[Federal Register Volume 74, Number 137 (Monday, July 20, 2009)]
[Proposed Rules]
[Pages 35232-35724]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-15882]



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Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 410, 416, and 419



Medicare Program: Proposed Changes to the Hospital Outpatient 
Prospective Payment System and CY 2010 Payment Rates; Proposed Changes 
to the Ambulatory Surgical Center Payment System and CY 2010 Payment 
Rates; Proposed Rule

Federal Register / Vol. 74, No. 137 / Monday, July 20, 2009 / 
Proposed Rules

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410, 416, and 419

[CMS-1414-P]
RIN 0938-AP41


Medicare Program: Proposed Changes to the Hospital Outpatient 
Prospective Payment System and CY 2010 Payment Rates; Proposed Changes 
to the Ambulatory Surgical Center Payment System and CY 2010 Payment 
Rates

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise the Medicare hospital 
outpatient prospective payment system (OPPS) to implement applicable 
statutory requirements and changes arising from our continuing 
experience with this system. In this proposed rule, we describe the 
proposed changes to the amounts and factors used to determine the 
payment rates for Medicare hospital outpatient services paid under the 
prospective payment system. These changes would be applicable to 
services furnished on or after January 1, 2010.
    In addition, this proposed rule would update the revised Medicare 
ambulatory surgical center (ASC) payment system to implement applicable 
statutory requirements and changes arising from our continuing 
experience with this system. In this proposed rule, we set forth the 
applicable relative payment weights and amounts for services furnished 
in ASCs, specific HCPCS codes to which these proposed changes would 
apply, and other pertinent ratesetting information for the CY 2010 ASC 
payment system. These proposed changes would be applicable to services 
furnished on or after January 1, 2010.

DATES: To be assured consideration, comments on all sections of this 
proposed rule must be received at one of the addresses provided in the 
ADDRESSES section no later than 5 p.m. EST on August 31, 2009.

ADDRESSES: In commenting, please refer to file code CMS-1414-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (no duplicates, 
please):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the instructions for 
``Comment or Submission'' and enter the file code to find the document 
accepting comments.
    2. By regular mail. You may mail written comments (one original and 
two copies) to the following address ONLY: Centers for Medicare & 
Medicaid Services, Department of Health and Human Services, Attention: 
CMS-1414-P, P.O. Box 8013, Baltimore, MD 21244-1850.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments (one 
original and two copies) to the following address ONLY: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-1414-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 (one original and two copies) before the 
close of the comment period to one of the following addresses:
    a. Room 445-G, Hubert H. Humphrey Building, 200 Independence 
Avenue, SW., Washington, DC 20201.
    (Because access to the interior of the HHH Building is not readily 
available to persons without Federal Government identification, 
commenters are encouraged to leave their comments in the CMS drop slots 
located in the main lobby of the building. A stamp-in clock is 
available for persons wishing to retain a proof of filing by stamping 
in and retaining an extra copy of the comments being filed.)
    b. 7500 Security Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call the telephone number (410) 786-9994 in advance to schedule 
your arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Alberta Dwivedi, (410) 786-0378, 
Hospital outpatient prospective payment issues.
    Dana Burley, (410) 786-0378, Ambulatory surgical center issues.
    Michele Franklin, (410) 786-4533, and Jana Lindquist, (410) 786-
4533, Partial hospitalization and community mental health center 
issues.
    James Poyer, (410) 786-2261, Reporting of quality data issues.

SUPPLEMENTARY INFORMATION:
    Submitting Comments: We welcome comments from the public on all 
issues set forth in this proposed rule to assist us in fully 
considering issues and developing policies. You can assist us by 
referencing file code CMS-1414-P for all issues on which you wish to 
comment.
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, MD 21244, on Monday through Friday of each week from 8:30 
a.m. to 4 p.m. EST. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

Electronic Access

    This Federal Register document is also available from the Federal 
Register online database through GPO Access, a service of the U.S. 
Government Printing Office. Free public access is available on a Wide 
Area Information Server (WAIS) through the Internet and via 
asynchronous dial-in. Internet users can access the database by using 
the World Wide Web; the Superintendent of Documents'' home page address 
is http://www.gpoaccess.gov/index.html, by using local WAIS client 
software, or by telnet to swais.access.gpo.gov, then login as guest (no 
password required). Dial-in users should use communications software 
and modem to call (202) 512-1661; type swais, then login as guest (no 
password required).

Alphabetical List of Acronyms Appearing in This Proposed Rule

ACEP American College of Emergency Physicians
AHA American Hospital Association
AHIMA American Health Information Management Association
AMA American Medical Association
AMP Average manufacturer price
AOA American Osteopathic Association
APC Ambulatory payment classification
ASC Ambulatory Surgical Center
ASP Average sales price

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AWP Average wholesale price
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Balanced Budget Refinement Act of 1999, Public 
Law 106-113
BCA Blue Cross Association
BCBSA Blue Cross and Blue Shield Association
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000, Public Law 106-554
CAH Critical access hospital
CAP Competitive Acquisition Program
CBSA Core-Based Statistical Area
CCR Cost-to-charge ratio
CERT Comprehensive Error Rate Testing
CKD Chronic kidney disease
CMHC Community mental health center
CMS Centers for Medicare & Medicaid Services
CORF Comprehensive outpatient rehabilitation facility
CPT [Physicians] Current Procedural Terminology, Fourth Edition, 
2009, copyrighted by the American Medical Association
CR Cardiac rehabilitation
CRNA Certified registered nurse anesthetist
CY Calendar year
DMEPOS Durable medical equipment, prosthetics, orthotics, and 
supplies
DMERC Durable medical equipment regional carrier
DRA Deficit Reduction Act of 2005, Public Law 109-171
DSH Disproportionate share hospital
EACH Essential Access Community Hospital
E/M Evaluation and management
EPO Erythropoietin
ESRD End-stage renal disease
FACA Federal Advisory Committee Act, Public Law 92-463
FAR Federal Acquisition Regulations
FDA Food and Drug Administration
FFS Fee-for-service
FSS Federal Supply Schedule
FTE Full-time equivalent
FY Federal fiscal year
GAO Government Accountability Office
GME Graduate medical education
HCPCS Healthcare Common Procedure Coding System
HCRIS Hospital Cost Report Information System
HHA Home health agency
HIPAA Health Insurance Portability and Accountability Act of 1996, 
Public Law 104-191
HOPD Hospital outpatient department
HOP QDRP Hospital Outpatient Quality Data Reporting Program
ICD-9-CM International Classification of Diseases, Ninth Edition, 
Clinical Modification
ICR Intensive cardiac rehabilitation
IDE Investigational device exemption
IME Indirect medical education
I/OCE Integrated Outpatient Code Editor
IOL Intraocular lens
IPPS [Hospital] Inpatient prospective payment system
IVIG Intravenous immune globulin
KDE Kidney disease education
MAC Medicare Administrative Contractors
MedPAC Medicare Payment Advisory Commission
MDH Medicare-dependent, small rural hospital
MIEA-TRHCA Medicare Improvements and Extension Act under Division B, 
Title I of the Tax Relief Health Care Act of 2006, Public Law 109-
432
MIPPA Medicare Improvements for Patients and Providers Act of 2008, 
Public Law 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Public Law 108-173
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public 
Law 110-173
MPFS Medicare Physician Fee Schedule
MSA Metropolitan Statistical Area
NCCI National Correct Coding Initiative
NCD National Coverage Determination
NTIOL New technology intraocular lens
OIG [HHS] Office of the Inspector General
OMB Office of Management and Budget
OPD [Hospital] Outpatient department
OPPS [Hospital] Outpatient prospective payment system
PHP Partial hospitalization program
PM Program memorandum
PPI Producer Price Index
PPS Prospective payment system
PR Pulmonary rehabilitation
PRA Paperwork Reduction Act
QAPI Quality Assessment and Performance Improvement
QIO Quality Improvement Organization
RFA Regulatory Flexibility Act
RHQDAPU Reporting Hospital Quality Data for Annual Payment Update 
[Program]
RHHI Regional home health intermediary
SBA Small Business Administration
SCH Sole community hospital
SDP Single Drug Pricer
SI Status indicator
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Public Law 
97-248
TOPS Transitional outpatient payments
USPDI United States Pharmacopoeia Drug Information
WAC Wholesale acquisition cost

    In this document, we address two payment systems under the Medicare 
program: The hospital outpatient prospective payment system (OPPS) and 
the revised ambulatory surgical center (ASC) payment system. The 
provisions relating to the OPPS are included in sections I. through 
XIV., and XVI. through XXI. of this proposed rule and in Addenda A, B, 
C (Addendum C is available on the Internet only; we refer readers to 
section XVIII.A. of this proposed rule), D1, D2, E, L, and M to this 
proposed rule. The provisions related to the revised ASC payment system 
are included in sections XV., XVI., and XVIII. through XXI. of this 
proposed rule and in Addenda AA, BB, DD1, DD2, and EE to this proposed 
rule. (Addendum EE is available on the Internet only; we refer readers 
to section XVIII.B. of this proposed rule.)

Table of Contents

I. Background and Summary of the CY 2010 OPPS/ASC Proposed Rule
    A. Legislative and Regulatory Authority for the Hospital 
Outpatient Prospective Payment System
    B. Excluded OPPS Services and Hospitals
    C. Prior Rulemaking
    D. APC Advisory Panel
    1. Authority of the APC Panel
    2. Establishment of the APC Panel
    3. APC Panel Meetings and Organizational Structure
    E. Summary of the Major Contents of This Proposed Rule
    1. Proposed Updates Affecting OPPS Payments
    2. Proposed OPPS Ambulatory Payment Classification (APC) Group 
Policies
    3. Proposed OPPS Payment for Devices
    4. Proposed OPPS Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
    5. Proposed Estimate of OPPS Transitional Pass-Through Spending 
for Drugs, Biologicals, Radiopharmaceuticals, and Devices
    6. Proposed OPPS Payment for Brachytherapy Sources
    7. Proposed OPPS Payment for Drug Administration Services
    8. Proposed OPPS Payment for Hospital Outpatient Visits
    9. Proposed Payment for Partial Hospitalization Services
    10. Proposed Procedures That Will Be Paid Only as Inpatient 
Services
    11. Proposed OPPS Nonrecurring Technical and Policy 
Clarifications
    12. Proposed OPPS Payment Status and Comment Indicators
    13. OPPS Policy and Payment Recommendations
    14. Proposed Update of the Revised Ambulatory Surgical Center 
(ASC) Payment System
    15. Reporting Quality Data for Annual Payment Rate Updates
    16. Healthcare-Associated Conditions
    17. Regulatory Impact Analysis
II. Proposed Updates Affecting OPPS Payments
    A. Proposed Recalibration of APC Relative Weights
    1. Database Construction
    a. Database Source and Methodology
    b. Proposed Use of Single and Multiple Procedure Claims
    c. Proposed Calculation of CCRs
    (1) Development of the CCRs
    (2) Charge Compression
    2. Proposed Data Development Process and Calculation of Median 
Costs
    a. Claims Preparations
    b. Splitting Claims and Creation of ``Pseudo'' Single Claims
    (1) Splitting Claims
    (2) Creation of ``Pseudo'' Single Claims
    c. Completion of Claim Records and Median Cost Calculations
    d. Proposed Calculation of Single Procedure APC Criteria-Based 
Median Costs
    (1) Device-Dependent APCs
    (2) Blood and Blood Products
    (3) Single Allergy Tests
    (4) Echocardiography Services

