for the CY 2015 payment determination is approximately 6,000 hours. In addition, HOPDs will incur a financial bu rden associated with the required data

abstraction and data submission for this meas ure. We estimate that the financial burden associated with this measure would be $180,000 ($30.00 per hour x 6,000 hours). These requirements are currently approved under OCN: 0938-1109. This approval expires on October 31, 2013. We invite public comment on the burd en associated with data validation information collection procedures. d. Hospital OQR Program Reconsid eration and Appeals Procedures In section XIII.I. of this proposed ru le, for the CY 2015 payment determination and subsequent years, we are proposing a mi nor change to the reconsideration request process to ensure our deadline for these requ ests will always fall on a business day. We also are proposing to codify our recons ideration request process at 42 CFR 419.46(h).CMS-1601-P 628

While there is burden associated wi th filing a reconsideration request, 5 CFR 1320.4 of the Paperwork Reduction Act of 1995 regulations excludes collection activities during the conduct of administrative actions such as redeterminations, reconsiderations, or appeal s or all of these actions. 2. ASCQR Program Requirements a. Claims-Based Measures for the CY 2014 Payment Determination In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68532), we discussed the information collection requireme nts for the five claims-based measures (four outcome measures and one process meas ure) to be used for the CY 2014 payment determination. The five measures are: (1 ) Patient Burn (NQF #0263); (2) Patient Fall (NQF #0266); (3) Wrong Site, Wrong Side , Wrong Patient, Wrong Procedure, Wrong Implant (NQF #0267); (4) Hospital Tr ansfer/Admission (NQF #0265); and (5) Prophylactic Intravenous (IV) Antibiotic Timing (NQF #0264). We collected quality measure data for the five claims-based measures using QDCs placed on submitted claims for services furnished from October 1, 2012 through December 31, 2012 that were paid by the contractor by April 30, 2013. Approximately 71 percent of ASCs pa rticipated in Medical Event Reporting, which included reporting on the first four claims-based measures, which are outcome measures. Between January 1995 and December 2007, ASCs reported 126 events, an average of 8.4 events per year (Florida Me dical Quality Assurance, Inc. and Health Services Advisory Group: Ambulatory Surgic al Center Environmental Scan (July 2008) (Contract No. GS - 10F - 0096T)). We estim ated the burden to report QDCs for theseCMS-1601-P 629

4 claims-based outcome measures to be nominal due to the small number of cases. Based on the data above, extrapolating from 71 per cent to 100 percent of ASCs reporting, there would be an average of 11.8 events per year or less than 1 case per month per ASC. For the claims-based process measure, Prophylactic IV Antibiotic Timing, we also estimated the burden associated with submitting QDCs to be nominal because few procedures performed by ASCs will requi re prophylactic antibiotic administration. We invite public comment on the burden associated with these information collection requirements. b. Claims-Based and Web-Based Measures for the CY 2015 and CY 2016 Payment

Determinations In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68532), we discussed the information collection requireme nts for the measures to be used 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 adde d two structural, Web-based, measures: Safe Surgery Checklist Use and ASC Facility Volume Data on Selected ASC Surgical Procedures (76 FR 74504 through 74509). Fo r the CY 2016 payment determination, we

finalized the retention of the seven measur es for the CY 2015 payment determination and added Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431) (76 FR 74509). Based on our data for CY 2014 payment determinations above for claims-based measures, extrapolating to 100 percent of AS Cs reporting, there would be an average ofCMS-1601-P 630 11.8 events per year. Thus, we estimated th e burden to report QDCs on this number of claims per year for the first four claims-based outcome measures to be nominal due to the small number of cases (approximately one case per month per ASC) for the CY 2015 and CY 2016 payment determinations. We estimated the burden associated with submitting QDCs for the fifth measure to be no minal as well, as discussed above. For the CY 2015 payment determination, for the Web-based measures, ASCs will enter required information using a Web-base d collection tool between July 1, 2013 and August 15, 2013. For the Safe Surgery Checklist Use measure, we estimated that each participating ASC will spend 10 minutes per y ear to collect and submit the required data, making the estimated annual burden associat ed with this measure 878 hours (5,260 ASCs x 1 measure x 0.167 hours per ASC). For the CY 2015 payment determination, we estimate that, for the ASC Facility Volume Data on Selected ASC Surgical Procedures measure, each participating ASC would spend 10 minutes per year to collect and submit the required data, making the estimated annual burden associated w ith this measure 878 hours (5,260 ASCs x 1 measure 0.167 hours per ASC). For the CY 2016 payment determination, in this proposed rule we are proposing that ASCs would report data for the Sa fe Surgery Checklist measure and the ASC Volume Data on Selected ASC Surgical Pr ocedures measure between January 1, 2015 and August 15, 2015 for services furn ished between January 1, 2014 and December 31, 2014. For the Safe Surgery Checklist measure for the CY 2016 payment determination, we estimate that each particip ating ASC would spend 10 minutes per year to collect and submit the required data, ma king the estimated annual burden associatedCMS-1601-P 631 with this measure 878 hours (5,260 ASCs x 1 measure x 0.167 hours per ASC). For the CY 2016 payment determination, for the ASC Volume Data on Selected ASC Surgical Procedures measure, we estimate that each participating ASC would spend 10 minutes per year to collect and submit the requir ed data, making the estimated annual burden associated with this measure 878 hours (5,260 ASCs x 1 measure x 0.167 hours per ASC). For the CY 2016 payment determination, for the NHSN HAI measure: Influenza Vaccination Coverage among Healthcare Perso nnel, we estimate that the total annual

burden associated with this measure for ASCs, including NHSN re gistration (5,260 ASCs x 0.083 hour per facility = 437 hours) and da ta submission (5,260 ASCs x 0.167 hour per response for 20 workers per facility = 17,568), will be 18,005 hours. This estimate is based upon burden estimates from the CDC (OMB No. 0920-0666) a nd reported numbers for the average number of workers per ASC. For the CY 2016 payment determination, in this proposed rule, we are proposing to add four measures to the program with data collection to begin during CY 2014 and

submission to be via a Web-based tool. As chart-abstracted measures, we estimate that each participating ASC would spend 35 minutes per case to collect and submit the data, making the total estimated burden for ASCs with a single case per ASC would be 3,067 hours (5,260 ASCs x 0.583 hours per case per ASC). We expect that ASCs would vary greatly as to the number of cas es per ASC due to ASC specialization. In addition, ASCs would incur a financial burden associated w ith chart abstraction and data submission for these four proposed measures. We estimate that, for a per chartCMS-1601-P 632 abstracted case, an ASC would incur a cost of $91,997 (5,260 ASCs x $30.00 per hour x 0.583 hours). We are soliciting public comment on the impact of adding these measures and requiring data submission. We invite public comment on the burden associated with these information collection requirements. c. Program Administrative Requirements and QualityNet Accounts; Extraordinary Circumstance and Extension Reque sts; Reconsideration Requests In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74516), we finalized our proposal to consid er an ASC to be participa ting in the ASCQR Program for the CY 2014 payment determination if the AS C includes QDCs specified for the program on their CY 2012 claims relating to the finalized measures.

In the FY 2013 IPPS/LTCH PPS final ru le, we finalized, for the CY 2015 payment determination and subsequent year s, that once an ASC submits any quality measure data, it would be considered to be participating in the ASCQR Program. Once an ASC submits quality measure data indicati ng its participation in the ASCQR Program, in order to withdraw, an ASC must complete and submit an online form indicating that it is withdrawing from the program. For the CY 2015 payment determination and subsequent years, if the ASC submits quality measure data, there is no a dditional action required by the ASC to indicate participation in the program. The burden associated with the requirements to withdraw from the program is the time a nd effort associated with accessing, completing, and submitting the online form. Based on the number of hospitals that have withdrawnCMS-1601-P 633 from the Hospital OQR Program over the past 4 years, we estimated that 2 ASCs would withdraw per year and that an ASC would expend 30 minutes to access and complete the form, for a total burden of 1 hour per year.

In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53638 through 53639), we finalized for the CY 2015 payment determination the requirement that ASCs to identify and register a QualityNet administrator in order to set up accounts necessary to enter

structural measure data. We estimated th at, based upon previous experience with the Hospital OQR Program, it would take an AS C 10 hours to obtain, complete, and submit an application for a QualityNet administrator and then set up the necessary accounts for structural measure data entry. We estimated the total burden to m eet these requirements to be 52,600 hours (10 hours x 5,260 ASCs). The financial burden associated with these requirements is estimated to be $1,578,000 ($30.00 per hour x 52,600 hours). In the FY 2013 IPPS/LTCH PPS final rule, we adopted a process for an extension or waiver for submitting information required under the program due to extraordinary

circumstances that are not within the ASC’ s control. We are requiring that an ASC would complete a request form that would be available on the QualityNet Web site, supply requested information, a nd submit the request. The bu rden associated with these requirements is the time and effort associated with gathering required information as well as accessing, completing, and submitting the form. Based on the number of ASCs that have submitted a request for an extension or waiver from the ASCQR Program over the past year, we estimate that 200 ASCs per year would request an exte nsion or waiver and that an ASC would expend 2 hours to gather required information as well as access,CMS-1601-P 634 complete, and submit the form, for a total burden of 400 hours per year. This estimate

takes into account continued bil ling and claims processing issues. We also adopted a reconsideration pr ocess that would apply to the CY 2014 payment determination and subsequent pa yment determination years under the ASCQR Program. While there is burden associated wi th an ASC filing a reconsideration request, the regulations at 5 CFR 1320.4 for the Pape rwork Reduction Act of 1995 exclude data

collection activities during the conduct of administrative actions such as redeterminations, reconsiderations, or appeals or all of these actions. We invite public comment on the burden associated with these information collection requirements. 3. Hospital VBP Program Requirements In section XIV. of this proposed ru le, for the Hospital VBP Program, we are proposing to allow hospitals to request an independent CMS review that would be an additional appeal process beyond the exis ting review and corrections process (77 FR 53578 through 53581 and 76 FR 74544 through 74547) and appeal process

codified at 42 CFR 412.167.

While there is burden associated with a hospital requesting an independent CMS review, the regulations at 5 CFR 1320.4 for the Paperwork Reduction Act of 1995

exclude collection activities during the conduct of administ rative actions such as redeterminations, reconsiderations, or appeals or all of these actions.CMS-1601-P 635 We invite public comment on the burden associated with these information collection requirements. If you comment on these information colle ction and recordkeeping requirements, please submit your comments to the Office of Information and Regulatory Affairs, Office of Management and Budget, Attention: CMS Desk Officer, CMS-1601-P; Fax: (202) 395-6974; or Email: OIRAsubmissions_@omb.eop.gov XXII. Response to Comments Because of the large number of public comments we normally receive on Federal Register documents, we are not able to acknowle dge or respond to them individually. We will consider all comments we receive by the date and time specified in the DATES section of this proposed rule, and, when we proceed with a subsequent document(s), we will respond to those comments in the preamble to that document. XXIII. 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 Pla nning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulator y Review (January 18, 2011), the Regulatory Flexibility Act (RFA) (Septemb er 19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) (March 22, 1995, Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999), and the Contract w ith America Advancement Act of 1996CMS-1601-P 636 (Pub. L. 104-121) (5 U.S.C. 804(2)). This se ction of the proposed rule contains the impact and other economic analyses for the provisions that we are proposing. Executive Orders 12866 and 13563 direct agenci es to assess all costs and benefits of available regulatory alterna tives and, if regulation is n ecessary, to select regulatory approaches that maximize net benefits (inc luding potential economi c, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both co sts and benefits, of reducing costs, of harmonizing rules, and of promoting flexibilit y. This proposed 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 w ith America Advancement Act of 1996 (Pub. L. 104-121). Accordingly, the proposed ru le has been reviewed by the Office of Management and Budget. We have prepared a regulatory impact analysis that, to the best of our ability, presents the costs and benefits of this proposed rule. In this proposed rule, we are soliciting public comments on the regulatory impact analysis provided.

2. Statement of Need This proposed rule is necessa ry to update the Medicare hospital OPPS rates. It is necessary to propose to make changes to th e payment policies and rates for outpatient services furnished by hospitals and CMHCs in CY 2014. We are re quired under section 1833(t)(3)(C)(ii) of the Act to update annua lly the OPPS conversion factor used to determine the payment rates for APCs. We also are required under section 1833(t)(9)(A) of the Act to review, not le ss often than annually, and re vise the groups, the relative payment weights, and the wage and other ad justments described in section 1833(t)(2) ofCMS-1601-P 637

the Act. We must review the clinical in tegrity of payment groups and relative payment weights at least annually. We are proposing to revise the APC relative payment weights using claims data for services furnis hed on and after January 1, 2012, through and including December 31, 2012, and updated cost report information. For CY 2014, we are proposing to conti nue the current payment adjustment for rural SCHs, including EACHs. In addition, s ection 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 incr ease factor. In this proposed rule, we are proposing to implement these payment provi sions. Also, we list the 15 drugs and biologicals in Table 19 that we are proposi ng to remove from pass-through payment

status for CY 2014. This proposed rule is also necessary to update the ASC payment rates for CY 2014, enabling CMS to make changes to payment policies and payment rates for covered surgical procedures and covered ancill ary services that are performed in an ASC in CY 2014. Because the ASC payment rate s 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 a nnually, depending on the type of code, it is necessary to update the ASC pa yment rates annually to refl ect these changes to HCPCSCMS-1601-P 638 codes. In addition, we are required under section 1833(i)(1) of the Act to review and update the list of surgical procedures that ca n 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 a ny annual update with respect to the year involved for ASCs that fail to meet the qua lity reporting requirem ents. For CY 2014, we discuss the impacts associated with this pa yment reduction in section XV.C. of this proposed rule. 3. Overall Impacts for the Proposed OPPS and ASC Payment Provisions

We estimate that the effects of th e proposed OPPS payment provisions would result in expenditures exceeding $100 million in any 1 year. We estimate that the total increase from the proposed changes in th is proposed rule in Federal government expenditures under the OPPS for CY 2014 compared to CY 2013 would be approximately $600 million. Taking into account our estimated changes in enrollment, utilization, and case-mix, we estimate that th e proposed OPPS expenditures for CY 2014 would be approximately $4.372 billion higher, relative to expenditures in CY 2013. Because this proposed rule is “economically significant” as measured by the $100 million threshold, we have prepared this regulatory impact analysis th at, to the best of our ability, presents its costs and benefits. Table 39 di splays the redistributional impact of the proposed CY 2014 changes in OPPS payment to various groups of hospitals and for

CMHCs.CMS-1601-P 639 We estimate that the proposed update to the conversion factor and other adjustments (not including the effects of outlier payments, the pass-through estimates, and the application of the fr ontier State wage adjustment for CY 2014) would increase total OPPS payments by 1.8 percent in CY 2014. The proposed changes to the APC weights, the proposed changes to the wage indices, the proposed continuation of a payment adjustment for rural SCHs, incl uding EACHs, and the proposed payment adjustment for cancer hospitals would not increase OPPS payments because these proposed changes to the OPPS would be budge t neutral. However, these proposed updates would change the distri bution of payments within the budget neutral system. We estimate that the proposed total change in payments between CY 2013 and CY 2014, considering all proposed payments, including pr oposed changes in es timated total outlier payments, pass-through payments, and the a pplication of the frontier State wage adjustment outside of budget neutrality, in addition to the application of the proposed

OPD fee schedule increase fact or after all adjustments requi red by sections 1833(t)(3)(F), 1833(t)(3)(G) and 1833(t)(17) of the Act, woul d increase total estimated OPPS payments by 1.8 percent.