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    (5) Nuclear Medicine Services
    (6) Hyperbaric Oxygen Therapy
    (7) Payment for Ancillary Outpatient Services When Patient 
Expires (-CA Modifier)
    e. Proposed Calculation of Composite APC Criteria-Based Median 
Costs
    (1) Extended Assessment and Management Composite APCs (APCs 8002 
and 8003)
    (2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC 
(APC 8001)
    (3) Cardiac Electrophysiologic Evaluation and Ablation Composite 
APC (APC 8000)
    (4) Mental Health Services Composite APC (APC 0034)
    (5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 
8007, and 8008)
    3. Proposed Calculation of OPPS Scaled Payment Weights
    4. Proposed Changes to Packaged Services
    a. Background
    b. Service-Specific Packaging Issues
    (1) Package Services Addressed by APC Panel Recommendations
    (2) Other Service-Specific Packaging Issues
    B. Proposed Conversion Factor Update
    C. Proposed Wage Index Changes
    D. Proposed Statewide Average Default CCRs
    E. Proposed OPPS Payment to Certain Rural and Other Hospitals
    1. Hold Harmless Transitional Payment Changes Made by Public Law 
110-275 (MIPPA)
    2. Proposed Adjustment for Rural SCHs Implemented in CY 2006 
Related to Public Law 108-173(MMA)
    F. Proposed Hospital Outpatient Outlier Payments
    1. Background
    2. Proposed Outlier Calculation
    3. Outlier Reconciliation
    G. Proposed Calculation of an Adjusted Medicare Payment from the 
National Unadjusted Medicare Payment
    H. Proposed Beneficiary Copayments
    1. Background
    2. Proposed Copayment Policy
    3. Proposed Calculation of an Adjusted Copayment Amount for an 
APC Group
III. Proposed OPPS Ambulatory Payment Classification (APC) Group 
Policies
    A. Proposed OPPS Treatment of New CPT and Level II HCPCS Codes
    1. Proposed Treatment of New Level II HCPCS Codes and Category I 
CPT Vaccine Codes and Category III CPT Codes for Which We Are 
Soliciting Public Comments in This Proposed Rule
    2. Proposed Process for New Level II HCPCS Codes and Category I 
and III CPT Codes for Which We Will Be Soliciting Public Comments in 
the CY 2010 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. New Technology APCs
    1. Background
    2. Proposed Movement of Procedures From New Technology APCs to 
Clinical APCs
    D. Proposed OPPS/ASC Specific Policies: Insertion of Posterior 
Spinous Process Distraction Device (APC 0052)
IV. Proposed OPPS Payment for Devices
    A. Pass-Through Payments for Devices
    1. Expiration of Transitional Pass-Through Payments for Certain 
Devices
    2. Proposed Provisions for Reducing Transitional Pass-Through 
Payments To Offset Costs Packaged Into APC Groups
    a. Background
    b. Proposed Policy
    B. Proposed Adjustment to OPPS Payment for No Cost/Full Credit 
and Partial Credit Devices
    1. Background
    2. Proposed APCs and Devices Subject to the Adjustment Policy
V. Proposed OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    A. Proposed OPPS Transitional Pass-Through Payment for 
Additional Costs of Drugs, Biologicals, and Radiopharmaceuticals
    1. Background
    2. Proposed Drugs and Biologicals With Expiring Pass-Through 
Status in CY 2009
    3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With 
New or Continuing Pass-Through Status in CY 2010
    4. Pass-Through Payments for Implantable Biologicals
    a. Background
    b. Proposed Policy for CY 2010
    5. Definition of Pass-Through Payment Eligibility Period for New 
Drugs and Biologicals
    6. Proposed Provision for Reducing Transitional Pass-Through 
Payments for Diagnostic Radiopharmaceuticals and Contrast Agents To 
Offset Costs Packaged Into APC Groups
    a. Background
    b. Payment Offset Policy for Diagnostic Radiopharmaceuticals
    c. Proposed Payment Offset Policy for Contrast Agents
    B. Proposed OPPS Payment for Drugs, Biologicals, and 
Radiopharmaceuticals Without Pass-Through Status
    1. Background
    2. Proposed Criteria for Packaging Payment for Drugs, 
Biologicals, and Radiopharmaceuticals
    a. Background
    b. Proposed Cost Threshold for Packaging Payment for HCPCS Codes 
That Describe Certain Drugs, Nonimplantable Biologicals, and 
Therapeutic Radiopharmaceuticals (``Threshold-Packaged Drugs'')
    c. Proposed Packaging Determination for HCPCS Codes That 
Describe the Same Drug or Biological But Different Dosages
    d. Proposed Packaging of Payment for Diagnostic 
Radiopharmaceuticals, Contrast Agents, and Implantable Biologicals 
(``Policy-Packaged'' Drugs and Devices)
    3. Proposed Payment for Drugs and Biologicals Without Pass-
Through Status That Are Not Packaged
    a. Proposed Payment for Specified Covered Outpatient Drugs 
(SCODs) and Other Separately Payable and Packaged Drugs and 
Biologicals
    b. Proposed Payment Policy
    4. Proposed Payment for Blood Clotting Factors
    5. Proposed Payment for Therapeutic Radiopharmaceuticals
    a. Background
    b. Proposed Payment Policy
    6. Proposed Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes, But Without OPPS Hospital 
Claims Data
VI. Proposed Estimate of OPPS Transitional Pass-Through Spending for 
Drugs, Biologicals, Radiopharmaceuticals, and Devices
    A. Background
    B. Proposed Estimate of Pass-Through Spending
VII. Proposed OPPS Payment for Brachytherapy Sources
    A. Background
    B. Proposed OPPS Payment Policy
VIII. Proposed OPPS Payment for Drug Administration Services
    A. Background
    B. Proposed Coding and Payment for Drug Administration Services
IX. Proposed OPPS Payment for Hospital Outpatient Visits
    A. Background
    B. Proposed Policies for Hospital Outpatient Visits
    1. Clinic Visits: New and Established Patient Visits
    2. Emergency Department Visits
    3. Visit Reporting Guidelines
X. Proposed Payment for Partial Hospitalization Services
    A. Background
    B. Proposed PHP APC Update for CY 2010
    C. Proposed Separate Threshold for Outlier Payments to CMHCs
XI. Proposed Procedures That Will Be Paid Only as Inpatient 
Procedures
    A. Background
    B. Proposed Changes to the Inpatient List
XII. Proposed OPPS Nonrecurring Technical and Policy Changes and 
Clarifications
    A. Kidney Disease Education Services
    1. Background
    2. Proposed Payment for Services Furnished by Providers of 
Services Located in a Rural Area
    B. Pulmonary Rehabilitation and Cardiac Rehabilitation Services
    1. Legislative Changes
    2. Proposed Payment for Services Furnished to Hospital 
Outpatients in a Pulmonary Rehabilitation Program
    3. Proposed Payment for Services Furnished to Hospital 
Outpatients Under a Cardiac Rehabilitation or an Intensive Cardiac 
Rehabilitation Program
    4. Physician Supervision for Pulmonary Rehabilitation, Cardiac 
Rehabilitation, and Intensive Cardiac Rehabilitation Services
    C. Stem Cell Transplants
    D. Physician Supervision
    1. Background
    2. Issues Regarding the Physician Supervision of Hospital 
Outpatient Services Raised by Hospitals and Other Stakeholders
    3. Proposed Policies for Direct Supervision of Hospital and CAH 
Outpatient Therapeutic Services

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    4. Proposed Policies for Direct Supervision of Hospital and CAH 
Outpatient Diagnostic Services
    5. Summary of CY 2010 Physician Supervision Proposals
    E. Direct Referral for Observation Services
XIII. Proposed OPPS Payment Status and Comment Indicators
    A. Proposed OPPS Payment Status Indicator Definitions
    1. Proposed Payment Status Indicators To Designate Services That 
Are Paid Under the OPPS
    2. Proposed Payment Status Indicators To Designate Services That 
Are Paid Under a Payment System Other Than the OPPS
    3. Proposed Payment Status Indicators To Designate Services That 
Are Not Recognized Under the OPPS But That May Be Recognized by 
Other Institutional Providers
    4. Proposed Payment Status Indicators To Designate Services That 
Are Not Payable by Medicare on Outpatient Claims
    B. Proposed Comment Indicator Definitions
XIV. OPPS Policy and Payment Recommendations
    A. MedPAC Recommendations
    B. APC Panel Recommendations
    C. OIG Recommendations
XV. Proposed Updates to the Ambulatory Surgical Center (ASC) Payment 
System
    A. Background
    1. Legislative Authority for the ASC Payment System
    2. Prior Rulemaking
    3. Policies Governing Changes to the Lists of Codes and Payment 
Rates for ASC Covered Surgical Procedures and Covered Ancillary 
Services
    B. Proposed Treatment of New Codes
    1. Proposed Treatment of New Category I and III CPT Codes and 
Level II HCPCS Codes
    2. Proposed Treatment of New Level II HCPCS Codes Implemented in 
April and July 2009
    C. Proposed Update to the List of ASC Covered Surgical 
Procedures and Covered Ancillary Services
    1. Covered Surgical Procedures
    a. Proposed Additions to the List of ASC Covered Surgical 
Procedures
    b. Proposed Covered Surgical Procedures Designated as Office-
Based
    (1) Background
    (2) Proposed Changes to Covered Surgical Procedures Designated 
as Office-Based for CY 2010
    c. Covered Surgical Procedures Designated as Device-Intensive
    (1) Background
    (2) Proposed Changes to List of Covered Surgical Procedures 
Designated as Device-Intensive for CY 2010
    d. ASC Treatment of Surgical Procedures Proposed for Removal 
from the OPPS Inpatient List for CY 2010
    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 2010
    c. Proposed Adjustment to ASC Payments for No Cost/Full Credit 
and Partial Credit Devices
    2. Proposed Payment for Covered Ancillary Services
    a. Background
    b. Proposed Payment for Covered Ancillary Services for CY 2010
    E. New Technology Intraocular Lenses (NTIOLs)
    1. Background
    2. NTIOL Application Process for Payment Adjustment
    3. Classes of NTIOLs Approved and New Request for Payment 
Adjustment
    a. Background
    b. Requests To Establish New NTIOL Class for CY 2010 and 
Deadline for Public Comment
    4. Proposed Payment Adjustment
    5. Proposed ASC Payment for Insertion of IOLs
    F. Proposed ASC Payment and Comment Indicators
    1. Background
    2. Proposed ASC Payment and Comment Indicators
    G. ASC Policy and Payment Recommendations
    H. Proposed Revision to Terms of Agreements for Hospital-
Operated ASCs
    1. Background
    2. Proposed Changes to the Terms of Agreements for ASCs Operated 
by a Hospital
    I. Calculation of the ASC Conversion Factor and ASC Payment 
Rates
    1. Background
    2. Proposed Calculation of the ASC Payment Rates
    a. Updating the ASC Relative Payment Weights for CY 2010 and 
Future Years
    b. Updating the ASC Conversion Factor
    3. Display of Proposed ASC Payment Rates
XVI. Reporting Quality Data for Annual Payment Rate Updates
    A. Background
    1. Overview
    2. Hospital Outpatient Quality Data Reporting Under Section 
109(a) of Public Law 109-432
    3. Reporting ASC Quality Data for Annual Payment Update
    4. HOP QDRP Quality Measures for the CY 2009 Payment 
Determinations
    5. HOP QDRP Quality Measures for the CY 2010 Payment 
Determination
    a. Background
    b. Maintenance of Technical Specifications for Quality Measures
    c. Publication of HOP QDRP Data
    B. Proposals Regarding Quality Measures
    1. Considerations in Expanding and Updating Quality Measures 
Under the HOP QRDP Program
    2. Retirement of HOP QRDP Quality Measures
    3. Proposed HOP QDRP Quality Measures for the CY 2011 Payment 
Determination
    C. Possible Quality Measures Under Consideration for FY 2012 and 
Subsequent Years
    D. Proposed Payment Reduction for Hospitals That Fail To Meet 
the HOP QDRP Requirements for the CY 2010 Payment Update
    1. Background
    2. Proposed Reporting Ratio Application and Associated 
Adjustment Policy for CY 2010
    E. Proposed Requirements for HOPD Quality Data Reporting for CY 
2011 and Subsequent Years
    1. Administrative Requirements
    2. Data Collection and Submission Requirements
    a. General Data Collection and Submission Requirements
    b. Extraordinary Circumstance Extension or Waiver for Reporting 
Quality Data
    3. HOP QDRP Validation Requirements
    a. Proposed Data Validation Requirements for CY 2011
    b. Proposed Data Validation Approach for CY 2012 and Subsequent 
Years
    c. Additional Data Validation Conditions Under Consideration for 
CY 2012 and Subsequent Years
    F. Proposed 2010 Publication of HOP QDRP Data
    G. Proposed HOP QDRP Reconsideration and Appeals Procedures
    H. Reporting of ASC Quality Data
I. Electronic Health Records
XVII. Healthcare-Associated Conditions
    A. Background
    1. Preventable Medical Errors and Hospital-Acquired Conditions 
(HACs) Under the IPPS
    2. Expanding the Principles of the IPPS HACs Payment Provision 
to the OPPS
    3. Discussion in the CY 2009 OPPS/ASC Final Rule With Comment 
Period
    B. Public Comments and Recommendations on Issues Regarding 
Healthcare-Associated Conditions From the Joint IPPS/OPPS Listening 
Session
    C. CY 2010 Approach to Healthcare-Associated Conditions Under 
the OPPS
XVIII. Files Available to the Public via the Internet
    A. Information in Addenda Related to the Proposed CY 2010 
Hospital OPPS
    B. Information in Addenda Related to the Proposed CY 2010 ASC 
Payment System
XIX. Collection of Information Requirements
XX. Response to Comments
XXI. Regulatory Impact Analysis
    A. Overall Impact
    1. Executive Order 12866
    2. Regulatory Flexibility Act (RFA)
    3. Small Rural Hospitals
    4. Unfunded Mandates
    5. Federalism
    B. Effects of OPPS Changes in This Proposed Rule
    1. Alternatives Considered
    2. Limitation of Our Analysis
    3. Estimated Effects of This Proposed Rule on Hospitals
    4. Estimated Effects of This Proposed Rule on CMHCs
    5. Estimated Effects of This Proposed Rule on Beneficiaries
    6. Conclusion
    7. Accounting Statement
    C. Effects of ASC Payment System Changes in This Proposed Rule
    1. Alternatives Considered
    2. Limitations of Our Analysis

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    3. Estimated Effects of This Proposed Rule on Payments to ASCs
    4. Estimated Effects of This Proposed Rule on Beneficiaries
    5. Conclusion
    6. Accounting Statement
    D. Effects of Proposed Requirements for Reporting of Quality 
Data for Annual Hospital Payment Update
    E. Executive Order 12866

Regulation Text

Addenda

Addendum A--Proposed OPPS APCs for CY 2010
Addendum AA--Proposed ASC Covered Surgical Procedures for CY 2010 
(Including Surgical Procedures for Which Payment Is Packaged)
Addendum B--Proposed OPPS Payment by HCPCS Code for CY 2010
Addendum BB--Proposed ASC Covered Ancillary Services Integral to 
Covered Surgical Procedures for CY 2010 (Including Ancillary 
Services for Which Payment Is Packaged)
Addendum D1--Proposed OPPS Payment Status Indicators for CY 2010
Addendum DD1--Proposed ASC Payment Indicators for CY 2010
Addendum D2--Proposed OPPS Comment Indicators for CY 2010
Addendum DD2--Proposed ASC Comment Indicators for CY 2010
Addendum E--Proposed HCPCS Codes That Would Be Paid Only as 
Inpatient Procedures for CY 2010
Addendum L--Proposed CY 2010 OPPS Out-Migration Adjustment
Addendum M--Proposed HCPCS Codes for Assignment to Composite APCs 
for CY 2010

I. Background and Summary of the CY 2010 OPPS/ASC Proposed Rule

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

    When the Medicare statute was enacted, Medicare payment for 
hospital outpatient services was based on hospital-specific costs. In 
an effort to ensure that Medicare and its beneficiaries pay 
appropriately for services and to encourage more efficient delivery of 
care, the Congress mandated replacement of the reasonable cost-based 
payment methodology with a prospective payment system (PPS). The 
Balanced Budget Act (BBA) of 1997 (Pub. L. 105-33) added section 
1833(t) to the Social Security Act (the Act) authorizing implementation 
of a PPS for hospital outpatient services. The OPPS was first 
implemented for services furnished on or after August 1, 2000. 
Implementing regulations for the OPPS are located at 42 CFR Part 419.
    The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act 
(BBRA) of 1999 (Pub. L. 106-113) made major changes in the hospital 
outpatient prospective payment system (OPPS). The following Acts made 
additional changes to the OPPS: the Medicare, Medicaid, and SCHIP 
Benefits Improvement and Protection Act (BIPA) of 2000 (Pub. L. 106-
554); the Medicare Prescription Drug, Improvement, and Modernization 
Act (MMA) of 2003 (Pub. L. 108-173); the Deficit Reduction Act (DRA) of 
2005 (Pub. L. 109-171), enacted on February 8, 2006; the Medicare 
Improvements and Extension Act under Division B of Title I of the Tax 
Relief and Health Care Act (MIEA-TRHCA) of 2006 (Pub. L. 109-432), 
enacted on December 20, 2006; the Medicare, Medicaid, and SCHIP 
Extension Act (MMSEA) of 2007 (Pub. L. 110-173), enacted on December 
29, 2007; and the Medicare Improvements for Patients and Providers Act 
(MIPPA) of 2008 (Pub. L. 110-275), enacted on July 15, 2008.
    Under the OPPS, we pay for hospital outpatient services on a rate-
per-service basis that varies according to the ambulatory payment 
classification (APC) group to which the service is assigned. We use the 
Healthcare Common Procedure Coding System (HCPCS) codes (which include 
certain Current Procedural Terminology (CPT) codes) and descriptors to 
identify and group the services within each APC group. The OPPS 
includes payment for most hospital outpatient services, except those 
identified in section I.B. of this proposed rule. Section 
1833(t)(1)(B)(ii) of the Act provides for payment under the OPPS for 
hospital outpatient services designated by the Secretary (which 
includes partial hospitalization services furnished by community mental 
health centers (CMHCs)) and hospital outpatient services that are 
furnished to inpatients who have exhausted their Part A benefits, or 
who are otherwise not in a covered Part A stay. Section 611 of Public 
Law 108-173 added provisions for coverage for an initial preventive 
physical examination, subject to the applicable deductible and 
coinsurance, as an outpatient department service, payable under the 
OPPS.
    The OPPS rate is an unadjusted national payment amount that 
includes the Medicare payment and the beneficiary copayment. This rate 
is divided into a labor-related amount and a nonlabor-related amount. 
The labor-related amount is adjusted for area wage differences using 
the hospital inpatient wage index value for the locality in which the 
hospital or CMHC is located.
    All services and items within an APC group are comparable 
clinically and with respect to resource use (section 1833(t)(2)(B) of 
the Act). In accordance with section 1833(t)(2) of the Act, subject to 
certain exceptions, services and items within an APC group cannot be 
considered comparable with respect to the use of resources if the 
highest median (or mean cost, if elected by the Secretary) for an item 
or service in the APC group is more than 2 times greater than the 
lowest median cost for an item or service within the same APC group 
(referred to as the ``2 times rule''). In implementing this provision, 
we generally use the median cost of the item or service assigned to an 
APC group.
    For new technology items and services, special payments under the 
OPPS may be made in one of two ways. Section 1833(t)(6) of the Act 
provides for temporary additional payments, which we refer to as 
``transitional pass-through payments,'' for at least 2 but not more 
than 3 years for certain drugs, biological agents, brachytherapy 
devices used for the treatment of cancer, and categories of other 
medical devices. For new technology services that are not eligible for 
transitional pass-through payments, and for which we lack sufficient 
data to appropriately assign them to a clinical APC group, we have 
established special APC groups based on costs, which we refer to as New 
Technology APCs. These New Technology APCs are designated by cost bands 
which allow us to provide appropriate and consistent payment for 
designated new procedures that are not yet reflected in our claims 
data. Similar to pass-through payments, an assignment to a New 
Technology APC is temporary; that is, we retain a service within a New 
Technology APC until we acquire sufficient data to assign it to a 
clinically appropriate APC group.

B. Excluded OPPS Services and Hospitals

    Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to 
designate the hospital outpatient services that are paid under the 
OPPS. While most hospital outpatient services are payable under the 
OPPS, section 1833(t)(1)(B)(iv) of the Act excludes payment for 
ambulance, physical and occupational therapy, and speech-language 
pathology services, for which payment is made under a fee schedule. 
Section 614 of Public Law 108-173 amended section 1833(t)(1)(B)(iv) of 
the Act to exclude payment for screening and diagnostic mammography 
services from the OPPS. The Secretary exercised the authority granted 
under the statute to also exclude from the OPPS those services that are 
paid under fee schedules or other payment systems. Such excluded 
services include, for

[[Page 35237]]

example, the professional services of physicians and nonphysician 
practitioners paid under the Medicare Physician Fee Schedule (MPFS); 
laboratory services paid under the clinical diagnostic laboratory fee 
schedule (CLFS); services for beneficiaries with end-stage renal 
disease (ESRD) that are paid under the ESRD composite rate; and 
services and procedures that require an inpatient stay that are paid 
under the hospital inpatient prospective payment system (IPPS). We set 
forth the services that are excluded from payment under the OPPS in 
Sec.  419.22 of the regulations.
    Under Sec.  419.20(b) of the regulations, we specify the types of 
hospitals and entities that are excluded from payment under the OPPS. 
These excluded entities include: Maryland hospitals, but only for 
services that are paid under a cost containment waiver in accordance 
with section 1814(b)(3) of the Act; critical access hospitals (CAHs); 
hospitals located outside of the 50 States, the District of Columbia, 
and Puerto Rico; and Indian Health Service hospitals.

C. Prior Rulemaking

    On April 7, 2000, we published in the Federal Register a final rule 
with comment period (65 FR 18434) to implement a prospective payment 
system for hospital outpatient services. The hospital OPPS was first 
implemented for services furnished on or after August 1, 2000. Section 
1833(t)(9) of the Act requires the Secretary to review certain 
components of the OPPS, not less often than annually, and to revise the 
groups, relative payment weights, and other adjustments that take into 
account changes in medical practices, changes in technologies, and the 
addition of new services, new cost data, and other relevant information 
and factors.
    Since initially implementing the OPPS, we have published final 
rules in the Federal Register annually to implement statutory 
requirements and changes arising from our continuing experience with 
this system. These rules can be viewed on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/. We published in the Federal 
Register on November 18, 2008 the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68502). In that final rule with comment period, 
we revised the OPPS to update the payment weights and conversion factor 
for services payable under the CY 2009 OPPS on the basis of claims data 
from January 1, 2007, through December 31, 2007, and to implement 
certain provisions of Public Law 110-173 and Public Law 110-275. In 
addition, in that final rule we also responded to public comments 
received on the provisions of the November 27, 2007 final rule with 
comment period (72 FR 66580) pertaining to the APC assignment of HCPCS 
codes identified in Addendum B to that rule with the new interim 
(``NI'') comment indicator, and to public comments received on the July 
18, 2008 OPPS/ASC proposed rule for CY 2009 (73 FR 41416).
    Subsequent to publication of the CY 2009 OPPS/ASC final rule with 
comment period, we published in the Federal Register on January 26, 
2009, a correction notice (74 FR 4343 through 4344) to correct certain 
technical errors in the CY 2009 OPPS/ASC final rule with comment 
period.