We estimate the total incr ease (from proposed changes to the ASC provisions in this proposed rule as well as from enrollm ent, utilization, and case-mix changes) in expenditures under the ASC payment system for CY 2014 compared to CY 2013 to be approximately $133 million. Because the provisions for the ASC payment system are part of a proposed rule that is “economica lly significant” as measured by the $100 million threshold, we have prepared a regulatory imp act analysis of the proposed changes to theCMS-1601-P 640 ASC payment system that, to the best of our ab ility, presents the costs and benefits of this portion of the proposed rule. Tables 40 and Table 41 of this proposed rule display the redistributional impact of the proposed CY 2014 changes on ASC payment, grouped by specialty area and then grouped by procedur es with the greatest ASC expenditures, respectively. 4. Detailed Economic Analyses a. Estimated Effects of Proposed OPPS Changes in this Proposed Rule (1) Limitations of Our Analysis The distributional impacts pr esented here are the projec ted effects of the proposed CY 2014 policy changes on various hospital gr oups. We post on the CMS Web site our proposed hospital-specific es timated payments for CY 2014 with the other supporting documentation for this proposed rule. To vi ew the hospital-specific estimates, we refer

readers to the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/HospitalOutpatientPPS/index.html . At the Web site, select “regulations and notices” from the left side of the page and then select “CMS-1601-P” from the list of regulations and notices. The hos pital-specific file layout and the hospital-specific file are listed with the other suppor ting documentation for this proposed rule. We show hospital-specific data only for hospitals whos e claims were used for modeling the impacts

shown in Table 39 below. We do not show hos pital-specific impacts for hospitals whose

claims we were unable to use. We refer read ers to section II.A. of this proposed rule for a discussion of the hospitals whose claims we do not use for ratesetting and impact

purposes.CMS-1601-P 641 We estimate the effects of the proposed individual policy changes by estimating payments per service, while holding all other payment policies constant. We use the best data available, but do not attempt to predic t behavioral responses to our proposed policy changes. In addition, we do not make adjustme nts for future changes in variables such as service volume, service-mix, or number of en counters. In this proposed rule, we are soliciting public comment and information a bout the anticipated e ffects of our proposed changes on providers and our methodology for estimating them. Any public comments

that we receive will be addressed in the a pplicable sections of the final rule with comment period that discu ss the specific policies. (2) Estimated Effects of Proposed OPPS Changes on Hospitals Table 39 below shows the estimated impact of this proposed rule on hospitals. Historically, the first line of the impact ta ble, which estimates the proposed change in payments to all facilities, has always incl uded cancer and children’s hospitals, which are held harmless to their pre-BBA amount. We also include CMHCs in the first line that includes all providers because we include CM HCs in our weight scaler estimate. We now include a second line for all hospita ls, excluding permanently held harmless hospitals and CMHCs. We present separate impacts for CM HCs in Table 39 and we discuss them separately below, because CMHCs are paid on ly for partial hospitaliz ation services under the OPPS and are a different provider type from hospitals. In CY 2013, we are paying CMHCs under APC 0172 (Level I Partial Hosp italization (3 services) for CMHCs) and APC 0173 (Level II Partial Hospitalization (4 or more services) for CMHCs), and we areCMS-1601-P 642 paying hospitals for partial hospitalization serv ices 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 hospita l-based PHPs). We di splay separately the impact of our proposed updates on CMHCs, and we discuss its impact on hospitals as part of our discussion of the hospital impacts. The estimated increase in the total paym ents made under the OPPS is determined largely by the increase to th e conversion factor under the statutory methodology. The distributional impacts presented do not include assumptions about changes in volume and service-mix. The conversion factor is update d annually by the OPD f ee schedule increase

factor as discussed in detail in sectio n II.B. of this proposed rule. Section 1833(t)(3)(C)(iv) of the Act provide s that the OPD fee schedule increase factor is equal to the market basket percentage increase appl icable under section 1886( b)(3)(B)(iii) of the Act, which we refer to as the IPPS market basket percentage increase. The proposed IPPS market basket percentage increase for FY 2014 is 2.5 percent (78 FR 27497). Section 1833(t)(3)(F)(i) of the Act reduces that 2.5 percent by the multifactor productivity adjustment described in secti on 1886(b)(3)(B)(xi) (II) of the Act, which is proposed to be 0.4 percentage points for FY 2014 (which is also the proposed MFP adjustment for FY 2014 in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27786); and sections 1833(t)(3)(F)(ii) and 1833(t)(3)(G)(ii) of the Ac t further reduce the market basket percentage increase by 0.3 percentage points, result ing in the proposed OPD fee

schedule increase factor of 1.8 percent, which we are proposi ng to use in the calculation of the proposed CY 2014 OPPS conversion factor . Section 10324 of the Affordable CareCMS-1601-P 643 Act, as amended by HCERA, further author ized additional expend itures outside budget neutrality for hospitals in certain frontier St ates that have a wage index less than 1.00.

The amounts attributable to this frontier State wage index adjustment are incorporated in

the CY 2014 estimates in Table 39. To illustrate the impact of the proposed CY 2014 changes, our analysis begins

with a baseline simulation m odel that uses the CY 2013 re lative payment weights, the FY 2013 final IPPS wage indices that include reclassifications, and the final CY 2013

conversion factor. Table 39 shows the estima ted redistribution of the proposed increase in payments for CY 2014 over CY 2013 payments to hospitals and CMHCs as a result of the following factors: APC reconfigurati on and recalibration for CY 2014 compared to CY 2013 payments (Column 2); the marginal impact of our packaging proposals other than packaging for clinical laboratory test s (Column 3); the marg inal impact of our proposal to package clinical la boratory services (Column 4); the combined impact of all of our packaging proposals and proposed AP C reconfiguration a nd recalibration for CY 2014, compared to CY 2013 payments (Column 5: the combined effect of columns 2, 3 and 4); the proposed wage indices and the rural adjustment (Column 6); the combined impact of proposed APC recalibration, the pr oposed wage indices a nd rural adjustment, and the proposed OPD fee schedule increase factor update to th e conversion factor (Column 7); the combined impact of proposed APC recalibration, the proposed wage indices and rural adjustment, the proposed conversion factor update, and the proposed CY 2014 frontier State wage index adjustment (Column 8); and the estimated impact taking into account all proposed payments for CY 2014 relative to all payments forCMS-1601-P 644 CY 2013 (Column 9), 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 neutrali ty adjustment for the rural adjustment for SCHs because we are not proposing to ma ke any changes to the policy for CY 2014. Because the updates to the c onversion factor (including th e update of the OPD fee schedule increase factor), the estimated cost of the rural adjustment, and the estimated cost of projected pass-through payment fo r CY 2014 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 hos pital (for example, how the APCs for the hospital’s most frequently furnished services will change), and the impact of the wage index changes on the hospital. However, tota l payments made under this system and the extent to which this proposed rule would redistribute money during implementation also would depend on changes in volume, practice pa tterns, and the mix of services billed between CY 2013 and CY 2014 by various groups of hospitals, which CMS cannot

forecast. Overall, we estimate that the proposed OPPS rates for CY 2014 would have a positive effect for providers paid under the OPPS, resulting in a 1.8 percent estimated increase in Medicare payments. Removing pa yments to cancer and children’s hospitals because their payments are held harmless to the pre-OPPS ratio between payment and cost and removing payments to CMHCs suggest that these proposed changes would result in a 1.8 percent estimated increase in Medica re payments to all other hospitals. Those estimated payments would not signif icantly impact other providers.CMS-1601-P 645 Column 1: Total Number of Hospitals

The first line in Column 1 in Table 39 shows the total numbe r of facilities (3,953), including designated cancer a nd children’s hospitals and CMHCs, for which we were able to use CY 2012 hospital outpatient and CMHC claims data to model CY 2013 and CY 2014 payments, by classes of hospitals, for CMHCs and for dedicated cancer hospitals. We excluded all hospitals and CMHCs for which we could not plausibly estimate CY 2013 or CY 2014 payment and entit ies that are not paid under the OPPS. The latter entities include CAHs, all-inclusiv e hospitals, and hospita ls located in Guam, the U.S. Virgin Islands, Northern Mariana Is lands, American Samoa, and the State of Maryland. This process is discussed in greate r detail in section II.A. of this proposed rule. At this time, we are unable to calcul ate a disproportionate sh are (DSH) variable for hospitals not particip ating in the IPPS. Hospitals for which we do not have a DSH variable are grouped separately and generally include freestanding psychiatric hospitals, rehabilitation hospitals, and long-term care hospitals. We show the total number (3,791) of OPPS hospitals, excluding the hold-har mless 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 perm anently holds harmless cancer hospitals and children’s hospitals to th eir “pre-BBA amount” as spec ified under the terms of the statute, and therefore, we removed them from our impact analyses. We show the isolated impact on 100 CMHCs at the bottom of the impact table and discuss that impact separately below.

Column 2: APC RecalibrationCMS-1601-P 646

Column 2 shows the estimated effect of the reconfiguration and recalibration of the APCs from CY 2013 to CY 2014 excluding the CY 2014 OPPS packaging proposals. Outpatient laboratory services paid at CLFS rates are included on both sides of the comparison. We estimate that most hospitals would not experience si gnificant changes in payment rates from the APC recalibration al one, though we estimate that Puerto Rico would experience a 4.3 percent increase in pa yments and that low volume rural hospitals (measured by lines of services) would expe rience a 1.8 percent payment decrease.

Column 3: APC Recalibration with CY 2014 Pa ckaging Proposals Other than Outpatient Laboratory Services Column 3 shows the estimated impa ct of the APC recalibration from CY 2013-2014 with our proposed packaging polic ies other than pack aging for outpatient laboratory services currently paid at CLFS rate s. Outpatient laborat ory services paid at

CLFS rates are included on both sides of the co mparison. Hospitals th at specialize in a limited set of services would experience the mo st significant changes in payment. Urban hospitals with less than 21,000 service lin es would experience estimated payment decreases ranging from 0.4 to 1.9 percent. Ho spitals where DSH data are not available (specialized hospitals not paid under the IPPS) would experience estimated payment decreases of 1.4 percent.

Column 4: APC Recalibration with CY 2014 Ou tpatient Laboratory Services Packaging Proposal

Column 4 shows the estimated effect of APC recalibration plus our proposed policy for packaging outpatient laboratory se rvices paid at CLFS rates. OutpatientCMS-1601-P 647 laboratory services paid at CLFS rates are included in the comparison. It does not include estimated effects for other packaging proposals. We estimate that smaller rural hospitals, particularly in the mid-Atlantic region, would experience the most significant payment changes related to the laboratory packaging policy proposal, as they likely furnish more ancillary laboratory services relativ e to other services than larger hospitals. We estimate that rural hospitals overall w ould experience a 1.3 pe rcent decrease in payment, and rural hospitals with 100 or fe wer beds would experience payment decreases between 1.9 and 3.5 percent. Urban hospitals overall would experien ce limited estimated payment increases ranging from 0.1 to 0.3 percent. Column 5: APC Recalibration with All Proposed Changes

Column 5 shows the combined effect s of the proposed reconfiguration, recalibration, and other policies (such as propos ing to set payment for separately payable drugs and biologicals at the statutory default of ASP+6), plus our proposals to package outpatient laboratory services a nd other services for CY 2014. We modeled the effect of the APC recalibration changes by varying only the relative payment weights (the final CY 2013 relative weights versus the proposed CY 2014 relative weight s calculated using

the service-mix and volume in the CY 2012 cl aims used for this proposed rule) and calculating the percent difference in the rela tive weight. Column 5 also reflects any proposed changes in multiple procedure disc ount patterns or conditional packaging that occur as a result of the proposed changes in the relative magnitude of payment weights. Overall, we estimate that proposed changes in APC reassignment and recalibration across all services paid unde r the OPPS, together with our proposedCMS-1601-P 648 packaging policies, would slight ly increase payments to urba n hospitals by 0.1 percent. We estimate that rural hospitals would experi ence a decrease in payments of 0.7 percent. Classifying hospitals according to te aching status, we estimate that the APC recalibration together with our proposed p ackaging policies would lead to a payment increase of 1.2 percent for major teaching hospitals. We estimate that nonteaching hospitals would experience a decrease of 0.6 pe rcent. Classifying hospitals by type of ownership suggests that vol untary, proprietary, and govern mental hospitals would experience changes ranging from a decrease of 0.6 percent to an increase of 0.2 percent

as a result of the APC recalibrati on and proposed packaging policies. Column 6: New Wage Indices and the E ffect of the Rural and Cancer Hospital Adjustments

Column 6 demonstrates the combined budget neutral impact of proposed APC recalibration; the proposed wage index update ; the proposed rural adjustment; and the proposed cancer hospital payment adjustment. We modeled the independent effect of the proposed budget neutrality adjustments a nd the proposed OPD fee schedule increase factor by using the relative payment weights and wage indices for each year, and using a

CY 2013 conversion factor that included the OPD fee schedule increase and a budget neutrality adjustment for differences in wage indices. Column 6 reflects the independent effect s of the proposed updated wage indices, including the applicat ion of budget neutrality for the ru ral floor policy on a nationwide

basis. This column excludes the effects of the proposed frontier State wage index adjustment, which is not budget neutral and is included in Column 8. We did not model aCMS-1601-P 649 budget neutrality adjustment for the rural adjustment for SCHs because we are not proposing to make any changes to the po licy for CY 2014. The differential impact between the CY 2013 cancer hospital paymen t adjustment and the proposed CY 2014 cancer hospital payment adjustment would ha ve a minimal effect on the budget neutral adjustment to the conversion factor. We m odeled the independent effect of updating the wage indices by varying only the wage indice s, holding APC relative payment weights, service-mix, and the rural adjustment cons tant and using the proposed CY 2014 scaled weights and a CY 2013 conversion factor that included a budget neutrality adjustment for the effect of changing the wage indices between CY 2013 and CY 2014. This column estimates the impact of applying the pr oposed FY 2014 IPPS wage indices for the proposed CY 2014 OPPS without the influe nce of the frontier State wage index adjustment, which is not budget neutral. The proposed frontier State wage index adjustment is reflected in the combined imp act shown in Column 8. We are proposing to continue the rural payment adjustment of 7.1 percent to rural SCHs for CY 2014, as described in section II.E. of this proposed ru le. We estimate that the combination of updated wage data and nationwide applicati on of rural floor budget neutrality would redistribute payment among regions. We also are proposing to update 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 proposed rural adjustment, urban hospitals would experience no cha nge from CY 2013 to CY 2014. However, rural hospitals would experience an estimated decrease of 0.3 percent. Urban hospitals in the New Engla nd, Mid Atlantic, and P acific regions and inCMS-1601-P 650 Puerto Rico would experience the most sign ificant payment changes of 0.6 to 0.7 percent increases. Regionally, the proposed changes would range from a decrease of 0.6 in the rural East South Central region to an increase of 0.7 percent in the rural Pacific region. Column 7: All Proposed Budget Neutrality Changes Combined with the Proposed OPD