D. Advisory Panel on Ambulatory Payment Classification Groups

1. Authority of the APC Panel
    Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of 
Public Law 106-113, and redesignated by section 202(a)(2) of Public Law 
106-113, requires that we consult with an outside panel of experts to 
review the clinical integrity of the payment groups and their weights 
under the OPPS. The Act further specifies that the panel will act in an 
advisory capacity. The Advisory Panel on Ambulatory Payment 
Classification (APC) Groups (the APC Panel), discussed under section 
I.D.2. of this proposed rule, fulfills these requirements. The APC 
Panel is not restricted to using data compiled by CMS, and it may use 
data collected or developed by organizations outside the Department in 
conducting its review.
2. Establishment of the APC Panel
    On November 21, 2000, the Secretary signed the initial charter 
establishing the APC Panel. This expert panel, which may be composed of 
up to 15 representatives of providers (currently employed full-time, 
not as consultants, in their respective areas of expertise) subject to 
the OPPS, reviews clinical data and advises CMS about the clinical 
integrity of the APC groups and their payment weights. The APC Panel is 
technical in nature, and it is governed by the provisions of the 
Federal Advisory Committee Act (FACA). Since its initial chartering, 
the Secretary has renewed the APC Panel's charter four times: on 
November 1, 2002; on November 1, 2004; on November 21, 2006; and on 
November 2, 2008. The current charter specifies, among other 
requirements, that: The APC Panel continues to be technical in nature; 
is governed by the provisions of the FACA; may convene up to three 
meetings per year; has a Designated Federal Officer (DFO); and is 
chaired by a Federal official designated by the Secretary.
    The current APC Panel membership and other information pertaining 
to the APC Panel, including its charter, Federal Register notices, 
membership, meeting dates, agenda topics, and meeting reports, can be 
viewed on the CMS Web site at: http://www.cms.hhs.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp#TopOfPage.
3. APC Panel Meetings and Organizational Structure
    The APC Panel first met on February 27 through March 1, 2001. Since 
the initial meeting, the APC Panel has held 15 meetings, with the last 
meeting taking place on February 18 and 19, 2009. Prior to each 
meeting, we publish a notice in the Federal Register to announce the 
meeting and, when necessary, to solicit nominations for APC Panel 
membership and to announce new members.
    The APC Panel has established an operational structure that, in 
part, includes the use of three subcommittees to facilitate its 
required APC review process. The three current subcommittees are the 
Data Subcommittee, the Visits and Observation Subcommittee, and the 
Packaging Subcommittee. The Data Subcommittee is responsible for 
studying the data issues confronting the APC Panel and for recommending 
options for resolving them. The Visits and Observation Subcommittee 
reviews and makes recommendations to the APC Panel on all technical 
issues pertaining to observation services and hospital outpatient 
visits paid under the OPPS (for example, APC configurations and APC 
payment weights). The Packaging Subcommittee studies and makes 
recommendations on issues pertaining to services that are not 
separately payable under the OPPS, but whose payments are bundled or 
packaged into APC payments. Each of these subcommittees was established 
by a majority vote from the full APC Panel during a scheduled APC Panel 
meeting, and their continuation as subcommittees was last approved at 
the February 2009 APC Panel meeting. At that meeting, the APC Panel 
recommended that the work of these three subcommittees continue, and we 
accept those recommendations of the APC Panel. All subcommittee 
recommendations are discussed and voted upon by the full APC Panel.

[[Page 35238]]

    Discussions of the other recommendations made by the APC Panel at 
the February 2009 meeting are included in the sections of this proposed 
rule that are specific to each recommendation. For discussions of 
earlier APC Panel meetings and recommendations, we refer readers to 
previously published hospital OPPS/ASC proposed and final rules, the 
CMS Web site mentioned earlier in this section, and the FACA database 
at http://fido.gov/facadatabase/public.asp.

E. Background and Summary of the CY 2010 OPPS/ASC Proposed Rule

    In this proposed rule, we set forth proposed changes to the 
Medicare hospital OPPS for CY 2010 to implement statutory requirements 
and changes arising from our continuing experience with the system. In 
addition, we are setting forth proposed changes to the revised Medicare 
ASC payment system for CY2010, including proposed updated payment 
weights and covered surgical ancillary services based on the proposed 
OPPS update. Finally, we are setting forth proposed quality measures 
for the Hospital Outpatient Quality Data Reporting Program (HOP QDRP) 
for reporting quality data for annual payment rate updates for CY 2011 
and subsequent calendar years, the requirements for data collection and 
submission for the annual payment update, and a proposed reduction in 
the OPPS payment for hospitals that fail to meet the HOP QDRP 
requirements for the CY 2010 payment update, in accordance with the 
statutory requirement. These changes would be effective for services 
furnished on or after January 1, 2010. The following is a summary of 
the major changes that we are proposing to make:
1. Proposed Updates Affecting OPPS Payments
    In section II. of this proposed rule, we set forth--
    <bullet> The methodology used to recalibrate the proposed APC 
relative payment weights.
    <bullet> The proposed changes to packaged services.
    <bullet> The proposed update to the conversion factor used to 
determine payment rates under the OPPS. In this section, we set forth 
proposed changes in the amounts and factors for calculating the full 
annual update increase to the conversion factor.
    <bullet> The proposed retention of our current policy to use the 
IPPS wage indices to adjust, for geographic wage differences, the 
portion of the OPPS payment rate and the copayment standardized amount 
attributable to labor-related cost.
    <bullet> The proposed update of statewide average default CCRs.
    <bullet> The proposed application of hold harmless transitional 
outpatient payments (TOPs) for certain small rural hospitals.
    <bullet> The proposed payment adjustment for rural SCHs.
    <bullet> The proposed calculation of the hospital outpatient 
outlier payment.
    <bullet> The calculation of the proposed national unadjusted 
Medicare OPPS payment.
    <bullet> The proposed beneficiary copayments for OPPS services.
2. Proposed OPPS Ambulatory Payment Classification (APC) Group Policies
    In section III. of this proposed rule, we discuss--
    <bullet> The proposed additions of new HCPCS codes to APCs.
    <bullet> Our proposals to establish a number of new APCs.
    <bullet> Our analyses of Medicare claims data and certain 
recommendations of the APC Panel.
    <bullet> The application of the 2 times rule and proposed 
exceptions to it.
    <bullet> Proposed changes to specific APCs.
    <bullet> Proposed movement of procedures from New Technology APCs 
to clinical APCs.
3. Proposed OPPS Payment for Devices
    In section IV. of this proposed rule, we discuss proposed pass-
through payment for specific categories of devices and the proposed 
adjustment for devices furnished at no cost or with partial or full 
credit.
4. Proposed OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    In section V. of this proposed rule, we discuss proposed CY 2010 
OPPS payment for drugs, biologicals, and radiopharmaceuticals, 
including the proposed payment for drugs, biologicals, and 
radiopharmaceuticals with and without pass-through status.
5. Proposed Estimate of OPPS Transitional Pass-Through Spending for 
Drugs, Biologicals, Radiopharmaceuticals, and Devices
    In section VI. of this proposed rule, we discuss the estimate of CY 
2010 OPPS transitional pass-through spending for drugs, biologicals, 
and devices.
6. Proposed OPPS Payment for Brachytherapy Sources
    In section VII. of this proposed rule, we discuss our proposal 
concerning payment for brachytherapy sources.
7. Proposed OPPS Payment for Drug Administration Services
    In section VIII. of this proposed rule, we set forth our proposed 
policy concerning coding and payment for drug administration services.
8. Proposed OPPS Payment for Hospital Outpatient Visits
    In section IX. of this proposed rule, we set forth our proposed 
policies for the payment of clinic and emergency department visits and 
critical care services based on claims data.
9. Proposed Payment for Partial Hospitalization Services
    In section X. of this proposed rule, we set forth our proposed 
payment for partial hospitalization services, including the proposed 
separate threshold for outlier payments for CMHCs.
10. Proposed Procedures That Will Be Paid Only as Inpatient Procedures
    In section XI. of this proposed rule, we discuss the procedures 
that we are proposing to remove from the inpatient list and assign to 
APCs for payment under the OPPS.
11. Proposed OPPS Nonrecurring Technical and Policy Changes and 
Clarifications
    In section XII. of this proposed rule, we set forth our proposals 
regarding nonrecurring technical issues and provide policy 
clarifications.
12. Proposed OPPS Payment Status and Comment Indicators
    In section XIII. of this proposed rule, we discuss our proposed 
changes to the definitions of status indicators assigned to APCs and 
present our proposed comment indicators for the final rule with comment 
period.
13. OPPS Policy and Payment Recommendations
    In section XIV. of this proposed rule, We address recommendations 
made by the Medicare Payment Advisory Commission (MedPAC) in its March 
2009 report to Congress, by the Office of Inspector General (OIG), and 
by the APC Panel regarding the OPPS for CY 2010.
14. Proposed Ambulatory Surgical Center (ASC) Payment System
    In section XV. of this proposed rule, we discuss the proposed 
update of the revised ASC payment system covered surgical procedures 
and covered ancillary services and payment rates for CY 2010.

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15. Reporting Quality Data for Annual Payment Rate Updates
    In section XVI. of this proposed rule: We discuss the proposed 
quality measures for reporting hospital outpatient (HOP) quality data 
for the annual payment update factor for CY 2012 and subsequent 
calendar years; set forth the requirements for data collection and 
submission for the annual payment update; and propose a reduction in 
the OPPS payment for hospitals that fail to meet the HOP Quality Data 
Reporting Program (QDRP) requirements for CY 2010.
16. Healthcare-Associated Conditions
    In section XVII. of this proposed rule, we discuss public responses 
to a December 2008 CMS public listening session addressing the 
potential extension of the principle of Medicare not paying more under 
the IPPS for the care of preventable hospital-acquired conditions 
experienced by a Medicare beneficiary during a hospital inpatient stay 
to medical care in other settings that are paid under other Medicare 
payment systems, including the OPPS, for those healthcare-associated 
conditions that occur or result from care in those other settings.
17. Regulatory Impact Analysis
    In section XXI. of this proposed rule, we set forth an analysis of 
the impact the proposed changes would have on affected entities and 
beneficiaries.

II. Proposed Updates Affecting OPPS Payments

A. Proposed Recalibration of APC Relative Weights

1. Database Construction
a. Database Source and Methodology
    Section 1833(t)(9)(A) of the Act requires that the Secretary review 
and revise the relative payment weights for APCs at least annually. In 
the April 7, 2000 OPPS final rule with comment period (65 FR 18482), we 
explained in detail how we calculated the relative payment weights that 
were implemented on August 1, 2000 for each APC group.
    For CY 2010, we are proposing to use the same basic methodology 
that we described in the April 7, 2000 OPPS final rule with comment 
period to recalibrate the APC relative payment weights for services 
furnished on or after January 1, 2010, and before January 1, 2011 (CY 
2010). 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. We are proposing to use the most 
recent available data to construct the database for calculating APC 
group weights. Therefore, for the purpose of recalibrating the proposed 
APC relative payment weights for CY 2010, we used approximately 130 
million final action claims for hospital outpatient department services 
furnished on or after January 1, 2008, and before January 1, 2009. (For 
exact counts of claims used, we refer readers to the claims accounting 
narrative under supporting documentation for this proposed rule on the 
CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/.)
    Of the 130 million final action claims for services provided in 
hospital outpatient settings used to calculate the CY 2010 OPPS payment 
rates for this proposed rule, approximately 100 million claims were the 
type of bill potentially appropriate for use in setting rates for OPPS 
services (but did not necessarily contain services payable under the 
OPPS). Of the 100 million claims, approximately 46 million claims were 
not for services paid under the OPPS or were excluded as not 
appropriate for use (for example, erroneous cost-to-charge ratios 
(CCRs) or no HCPCS codes reported on the claim). From the remaining 54 
million claims, we created approximately 91 million single records, of 
which approximately 61 million were ``pseudo'' single or ``single 
session'' claims (created from 24 million multiple procedure claims 
using the process we discuss later in this section). Approximately 
622,000 claims were trimmed out on cost or units in excess of +/- 3 
standard deviations from the geometric mean, yielding approximately 90 
million single bills for median setting. As described in section 
II.A.2. of this proposed rule, our data development process is designed 
with the goal of using appropriate cost information in setting the APC 
relative weights. The bypass process described in section II.A.1.b. of 
this proposed rule discusses how we develop ``pseudo'' single claims, 
with the intention of using more appropriate data from the available 
claims. In some cases, the bypass process allows us to use some portion 
of the submitted claim for cost estimation purposes, while the 
remaining information on the claim continues to be unusable. Consistent 
with the goal of using appropriate information in our data development 
process, we only use claims (or portions of each claim) that are 
appropriate for ratesetting purposes. Ultimately, we were able to use 
for CY 2010 ratesetting some portion of 95 percent of the CY 2008 
claims containing services payable under the OPPS.
    The proposed APC relative weights and payments for CY 2010 in 
Addenda A and B to this proposed rule were calculated using claims from 
CY 2008 that were processed before January 1, 2009, and continue to be 
based on the median hospital costs for services in the APC groups. We 
selected claims for services paid under the OPPS and matched these 
claims to the most recent cost report filed by the individual hospitals 
represented in our claims data. We continue to believe that it is 
appropriate to use the most current full calendar year claims data and 
the most recently submitted cost reports to calculate the median costs 
which we are proposing to convert to relative payment weights for 
purposes of calculating the CY 2010 payment rates.
b. Proposed Use of Single and Multiple Procedure Claims
    For CY 2010, in general, we are proposing to continue to use single 
procedure claims to set the medians on which the APC relative payment 
weights would be based, with some exceptions as discussed below in this 
section. We generally use single procedure claims to set the median 
costs for APCs because we believe that the OPPS relative weights on 
which payment rates are based should be derived from the costs of 
furnishing one 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.
    We agree that, optimally, it is desirable to use the data from as 
many claims as possible to recalibrate the APC relative payment 
weights, including those claims for multiple procedures. As we have for 
several years, we continued to use date of service stratification and a 
list of codes to be bypassed to convert multiple procedure claims to 
``pseudo'' single procedure claims. Through bypassing specified codes 
that we believe do not have significant packaged costs, we are able to 
use more data from multiple procedure claims. In many cases, this 
enables us to create multiple ``pseudo'' single claims from claims that 
were submitted as multiple procedure claims that contained numerous 
separately paid procedures reported on the same date on one claim. We 
refer to these newly created single procedure claims as ``pseudo'' 
single claims. The history of our use of a bypass list to generate 
``pseudo'' single claims is well documented, most recently in the CY 
2009 OPPS/ASC final rule with comment period (73 FR 68512 through

[[Page 35240]]

68519). In addition, for CY 2008, we increased packaging and created 
the first composite APCs. This also increased the number of bills that 
we were able to use for median calculation by enabling us to use claims 
that contained multiple major procedures that previously would not have 
been usable. Further, for CY 2009, we expanded the composite APC model 
to one additional clinical area, multiple imaging services (73 FR 68559 
through 68569). We refer readers to section II.A.2.e. of this proposed 
rule for discussion of the use of claims to establish median costs for 
composite APCs.
    We are proposing to continue to apply these processes to enable us 
to use as much claims data as possible for ratesetting for the CY 2010 
OPPS. This process enabled us to create, for this proposed rule, 
approximately 61 million ``pseudo'' single claims, including multiple 
imaging composite ``single session'' bills (we refer readers to section 
II.A.2.e.(5) of this proposed rule for further discussion), to add to 
the approximately 30 million ``natural'' single bills. For this 
proposed rule, ``pseudo'' single and ``single session'' procedure bills 
represent 67 percent of all single bills used to calculate median 
costs.
    For CY 2010, we are proposing to bypass 438 HCPCS codes for CY 2010 
that are identified in Table 1 of this proposed rule. Since the 
inception of the bypass list, we have calculated the percent of 
``natural'' single bills that contained packaging for each HCPCS code 
and the amount of packaging in each ``natural'' single bill for each 
code. We have generally retained the codes on the previous year's 
bypass list and used the update year's data (for CY 2010, data 
available for the February 2009 APC Panel meeting from CY 2008 claims 
processed through September 30, 2008) to determine whether it would be 
appropriate to propose to add additional codes to the previous year's 
bypass list. For CY 2010, we are proposing to continue to bypass all of 
the HCPCS codes on the CY 2009 OPPS bypass list. We also are proposing 
to add to the bypass list for CY 2010 all HCPCS codes not on the CY 
2009 bypass list that, using both CY 2009 final rule and February 2009 
APC Panel data, meet the same previously established empirical criteria 
for the bypass list that are summarized below. The entire list proposed 
for CY 2010 (including the codes that remain on the bypass list from 
prior years) is open to public comment. We assume that the 
representation of packaging in the ``natural'' single claims for any 
given code is comparable to packaging for that code in the multiple 
claims. The proposed criteria for the bypass list are:
    <bullet> There are 100 or more ``natural'' single claims for the 
code. This number of single claims ensures that observed outcomes are 
sufficiently representative of packaging that might occur in the 
multiple claims.
    <bullet> Five percent or fewer of the ``natural'' single claims for 
the code have packaged costs on that single claim for the code. This 
criterion results in limiting the amount of packaging being 
redistributed to the separately payable procedure remaining on the 
claim after the bypass code is removed and ensures that the costs 
associated with the bypass code represent the cost of the bypassed 
service.
    <bullet> The median cost of packaging observed in the ``natural'' 
single claims is equal to or less than $50. This limits the amount of 
error in redistributed costs.
    <bullet> The code is not a code for an unlisted service.
    In addition, we are proposing to continue to include on the bypass 
list HCPCS codes that CMS medical advisors believe have minimal 
associated packaging based on their clinical assessment of the complete 
CY 2010 OPPS proposal. Some of these codes were identified by CMS 
medical advisors and some were identified in prior years by commenters 
with specialized knowledge of the services that they requested be added 
to the bypass list. We also are proposing to continue to include on the 
bypass list certain HCPCS codes in order to purposefully direct the 
assignment of packaged costs where codes always appear together and 
there would otherwise be few single claims available for ratesetting. 
For example, we have previously discussed our reasoning for adding 
HCPCS code G0390 (Trauma response team associate with hospital critical 
care service) and the CPT codes for additional hours of drug 
administration to the bypass list (73 FR 68513 and 71 FR 68117 through 
68118).
    As a result of the multiple imaging composite APCs that we 
established in CY 2009, we note that the program logic for creating 
``pseudo'' singles from bypassed codes that are also members of 
multiple imaging composite APCs changed. When creating the set of 
``pseudo'' single claims, claims that contain ``overlap bypass codes,'' 
that is, those HCPCS codes that are both on the bypass list and are 
members of the multiple imaging composite APCs, were identified first. 
These HCPCS codes were then processed to create multiple imaging 
composite ``single session'' bills, that is, claims containing HCPCS 
codes from only one imaging family, thus suppressing the initial use of 
these codes as bypass codes. However, these ``overlap bypass codes'' 
were retained on the bypass list because, at the end of the ``pseudo'' 
single processing logic, we reassessed the claims without suppression 
of the ``overlap bypass codes'' under our longstanding ``pseudo'' 
single process to determine whether we could convert additional claims 
to ``pseudo'' single claims. (We refer readers to section II.A.2.b. of 
this proposed rule for further discussion of the treatment of ``overlap 
bypass codes.'') This process also created multiple imaging composite 
``single session'' bills that could be used for calculating composite 
APC median costs. ``Overlap bypass codes'' that are members of the 
proposed multiple imaging composite APCs are identified by asterisks 
(*) in Table 1 below.
    At the February 2009 APC Panel Meeting, the APC Panel recommended 
that CMS place CPT code 76098 (Radiological examination, surgical 
specimen) on the bypass list and reassign the code to APC 0260 (Level I 
Plain Film Except Teeth) in response to a public presentation 
requesting that CMS makes these changes. Although CPT code 76098 would 
not be eligible for addition to the bypass list because the frequency 
and magnitude of packaged costs in its ``natural'' single claims exceed 
the empirical criteria, the presenter suggested that the ``natural'' 
single claims represented aberrant billing with inappropriate packaged 
services and pointed out that the packaged services support the 
surgical procedures that commonly are also reported on claims for CPT 
code 76098. The presenter suggested that bypassing CPT code 76098 would 
properly allocate packaged costs to surgical procedures on these 
claims, and would increase the number of single claims available for 
ratesetting for both CPT code 76098 and the associated surgical breast 
procedures. The APC Panel indicated that the issues raised by the 
presenter appeared to be consistent with clinical practice and 
subsequently made the recommendation to bypass CPT code 76098 and 
reassign the code to APC 0260 based on its revised cost.
    Based on the APC Panel's specific recommendation for CPT code 
76098, we studied the billing patterns for the code in the ``natural'' 
single and multiple major claims in the CY 2008 claims data available 
for the February 2009 APC Panel. The presenter asserted that CPT code 
76098 is commonly billed with surgical breast procedures and our claims 
data from the multiple procedure

[[Page 35241]]

claims confirm this observation. However, as noted above, there are 
also a significant number of ``natural'' single bills in those data 
(1,303), and these ``natural'' single claims include packaged services, 
such as CPT code 19290 (Preoperative placement of needle localization 
wire, breast) and CPT 77032 code (Mammographic guidance for needle 
placement, breast (e.g., for wire localization or for injection), each 
lesion, radiological supervision and interpretation). We have received 
anecdotal information that hospitals may place guidance wires prior to 
surgery in the hospital's radiology department and then examine the 
surgical specimen in the radiology department after its surgical 
removal. This information, along with the number of observed 
``natural'' single claims, suggests that the packaged costs might 
appropriately be associated with the radiological examination of the 
breast specimen. Although bypassing CPT code 76098 would allow for the 
creation of more ``pseudo'' single claims for ratesetting, it would 
also require the assumption that all packaging on the claim would be 
correctly assigned to the remaining major procedure where it exists and 
that on ``natural'' single bills no packaging would be appropriately 
associated with CPT code 76098. Given the number of ``natural'' single 
bills for CPT code 76098 and the significant packaged costs on these 
claims, we are not confident that placement on the bypass list is 
appropriate.
    While we are not proposing to place CPT code 76098 on the bypass 
list, and we want to continue to provide separate payment for this 
procedure when appropriate, we do believe that CPT code 76098 is 
generally ancillary and supportive to surgical breast procedures. In CY 
2008 we established a group of conditionally packaged codes, called 
``T-packaged codes,'' whose payment is packaged when one or more 
separately paid surgical procedures with status indicator ``T'' are 
provided during a hospital encounter. In order to provide separate 
payment for CPT code 76098 when not provided with a separately payable 
surgical procedure, and also to recognize its ancillary and supportive 
nature when it accompanies separately payable procedures, we are 
proposing to conditionally package CPT code 76098 as a ``T-packaged 
code'' for CY 2010, identified with status indicator ``Q2'' in Addendum 
B to this proposed rule. As a ``T-packaged code,'' CPT code 76098 would 
receive separate payment except where it appears with a surgical 
procedure, in which case its payment would be packaged. Designating CPT 
76098 in this way allows the separate payment to appropriately account 
for the packaged costs that appear on the code's ``natural'' single 
bills, while also allowing us to use more multiple procedure claims 
that include both a surgical procedure and CPT code 76098 to set the 
payment rates for the related surgical procedures. The code-specific 
median cost of CPT code 76098 is approximately $346, consistent with 
its CY 2009 assignment to APC 0317 (Level II Miscellaneous Radiology 
Procedures) which has an APC median cost of approximately $339. In 
contrast, the median cost of APC 0260, the APC reassignment recommended 
by the APC Panel, is much lower at approximately $46. Therefore, we are 
not accepting the APC Panel's recommendation to reassign CPT code 
76098. Instead, we are proposing to continue its assignment to APC 0317 
for CY 2010 in those cases where CPT code 76098 is separately paid.
    Table 1 includes the proposed list of bypass codes for CY 2010. 
This list contains bypass codes that are appropriate to claims for 
services in CY 2008 and, therefore, includes codes that were deleted 
for CY 2009. We retain these deleted bypass codes on the bypass list 
because these codes existed in CY 2008, the year of our claims data. 
Using these deleted bypass codes for bypass purposes allows us to 
potentially create more ``pseudo'' single claims for ratesetting 
purposes. ``Overlap bypass codes'' that are members of the proposed 
multiple imaging composite APCs are identified by asterisks (*) in 
Table 1 below.
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BILLING CODE 4120-01-C
c. Proposed Calculation of CCRs
(1) Development of the CCRs
    We calculated hospital-specific overall ancillary CCRs and 
hospital-specific departmental CCRs for each hospital for which we had 
CY 2008 claims data from the most recent available hospital cost 
reports, in most cases, cost reports beginning in CY 2007. For the CY 
2010 OPPS proposed rates, we used the set of claims processed during CY 
2008. We applied the hospital-specific CCR to the hospital's charges at 
the most detailed level possible, based on a revenue code-to-cost 
center crosswalk that contains a hierarchy of CCRs used to estimate 
costs from charges for each revenue code. That crosswalk is available 
for review