Fee Schedule Increase

Column 7 demonstrates the cumulative impact of the proposed budget neutral adjustments from Columns 5 and 6 and the pr oposed OPD fee schedule increase factor of 1.8 percent. We estimate that, for some hos pitals, the addition of the proposed OPD fee schedule increase factor of 1.8 percent w ould mitigate the impacts created by the proposed budget neutrality adjustments made in Columns 5 and 6. Most classes of hospitals would receive an increase that is in line with the proposed 1.8 percent overall in crease after the update is a pplied to the budget neutrality adjustments. The largest rural hospita ls by number of beds (200+ beds) would experience payment increases of 1.4 percent. Proprietary, voluntary, and government hospitals would experience payment increases ra nging from 1.0 to 2.0 percent. Hospitals

in Puerto Rico would receive an estimated payment increase of 6.3 percent. The rural Mid-Atlantic region would experience a 0.4 pe rcent payment decrease, while the urban Mid-Atlantic region would experience a 2.8 pe rcent payment increase. Classified by teaching status, nonteaching hospitals would e xperience a small payment increase of 1.1 percent, with minor and major teaching hosp itals experiencing increases ranging from 1.8 to 3.2 percent, respectively.CMS-1601-P 651 Column 8: 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 1.8 percent OP D fee schedule increase factor, and the nonbudget neutral impact of applying the propos ed frontier State wage adjustment (that is, the proposed frontier State wage index ch ange in addition to all proposed changes reflected in Column 7). This column differs from Column 7 solely based on application of the proposed nonbudget neutral frontie r State wage index adjustment. In general, we estimate that all facili ties and all hospitals would experience a combined increase of 1.9 percent due to the proposed nonbudget neutral frontier State wage index adjustment. The index would only affect urban hospitals in the West North Central and Mountain regions. Urban hosp ital in those regions would experience estimated increases of 4.5 per cent (West North Central) an d 2.3 percent (Mountain) that are attributable to the proposed frontier State wage index and the OPD fee schedule increase factor, and rural hospitals would experience estimated increases of 3.5 percent (West North Central) and 3.4 percent (Mountain) that are attributab le to the proposed frontier State wage index and the OPD fee schedule increase factor. Column 9: All Proposed Changes for CY 2014 Column 9 depicts the full impact of the proposed CY 2014 policies on each hospital group by including the effect of all of the proposed changes for CY 2014 and comparing them to all estimated payments in CY 2013. Column 9 shows the combined budget neutral effects of Column 5 and 6; th e proposed OPD fee schedule increase; theCMS-1601-P 652 impact of the proposed frontier State wage index adjustment; the impact of estimated OPPS outlier payments as discussed in section II.G. of this proposed rule; the proposed change in the Hospital OQR Program pa yment reduction for the small number of hospitals in our impact model that failed to meet the reporting require ments (discussed in section XIII. of this proposed rule); and th e impact of decreasing the estimate of the percentage of total OPPS payments dedicate d to transitional pass- through payments. Of those hospitals that failed to meet the Hospital OQR Program reporting requirements for the full CY 2013 update (and assumed, for modeli ng purposes, to be the same number for CY 2014), we included 34 hospitals in our m odel because they had both CY 2012 claims data and recent cost report data. We estim ate that the cumulative effect of all proposed changes for CY 2014 would increase paymen ts to all providers by 1.8 percent for CY 2014. We modeled the independent effect of all proposed changes in Column 9 using the final relative payment weights for CY 2013 and the proposed relative payment weights for CY 2014. We used the final conversion factor for CY 2013 of $71.313 and the proposed CY 2014 conversion factor of $72.728 discussed in section II.B. of this proposed rule. Column 9 contains simulated outlier pa yments for each year. We used the one year proposed charge inflation factor used in the proposed FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27767) of 4.85 percent ( 1.0485) to increase individual costs on the CY 2012 claims, and we used the most recent overall CCR in the April 2013 Outpatient Provider-Specific File (OPSF) to estimate outlier payments for CY 2013. Using the CY 2012 claims and a 4.85 percent charge infl ation factor, we currently estimate thatCMS-1601-P 653outlier payments for CY 2013, using a multiple threshold of 1.75 and a proposed fixeddollar threshold of $2,025 should be approximate ly 1.2 percent of total payments. The estimated current outlier payments of 1.2 per cent are incorporated in the comparison in

Column 9. We used the same set of claims and a proposed charge in flation factor of 9.93 percent (1.0993) and the CCRs in the April 2013 OPSF, with an adjustment of 0.9732, to reflect relative changes in cost and char ge inflation between CY 2012 and CY 2014, to model the proposed CY 2014 outliers at 1.0 perc ent of estimated tota l payments using a multiple threshold of 1.75 and a proposed fixed-dollar threshold of $2,775. We estimate that the anticipated ch ange in payment between CY 2013 and CY 2014 for the hospitals failing to meet th e Hospital OQR Program requirements would be negligible. Overall, we estimate that facilities would expe rience an increase of 1.8 percent under this proposed rule in CY 2014 relative to total spending in CY 2013. This projected increase (shown in Column 9) of Table 39 reflects the proposed 1.8 percent OPD fee schedule in crease factor, with 0.13 percent for the proposed change in the pass-through estimate between CY 2013 and CY 2014, less 0.2 percent for the difference in estimated outlier payments between CY 2013 (1.2 percent) and CY 2014 (1.0 percent), less 0.1 percent due to the fron tier adjustment in CY 2013, plus 0.1 percent due to the proposed frontier State wage inde x adjustment in CY 2014. When we exclude cancer and children’s hospitals (which are held harmless to their pre-BBA amount) and CMHCs, the estimated update increases to 1.8 percent after rounding. We estimate that the combined effect of all proposed changes for CY 2014 would increase payments to urban hospitals by 2.0 percent.CMS-1601-P 654 Overall, we estimate that rural hospitals would experience a 0.9 percent increase as a result of the combined effects of all proposed changes for CY 2014. We estimate that rural hospitals that b ill less than 5,000 lines of OPPS services would experience an increase of 2.2 percent and rura l hospitals that bill 5,000 or mo re lines of OPPS services would experience increases rang ing from 0.9 to 2.4 percent. Among teaching hospitals, we estimate that the impacts resulting from the combined effects of all proposed changes w ould include an increas e of 3.1 percent for major teaching hospitals and 1.2 percent fo r nonteaching hospitals. Minor teaching hospitals would experience an es timated increase of 1.8 percent. In our analysis, we also have categori zed hospitals by type of ownership. Based on this analysis, we estimate that voluntary hospitals would experi ence an increase of 2.1 percent, proprietary hosp itals would experience an increase of 1.3 percent, and governmental hospitals would expe rience an increase of 1.0 percent.CMS-1601-P 655TABLE 39.—ESTIMATED IMPACT OF THE PROPOSEDCY 2014 CHANGES FOR THE HOSPITAL OUTPATIENTPROSPECTIVE PAYMENTS SYSTEM(1) (2) (3) (4)(5) (6) (7) (8) (9)Number ofHospitalsAPCRecalibration(CY 2013-2014) (%)Impact ofPackagingProposalsOther thanOutpatientLaboratoryServices (%)Impact ofOutpatientLaboratoryServicesPackagingProposal(%)APCRecalibration (allchanges)(%)New WageIndex andProviderAdjustments(%)CombinedCols 5, 6withMarketBasketUpdate (%)Column 7with FrontierWage IndexAdjustment(%)AllProposedChanges(%)ALL FACILITIES *3,953 0.0 0.0 0.0 0.0 0.0 1.8 1.9 1.8ALL HOSPITALS3,791 0.1 -0.1 0.0 0.0 0.0 1.8 1.9 1.8(excludes hospitals permanently held harmless and CMHCs)URBAN HOSPITALS 2,859 0.1 -0.20.2 0.1 0.01.9 2.0 2.0LARGE URBAN 1,566 0.1 0.00.3 0.4 0.22.3 2.3 2.3(GT 1 MILL.)OTHER URBAN 1,293 0.0 -0.30.1 -0.2 -0.1 1.5 1.7 1.5(LE 1 MILL.)RURAL HOSPITALS 932 0.0 0.6 -1.3-0.7 -0.3 0.9 1.1 0.9SOLE COMMUNITY 389 0.1 0.8 -1.0 -0.1 -0.3 1.4 1.8 1.5OTHER RURAL 543 0.0 0.4 -1.6-1.2 -0.2 0.3 0.4 0.4BEDS (URBAN)0 - 99 BEDS 959 0.0 -0.30.3 0.0 0.11.8 2.0 1.9100-199 BEDS 831 0.1 -0.3 -0.2 -0.4 -0.1 1.3 1.4 1.4200-299 BEDS 454 0.1 -0.6 0.1 -0.4 0.0 1.4 1.6 1.4300-499 BEDS 407 0.3 -0.40.5 0.3 0.02.1 2.2 2.1500 + BEDS 208 -0.1 0.60.2 0.7 0.22.6 2.6 2.6BEDS (RURAL)0 - 49 BEDS 352 0.7 1.3 -3.5 -1.5 -0.6 -0.3 -0.1 -0.3CMS-1601-P 656(1) (2) (3) (4)(5) (6) (7) (8) (9)Number ofHospitalsAPCRecalibration(CY 2013-2014) (%)Impact ofPackagingProposalsOther thanOutpatientLaboratoryServices (%)Impact ofOutpatientLaboratoryServicesPackagingProposal(%)APCRecalibration (allchanges)(%)New WageIndex andProviderAdjustments(%)CombinedCols 5, 6withMarketBasketUpdate (%)Column 7with FrontierWage IndexAdjustment(%)AllProposedChanges(%)50- 100 BEDS 342 0.2 1.5 -1.9-0.3 -0.1 1.4 1.6 1.4101- 149 BEDS 133 -0.3 0.1 -0.6 -0.8 -0.5 0.5 0.7 0.6150- 199 BEDS 61 -0.5 0.2 -0.8 -1.1 -0.1 0.5 1.0 0.5200 + BEDS 44 0.1 -0.6 0.3 -0.2 -0.2 1.4 1.4 1.6VOLUME (URBAN)LT 5,000 Lines485 -1.4 -0.4 2.40.5 0.2 2.5 2.7 2.65,000 - 10,999 Lines 109 -1.4-0.5 3.2 1.3 -0.1 3.0 3.5 2.411,000 - 20,999 Lines 132 0.1 -1.9 2.4 0.60.0 2.5 2.6 2.521,000 - 42,999 Lines 262 0.4-1.8 1.2 -0.2 -0.2 1.4 1.4 1.442,999 - 89,999 Lines 517 0.2-0.9 0.7 -0.1 0.1 1.8 1.8 1.8GT 89,999 Lines1,354 0.1 0.0 0.1 0.1 0.0 2.0 2.1 2.0VOLUME (RURAL)LT 5,000 Lines31 -1.8 0.3 2.2 0.6 -0.4 2.1 6.7 2.25,000 - 10,999 Lines 34 5.8 -0.1 -4.4 1.0 -0.5 2.3 2.3 2.411,000 - 20,999 Lines 67 3.0 0.2 -2.6 0.5 -0.7 1.6 1.7 1.521,000 - 42,999 Lines 182 1.01.2 -2.4 -0.3 -0.3 1.2 1.8 1.1GT 42,999 Lines 618 -0.1 0.6 -1.2 -0.7 -0.2 0.8 1.0 0.9REGION (URBAN)NEW ENGLAND 150 0.0 2.2 -1.4 0.7 0.6 3.1 3.1 3.0MIDDLE ATLANTIC 342 0.0 0.8-0.5 0.3 0.7 2.8 2.8 2.8SOUTH ATLANTIC 432 -0.3 -0.6 0.5 -0.4 -0.3 1.1 1.1 1.2EAST NORTH CENT. 459 0.2 0.1-0.3 0.0 -0.2 1.5 1.5 1.6EAST SOUTH CENT. 172 -0.2 -0.80.9 -0.1 -0.3 1.4 1.4 1.5WEST NORTH CENT. 193 0.0 0.5 1.5 2.0 -0.3 3.5 4.5 3.5WEST SOUTH CENT. 487 0.7 -2.10.5 -0.9 -0.2 0.8 0.8 0.9MOUNTAIN 194 -0.6 0.4 0.8 0.5 -0.3 2.0 2.3 2.0CMS-1601-P 657(1) (2) (3) (4)(5) (6) (7) (8) (9)Number ofHospitalsAPCRecalibration(CY 2013-2014) (%)Impact ofPackagingProposalsOther thanOutpatientLaboratoryServices (%)Impact ofOutpatientLaboratoryServicesPackagingProposal(%)APCRecalibration (allchanges)(%)New WageIndex andProviderAdjustments(%)CombinedCols 5, 6withMarketBasketUpdate (%)Column 7with FrontierWage IndexAdjustment(%)AllProposedChanges(%)PACIFIC 385 0.5 -0.9 0.6 0.2 0.6 2.6 2.6 2.5PUERTO RICO 45 4.3 -0.50.0 3.9 0.66.3 6.3 6.6REGION (RURAL)NEW ENGLAND 25 -0.3 3.5-1.6 1.6 0.6 3.9 3.9 3.8MIDDLE ATLANTIC 68 0.3 1.7 -3.9-2.0 -0.3 -0.4 -0.4 -0.4SOUTH ATLANTIC 158 -0.3 -0.2 -0.9 -1.4 -0.4 0.0 0.0 0.1EAST NORTH CENT. 124 0.0 0.8 -1.8 -1.1 -0.4 0.4 0.4 0.4EAST SOUTH CENT. 170 0.0 -0.3-0.8 -1.1 -0.6 0.1 0.1 0.2WEST NORTH CENT. 99 -0.1 0.8 0.0 0.7 -0.1 2.3 3.5 2.5WEST SOUTH CENT. 196 0.6 -0.4 -1.3 -1.1 -0.4 0.3 0.3 0.4MOUNTAIN 63 -0.1 1.6 -1.6-0.2 0.2 1.9 3.4 1.4PACIFIC 29 0.2 1.9 -0.21.8 0.7 4.3 4.3 4.3TEACHING STATUSNON-TEACHING 2,792 0.0 -0.4-0.2 -0.6 -0.1 1.1 1.2 1.2MINOR 686 0.0 -0.5 0.5 0.0 0.0 1.8 2.0 1.8MAJOR 313 0.2 1.2 -0.21.2 0.2 3.2 3.2 3.1DSH PATIENT PERCENT0 12 1.8 -5.4 3.5 -0.3 -0.1 1.5 1.5 1.4GT 0 - 0.10 349 -0.4 0.20.6 0.4 0.12.3 2.4 2.30.10 - 0.16 334 -0.2 0.30.1 0.2 0.12.1 2.2 2.20.16 - 0.23 680 -0.1 0.3 -0.2 0.1 0.0 1.8 2.0 1.90.23 - 0.35 1,045 -0.2 0.10.1 0.0 0.01.7 1.9 1.8GE 0.35 831 0.7 -0.8 -0.2-0.3 0.0 1.5 1.5 1.5DSH NOT AVAILABLE ** 540 2.3 -1.4 1.6 2.4 0.0 4.2 4.2 3.9URBAN TEACHING/DSHCMS-1601-P 658(1) (2) (3) (4)(5) (6) (7) (8) (9)Number ofHospitalsAPCRecalibration(CY 2013-2014) (%)Impact ofPackagingProposalsOther thanOutpatientLaboratoryServices (%)Impact ofOutpatientLaboratoryServicesPackagingProposal(%)APCRecalibration (allchanges)(%)New WageIndex andProviderAdjustments(%)CombinedCols 5, 6withMarketBasketUpdate (%)Column 7with FrontierWage IndexAdjustment(%)AllProposedChanges(%)TEACHING & DSH 909 0.1 0.2 0.2 0.5 0.12.4 2.5 2.4NO TEACHING/DSH 1,429 0.0 -0.8 0.2 -0.5 0.0 1.2 1.3 1.3NO TEACHING/NO DSH 12 1.8 -5.43.5 -0.3 -0.1 1.5 1.5 1.4DSH NOT AVAILABLE** 509 2.0 -1.2 1.5 2.3 0.1 4.2 4.2 3.9TYPE OF OWNERSHIPVOLUNTARY 2,004 0.0 0.20.0 0.2 0.12.0 2.2 2.1PROPRIETARY 1,250 0.3 -1.50.9 -0.4 -0.1 1.3 1.4 1.3GOVERNMENT 537 0.3 0.1 -1.0-0.6 -0.2 1.0 1.0 1.0CMHCs100 -5.4 -3.6 3.5 -5.7-0.2 -4.1 -4.1 -3.8Column (1) shows total hospitals and/or CMHCs.Column (2) shows the impact of changes resulting from the reclassification of HCPCS codes among APC groups and the proposed recalibration of APC weights based on CY 2012 hospitalclaims data. Changes in this column donot include reconfigurations and datachanges from the 2014 packaging proposal.Column (3) shows the additional impact of changes resulting fromthe reclassification of HCPCS codes among APC groups and otherdata changes as a result of including the 2014 OPPSpackaging proposal (but excluding the proposed packaging of outpatient laboratory services currently paid at CLFS rates).Column (4) shows the additional impact of changes resulting fromthe reclassification of HCPCS codes among APC groups and otherdata changes as a result of including the 2014 OPPSproposal to package outpatient laboratory services currently paid at CLFS rates.Column (5) includes all CY 2014 OPPS proposals and compares those to the CY 2013 OPPS (which includes outpatient laboratory services previously paid at CLFS rates).Column (6) shows the budget neutral impact of updating the wage index by applying the FY 2014 hospital inpatient wage index. The proposed rural adjustment continues our current policyof 7.1 percent so the budget neutrality factor is 1. Similarly, the differential in estimated cancer hospital payments for theproposed adjustment is minimal and thus results in a budgetneutrality factor of 1.0001.Column (7) shows the impact of all budget neutrality adjustments and the proposed addition of the 1.8 percent OPD fee scheduleupdate factor (2.5 percent reduced by 0.4 percentagepoints for the proposed productivity adjustment and further reducedby 0.3 percentage point in order to satisfy statutory requirements set forth in the Affordable Care Act).Column (8) shows the non-budget neutral impact ofapplying the frontier State wage adjustment.Column (9) shows the additional adjustments to the conversionfactor resulting from a change in the pass-through estimate, adding estimated outlier payments, and applying payment wageindexes.*These 3,953 providers include children and cancer hospitals, which are held harmless to pre-BBA amounts, and CMHCs. Paymentsfor laboratory services at CLFS rates, which we areproposing to package in the CY 2014 OPPS, are included in the columns where appropriate.** Complete DSH numbers are not available for providers that are not paid under IPPS,including rehabilitation, psychiatric, and long-term care hospitals.CMS-1601-P (3) Estimated Effects of Proposed OPPS Changes on CMHCs