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and continuous comment on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/03_crosswalk.asp#TopOfPage. We calculated CCRs 
for the standard and nonstandard cost centers accepted by the 
electronic cost report database. In general, the most detailed level at 
which we calculated CCRs was the hospital- specific departmental level. 
For a discussion of the hospital-specific overall ancillary CCR 
calculation, we refer readers to the CY 2007 OPPS/ASC final rule with 
comment period (71 FR 67983 through 67985).
    For CY 2010, we are proposing to continue using the hospital-
specific overall ancillary and departmental CCRs to convert charges on 
the claims reported under specific revenue codes to estimated costs 
through application of a revenue code-to-cost center crosswalk.
(2) Charge Compression
    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. We discuss our CCR calculation in section 
II.A.1.c. of this proposed rule and how we use these CCRs to estimate 
cost on hospital outpatient claims in detail in section II.A.2.a. of 
this proposed rule. As a result, the cost-based weights incorporate 
aggregation bias, undervaluing high cost items and overvaluing low cost 
items when an estimate of average markup, embodied in a single CCR, is 
applied to items of widely varying costs in the same cost center. 
Commenters expressed increased concern about the impact of charge 
compression when CMS began setting the relative weights for payment 
under the IPPS based on the costs of inpatient hospital services, 
rather than the charges for the services.
    To explore this issue, in August 2006 we awarded a contract to RTI 
International (RTI) to study the effects of charge compression in 
calculating the IPPS relative weights, particularly with regard to the 
impact on inpatient diagnosis-related group (DRG) payments, and to 
consider methods to capture better the variation in cost and charges 
for individual services when calculating costs for the IPPS relative 
weights across services in the same cost center. Of specific note was 
RTI's analysis of a regression-based methodology estimating an average 
adjustment for CCR by type of revenue code from an observed 
relationship between provider cost center CCRs and proportional billing 
of high and low cost services in the revenue codes associated with the 
cost center in the claims data. RTI issued a report in March 2007 with 
its findings on charge compression. The report is available on the CMS 
Web site at: http://www.cms.hhs.gov/reports/downloads/Dalton.pdf. 
Although this report was focused largely on charge compression in the 
context of the IPPS cost-based relative weights, several of the 
findings were relevant to the OPPS. Therefore, we discussed the 
findings and our responses to that report in the CY 2008 OPPS/ASC 
proposed rule (72 FR 42641 through 42643) and reiterated them in the CY 
2008 OPPS/ASC final rule with comment period (72 FR 66599 through 
66602).
    RTI noted in its 2007 report that its research was limited to IPPS 
DRG cost-based weights and that it did not examine potential areas of 
charge compression specific to hospital outpatient services. We were 
concerned that the analysis was too limited in scope because typically 
hospital cost report CCRs encompass both inpatient and outpatient 
services for each cost center. Further, because both the IPPS and OPPS 
rely on cost-based weights, we preferred to introduce any 
methodological adjustments to both payment systems at the same time. We 
believe that because charge compression affects the cost estimates for 
services paid under both IPPS and OPPS in the same way, it is 
appropriate that we would use the same or, at least, similar approaches 
to address the issue. Finally, we noted that we wished to assess the 
educational activities being undertaken by the hospital community to 
improve cost reporting accuracy in response to RTI's findings, either 
as an adjunct to or in lieu of regression-based adjustments to CCRs.
    We expanded RTI's analysis of charge compression to incorporate 
outpatient services. In August 2007, we again contracted with RTI. 
Under this contract, we asked RTI to evaluate the cost estimation 
process for the OPPS relative weights. This research included a 
reassessment of the regression-based CCR models using hospital 
outpatient and inpatient charge data, as well as a detailed review of 
the OPPS revenue code-to-cost center crosswalk and the OPPS' hospital-
specific CCR methodology. In evaluating cost-based estimation, in 
general, the results of RTI's analyses impact both the OPPS APC 
relative weights and the IPPS MS-DRG (Medicare-Severity) relative 
weights. The RTI final report can be found on RTI's Web site at: http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf. For a complete discussion of the RTI 
recommendations, public comments, and our responses, we refer readers 
to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519 
through 68527).
    In the FY 2009 IPPS final rule, we finalized our proposal for both 
the OPPS and IPPS to add one cost center to the cost report so that, in 
general, the costs and charges for relatively inexpensive medical 
supplies would be reported separately from the costs and charges for 
more expensive implantable devices (such as pacemakers and other 
implantable devices). Specifically, we said that we would create one 
cost center for ``Medical Supplies Charged to Patients'' and one cost 
center ``Implantable Devices Charged to Patients.'' This change 
ultimately will split the current CCR for Medical Supplies and 
Equipment into one CCR for medical supplies and another CCR for 
implantable devices. In response to the majority of commenters on the 
proposal set forth in the FY 2009 IPPS proposed rule, we finalized a 
definition of the Implantable Devices Charged to Patients cost center 
as capturing the costs and charges billed with the following UB-04 
revenue codes: 0275 (Pacemaker), 0276 (Intraocular lens), 0278 (Other 
implants), and 0624 (FDA investigational devices). This change to the 
cost report form will be made and will be reflected in cost reports for 
cost reporting periods beginning in the spring of 2009. Because there 
is generally a 3-year lag between the availability of cost report data 
for IPPS and OPPS ratesetting purposes in a given calendar year, we 
believe we will be able to use data from the revised cost report form 
to estimate costs from charges associated with UB-04 revenue codes 
0275, 0276, 0278, and 0624 for implantable devices in order to more 
accurately estimate the costs of device-related procedures for the CY 
2013 OPPS relative weights. For a complete discussion of the proposal, 
public comments, and our responses, we refer readers to the FY2009 IPPS 
final rule (73 FR 48458 through 48467).
    For the CY 2009 OPPS/ASC proposed rule, we made a similar proposal 
for drugs, proposing to split the Drugs Charged to Patients cost center 
into two cost centers: One for drugs with high pharmacy overhead costs 
and one for drugs with low pharmacy overhead costs (73 FR 41492). We 
noted that we expected that CCRs from the proposed new cost centers 
would be available in 2 to 3 years to refine OPPS drug cost

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estimates by accounting for differential hospital markup practices for 
drugs with high and low pharmacy overhead costs. However, after 
consideration of the public comments received and the APC Panel 
recommendations, we did not finalize our proposal to split the single 
standard Drugs Charged to Patients cost center into two cost centers, 
and instead indicated in the CY 2009 OPPS/ASC final rule with comment 
period (73 FR 68659) that we would continue to explore other potential 
approaches to improve our drug cost estimation methodology. Unlike 
implantable devices, we do not currently have a policy to address 
charge compression in our cost estimation for expensive drugs and 
biologicals. In section V.B.3.of this proposed rule, we are proposing 
an adjustment to our cost estimation methodology for drugs and 
biologicals in CY 2010 to address charge compression by proposing to 
shift a portion of the pharmacy overhead cost associated with packaged 
drugs and biologicals from those packaged drugs and biologicals to 
separately payable drugs and biologicals; proposing payment for 
separately payable drugs and biologicals at ASP +4 percent; and 
proposing a proportional reduction in the total amount of pharmacy 
overhead cost associated with packaged drugs and biologicals prior to 
our estimating the total resource costs of individual OPPS services.
    Finally, in the CY 2009 OPPS/ASC final rule with comment period, we 
indicated that we would be making some OPPS-specific changes in 
response to the RTI report recommendations. With regard to modifying 
the cost reporting preparation software in order to impose fixed 
descriptions for nonstandard cost centers, we indicated that the change 
would be made for the next release of the cost report software. We 
anticipate that these changes will be made to the cost reporting 
software in CY 2010 and will act as a quality check for hospitals to 
review their choice of nonstandard cost center code to ensure that the 
reporting of nonstandard cost centers is accurate, while not 
significantly increasing provider burden. In addition to improving the 
reporting mechanism for the nonstandard cost centers, we indicated in 
the CY 2009 final rule with comment period that we also planned to add 
the new nonstandard cost centers for Cardiac Rehabilitation, Hyperbaric 
Oxygen Therapy, and Lithotripsy. We expect that changes to add these 
nonstandard cost centers will be proposed for cost reports beginning in 
CY 2011 as part of a larger effort to update the Medicare cost report. 
We noted in the FY 2009 IPPS final rule (73 FR 48467 through 48468) 
that we are updating the cost report form to eliminate outdated 
requirements, in conjunction with the Paperwork Reduction Act, and that 
we planned to propose actual changes to the cost reporting form, the 
attending cost reporting software, and the cost report instructions in 
Chapter 36 of the PRM-II. We believe that improved cost report 
software, the incorporation of new nonstandard cost centers, and 
elimination of outdated requirements will improve the accuracy of the 
cost data contained in the electronic cost report data files and, 
therefore, the accuracy of our cost estimation processes for the OPPS 
relative weights. As has been described above, CMS has taken steps to 
address charge compression in the IPPS and OPPS, and continues to 
examine ways in which it can improve the accuracy of its cost 
estimation process.
2. Proposed Data Development Process and Calculation of Median Costs
    In this section of this proposed rule, we discuss the use of claims 
to calculate the proposed OPPS payment rates for CY 2010. The hospital 
OPPS page on the CMS Web site on which this proposed rule is posted 
provides an accounting of claims used in the development of the 
proposed payment rates at: http://www.cms.hhs.gov/HospitalOutpatientPPS. The accounting of claims used in the development 
of this proposed rule is included on the Web site under supplemental 
materials for the CY 2010 proposed rule. That accounting provides 
additional detail regarding the number of claims derived at each stage 
of the process. In addition, below in this section we discuss the file 
of claims that comprise the data set that is available for purchase 
under a CMS data use agreement. Our CMS Web site, http://www.cms.hhs.gov/HospitalOutpatientPPS, includes information about 
purchasing the ``OPPS Limited Data Set,'' which will now include the 
additional variables previously available only in the OPPS Identifiable 
Data Set, including ICD-9-CM diagnosis codes and revenue code payment 
amounts. This file is derived from the CY 2008 claims that were used to 
calculate the proposed payment rates for the CY2010 OPPS.
    We used the following methodology to establish the relative weights 
used in calculating the proposed OPPS payment rates for CY 2010 shown 
in Addenda A and B to this proposed rule.
a. Claims Preparation
    We used the CY 2008 hospital outpatient claims processed before 
January 1, 2009 to calculate the median costs of APCs, which in turn 
are used to set the proposed relative weights for CY 2010. To begin the 
calculation of the relative weights for CY 2010, we pulled all claims 
for outpatient services furnished in CY 2008 from the national claims 
history file. This is not the population of claims paid under the OPPS, 
but all outpatient claims (including, for example, critical access 
hospital (CAH) claims and hospital claims for clinical laboratory 
services for persons who are neither inpatients nor outpatients of the 
hospital).
    We then excluded claims with condition codes 04, 20, 21, and 77. 
These are claims that providers submitted to Medicare knowing that no 
payment would be made. For example, providers submit claims with a 
condition code 21 to elicit an official denial notice from Medicare and 
document that a service is not covered. We then excluded claims for 
services furnished in Maryland, Guam, the U.S. Virgin Islands, American 
Samoa, and the Northern Mariana Islands because hospitals in those 
geographic areas are not paid under the OPPS.
    We divided the remaining claims into the three groups shown below. 
Groups 2 and 3 comprise the 100 million claims that contain hospital 
bill types paid under the OPPS.
    1. Claims that were not bill types 12X, 13X (hospital bill types), 
14X (laboratory specimen bill types), or 76X (CMHC bill types). Other 
bill types are not paid under the OPPS and, therefore, these claims 
were not used to set OPPS payment.
    2. Claims that were bill types 12X, 13X or 14X. Claims with bill 
types 12X and 13X are hospital outpatient claims. Claims with bill type 
14X are laboratory specimen claims, of which we use a subset for the 
limited number of services in these claims that are paid under the 
OPPS.
    3. Claims that were bill type 76X (CMHC). (These claims are later 
combined with any claims in item 2 above with a condition code 41 to 
set the per diem partial hospitalization rates determined through a 
separate process.)
    To convert charges on the claims to estimated cost, we needed to 
multiply those charges by the CCR associated with each revenue code as 
discussed in section II.A.1.c.(1) of this proposed rule. For the CCR 
calculation process, we used the same general approach that we used in 
developing the final APC rates