The last line of Table 39 demonstrates the isolated impact on CMHCs, which furnish only partial hospitalization (PHP) se rvices under the OPPS. In CY 2013, CMHCs are paid under two APCs for these services : APC 0172 (Level I Pa rtial 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 Hospitalizati on (3 services) for hospital-based PHPs) and APC 0176 (Level II Partial Hospitalization (4 or more services) for hospital-based PHPs). We use our standard rate-setting methodology to de rive the 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. For CY 2014, we are proposing to continue the provider-specific APC structur e that we adopted in CY 2011. We modeled the impact of this proposed APC policy assuming that CMHCs will continue to provide the same number of days of PHP care, with each da y having either 3 services or 4 or more services, as seen in the CY 2012 claims data used for this proposed. 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 se rvices are provided to the beneficiary. Because the proposed relative payment we ights for APC 0173 (Level II Partial Hospitalization (4 or more services) for CM HCs) decline in CY 2014, we estimate that there would be an overall 3.8 percent decr ease in payments to CMHCs (shown in Column 9).CMS-1601-P

Column 6 shows that the estimated impact of adopting the proposed FY 2014 wage index values would result in a small d ecrease of 0.2 percent to CMHCs. We note that all providers paid under the OPPS, including CMHCs, would receive a 1.8 percent

OPD fee schedule increase fact or. Column 7 shows that combining this proposed OPD fee schedule increase factor, along with pr oposed changes in APC policy for CY 2014 and the proposed FY 2014 wage index updates, would result in an estimated decrease of 4.1 percent. Column 8 shows that adding th e proposed frontier State wage adjustment would result in no change to the cumulative 4.1 percent decrease. Column 9 shows that adding the proposed changes in outlier and pass-though payments w ould result in a 3.8 percent decrease in payment for CMHCs. Th is reflects all propos ed changes to CMHCs

for CY 2014. (4) Estimated Effect of Propos ed OPPS Changes on Beneficiaries For services for which the beneficiary pays a copayment of 20 percent of the payment rate, the beneficiary share of paymen t would increase for services for which the OPPS payments will rise and would decrease for services for which the OPPS payments will fall. For further discussion on the calculation of the national unadjusted copayments and minimum unadjusted copayments, we refer readers to section II .I. of this proposed rule. In all cases, the statute limits benefi ciary liability for copaym ent for a procedure to the hospital inpatient deductible for the applicable year. The CY 2013 hospital inpatient deductible is $1,184. The amount of the CY 2014 hospital inpatient deductible is not available at the time of public ation of this proposed rule.CMS-1601-P 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 2012 claims. We estimate, using the claims of the 3,791 hospitals and CMHCs on which our modeling is based, that total beneficiary liability for copayments would remain approximately the same as an overall percen tage of total payments, being 20.4 percent in CY 2013 and 20.2 percent in CY 2014. (5) Estimated Effects of Proposed OPPS Changes on Other Providers The relative payment weights and paym ent amounts established under the OPPS affect the payments made to ASCs as discussed in section XII. of this proposed rule. No types of providers or suppliers other than hospitals, CMHCs and ASCs would be affected by the proposed changes in this proposed rule. (6) Estimated Effects of Proposed O PPS Changes on the Medicare and Medicaid Programs The effect on the Medicare program is expected to be $600 million in additional program payments for OPPS services furnishe d in CY 2014. The effect on the Medicaid program is expected to be limited to incr eased copayments that Medicaid may make on behalf of Medicaid recipients who are also Medicare beneficiaries. We refer readers to our discussion of the impact on beneficiaries in section XXI II.A. of this proposed rule. (7) Alternative OPPS Policies Considered Alternatives to the OPPS changes we ar e proposing to make and the reasons for

our selected alternatives are discussed throughout this proposed rule. In this section, we discuss some of the major issues and the alternatives considered.CMS-1601-P

● Alternatives Considered for the Establishment of Comprehensive APCs We are proposing in section II.A.2.e . of this proposed rule to create 29 comprehensive APCs for CY 2014 to prospect ively pay for device-dependent services associated with 121 HCPCS codes. We are proposing to define a comprehensive APC as a classification for the provision of a primary service and all adjunct services provided to support the delivery of the primary service. The comprehensive APC would treat all individually reported codes as representing components of the comprehensive service, resulting in a single prospec tive payment based on the cost of all individually reported codes that represent the provision of a primar y service as well as all adjunct services provided to support that deliv ery of the primary service. For these APCs, we are proposing to treat all previously individuall y reported codes as representing components of the comprehensive service, making a si ngle payment for the co mprehensive service based on all charges on the clai m, excluding only charges fo r services that cannot be covered by Medicare Part B or that are not payable under the OPPS. This would create a single all-inclusive payment for the claim that is subject to a single beneficiary copayment, up to the cap set at the le vel of the inpatient hospital deductible. We are proposing this as a step that we believe will further improve the accuracy of our payments for these services where ther e is a substantial cost for a device that is large compared to the other co sts that contribute to the cost of the procedure, and where the cost of the procedure is large compar ed to the adjunctive and supportive services delivered along with that procedure. We also believe our proposal will enhance beneficiary understanding and transparency for the beneficiary, for physicians, and forCMS-1601-P hospitals by creating a common reference point with a similar meaning for all three groups by using the comprehensive service conc ept that already identifies these same services when they are performe d in an inpatient environment. In proposing to package into the comp rehensive APCs all other services and supplies, we are including the diagnostic proced ures, tests and treatments that assist in the delivery of the primary procedure, visits a nd evaluations performed in association with the procedure, uncoded services and supp lies used during the service, outpatient department services delivered by therapists as part of the comprehensive service, durable medical equipment as well as the supplies to support that equipment, and any other components reported by HCPCS codes that are provided during the comprehensive service, except for mammography services and ambulance services, which are never payable as OPD services in accordance w ith section 1833(t)(1)(B)(iv) of the Act. We also considered several ranges of alte rnatives. First, we considered but are not proposing a limitation of the services th at we considered to be ancillary and supportive to the primary service. We did not propose to limit the comprehensive APCs to only HCPCS codes that are currently pa id using OPPS payment calculations because we could not identify a unique clinical charact eristic that set these services apart from other services reported on the cl aim. We determined that se rvices currently excluded by the Secretary from OPPS calculations, including, for example, such services as laboratory

tests and certain orthotics a nd supplies, were adjunctive and supportive to the primary procedure in the same manner as the othe r services currently paid using our OPPS methodology were adjunctive and s upportive. We also noted that these services that areCMS-1601-P currently priced using other payment systems represented a very small fraction of the costs reported on these device dependent claims, typically on the order of 1 percent of the total reported costs. This was consistent wi th our determination that these services were adjunctive and supportive and should be includ ed in our definition of a comprehensive

APC. Second, we considered but did not propose creating comprehensive APCs for a

different cohort of device de pendent procedures. We did not propose a more limited list

because we determined that the 29 APCs we proposed all consistently identified truly device dependent services where the other services that are cu rrently assigned to the other device dependent APCs that ar e not being proposed as compre hensive APCs were clearly provided in support of a primary procedure. We considered limiting our proposal to the five or ten procedures with the most expens ive devices but believed that such a division would be arbitrary and would i gnore the natural division that occurred when the costs and

clinical characteristics of these services were compared to similar procedures delivered as comprehensive services to inpatients. A lternatively, we considered limiting the proposal to those comprehensive services where the pr ocedure itself, without consideration of the device, was responsible for the most signi ficant portion of the cost and was also responsible for the need to de liver the majority of the addi tional services provided during the encounter. However, although we considered that this last consideration did in fact identify services that were consistent with our proposal to define comprehensive services, we did not propose this alternative as we be lieve our proposal to create comprehensiveCMS-1601-P APCs for only the 29 most costly device depend ent APCs is most consistent with our past practices of iteratively imp roving the OPPS in small and well-defined increments. Third, we considered proposing payment adjustments for instances when multiple procedures assigned to comprehensive APCs were reported on the same claim. However, we did not propose this. In examining our claims data, we determined that multiple procedures assigned to comprehensive APCs were reported in only 25 percent of the claims, and that these multiple procedures were almost always reporting components of the same service, such as car diac stenting, and were assigned to the same APC. In our claims data it was very uncommon to find multiple unrelated device dependent procedures being delivered at the same time. Therefore, we decide d to propose that the primary procedure would determine the compre hensive APC and that, in the rare event that procedures were reported that mapped to two different comprehensive APCs on the same claim, the most expensive procedur e according to our traditional OPPS accounting methodology would determine the comprehensive APC assignment. We believe that this is consistent with the methodology for assigni ng payments for those inpatient claims that represent the same or similar comprehensiv e procedures and that it most accurately reflects the comprehensive service on those occasions in which two or more device dependent HCPCS codes are used to repor t the single comprehensive service. Finally, we considered retaining the device-to-procedure edits and procedure-to-device edits that were characteri stic of our device-dependent APCs but we instead proposed the elimination of the edits along with the elimination of the status of device dependent APC. We noted that th e device-dependent APC was created inCMS-1601-P response to concerns that hospitals were not coding for the device and that our relative cost estimations were conseque ntly incorrect. In the interv ening years we have noticed a significant improvement and stabilization in the reporting of costs, to the extent that we believe that hospitals are now fully accustom ed to appropriate cost reporting under the OPPS such that special billi ng constraints are unn ecessary. We further believe that, under our proposal to create comprehensive APCs, there would now be an additional mechanism to ensure accurate cost estimation for the most expensive devices for which

an inadvertent omission of costs would be most significant. In the calc ulations of relative cost for the comprehensive APCs, costs for th e device would be correctly assigned to the procedure as long as the hosp ital reports covered costs anywhere on the claim. Specific device reporting would still be expected a nd required, but variations in accounting practices would be less likely to influence the final cost accounting. In summary, we determined to propose to make an all-inclusive comprehensive payment for the procedures in the 29 most costly device dependent APCs because we

believe that this identified a consistent set of procedures that were typically provided as a primary procedure supported by a set of adjunctiv e services, and that th is set of services represented an incremental improvement in our prospective payments similar to other prior incremental improvements through which we have established our approach to updating and improving the OPPS.