[[Page 35255]]

for CY 2007, using the revised CCR calculation which excluded the costs 
of paramedical education programs and weighted the outpatient charges 
by the volume of outpatient services furnished by the hospital. We 
refer readers to the CY 2007 OPPS/ASC final rule with comment period 
for more information (71 FR 67983 through 67985). We first limited the 
population of cost reports to only those for hospitals that filed 
outpatient claims in CY 2008 before determining whether the CCRs for 
such hospitals were valid.
    We then calculated the CCRs for each cost center and the overall 
ancillary CCR for each hospital for which we had claims data. We did 
this using hospital-specific data from the Hospital Cost Report 
Information System. We used the most recent available cost report data, 
in most cases, cost reports beginning in CY 2007. For this proposed 
rule, we used the most recently submitted cost reports to calculate the 
CCRs to be used to calculate median costs for the proposed CY 2010 OPPS 
payment rates. If the most recent available cost report was submitted 
but not settled, we looked at the last settled cost report to determine 
the ratio of submitted to settled cost using the overall ancillary CCR, 
and we then adjusted the most recent available submitted but not 
settled cost report using that ratio. We calculated both an overall 
ancillary CCR and cost center-specific CCRs for each hospital. We used 
the overall ancillary CCR referenced in section II.A.1.c.(1) of this 
proposed rule for all purposes that require use of an overall ancillary 
CCR.
    We then flagged CAH claims, which are not paid under the OPPS, and 
claims from hospitals with invalid CCRs. The latter included claims 
from hospitals without a CCR; those from hospitals paid an all-
inclusive rate; those from hospitals with obviously erroneous CCRs 
(greater than 90 or less than .0001); and those from hospitals with 
overall ancillary CCRs that were identified as outliers (3 standard 
deviations from the geometric mean after removing error CCRs). In 
addition, we trimmed the CCRs at the cost center (that is, 
departmental) level by removing the CCRs for each cost center as 
outliers if they exceeded <plus-minus>3 standard deviations from the 
geometric mean. We used a four-tiered hierarchy of cost center CCRs, 
the revenue code-to-cost center crosswalk, to match a cost center to 
every possible revenue code appearing in the outpatient claims that is 
relevant to OPPS services, with the top tier being the most common cost 
center and the last tier being the default CCR. If a hospital's cost 
center CCR was deleted by trimming, we set the CCR for that cost center 
to ``missing'' so that another cost center CCR in the revenue center 
hierarchy could apply. If no other cost center CCR could apply to the 
revenue code on the claim, we used the hospital's overall ancillary CCR 
for the revenue code in question. For example, if a visit was reported 
under the clinic revenue code but the hospital did not have a clinic 
cost center, we mapped the hospital-specific overall ancillary CCR to 
the clinic revenue code. The revenue code-to-cost center crosswalk is 
available for inspection and comment on the CMS Web site: http://www.cms.hhs.gov/HospitalOutpatientPPS. Revenue codes not used to set 
medians or to model impacts are identified with an ``N'' in the revenue 
code-to-cost center crosswalk.
    We are proposing to update the revenue code-to-cost center 
crosswalk to more accurately reflect the current use of revenue codes. 
We indicated in the CY 2009 OPPS/ASC final rule with comment period (73 
FR 68531) that we intended to assess the National Uniform Billing 
Committee (NUBC) revenue codes to determine whether any changes to the 
list of packaged revenue codes should be proposed for the CY 2010 OPPS. 
We expanded this evaluation to review all revenue codes in the revenue 
code-to-cost center crosswalk that we have used for OPPS ratesetting 
purposes in recent years against the CY 2008 NUBC definitions of 
revenue codes in place for CY 2008. As a result of that review we are 
proposing to revise the revenue code-to-cost center crosswalk as 
described in Table 2 below to update the revenue codes for which we 
would estimate costs on each claim and incorporate the costs for those 
revenue codes into APC median cost estimates. In Table 2, Column A 
provides the 2008 revenue code and description. Column B indicates 
whether the charges reported with the revenue code would be converted 
to cost and incorporated into median cost estimates for CY 2010. Column 
C indicates whether the charges reported with the revenue code were 
converted to cost and incorporated into median cost estimates for the 
CY 2009 OPPS. In both columns, a ``Y'' indicates that the charges would 
be converted to cost in CY 2010 (or were converted for CY 2009), and an 
``N'' indicates that charges reported under the revenue code would not 
be converted to cost and incorporated into median cost estimates. 
Finally, Column D provides our rationale for the proposed CY 2010 
change.
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    Also, as a result of our comprehensive review of the revenue codes 
included in the revenue code-to-cost center crosswalk, we are proposing 
to add revenue codes to the hierarchy of primary, secondary, and 
tertiary hospital cost report cost centers that result in the 
departmental CCRs that we use to estimate cost from charges for some 
revenue codes or to revise the applicable cost centers associated with 
a given revenue code. Table below lists the revenue codes for which we 
are proposing changes to the revenue code-to-cost center crosswalk and 
our rationale for each proposed change. With the exception of revenue 
code 0942 (Other Therapeutic Services; Education/Training), the revenue 
codes for which we are proposing changes to the designated departmental 
CCRs are those identified in our comprehensive review that are also 
listed above in Table 2.

 Table 3--Proposed Changes to CY 2010 OPPS Hierarchy of Cost Centers in
                the Revenue Code-to-Cost Center Crosswalk
------------------------------------------------------------------------
    2008 Revenue code and
         description             Rationale for proposed CY 2010 change
------------------------------------------------------------------------
0392--Administration,          We are proposing to crosswalk charges
 Processing and Storage for     under revenue code 0392 to cost center
 Blood and Blood Components;    4700 (Blood Storing, Processing, &
 Processing and Storage.        Transfusing) because we believe that
                                cost center 4700 is the most likely
                                departmental cost center to which
                                hospitals would assign the costs of
                                blood processing and storage. We are
                                proposing no secondary or tertiary cost
                                centers because we believe that no other
                                departmental cost centers are
                                appropriate.
0623--Medical Surgical         We are proposing to crosswalk the charges
 Supplies--Extension of 027X;   reported under revenue code 0623 to cost
 Surgical Dressings.            center 5500 (Medical Supplies Charged to
                                Patients) as the primary cost center
                                because we believe that the costs
                                associated with the charges for surgical
                                dressings are most likely to be assigned
                                by hospitals to cost center 5500. We are
                                proposing no secondary or tertiary cost
                                centers because we believe that no other
                                departmental cost centers are
                                appropriate.
0931--Medical Rehabilitation   We are proposing to crosswalk charges
 Day Program; Half Day.         reported under revenue codes 0931 and
                                0932 to cost center 6000 (Clinic) as the
                                primary cost center. We are proposing no
                                secondary or tertiary cost centers
                                because we believe that no other
                                departmental cost centers are
                                appropriate.
0932--Medical Rehabilitation
 Day Program; Full Day
0942--Other Therapeutic        We are proposing to crosswalk the charges
 Services (also see 095x, an    under revenue code 0942 to cost center
 extension of 094x); Educ/      6000 (Clinic) as the primary cost
 Training.                      center. Currently, the charges under
                                revenue code 0942 are crosswalked to the
                                overall ancillary CCR. We believe that
                                cost center 6000 is a more appropriate
                                primary cost center. We are proposing no
                                secondary or tertiary cost centers
                                because we believe that no other
                                departmental cost centers are
                                appropriate.
0948--Other Therapeutic        We are proposing to crosswalk the charges
 Services (also see 095x, an    under revenue code 0948 to cost center
 extension of 094x);            4900 (Respiratory Therapy) as primary
 Pulmonary Rehabilitation.      and to cost center 6000 (Clinic) as
                                secondary because we believe that
                                hospitals are most likely to assign the
                                costs of these services to these cost
                                centers. We are proposing no tertiary
                                cost center.
------------------------------------------------------------------------

    Having revised the revenue code-to-cost center crosswalk, we then 
converted the charges to costs on each claim by applying the CCR that 
we believed was best suited to the revenue code indicated on the line 
with the charge. One exception to this general methodology for 
converting charges to costs on each claim is the calculation of median 
blood costs, as discussed in section II.A.2.d.(2) of this proposed 
rule.
    Thus, we applied CCRs as described above to claims with bill type 
12X, 13X, or 14X, excluding all claims from CAHs and hospitals in 
Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the 
Northern Mariana Islands and

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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. 
These claims were combined with the 76X claims identified previously to 
calculate the partial hospitalization per diem rates. We note that the 
separate file containing partial hospitalization claims is included in 
the files that are available for purchase as discussed above.
    We then excluded claims without a HCPCS code. We moved to another 
file claims that contained nothing but influenza and pneumococcal 
pneumonia (PPV) vaccines. Influenza and PPV vaccines are paid at 
reasonable cost and, therefore, these claims are not used to set OPPS 
rates.
    We next copied line-item costs for drugs, blood, and brachytherapy 
sources (the lines stay on the claim, but are copied onto another file) 
to a separate file. No claims were deleted when we copied these lines 
onto another file. These line-items are used to calculate a per unit 
mean and median cost and a per day mean and median cost for drugs, 
therapeutic radiopharmaceutical agents, and brachytherapy sources, as 
well as other information used to set payment rates, such as a unit-to-
day ratio for drugs.
    To implement our proposal to redistribute some portion of total 
cost for packaged drugs and biologicals to separately payable drugs and 
biologicals as acquisition and pharmacy overhead and handling costs 
discussed in section V.B.3. of this proposed rule, we used the line-
item cost data for drugs and biologicals for which we had a HCPCS code 
with ASP pricing information to calculate the ASP+X values first for 
all drugs and biologicals, and then for separately payable drugs and 
biologicals and for packaged drugs and biologicals, respectively, by 
taking the ratio of total claim cost for each group relative to total 
ASP dollars (per unit of each drug or biological HCPCS code's April 
2009 ASP amount multiplied by total units for each drug or biological 
in the CY 2008 claims data). These values are ASP+13 percent, ASP-2 
percent, and ASP+247 percent, respectively. As we discuss in greater 
detail in section V.B.3. of this proposed rule, we believe that between 
one-third and one-half of the total cost in our claims data in excess 
of ASP dollars for packaged drugs and biologicals, about $150 million, 
is currently allocated to packaged drugs and biologicals due to the 
combined effects of charge compression and our choice of a drug 
packaging threshold but should instead be allocated to separately 
payable drugs and biologicals as acquisition and pharmacy overhead and 
handling cost. The $150 million is between one-third and one-half of 
the difference of $395 million between the total cost of packaged drugs 
and biologicals in our CY 2008 claims data ($555 million) and ASP 
dollars for the same drugs and biologicals ($160 million). Removing 
$150 million in pharmacy overhead cost from packaged drugs and 
biologicals reduces the $555 million to $405 million, a 27 percent 
reduction. To implement our CY 2010 proposal to redistribute $150 
million in claim cost from packaged drugs and biologicals to separately 
payable drugs and biologicals, we multiplied the cost of each packaged 
drug or biological with a HCPCS code and ASP pricing information in our 
CY 2008 claims data by 0.73. We also added the redistributed $150 
million to the total cost of separately payable drugs and biologicals 
in our CY 2008 claims data, which increased the relationship between 
the total cost for separately payable drugs and biologicals and ASP 
dollars for the same drugs and biologicals to ASP+4 percent.
    For CY 2010, we added an additional trim in our claims preparation 
to remove line-items that were not paid during claim processing, 
presumably for a line-item rejection or denial. The number of edits for 
valid OPPS payment in the Integrated Outpatient Code Editor (I/OCE) and 
elsewhere has grown significantly in the past few years, especially 
with the implementation of the full spectrum of National Correct Coding 
Initiative (NCCI) edits. To ensure that we are using valid claims that 
represent the cost of payable services to set payment rates, we removed 
line-items with an OPPS status indicator for the claim year (CY 2008) 
and a status indicator of ``S,'' ``T,'' ``V,'' or ``X'' when separately 
paid under the proposed CY 2010 payment system. This logic preserves 
charges for services that would not have been paid in the claim year 
but for which some estimate of cost is needed for the prospective year, 
such as services newly proposed to come off the inpatient list for CY 
2010 which were assigned status indicator ``C'' in the claim year.
    Using February 2009 APC Panel data, we estimate that the impact of 
removing line-items with valid status indicators that received no CY 
2008 payment was limited to approximately 1.4 percent of all line-items 
for separately paid services. This additional trim reduced the number 
of single bills available for ratesetting by 1.5 percent. For 
approximately 92 percent of procedural APCs, we observed a change in 
the APC median cost of less than 1 percent. A handful of APCs 
experienced greater changes in median cost. For example, APC 0618 
(Trauma Response with Critical Care) experienced declines in both the 
number of single bills used to set the median cost and the estimated 
median cost itself. This occurred because the I/OCE has an edit to 
ensure that HCPCS code G0390 (Trauma response team activation 
associated with hospital critical care service), which is assigned to 
APC 0618, receives payment only when one unit of G0390 appears with 
both a revenue code in the 68x series and CPT code 99291 (Critical 
care, evaluation and management of the critically ill or critically 
injured patient; first 30-74 minutes) on the claim for the same date of 
service, as described in the CY 2007 OPPS/ASC final rule with comment 
period (71 FR 68134). If the I/OCE criteria are not met, HCPCS code 
G0390 is not separately paid, and we found that a number of CY2008 
claims including HCPCS code G0390 did not meet the criteria for 
payment. On the other hand, a few APCs had greater estimated median 
costs and greater numbers of single bills as a result of this 
additional trim, presumably because removing lines from the claim 
allowed us to identify more single bills. We believe that removing 
lines with valid status indicators that were edited and not paid during 
claims processing increases the accuracy of the single bills used to 
determine the APC median costs for ratesetting.
b. Splitting Claims and Creation of ``Pseudo'' Single Claims
(1) Splitting Claims
    We then split the remaining claims into five groups: single majors, 
multiple majors, single minors, multiple minors, and other claims. 
(Specific definitions of these groups follow below.) We are proposing 
to continue our current policy of defining major procedures as any 
HCPCS code having a status indicator of ``S,'' ``T,'' ``V,'' or ``X,'' 
defining minor procedures as any code having a status indicator of 
``F,'' ``G,'' ``H,'' ``K,'' ``L,'' ``R,'' ``U,'' or ``N,'' and 
classifying ``other'' procedures as any code having a status indicator 
other than one that we have classified as major or minor. For CY 2010, 
we are proposing to continue assigning status indicator ``R'' to blood 
and blood products; status indicator ``U'' to brachytherapy sources; 
status indicator ``Q1'' to all ``STVX-packaged codes''; status 
indicator ``Q2'' to all ``T-packaged codes''; and status indicator 
``Q3'' to all codes that may be paid through a