● Alternatives Considered for Payment of Hospital Outpatient Visits

As described in section VII. of this proposed rule, we are proposing to replace the

current five levels of visit codes for each cl inic, Type A ED, and Type B ED visits withCMS-1601-P three new alphanumeric Level II HCPCS codes representing a single le vel of payment for the three types of visits, respectively. We are proposing to assign the new alphanumeric Level II HCPCS to newly created APCs with CY 2014 OPPS payment rates based on the total mean costs of Level 1 through Level 5 visit codes obtained from CY 2012 OPPS claims data for each visit type. In developing this policy, we considered another alternative, which was to replace the current five levels of visit codes for each clinic, Type A ED, and Type B ED visit with 6 new alphanumeric Level II HCPCS codes representing two leve ls (lower level and higher level) of payment for each of the three types of visits. The lower-level alphanumeric codes for clinic, Type A ED, and Type B ED visits would replace the current Level 1 and Level 2 visit codes, resp ectively, and would be assigned to newly created or reconfigured APCs with CY 2014 OPPS payment rates based on the total mean

costs of Level 1 and 2 visit codes obtained from CY 2012 OPPS claims data for each visit type. The higher-level alphanumeric codes for clinic, Type A ED, and Type B ED visits would replace the current Leve l 3 through Level 5 visit codes, respectively, and would be assigned to newly created or reconfigured APCs with CY 2014 OPPS payment rates

based on the total mean costs of Level 3 through Level 5 visit codes obtained from CY 2012 OPPS claims data for each visit type.

While we believe that this alternative could offer advantages over the current CY 2013 OPPS visit payment policy, we did not choose this alternative because as we describe in section VII. of this proposed ru le we believed that a single level of payment for each type of clinic and ED visit was the best policy option as this proposal would beCMS-1601-P easily implemented by hospitals; reduces admi nistrative burden relative to the existing five-level visit payment struct ure; and maximizes hospitals’ in centives to provide care in

the most efficient manner as there would be no incentive to provide unnecessary care to achieve a higher level visit threshold. A tw o-level visit payment structure would not be as easily implemented by hospitals as a single- level visit payment structure, and the need for hospitals to develop and im plement guidelines to differen tiate the levels of service would continue to exist. Also, while the two-level visit payment structure may provide incentives for hospitals to be efficient, th e incentives may not be so great as under a single-level visit payment structure. Theref ore, we are proposing to create three new alphanumeric Level II HCPCS codes to describe all levels of each type of clinic and ED visit rather than continue to recognize fi ve levels each of clinic and ED visits. b. Estimated Effects of ASC Payment System Proposed Policies ASC payment rates are calculated by multiplying the ASC conversion factor by the ASC relative payment weight. As discusse d fully in section XII. of this proposed rule, we are proposing to set the CY 2014 AS C relative payment weights by scaling the proposed CY 2014 OPPS relative payment we ights by the proposed ASC scaler of 0.8961. The estimated effects of the propos ed updated relative payment weights on payment rates are varied and are reflected in the estimated payments displayed in Tables

40 and 41 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.CMS-1601-P The Affordable Care Act defines the productiv ity adjustment to be equal to the 10-year moving average of changes in annual economy-wide private nonfarm business multifactor productivity (MFP) (as projecte d by the Secretary for the 10-year period ending with the applicable fiscal year, year, cost reporting period, or other annual period). For ASCs that fail to meet their quality reporting requirements, the CY 2014 payment determinations will be based on the applicati on of a 2.0 percentage point reduction to the annual update factor, which currently is the CPI-U. We calculated the proposed CY 2014 ASC conversion factor by adjusting the CY 2013 ASC conversion factor by 1.0004 to account for changes in the pre-floor and pre- reclassified hospital wage indices between CY 2013 and CY 2014 and by applying the proposed CY 2014 MFP-adjusted CPI-U update factor of 0.9 percent (projected CP I-U update of 1.4 percent minus a projected productivity adjustment of 0.5. percent). The proposed CY 2014 ASC conversion factor is $43.321. (1) Limitations of Our Analysis Presented here are the projected eff ects of the proposed changes for CY 2014 on Medicare payment to ASCs. A key limitation of our analysis is our inability to predict changes in ASC service-mix between CY 2012 and CY 2014 with prec ision. We believe that the net effect on Medicare expenditu res resulting from the proposed CY 2014 changes would be small in the aggregate for all ASCs. However, such changes may have differential effects across surgic al specialty groups as ASCs continue to adjust to the payment rates based on the polic ies of the revised ASC paym ent system. We are unable to accurately project such changes at a disa ggregated level. Clearly, individual ASCsCMS-1601-P would experience changes in payment that di ffer from the aggregated estimated impacts presented below. (2) Estimated Effects of ASC Payment System Proposed Policies on ASCs Some ASCs are multispecialty facilities that perform the gamut of surgical procedures from excision of lesions to hernia repair to cataract extraction; others focus on a single specialty and perform only a limited rang e of surgical procedures, such as eye, digestive system, or orthopedic procedures. The combined effect on an individual ASC of the proposed update to the CY 2014 paymen ts would depend on a number of factors, including, but not limited to, the mix of se rvices the ASC provides, the volume of specific services provided by the ASC, the pe rcentage of its patie nts who are Medicare beneficiaries, and the extent to which an ASC provides different services in the coming year. The following discussion presents tables that display estimates of the impact of the proposed CY 2014 updates to the ASC payment system on Medicare payments to ASCs, assuming the same mix of services as reflec ted in our CY 2012 claims data. Table 40 depicts the estimated aggregate percent cha nge in payment by surgical specialty or ancillary items and services group by co mparing estimated CY 2013 payments to estimated CY 2014 payments, and Table 41 shows a comparison of estimated CY 2013 payments to estimated CY 2014 payments for pr ocedures that we estimate would receive the most Medicare payment in CY 2014.

Table 40 shows the estimated effects on aggregate Medicare payments under the ASC payment system by surgical specialty or ancillary items and services group. We have aggregated the surgical HCPCS code s by specialty group, grouped all HCPCS codesCMS-1601-P for covered ancillary items and services into a single group, and then estimated the effect on aggregated payment for surgical specialty and ancillary items and services groups. The groups are sorted for display in des cending order by estimated Medicare program payment to ASCs. The following is an expl anation of the information presented in

Table 40.

● Column 1—Surgical Specialty or Anc illary Items and Services Group indicates the surgical specialty into which ASC proce dures are grouped and the ancillary items and services group which includes all HCPCS codes for covered an cillary items and services. To group surgical procedures by surgical specialty, we used the CPT code range definitions and Level II HCPCS codes and Category III CPT codes as appropriate, to account for all surgical procedures to wh ich the Medicare pr ogram payments are

attributed.

● Column 2—Estimated CY 2013 ASC Payments were calculated using CY 2012 ASC utilization (the most recent fu ll year of ASC utilization) and CY 2013 ASC payment rates. The surg ical specialty and ancillary items and services groups are displayed in descending order base d on estimated CY 2013 ASC payments.

● Column 3—Estimated CY 2014 Percent Change is the aggregate percentage increase or decrease in Medicare program pa yment to ASCs for each surgical specialty or ancillary items and services group that woul d be attributable to proposed updates to ASC payment rates for CY 2014 compared to CY 2013. As seen in Table 40, we estimate that the proposed update to ASC rates for CY 2014 would result in a 3 per cent decrease in aggregate payment amounts for eye andCMS-1601-P ocular adnexa procedures, an 8 percent increase in aggregate payment amounts for digestive system procedures, and a 1 percen t increase in aggregate payment amounts for nervous system procedures. Generally, for the surgical specialty gr oups that account for less ASC utilization and spending, we estimate that the paymen t effects of the proposed CY 2014 update are variable. For instance, we estimate that, in the aggregate, payment for musculoskeletal system procedures would decrease by 1 pe rcent, whereas payment for genitourinary system procedures, integumentary system pro cedures and respiratory system procedures would increase by 5 to 7 percent under the proposed CY 2014 rates. An estimated increase in aggregate pa yment for the specialty group does not mean that all procedures in the group would experien ce increased payment rates. For example, the estimated increase for CY 2014 for digestiv e system procedures is likely due to an increase in the ASC payment weight for some of the high volume procedures, such as CPT code 43239 (Upper GI endoscopy biopsy) where estimated payment would increase by 13 percent for CY 2014. Also displayed in Table 40 is a separa te estimate of Medicare ASC payments for the group of separately payable covered an cillary items and serv ices. The payment estimates for the covered surgical procedures include the costs of packaged ancillary items and services. We estimate that aggregate payments for these items and services would decrease by 12 percent for CY 2014.CMS-1601-P

TABLE 40.—ESTIMATED IMPACT OF THE PROPOSED CY 2014 UPDATE O THE ASC PAYMENT SYSTEM ON AGGREGATE CY 2014 MEDICARE PROGRAM PAYMENTS BY SURGICAL SPECIALTY OR ANCILLARY ITEMS AND SERVICES GROUP

Surgical Specialty Group (1) Estimated CY 2013

ASC Payments (in Millions) (2) Estimated CY 2014 Percent Change (3) Total $3,625 1% Eye and ocular adnexa $1,496 -3% Digestive system $743 8% Nervous system $540 1% Musculoskeletal system $441 -1% Genitourinary system $159 5% Integumentary system $130 7% Respiratory system $46 7% Cardiovascular system $32 -2% Ancillary items and services $20 -12% Auditory system $12 4% Hematologic & lymphatic systems $5 17%

Table 41 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 2014. The table displays 30 of the procedures receiving the greatest estimated CY 2014 aggregate Medicare payments to AS Cs. The HCPCS codes are sorted in descending order by estimated CY 2014 program payment.

● Column 1–CPT/HCPCS code.

● Column 2–Short Descriptor of the HCPCS code.

● Column 3–Estimated CY 2013 ASC Payments were calculated using CY 2012 ASC utilization (the most recent full year of ASC utilization) and the proposed CY 2014CMS-1601-P ASC payment rates. The estimated CY 2014 payments are expressed in millions of

dollars.

● Column 4–Estimated CY 2014 Percent Change reflects the percent differences between the estimated ASC payment for CY 2013 and the estimated payment for CY 2014 based on the proposed update.

TABLE 41.--ESTIMATED IMPACT OF THE PROPOSED CY 2014 UPDATE TO THE ASC PAYMENT SYSTEM ON AGGREGATE PAYMENTS FOR SELECTED PROCEDURES

CPT/HCPCS Code*

(1) Short Descriptor (2) Estimated CY 2013

ASC Payments (in millions) (3) Estimated CY 2014 Percent Change (4) 66984 Cataract surg w/iol, 1 stage $1,107 -3% 43239 Upper GI endoscopy, biopsy $163 13% 45380 Colonoscopy and biopsy $154 7% 45385 Lesion removal colonoscopy $98 7% 66982 Cataract surgery, complex $89 -3% 45378 Diagnostic colonoscopy $80 7% 64483 Inj foramen epidural l/s $79 14% 62311 Inject spine l/s (cd) $71 14% 66821 After cataract laser surgery $59 -1% G0105 Colorectal scrn; hi risk ind $42 0% 15823 Revision of upper eyelid $40 2% 64493 Inj paravert f jnt l/s 1 lev $40 14% 63650 Implant neuroelectrodes $39 4% G0121 Colon ca scrn not hi rsk ind $36 0% 29827 Arthroscop rotator cuff repr $34 5% 64590 Insrt/redo pn/gastr stimul $33 6% 64721 Carpal tunnel surgery $31 -1% 63685 Insrt/redo spine n generator $31 6% 64636** Destroy l/s facet jnt addl $31 -100%

29881 Knee arthroscopy/surgery $30 -3% 64635 Destroy lumb/sac facet jnt $26 73%CMS-1601-P

CPT/HCPCS Code*

(1) Short Descriptor (2) Estimated CY 2013

ASC Payments (in millions) (3) Estimated CY 2014 Percent Change (4) 29880 Knee arthroscopy/surgery $25 -3% 43235 Uppr gi endoscopy diagnosis $23 13% 45384 Lesion remove colonoscopy $22 7% 52000 Cystoscopy $21 5% 62310 Inject spine c/t $20 14% 29823 Shoulder arthroscopy/surgery $19 5% 67042 Vit for macular hole $19 0% 28285 Repair of hammertoe $18 5% 50590 Fragmenting of kidney stone $18 2% *Note that HCPCS codes we are proposing to delete for CY 2014 are not displayed in this table. ** The 100 percent decrease in estimated payment re flects our CY 2014 proposal to package the payment for CPT code 64636.

(3) Estimated Effects of ASC Payment System Proposed Policies on Beneficiaries We estimate that the proposed CY 2014 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 proce dures and for those that we are proposing to designate as office-based for CY 2014. First, other than certain preventive services where coinsurance and th e 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 pr ocedures 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 al l 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 willCMS-1601-P almost always be less than the OPPS copaymen t amount for the same services. (The only exceptions would be if the ASC coinsuran ce amount exceeds the inpatient deductible. The statute requires that copayment amount s under the OPPS not exceed the inpatient deductible.) Beneficiary coin surance for services migrati ng from physicians' offices to ASCs may decrease or incr ease under the revised ASC payment system, depending on the particular service and the relative paym ent amounts for that service in the physician's office compared to the ASC. However, for those additiona l procedures that we are proposing to designate as office-based in CY 2014, the beneficiary coinsurance amount would be no greater than the beneficiary coin surance in the physician's office because the coinsurance in both settings is 20 percent (except for certain preventive services where

the coinsurance is waiv ed in both settings). (4) Alternative ASC Payment Policies Considered

Alternatives to the minor changes that we are proposing to make to the ASC payment system and the reasons that we ha ve chosen specific options are discussed throughout this proposed rule. There are no pr oposed major changes to ASC policies for

CY 2014. c. Accounting Statements and Tables As required by OMB Circul ar A-4 (available on the Office of Management and Budget Web Site at: http://www.whitehouse.gov/sites/default/file s/omb/assets/regulatory_matters_pdf/a4.pdf), we have prepared two accounting statemen ts to illustrate th e impacts of this proposed rule. The first accounting statement, Table 42 (below) illustrates theCMS-1601-P classification of expenditure s for the CY 2014 estimated hos pital OPPS incurred benefit impacts associated with the proposed CY 2014 OPD fee schedule increase, based on the 2013 Trustee’s Report. The second accounting st atement, Table 43 (below) illustrates the classification of expenditures associated with the proposed 0.9 percent CY 2014 update to the ASC payment system, based on the pr ovisions of this proposed rule and the baseline spending estimates for ASCs in the 2013 Trustee’s Report. The third accounting statement, Table 44 (below), illustrates the cl assification of expenditures associated with the proposed revision to the definition of hos pital-based EP in payment year 2013 for EPs reassigning benefits to Method II CAHs. Lastly, the tables classify most estimated impacts as transfers.

TABLE 42.--ACCOUNTING STATEMENT: CY 2014 ESTIMATED HOSPITAL

OPPS TRANSFERS FROM CY 2013 TO CY 2014 ASSOCIATED WITH THE PROPOSED CY 2014 HOSPITAL OUTP ATIENT OPD FEE SCHEDULE INCREASE

Category Transfers Annualized Monetized Transfers $600 million From Whom to Whom Federal Govern ment to outpatient hospitals and other providers who r eceive payment under the hospital OPPS Total $600 million

TABLE 43.--ACCOUNTING STATEM ENT: CLASSIFICATION OF ESTIMATED TRANSFERS FROM CY 2013 TO CY 2014 AS A RESULT OF THE

PROPOSED CY 2014 UPDATE TO THE REVISED ASC PAYMENT SYSTEM Category Transfers Annualized Monetized Transfers $27 million

From Whom to Whom Federal Government to Medicare Providers and Suppliers Total $27 millionCMS-1601-P

TABLE 44.--ACCOUNTING STATEM ENT: CLASSIFICATION OF ESTIMATED TRANSFERS FROM CY 2013 TO CY 2014 AS A RESULT OF THE PROPOSED REVISIONS TO THE DEFI NITION OF PROV IDER-BASED EP UNDER THE EHR INCENTIVE PROGRAM Category Transfers Annualized Monetized Transfers $17,985,000 to $35,970,000 From Whom to Whom Federal Gove rnment to Medicare Providers Total $17,985,000 to $35,970,000

d. Effects of Proposed Requireme nts for the Hospital OQR Program In section XIII. of this proposed rule, we are proposing to adopt policies affecting the Hospital OQR Program. We determined that 114 hospitals did not meet the requirements to receive the full

OPD fee schedule increase fact or for CY 2013. Most of thes e hospitals (106 of the 114) received little or no OPPS payment on an a nnual 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 and that 106 hospitals may not receive the full OPD

fee schedule increase factor in CY 2015. We are unable at this time to estimate the number of hospitals that may not receive th e full OPD fee schedule increase factor in

CY 2016.

In section XVI.E.3.a. of the CY 2010 O PPS/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 pape r 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 2011CMS-1601-P OPD fee schedule increase factor, but the fail ure 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 w ould: 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 ove rall hospital burden becau se most hospitals would not be selected to undergo validati on 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 adopt ed in the Hospital IQR Program (75 FR 50225 through 50229). As a result, we beli eved that the effect of our validation process for CY 2012 would be minimal in term s of the number of hospitals that would not meet all program requirements.

In the CY 2012 OPPS/ASC final rule w ith 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 conductCMS-1601-P a measure level validation by assessing whether the measure data submitted by the hospital matches the independently reabstracted measure data. In the CY 2013 OPPS/ASC final rule with comment period, for the CY 2014 payment determination and subsequent y ears, we made some modifications to administrative requirements in extending a dead line to submit a Notice of Participation as well as to extraordinary circumstance waiver or extension and rec onsideration processes to broaden the scope of personnel who can si gn these requests. However, we did not make any modifications to our validation requirements. We e xpect these policies to have minimal impact on the program. In this proposed rule, for CY 2016 payment determination and subsequent years, we are proposing to add five quality measures with data collection to begin in CY 2014. For four of these measures, data would be submitted via an online tool located on a CMS

Web site and one would be submitted via CD C’s NHSN. We are proposing to remove two measures from the Hospital OQR Program. As stated above, we are unable to estima te the number of hospitals that may not

receive the full OPD fee schedule increase fa ctor in CY 2016. We also are unable to estimate the number of hospitals that woul d fail the validation documentation submission requirement for the CY 2016 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 forCMS-1601-P copying and approximately $1.00 per case for postage. We have found that an outpatient medical chart is generally up to 10 pages. Thus, as a result of validation requirements effective for CY 2014, we estimate that we will have expenditures of approximately $13,200 per quarter for CY 2014. Because we will pay for the data collection effort, we believe that a requirement for medical re cord documentation for 6,000 total cases per quarter for up to 500 hospitals for CY 2014 represents a minimal burden to Hospital OQR Program participating hospitals. e. Effects of Proposals for the ASCQR Program In section XV. of this proposed rule, for the ASCQR Program, we are proposing four additional quality measures for the CY 2016 payment determination and subsequent years. Data collection for these proposed measures would begin in CY 2014. We are proposing to collect aggregate data (numerators, denominat ors, and exclusions) on all ASC patients for these four proposed chart-ab stracted measures via an online Web-based tool located on a CMS Web page. We ar e also proposing for the CY 2016 payment determination and subsequent years require ments for facility participation, data collection, and submission for claims-bas ed, CMS Web-based, and NHSN 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 expect our new policies to significantly affect the number of ASCs that do not receive a full annual payment update in CY 2016, though we are not able to estimate the level of this impact at this time.CMS-1601-P f. Effects of Proposed Changes to the CfCs for OPOs Relating to the Outcome Measures Requirement for Recertification In section XVI. of this proposed rule, we discussed our proposal to modify the current outcome measures requirement that OPOs meet all three outcome measures set forth in § 486.318 to a requirement that they m eet two out of the thre e outcome measures. Our proposal would result in those OPOs that fail only one outcome measures avoiding automatic decertification based upon the cu rrent outcome measures requirement. While we are confident that our propos al would have a significantly positive

effect on the OPOs that avoided automatic d ecertification, it is very difficult to quantify the impact of this change. As discusse d under section XXI.C. of this proposed rule relating to the ICR requirements, we anticipat e that most OPOs that are decertified would engage in the appeals process as set forth in § 486.314. However, we have no reliable way of estimating how many OPOs would likely obtain reversals of their decertifications during reconsideration or how many continue on to a hearing before a CMS hearing officer. Therefore, although we believe th ere would be a considerably large positive effect as a result of our proposed change to the outcome measures requirement, we are unable to provide a specific esti mate of that cost savings.CMS-1601-P g. Effects of Proposed Revisions of the QIO Regulations In section XVII. of this proposed rule, we are proposing to u pdate the regulations at 42 CFR 475 and 476 based on the recently enacted Trade Adjustment Assistance Extension Act of 2011 (TAAEA) (Pub. L. 112-40, Section 261) whereby Congress authorized numerous changes to the original legislation and included additional flexibility for the Secretary in the administration of the QIO program. Currently, 42 CFR Part 475 includes definitions and standards governing eligibility and the aw ard of contracts to QIOs. In this proposed rule, we set forth pr oposals for the partial de letion and revision of the regulations under 42 CFR Parts 475 and 476, which relate to the QIO program, including the following: (1 ) replace nomenclature that has been amended by the TAAEA; (2) revise the existi ng definition for the term “phys ician” in Parts 475 and 476; (3) add new definitions as necessary to support the new substantive provisions in Subpart C; and (4) revise, add, and re place some of the substantiv e provisions in Subpart C to fully exercise the Secretary’s authority fo r the program and update the contracting requirements to align with c ontemporary quality improvement. We estimate the effects of the proposed QIO Program changes to be consistent with the Congressional Budget Office’s 2011 Co st Estimate of the Trade Bill (H.R. 2832) which included a reduction in spending of $330 million over the 2012-2021 period. According to the CBO Estimate, the Act and subsequently the proposed regulatory changes “would modify the provisions unde r which CMS contracts with independent entities called [“]Quality Improvement Organi zations [(QIOs)”] in Medicare. QIOs, generally staffed by health care professionals , review medical care, help beneficiariesCMS-1601-P with complaints about the qua lity of care, and implement care improvements. H.R. 2832 would make several change s to the composition and ope ration of QIOs, and would harmonize QIO contracts with requirements of the Federal Acquisition Regulation. Among those changes are a modification to expand the geogra phic scope of QIO contracts and a lengthening of the contract pe riod. CBO estimates that those provisions would reduce spending by $330 million over the 2012-2021 period.” h. Effects of Proposals Regarding Medica re-Fee-for-Service EHR Incentive Program (1) Incentive Payments for Eligible Profe ssionals (EPs) Reassigning Benefits to Method

II CAHs

As discussed in section XV III.A. of this proposed rule, we are proposing to revise the regulations to provide, during paym ent year 2013 alone, a special method for determining the hospital-based status of EP s who reassign their be nefits to Method II CAHs. It is difficult to determine with preci sion the cost impact of this proposal. We lack specific information on key factors aff ecting this impact, including the number of EPs who reassign their benefits to Method II CAHs, the proportion of those EPs who would be determined to be nonhospital-ba sed for 2013 under our proposal, the proportion of those EPs who will qualify for Medicaid incentive payments and choose to accept those payments because they are higher, and the proportion of the remaining EPs who will successfully demonstrate meaningful use in order to qualify for Medicare incentive payments. It is therefore necessary to rely on estimates for each of these factors. As much as possible we will employ the methods of cost estimation that we used to

determine the estimated costs of the Medicare incentives for EPs in our Stage 1 final ruleCMS-1601-P (75 FR 44549) and Stage 2 final rule (77 FR 54139) for the Medicare Electronic Health Record Incentive Program, as well as the estim ates that we have previously employed for specific factors. Of the approximately 1,200 CAHs, about three-quarters, or 900, elect under section 1834(g)(2) of the Act to receive a cost-based payment for the facility costs of providing outpatient services, plus 115 percent of the fee schedule amount for professional services included w ithin outpatient CAH services. As we have indicated, we lack specific information on the numbers of EPs who reassign their benefits to these Method II CAHs. While CAHs are relatively small inpatient fac ilities, we understand that many of them have fairly substantial outpa tient clinics. At the same time, we have also been informed that they rely largel y on nonphysician practitione rs (nurses and nurse practitioners) to staff these outpatient clinics. Therefore, we will assume that the typical outpatient department in a Method II CAH ha s a relatively small number of physicians, between 5 and 10, on staff and billing for profe ssional services that are reassigned to the

CAH. We will also use this estimate of 5 to 10 physicians per Method II CAH to establish an upper and lower range to our impact estimate. The number of EPs reassigning benefits for outpatient services to Method II CAHs is therefore between 4,500 and 9,000. In our Stage 2 final rule (77 FR 54139) fo r the Medicare Electronic Health Record Incentive Program, we determined that about 14 percent of EPs with Medicare claims were hospital-based, and thus ineligible to receive Medicare EHR incentive payments. For purposes of this impact statement, we will assume that 10 percent of EPs reassigningCMS-1601-P benefits to Method II CAHs are hospital-ba sed. Because CAHs have relatively small inpatient hospital facilities, we believe that the physicians practici ng in these facilities will bill for somewhat fewer inpatient serv ices than EPs generally. Using this assumption, the estimate of nonhospital-based EPs reassigning benefits to Method II CAHs is therefore between 4,050 and 8,100. Of these nonhospital-base d EPs reassigning benefits to Method II CAHs, some propor tion will qualify for Medicaid incentive payments and will choose to receive payments under that program because the payments are higher. For these purposes we will employ the same estimate (20 percent) that we have employed for developing cost estimate in our Stage 2 final rule (77 FR 54140). Thus, we estimate that between 3,240 and 6,480 non-hospital-based EPs reassigning

benefits to Method II CAHs do not choose to receive Medicaid incentive payments. As we have discussed in prior rules ( 77 FR 54140) our estimates for the number of EPs that will successfully demonstrate meaningful use of CEHRT are uncertain. The percentage of Medicare EPs who will satisfy the criteria for demonstrating meaningful use of CEHRT and will qualify for incentive payments is a key, but highly uncertain factor in developing cost estimates for the EHR incentive program in general and for the present purposes in particular . Consistent with the estima tes that we have employed for EPs generally in developing cost estimates in the Stage II final rule, we will assume that 37 percent of the nonhospital-based EPs reassi gning benefits to Method II CAHs will satisfy the criteria for demonstrating mean ingful use of CEHRT and will qualify for incentive payments in payment years 2013. Thus, we estimate that between 1,199 and 2,398 EPs reassigning benefits to Method II CAHs will actually qualify to receiveCMS-1601-P Medicare EHR incentive payments in 2013. As we have previously discussed, section 1848(o)(1)(B) of the Act provides that the incentive payment for an EP for a given payment year shall not exceed the following amounts:

• For the EP’s first payment year, fo r such professional, $15,000 (or $18,000, if the EP’s first payment year is 2011 or 2012);

• For the EP’s second payment year, $12,000;

• For the EP’s third payment year, $8,000;

• For the EP’s fourth payment year, $4,000;

• For the EP’s fifth payment year, $2,000; and

• For any succeeding year, $0. We lack any information on how many of the EPs reassigning benefits to Method II CAHs will qualify for incentive payments for the first time in 2013. However, if we assume for purposes of setting upper limits on our estimates, that all of the 1,199 to 2,398 EPs we have estimated will receive qualify for the first time and receive the maximum incentive payment, our proposal will cost between $17,985,000 and $35,970,000 in payments that we have not previously been making in 2013. Despite the uncertainties of the assumptions that we have employed in de veloping these estimates , we can state with reasonable confidence that our proposal will result in considerably less than $50,000,000 in payments over and above the payments we w ould make in the absence of this proposal

for 2013.CMS-1601-P (2) Cost Reporting Periods for Interim and Final EHR Incentive Payments to Eligible Hospitals As we discussed in section XVIII.B. of this proposed rule, we are proposing to revise the regulations to provi de that, in cases where there is no 12-month cost reporting period that begins on or after the beginning of a payment year, we will use the most recent 12-month cost reporting period available at the time of final settlement in order to determine final EHR incentive payments for the hospital. We are making this proposal solely to address situations in which hospitals have been receiving interim EHR payments

but the contractors have not been able to ma ke a determination of final payments because there is no hospital cost report that meets th e existing requirements of the regulations. Therefore, we do not expect this to have any financial impact. This proposal would merely allow us to make final settlements in cases that the current regulations do not

cover. B. Regulatory Flexibility Act (RFA) Analysis The RFA requires agencies to analyze options for regulatory relief of small entities, if a rule has a signi ficant impact on a substantial nu mber of small entities. For purposes of the RFA, we estimate that most hospitals, ASCs and CMHCs are small

entities as that term is used in the RFA. For purposes of the RFA, most hospitals are considered small businesses according to th e Small Business Administration’s size standards with total revenues of $35.5 million or less in any single year. Most ASCs and

most CMHCs are considered small businesse s with total revenues of $10 million or less in any single year. We estimate that this proposed rule may have a significant impact onCMS-1601-P approximately 2,004 hospitals with voluntary ownership. For details, see the Small

Business Administration’s “Table of Small Business Size Standards” at http://www.sba.gov/content/table- small-business-size-standards. In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the opera tions of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 603 of the RFA. For purposes of section 1102(b) of th e Act, we define a small rural hospital as a hospital that is located outside of a metr opolitan statistical area and has 100 or fewer beds. We estimate that this proposed rule may have a significant impact on approximately 694 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 i ssuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. That threshold level is currently approximately $141 million. This proposed rule does not mandate any requirement s for State, local, or tribal governments, or for the private sector.

D. Conclusion The changes we are proposing to make in this proposed rule would affect all classes of hospitals paid under the OPPS and will affect both CMHCs and ASCs. WeCMS-1601-P estimate that most classes of hospitals pa id under the OPPS would experience a modest increase or a minimal decrease in paymen t for services furnished under the OPPS in

CY 2013. Table 39 demonstrates the estimated distributional impact of the OPPS budget neutrality requirements that would result in a 1.8 percent increase in payments for all services paid under the OPPS in CY 2014, afte r considering all of the proposed changes to APC reconfiguration and recalibration, as well as th e proposed OPD fee schedule increase factor, proposed wage index change s, including the proposed frontier State wage index adjustment, estimated payment for outliers, and proposed changes to the pass-through payment estimate. However, some classes of providers that are paid under the OPPS would experience more significant ga ins and others would experience modest losses in OPPS payments in CY 2014. We estim ate that rural hospitals with 100 or fewer beds would experience a decrease of 3.9 percen t. CMHCs would see an overall decrease in payment of 7.7 percent as a result of a decrease in their estimated costs. However, urban hospitals in Puerto Rico would expe rience an estimated 7.9 percent increase in payment, and non-teaching hospitals for wh om DSH data are not available (non-IPPS hospitals) would experience a 5.3 percent increase in payment. The proposed updates to the ASC payment system for CY 2014 would affect each of the approximately 5,300 ASCs currently appr oved 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 be neficiaries, the degree to which the payments for the procedures offered by th e ASC are proposed to be changed under the ASC payment system, and the extent to wh ich the ASC provides a different set ofCMS-1601-P procedures in the coming year. Table 40 demonstrates the estimated distributional impact among ASC surgical specialties of the proposed MFP-adjusted CPI-U update factor of 0.9 percent for CY 2014. XXIIV. Federalism Analysis Executive Order 13132 establishes certain requ irements that an agency must meet when it promulgates a proposed rule (and subseq uent final rule) that imposes substantial direct costs on State and local governments , preempts State law, or otherwise has Federalism implications. We have examin ed the OPPS and ASC provisions included in this proposed rule in accordance with Executive Order 13132, Federalism, and have determined that they will not have a substant ial direct effect on State, local or tribal governments, preempt State law, or otherw ise have a Federalism implication. As reflected in Table 39 of this proposed ru le, we estimate that OPPS payments to governmental hospitals (including State and lo cal governmental hospitals) would increase by 0.5 percent under this proposed rule. While we do not know the number of ASCs or CMHCs with government ownership, we anticipate th at it is small. The analyses we have provided in this section of this proposed rule , in conjunction with th e remainder of this document, demonstrate that this proposed rule is consistent with the regulatory philosophy and principles identified in Ex ecutive Order 12866, the RFA, and section 1102(b) of the Act. This proposed rule would affect payments to a substantial number of small rural hospitals and a small number of rural ASCs, as well as other classes of hospitals, CMHCs, and ASCs, and some effects may be significant.CMS-1601-P List of Subjects

42 CFR Part 405 Administrative practice a nd procedure, Health facili ties, Health professions, Kidney diseases, Medicare, Reporting a nd recordkeeping, Rural areas, X-rays.

42 CFR Part 410 Health facilities, Health professions, La boratories, Medicare, Rural areas, X-rays.

42 CFR Part 412 Administrative practice and procedure, Health facilitie s, Medicare, Puerto Rico, Reporting and recordkeeping requirements.

42 CFR Part 416 Health facilities, Health professions , Medicare, Reporting and recordkeeping requirements.

42 CFR Part 419 Hospitals, Medicare, Reporting an d recordkeeping requirements.

42 CFR Part 475 Grant programs-health, Health care, H ealth professions, Quality Improvement Organization (QIO)

42 CFR Part 476 Health care, Health pr ofessional, Health record, Quality Improvement Organization (QIO), Penalt ies, Privacy, Reporting and recordkeeping requirements.

42 CFR Part 486CMS-1601-P Grant programs-health, Health facilities, Medicare, Reporting and recordkeeping requirements, X-rays.

42 CFR Part 495 Computer technology, Electronic health reco rds, Electronic transactions, Health, Health care. Health information technology, Hea lth insurance, Health records, Hospitals, Laboratories, Medicaid, Medicare, Privacy, Reporting and recordkeeping requirements, Public health, Security. For reasons stated in the preamble of th is document, the Centers for Medicare & Medicaid Services is proposing to ame nd 42 CFR Chapter IV as set forth below:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND

DISABLED 1. The authority citation for part 405, Subpart R continues to read as follows: Authority: Secs. 205, 1102, 1814(b), 1815(a), 1833, 1861(v), 1871, 1872, 1878, and 1886 of the Social Security Act (42 U.S.C. 405, 1302, 1395f(b), 1395g(a), 1395l, 1395x(v), 1395hh, 1395ii, 1395oo, and 1395ww). 2. Section 405.1804 is amended by revising paragraph (a) to read as follows: § 405.1804 Matters not subject to admini strative and judicial review under prospective payment system.

* * * * * (a) The determination of the requir ement, or the proportional amount, of the budget neutrality adjustment in the prosp ective payment rates required under section 1886(e)(1) of the Social Security Act.CMS-1601-P

* * * * * 3. Section 405.1885 is amended by re vising paragraph (a)(1) and adding paragraph (b)(2)(iv) to read as follows: § 405.1885 Reopening an intermediary determination or reviewing entity decision. (a) * * * (1) A Secretary determination, an interm ediary determination, or a decision by a reviewing entity (as described in § 405.1801( a)) may be reopened, with respect to specific findings on matters at issue in a de termination or decision, by CMS (with respect to Secretary determinations), by the inte rmediary (with respect to intermediary determinations), or by the re viewing entity that made th e decision (as described in paragraph (c) of this section). (i) A specific finding on a matter at issue may be legal or factual in nature or a

mixed matter of both law and fact. (ii) A specific finding on a matter at issue may include a factual matter that arose in or was determined for the same cost report ing period as the period at issue in an appeal filed, or a reopening requested by a provider or initiated by an intermediary, under this subpart. (iii) A specific finding on a matter at i ssue may include a predicate fact, which is

a factual matter that arose in or was determin ed for a cost reporting period that predates the period at issue (in an appeal filed, or a reopening requested by a provider or initiated by an intermediary, under this subpart), and su ch factual matter was used in determining an aspect of the provider’s reimburseme nt for a later cost reporting period.CMS-1601-P (iv) A specific finding on a matter at i ssue may not be reopened, and if reopened, revised, except as provided fo r by this section, § 405.1887, and § 405.1889.

* * * * * (b) * * * (2) * * * (iv) The 3-year period described in para graphs (b)(2)(i) throu gh (b)(2)(iii) of this section applies to, and is calculated separate ly for, each specific finding on a matter at issue (as described in paragraphs (a)( 1)(i) through (iv) of this section.

* * * * * PART 410—SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS 4. The authority citation for part 410 continues to read as follows: Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh). 5. Section 410.27 is amended by— a. Revising paragraph (a) introductory text. b. Removing the word “and” at th e end of paragraph (a)(1)(iii). c. Removing the period at the end of paragraph (a)(1)(iv)(E) and adding in its place “; and”. d. Adding paragraph (a)(1)(v).

The revisions and addition read as follows: § 410.27 Therapeutic outpatient hospital or CAH services and supplies incident to a physician’s or nonphysician practi tioner’s service: Conditions.CMS-1601-P (a) Medicare Part B pays for therapeu tic hospital or CAH services and supplies furnished incident to a physician’s or nonphysician practitioner’s service, which are

defined as all services and s upplies furnished to hospital or CAH outpatients that are not diagnostic services and that aid the p hysician or nonphysician practitioner in the treatment of the patient, including drug s and biologicals which are not usually self-administered, if— (1) * * * (v) In accordance with applicable State law.

* * * * *

PART 412—PROSPECTIVE PAYM ENT SYSTEMS FOR INPATIENT

HOSPITAL SERVICES 6. The authority citation for part 412 continues to read as follows: Authority : Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh) and sec. 124 of Pub. L. 106-113 (113 Stat. 1501A-332). 7. Section 412.167 is amended by redesi gnating paragraph (c) as paragraph (d) and adding a new paragraph (c) to read as follows: § 412.167 Appeals under the Hospital Value-Based Purchasing (VBP) Program.

* * * * * (c) If a hospital is dissatisfied with CMS’ decision on an appeal request submitted under paragraph (b) of this se ction, the hospital may request an independent CMS review

of that decision.

* * * * *CMS-1601-P

PART 416—AMBULATORY SURGICAL SERVICES 8. 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). 9. Section 416.171 is amended by revising paragraph (b)(2) to read as follows: § 416.171 Determination of paym ent rates for ASC services.

* * * * * (b) * * * (2) Device-intensive procedures a ssigned to any APC under the OPPS with device costs greater than 50 percent of the APC costs based on the standard OPPS APC ratesetting methodology.

* * * * *

PART 419—PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL

OUTPATIENT DEPARTMENT SERVICES 10. The authority citation for part 419 continues to read as follows: Authority: Secs. 1102, 1833(t), and 1871 of the So cial Security Act (42 U.S.C. 1302, 1395(t), and 1395hh). 11. Section 419.2 is amended by revising para graphs (b) introduc tory text, (b)(3), (b)(4), (b)(7), (b)(11), and (b)(12) and adding paragraphs (b)(13) thr ough (17) to read as

follows: § 419.2 Basis of payment.

* * * * *CMS-1601-P (b) Determination of ho spital 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-rel ated costs that are integral, ancillary, s upportive, dependent, or adjunctiv e to performing a procedure or furnishing a service on an outpatient basis. In general, these packaged costs may include, but are not limited to, the following items and services, the payment for which are packaged or conditionally packaged into th e payment for the related procedures or

services.

* * * * * (3) Observation services; (4) Anesthesia, certain drugs, biologicals, and other pharmaceuticals; medical and surgical supplies (including, for example, but not limited to, implantable or certain nonimplantable medical devices, certain drugs and biologicals, implantable biologicals,

and skin substitutes or similar wound trea tment products) and equipment; surgical dressings; and devices used for external reduction of fractures and dislocations;

* * * * * (7) Ancillary services;

* * * * * (11) Implantable and insertable me dical items and devices, including, but not limited to, prosthetic devices (other than dental ) which replace all or part of an internal body organ (including colostomy bags and supplie s directly related to colostomy care), including replacement of these devices;CMS-1601-P (12) Costs incurred to procure dono r tissue other than corneal tissue; (13) Image guidance, processing, supe rvision, and interp retation services; (14) Intraoperative items and services; (15) Drugs, biologicals, and radiopharm aceuticals that function as supplies when used in a diagnostic test or procedure (including but not limited to, diagnostic radiopharmaceuticals, contrast agen ts, and pharmacologi c stress agents; (16) Certain clinical dia gnostic laboratory tests; and (17) Procedures described by add-on codes.

* * * * * 12. Section 419.22 is amended by revising the introductory text and paragraphs (j) and (1) to read as follows: § 419.22 Hospital outpatient services ex cluded from payment under the hospital outpatient prospective payment system. The following services are not paid for under the hospital outp atient prospective payment system (except when packaged as a part of a bundled payment):

* * * * * (j) Except as provided in § 419.2( b)(4) and (11), prosthetic devices, prosthetic supplies, and orthotic devices.

* * * * * (l) Except as provided in § 419.2(b)(16) , clinical diagnostic laboratory tests.

* * * * *CMS-1601-P 13. Section 419.32 is amended by adding paragraph (b)(1)(iv)(B)( 5 ) to read as

follows: § 419.32 Calculation of prospective payment rates for hospital outpatient services.

* * * * * (b) * * * (1) * * * (iv) * * * (B) * * * ( 5 ) For calendar year 2014, a multifactor pr oductivity adjustment (as determined by CMS) and 0.3 percentage point.

* * * * *

14. Section 419.46 is added to S ubpart D to read as follows: § 419.46 Participation, data submission , and validation requirements under the Hospital Outpatient Quality Reporting (OQR) Program. (a) Participation in the Hospital OQR Program. To participate in the Hospital OQR Program, a hospital as defined in section 1886(d)(1)(B) of the Ac t and is paid under

the OPPS must— (1) Register on the QualityNet Web site before beginning to report data; (2) Identify and register a QualityNet security administrator as part of the registration process under paragrap h (a)(1) of this section; and (3) Complete and submit an online participation form available at the QualityNet.org Web site if this form has not been previously completed, if a hospital hasCMS-1601-P previously withdrawn, or if the hospital acquires a new CMS Certification Number (CCN). For Hospital OQR Program purposes , hospitals that shar e the same CCN are required to complete a single online participation form. Once a hospital has submitted a participation form, it is considered to be an active Hospital OQR Program participant until such time as it submits a withdrawal form to CMS or no longer has an effective Medicare provider agreement. Deadlines fo r the participation form are described in paragraphs (a)(3)(i) and (ii) of this secti on, and are based on the date identified as a hospital’s Medicare acceptance date. (i) If a hospital has a Medicare acceptan ce date before January 1 of the year prior to the affected annual payment update, the hos pital must complete and submit to CMS a completed Hospital OQR Notice of Participa tion Form by July 31 of the calendar year prior to the affected annual payment update. (ii) If a hospital has a Me dicare acceptance date on or after January 1 of the year prior to the affected annual payment upda te, the hospital must submit a completed participation form no later than 180 days fr om the date identified as its Medicare acceptance date. (b) Withdrawal from the Hospital OQR Program

. A participating hospital may withdraw from the Hospital OQR Program by submitting to CMS a withdrawal form that can be found in the secure portion of the QualityNet Web site. The hospital may withdraw any time from January 1 to November 1 of the year prior to the affected annual payment updates. A withdrawn hospital will not be able to later sign up to participate in that payment update, is subject to a reduced annual payment update as specified underCMS-1601-P § 419.43(h), and is required to submit a new part icipation form in order to participate in any future year of the Hospital OQR Program. (c) Submission of Hospital OQR Program data . (1) General rule . Except as provided in paragraph (d) of th is section, hospitals that participate in the Hospital OQR Program must submit to CMS data on measur es selected under section 1833(17)(C) of the Act in a form and manner, a nd at a time, specified by CMS. (2) Submission deadlines. Submission deadlines by m easure and by data type are posted on the QualityNet Web site. (3) Initial submission deadlines for a hospital that did not participate in the previous year’s Ho spital OQR Program. (i) If a hospital has a Medicare acceptance date before January 1 of the year prior to th e affected annual payment update, the hospital must submit data beginning with encounters occurring during the firs t calendar quarter of the year prior to the affected annual pa yment update, in addition to submitting a completed Hospital OQR Notice of Participatio n Form under paragraph (a)(3)(i) of this

section. (ii) If a hospital has a Me dicare acceptance date on or after January 1 of the year prior to the affected annual payment update, th e hospital must submit data for encounters beginning with the first full quarter followi ng submission of the completed Hospital OQR Notice of Participation Form under para graph (a)(3)(ii) of this section. (iii) Hospitals with a Medicare acceptance date before or after January 1 of the year prior to an affected annual payment upda te must follow data submission deadlines as specified in paragraph (c)(2) of this section.CMS-1601-P (d) Exception. CMS may grant an extension or waiver of one or more data submission deadlines and requirements in th e event of extraord inary circumstances beyond the control of the hospital, such as when an act of nature affects an entire region or locale or a systemic problem with one of CMS’ data collection systems directly or indirectly affects data subm ission. CMS may grant an extension or waiver as follows: (1) Upon request by the hospital. Specific requirements for submission of a request for an extension or waiver ar e available on the QualityNet Web site. (2) At the discretion of CMS. CMS may grant waivers or extensions to hospitals that have not requested them when CMS determines that an extraordinary circumstance

has occurred. (e) Validation of Hospital OQR Program data. CMS may validate one or more

measures selected under sect ion 1833(17)(C) of the Act by reviewing documentation of patient encounters submitted by se lected participating hospitals. (1) Upon written request by CMS or its contractor, a hospital must submit to CMS supporting medical record documentation that the hospital used for purposes of data submission under the program. The specific sample that a hospital must submit will be identified in the written request. A hosp ital must submit the supporting medical record

documentation to CMS or its contractor with in 45 days of the date identified on the written request, in the form and manner specified in the written request. (2) A hospital meets the validation requireme nt with respect to a fiscal year if it achieves at least a 75-percent reliabil ity score, as determined by CMS.CMS-1601-P (f) Reconsiderations and appeal s of Hospital OQR Program decisions. (1) A hospital may request reconsider ation of a decision by CMS that the hospital has not met the requirements of the Hospital OQR Program for a particular fiscal year. Except as provided in paragraph (d) of th is section, a hospital must submit a reconsideration request to CMS via the QualityNet Web site, no later than the first business day of the month of February of the affected payment year. (2) A reconsideration request must contain the following information: (i) The hospital’s CMS Certification Number (CCN); (ii) The name of the hospital; (iii) The 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; (iv) The hospital’s basis for request ing reconsideration. The hospital must identify its specific reason(s) for believing it should not be subject to the reduced annual payment update; (v) The hospital-designat ed personnel contact inform ation, including name, email address, telephone number, and mailing addre ss (must include physical mailing address, not just a post office box); (vi) The hospital-design ated personnel’s signature; (vii) A copy of all materials that the hospital submitted to comply with the requirements of the affected Hospital OQR Program payment determination year; andCMS-1601-P (viii) If the hospital is requesti ng reconsideration on the basis that CMS

determined it did not meet the affected payment determination year’s validation requirement set forth in paragraph (e)(1) of this section, 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 are eligible to be reconsidered. (3) A hospital that is dissatisfi ed with a decision made by CMS on its reconsideration request may file an appeal with the Provider Reimbursement Review Board under part 405, subpart R, of this chapter. 15. Section 419.66 is amended by revising pa ragraph (b)(3) to read as follows: § 419.66 Transitional pass-through payments: Medical devices.

* * * * * (b) * * * (3) The device is an integral part of th e service furnished, is used for one patient only, comes in contact with human tissue, a nd is surgically implanted or inserted, whether or not is remains with the patient when the patient is released from the hospital.

* * * * * PART 475—QUALITY IMPROVEMENT ORGANIZATIONS 16. The authority citation for part 475 continues to read as follows: Authority : Secs. 1102 and 1871 of the Social Se curity Act (42 U.S.C. 1302 and 1395hh). 17. Section § 475.1 is amended by—CMS-1601-P a. Redesignating paragra phs (a) through (d) in the defi nition of “Five percent or more owner” as paragraphs (1) through (4). b. Adding, in alphabetical order, the definitions of “Case reviews”, “Practitioner”, “QIO area”, and Quality improvement initiative”. c. Revising the definition of “Physician”.

The additions and revision read as follows: § 475.1 Definitions.

* * * * *

Case reviews means the different types of revi ews that QIOs are authorized to perform. Such reviews in clude, but are not limited to— (1) Beneficiary complaint reviews; (2) General quality of care reviews; (3) Emergency Medical Treatment and Labor Act (EMTALA) reviews; (4) Medical necessity reviews, includ ing appeals and DRG validation reviews;

and (5) Admission and discharge reviews.

* * * * * Physician means: (1) A doctor of medicine or osteopat hy, a doctor of dental surgery or dental medicine, a doctor of podiatry, a doctor of opt ometry, or a chiroprac tor as described in section 1861(r) of the Act;CMS-1601-P (2) An intern, resident, or Federal G overnment employee authorized under State or Federal law to practice as a doctor as descri bed in paragraph (1) of this definition; and (3) An individual licensed to practice as a doctor as described in paragraph (1) of this definition in any Territory or Commonwealth of the United States of America.

Practitioner has the same meaning as provi ded in § 476.1 of this chapter. QIO area means the defined geographic area, su ch as the State(s), region(s), or community(ies), in which the CMS cont ract directs the QIO to perform. Quality improvement initiative has the same meaning as provided in § 476.1 of this chapter. 18. Subpart C is revise d to read as follows: Subpart C—Quality Improvement Organizations

Sec. 475.100 Scope and applicability. 475.101 Eligibility requirements for QIO contracts. 475.102 Requirements for performing case reviews. 475.103 Requirements for performing quality improvement initiatives. 475.104 [Reserved] 475.105 Prohibition against contracting with heal th care facilities, a ffiliates, and payor organizations. 475.106 [Reserved] 475.107 QIO contract awards. Subpart C—Quality Improvement OrganizationsCMS-1601-P § 475.100 Scope and applicability. This subpart implements sections 1152 a nd 1153(b) and (c) of the Social Security Act as amended by section 261 of the Trade Adjustment Assistance Extension Act of 2011. This subpart defines the types of organiza tions that are eligible to become Quality Improvement Organizations (QIOs) and desc ribes certain steps CMS will take in selecting QIOs. § 475.101 Eligibility requiremen ts for QIO contracts. In order to be eligible for a QIO contr act, an organization must meet the following requirements: (a) Have a governing body that include s at least one individual who is a representative of health care providers and at least one indi vidual who is a representative

of consumers. (b) Demonstrate the ability to perf orm the functions of a QIO, including— (1) The ability to meet the eligibility requirements and perform activities as set forth in the QIO Request for Proposal; and (2) The ability to— (i) Perform case reviews as described in § 475.102; and/or (ii) Perform quality improvement initiatives as se t forth in § 475.103. (c) Demonstrate the ability to activel y engage beneficiaries, families, and consumers, as applicable, in case revi ews as set forth in § 475.102, or quality improvement initiatives as set forth in § 475.103. § 475.102 Requirements for performing case reviews.CMS-1601-P (a) In determining whether or not an or ganization has demonstrated the ability to perform case review, CMS will take into consideration factors such as: (1) The organization’s proposed processe s, capabilities, qua ntitative, and/or qualitative performance objectives a nd methodology to perform case reviews; (2) The organization’s proposed invol vement of and access to physicians and practitioners in the QIO area wi th the appropriate expertise a nd specialization in the areas of health care related to case reviews; (3) The organization’s ability to take in to consideration urba n versus rural, and regional characteristics in the health car e setting where the care under review was provided; (4) The organization’s ability to take into consideration evidence-based national clinical guidelines and professionally recognized standards of care; and (5) The organization’s a ccess to qualified informati on technology (IT) expertise. (b) In making determinations under this section, CMS may consider characteristics such as the organization’s geographic location and size. CMS may also consider prior experience in health care quality improvement that CMS considers relevant to performing case reviews; such pr ior experience may include prior similar case review experience. (c) A State government that administer s a Medicaid program will be considered incapable of performing case review in an effective manner, unless the State

demonstrates to the satisfaction of CMS that the State agency performing the case review will act with complete objectivity and independence from the Medicaid program.CMS-1601-P § 475.103 Requirements for performing quality improvement initiatives. (a) In determining whether or not an or ganization has demonstrated the ability to perform quality improvement initiatives, CMS w ill take into consideration factors such

as: (1) The organization’s proposed processe s, capabilities, qua ntitative, and/or qualitative performance objectives, and methodology to perform quality improvement initiatives; (2) The organization’s proposed involve ment of and access to physicians and practitioners in the QIO area that have the requisite expertise and specialization in the areas of health care concerning the quality improvement initiative; and (3) The organization’s access to prof essionals with requ isite knowledge of quality improvement methodologies and prac tices, as well as qualified information technology and technical expertise. (b) In making determinations under this section, CMS may consider characteristics such as the organization’s geographic location and size. CMS may also consider prior experience in health care quality improvement that CMS considers relevant to performing quality improvement initiatives; such prior experience may include prior similar quality improvement initiative experience. (c) A State government that administer s a Medicaid program will be considered incapable of performing quality improvement initiative functions in an effective manner,

unless the State demonstrates to the satisfac tion of CMS that the State agency performingCMS-1601-P the quality improvement initiatives will act with complete objectivity and independence from the Medicaid program. § 475.104 [Reserved] § 475.105 Prohibition against contracting with health care facilities, affiliates, and payor organizations. (a) Basic rule . Except as permitted under paragra ph (a)(3) of this section, the following are not eligible for QIO contracts: (1) A health care faci lity in the QIO area. (2) A health care facility affiliate; that is, an organization in which more than 20 percent of the members of the governing body are also either a governing body member, officer, partner, five percent or more owne r, or managing employee in a health care facility in the QIO area. (3) A payor organization, unless the Secret ary determines that there is no other entity available for an area w ith which the Secretary can ente r into a contract under this part or the Secretary determines that a payor organization is a more qualified entity to perform one or more of the functions of a QIO described in § 475.101(b) and this more qualified entity meets all other require ments and standards of this part. (b) [Reserved] (c) Subcontracting . A QIO must not subcontract w ith a health care facility to perform any case review activities except fo r the review of th e quality of care. § 475.106 [Reserved] § 475.107 QIO contract awards.CMS-1601-P Subject to the provisions of § 475.105, CMS will take the following actions in awarding QIO contracts: (a) Identify, from among all proposals submitted in response to a Request for Proposal, all proposals submitted by organiza tions that meet the requirements of § 475.101; (b) Identify, from among all proposals identified in para graph (a) of this section, all proposals that set forth minimally acceptable plans in accordance with the requirements of § 475.102 or § 475.103, as applicable; and (c) Award the contract to the selected organization for a specific QIO area for a period of 5 years. PART 476—QUALITY IMPROVEMEN T ORGANIZATION REVIEW 19. The authority for part 476 continues to read as follows: Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh). 20. The heading of part 476 is revi sed to read as set forth above. 21. In § 461.1, paragraphs (a) through (d) in the definition of “Five percent or more owner” are redesignated as paragr aphs (1) though (4) an d the definition of “Physician” is revised to read as follows: § 476.1 Definitions.

* * * * * Physician means:CMS-1601-P (1) A doctor or medicine or osteopat hy, a doctor of dental surgery or dental medicine, a doctor of podiatry, a doctor of optom etry, or a chiropractor, as described in section 1861(r) of the Act; (2) An intern, resident, or Federal G overnment employee authorized under State or Federal law to practice as a doctor as descri bed in paragraph (1) of this definition; and (3) An individual licensed to practice as a doctor as described in paragraph (1) of this definition in any Territory or Commonwealth of the United States of America. 22. The heading of Subpart C is revised to read as follows: Subpart C—Review Responsibilities of Qu ality Improvement Organizations (QIOs)

PART 486—CONDITIONS FOR COVERAGE OF SPECIALIZED SERVICES

FURNISHED BY SUPPLIERS 23. The authority citation of part 486 continues to read as follows: Authority: Secs. 1102, 1138, and 1871 of the Social Security Act (42 U.S.C. 1302, 1302b-8, and 1395hh) and section 371 of the P ublic Health Service Act (42 U.S.C. 273). 24. Section 486.316 is amended by revising pa ragraphs (a)(1) and (b) to read as

follows: § 486.316 Re-certification and competition processes. (a) * * * (1) Meets two out of the three outcome measures requirements at § 486.318; and

* * *CMS-1601-P (b) Decertification and competition . If an OPO does not meet two out of the

three outcome measures as described in paragraph (a)(1) of th is section or the requirements described in paragraph (a)(2) of this section, the OPO is decertified. If the OPO does not appeal or the OPO appeals a nd the reconsideration official and CMS hearing officer uphold the decertification, the OPO’s service area is opened for competition from other OPOs. The decertifie d OPO is not permitted to compete for its open area or any other open area. An OP O competing for an open service area must submit information and data that describe the barriers in its service area, how they affected organ donation, what steps the OP O took to overcome them, and the results.

* * * * * 25. Section 486.318 is amended by revising paragraph (a) intr oductory text and paragraph (b) introductory text to read as follows: § 486.318 Condition: Outcome measures. (a) With the exception of OPOs opera ting exclusively in noncontiguous States, Commonwealths, Territories, or possessions, an OPO must meet two out of the three following outcome measures:

* * * * * (b) For OPOs operating exclusively in noncontiguous States, Commonwealths, Territories, and possessions, an OPO must meet two out of the three following outcome

measures: * * * * *CMS-1601-P

PART 495--STANDARDS FOR THE ELECTRONIC HEALTH RECORD

TECHNOLOGY INCENTIVE PROGRAM 26. 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). 27. Section 495.4 is amended by revising the definition of “Hospital-based EP”

to read as follows: § 495.4 Definitions.

* * * * * Hospital-based EP. Unless it meets the requirements of § 495.5, a hospital-based EP means an EP who furnishes 90 percent or more of his or her covered professional services in sites of service identified by the codes used in the HIPAA standard transaction as an inpatient hospital or emergency room setting in the year preceding the payment year, or in the case of a payment adjustment y ear, in either of the 2 years before the year preceding such payment adjustment year. (1) For Medicare, this is calculated based on— (i) The Federal fiscal year preceding the payment year; and (ii) For the payment adjustments, based on— (A) The Federal fiscal year 2 years before the payment adjustment year; or (B) The Federal fiscal year 3 year s before the payment adjustment year. (2) For Medicaid, it is at the State’s di scretion if the data are gathered on the Federal fiscal year or calendar year preceding the payment year.CMS-1601-P (3) For the CY 2013 payment year only, an EP who furnishes services billed by a CAH receiving payment under Method II (as desc ribed in § 413.70(b)(3) of this chapter) is considered to be hospital-based if 90 percen t or more of his or her covered professional

services are furnished in sites of servi ce identified by the codes used in the HIPPA standard transaction as an inpatient hospita l or emergency room setting in e ach of the Federal fiscal years 2012 and 2013.

* * * * * 28. Section 495.104 is amended by revising paragraph (c)(2) to read as follows: § 495.104 Incentive payments to eligible hospitals.

* * * * * (c) * * * (2) Interim and final payments . CMS uses data on hospi tal acute care inpatient discharges, Medicare Part A acu te care inpatient bed-days, Medicare Part C acute care inpatient bed-days, and total acute care inpatient bed-days from the latest submitted 12-month hospital cost report as the basis fo r making preliminary incentive payments. Final payments are determined at the time of settling the first 12-month hospital cost report for the hospital fiscal year that begins on or after the first day of the payment year,

and settled on the basis of data from that cost reporting period. In cases where there is no 12-month hospital cost report period beginning on or after the first day of the payment year, final payments may be determined and settled on the basis of data from the most recently submitted 12-month hospital cost report.

* * * * *CMS-1601-P (Catalog of Federal Domestic Assistan ce Program No. 93.773, Medicare—Hospital Insurance; Program No. 93.774, Medicare—Suppl ementary Medical Insurance Program; and Program No. 93.778 (M edical Assistance) Dated: June 18, 2013

______________________________ Marilyn Tavenner, Administrator,

Centers for Medicare & Medicaid

Services

.

Dated: June 26, 2013

___________________________ Kathleen Sebelius, Secretary

.

BILLING CODE 4120-01-PCMS-1601-P

[FR Doc. 2013-16555 Filed 07/08/2013 at 4:15 pm; Publication Date: 07/19/2013]