[[Page 35263]]

composite APC based on composite-specific criteria or paid separately 
through single code APCs when the criteria are not met. As discussed in 
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68709), we 
established status indicators ``Q1,'' ``Q2,'' and ``Q3'' to facilitate 
identification of the different categories of codes. We are proposing 
to treat these codes in the same manner for data purposes for CY 2010 
as we have treated them since CY 2008. Specifically, we are proposing 
to continue to evaluate whether the criteria for separate payment of 
codes with status indicator ``Q1'' or ``Q2'' are met in determining 
whether they are treated as major or minor codes. As discussed earlier 
in this section, because we are proposing to treat CPT code 76098 as 
conditionally packaged, this logic now includes the addition of CPT 
code 76098 as a ``Q2'' code. Codes with status indicator ``Q1'' or 
``Q2'' are carried through the data either with status indicator ``N'' 
as packaged or, if they meet the criteria for separate payment, they 
are given the status indicator of the APC to which they are assigned 
and are considered as ``pseudo'' single major codes. Codes assigned 
status indicator ``Q3'' are paid under individual APCs unless they 
occur in the combinations that qualify for payment as composite APCs 
and, therefore, they carry the status indicator of the individual APC 
to which they are assigned through the data process and are treated as 
major codes during both the split and ``pseudo'' single creation 
process. The calculation of the median costs for composite APCs from 
multiple major claims is discussed in section II.A.2.e. of this 
proposed rule.
    Specifically, we divided the remaining claims into the following 
five groups:
    1. Single Major Claims: Claims with a single separately payable 
procedure (that is, status indicator ``S,'' ``T,'' ``V,'' or ``X,'' 
which includes codes with status indicator ``Q3''); claims with one 
unit of a status indicator ``Q1'' code (``STVX-packaged'') where there 
was no code with status indicator ``S,'' ``T,'' ``V,'' or ``X'' on the 
same claim on the same date; or claims with one unit of a status 
indicator ``Q2'' code (``T- packaged'') where there was no code with a 
status indicator ``T'' on the same claim on the same date.
    2. Multiple Major Claims: Claims with more than one separately 
payable procedure (that is, status indicator ``S,'' ``T,'' ``V,'' or 
``X,'' which includes codes with status indicator ``Q3''), or multiple 
units of one payable procedure. These claims include those codes with a 
status indicator ``Q2'' code (``T-packaged'') where there was no 
procedure with a status indicator ``T'' on the same claim on the same 
date of service but where there was another separately paid procedure 
on the same claim with the same date of service (that is, another code 
with status indicator ``S,'' ``V,'' or ``X''). We also include in this 
set claims that contained one unit of one code when the bilateral 
modifier was appended to the code and the code was conditionally or 
independently bilateral. In these cases, the claims represented more 
than one unit of the service described by the code, notwithstanding 
that only one unit was billed.
    3. Single Minor Claims: Claims with a single HCPCS code that was 
assigned status indicator ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' ``R,'' 
``U,'' or ``N'' and not status indicator ``Q1'' (``STVX-packaged'') or 
status indicator ``Q2'' (``T-packaged'') code.
    4. Multiple Minor Claims: Claims with multiple HCPCS codes that are 
assigned status indicator ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' ``R,'' 
``U,'' or ``N;'' claims that contain more than one code with status 
indicator ``Q1'' (``STVX-packaged'') or more than one unit of a code 
with status indicator ``Q1'' but no codes with status indicator ``S,'' 
``T,'' ``V,'' or ``X'' on the same date of service; or claims that 
contain more than one code with status indicator ``Q2'' (T-packaged), 
or ``Q2'' and ``Q1,'' or more than one unit of a code with status 
indicator ``Q2'' but no code with status indicator ``T'' on the same 
date of service.
    5. Non-OPPS Claims: Claims that contain no services payable under 
the OPPS (that is, all status indicators other than those listed for 
major or minor status). These claims were excluded from the files used 
for the OPPS. Non-OPPS claims have codes paid under other fee 
schedules, for example, durable medical equipment or clinical 
laboratory tests, and do not contain a code for a separately payable or 
packaged OPPS service. Non-OPPS claims include claims for therapy 
services paid sometimes under the OPPS but billed, in these non-OPPS 
cases, with revenue codes indicating that the therapy services would be 
paid under the Medicare Physician Fee Schedule (MPFS).
    The claims listed in numbers 1, 2, 3, and 4 above are included in 
the data file that can be purchased as described above. Claims that 
contain codes to which we have assigned status indicators ``Q1'' 
(``STVX-packaged'') and ``Q2'' (``T-packaged'') appear in the data for 
the single major file, the multiple major file, and the multiple minor 
file used in this proposed rule. Claims that contain codes to which we 
have assigned status indicator ``Q3'' (composite APC members) appear in 
the data of both the single and multiple major files used in this 
proposed rule, depending on the specific composite calculation.
(2) Creation of ``Pseudo'' Single Claims
    To develop ``pseudo'' single claims for this proposed rule, we 
examined both the multiple major claims and the multiple minor claims. 
We first examined the multiple major claims for dates of service to 
determine if we could break them into ``pseudo'' single procedure 
claims using the dates of service for all lines on the claim. If we 
could create claims with single major procedures by using dates of 
service, we created a single procedure claim record for each separately 
payable procedure on a different date of service (that is, a ``pseudo'' 
single).
    We also used the bypass codes listed earlier in Table 1 and 
discussed in section II.A.1.b. of this proposed rule to remove 
separately payable procedures that 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 
claims. The proposed CY 2010 ``overlap bypass codes'' are listed in 
Table 1 in section II.A.1.b. of this proposed rule. When one of the two 
separately payable procedures on a multiple procedure claim was on the 
bypass list, we split the claim into two ``pseudo'' single procedure 
claim records. The single procedure claim record that contained the 
bypass code did not retain packaged services. The single procedure 
claim record that contained the other separately payable procedure (but 
no bypass code) retained the packaged revenue code charges and the 
packaged HCPCS code charges. We also removed lines that contained 
multiple units of codes on the bypass list and treated them as 
``pseudo'' single claims by dividing the cost for the multiple units by 
the number of units on the line. Where one unit of a single, separately 
payable procedure code remained on the claim after removal of the 
multiple units of the bypass code, we created a ``pseudo'' single 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

[[Page 35264]]

otherwise be multiple procedure claims and could not be used.
    We then assessed the claims to determine if the criteria for the 
multiple imaging composite APCs, discussed in section II.A.2.e.(5) of 
this proposed rule, were met. Where the criteria for the imaging 
composite APCs were met, we created a ``single session'' claim for the 
applicable imaging composite service and determined whether we could 
use the claim in ratesetting. For HCPCS codes that are both 
conditionally packaged and are members of a multiple imaging composite 
APC, we first assessed whether the code would be packaged and if so, 
the code ceased to be available for further assessment as part of the 
composite APC. Because the packaged code would not be a separately 
payable procedure, we considered it to be unavailable for use in 
setting the composite APC median cost. Having identified ``single 
session'' claims for the imaging composite APCs, we reassessed the 
claim to determine if, after removal of all lines for bypass codes, 
including the ``overlap bypass codes,'' a single unit of a single 
separately payable code remained on the claim. If so, we attributed the 
packaged costs on the claim to the single unit of the single remaining 
separately payable code other than the bypass code to create a 
``pseudo'' single claim. We also identified line items of overlap 
bypass codes as a ``pseudo'' single claim. This allowed us to use more 
claims data for ratesetting purposes for this proposed rule.
    We also examined the multiple minor claims to determine whether we 
could create ``pseudo'' single procedure claims. Specifically, where 
the claim contained multiple codes with status indicator ``Q1'' 
(``STVX-packaged'') on the same date of service or contained multiple 
units of a single code with status indicator ``Q1,'' we selected the 
status indicator ``Q1'' HCPCS code that had the highest CY 2008 
relative weight, set the units to one on that HCPCS code to reflect our 
policy of paying only one unit of a code with a status indicator of 
''Q1.'' We then packaged all costs for the following into a single cost 
for the ``Q1'' HCPCS code that had the highest CY 2008 relative weight 
to create a ``pseudo'' single claim for that code: Additional units of 
the status indicator ``Q1'' HCPCS code with the highest CY 2008 
relative weight; other codes with status indicator ``Q1;'' and all 
other packaged HCPCS codes and packaged revenue code costs. We changed 
the status indicator for selected codes from the data status indicator 
of ``N'' to the status indicator of the APC to which the selected 
procedure was assigned for further data processing and considered this 
claim as a major procedure claim. We used this claim in the calculation 
of the APC median cost for the status indicator ``Q1'' HCPCS code.
    Similarly, where a multiple minor claim contained multiple codes 
with status indicator ``Q2'' (``T-packaged'') or multiple units of a 
single code with status indicator ``Q2,'' we selected the status 
indicator ``Q2'' HCPCS code that had the highest CY 2008 relative 
weight, set the units to one on that HCPCS code to reflect our policy 
of paying only one unit of a code with a status indicator of ''Q2.'' We 
then packaged all costs for the following into a single cost for the 
``Q2'' HCPCS code that had the highest CY 2008 relative weight to 
create a ``pseudo'' single claim for that code: Additional units of the 
status indicator ``Q2'' HCPCS code with the highest CY 2008 relative 
weight; other codes with status indicator ``Q2''; and other packaged 
HCPCS codes and packaged revenue code costs. We changed the status 
indicator for the selected code from a data status indicator of ``N'' 
to the status indicator of the APC to which the selected code was 
assigned, and we considered this claim as a major procedure claim.
    Lastly, where a multiple minor claim contained multiple codes with 
status indicator ``Q2'' (``T-packaged'') and status indicator ``Q1'' 
(``STVX-packaged''), we selected the status indicator ``Q2'' HCPCS code 
(``T-packaged'') that had the highest relative weight for CY 2008 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 
claim for that code: additional units of the status indicator ``Q2'' 
HCPCS code with the highest CY 2008 relative weight; other codes with 
status indicator ``Q2;'' codes with status indicator ``Q1'' (``STVX-
packaged''); and other packaged HCPCS codes and packaged revenue code 
costs. We favor status indicator ``Q2'' over ``Q1'' HCPCS codes because 
``Q2'' HCPCS codes have higher CY 2008 relative weights. If a status 
indicator ``Q1'' HCPCS code had a higher CY 2008 relative weight, it 
would become the primary code for the simulated single bill process. We 
changed the status indicator for the selected status indicator ``Q2'' 
(``T-packaged'') code from a data status indicator of ``N'' to the 
status indicator of the APC to which the selected code was assigned and 
we considered this claim as a major procedure claim.
    We excluded those claims that we were not able to convert to single 
claims even after applying all of the techniques for creation of 
``pseudo'' singles to multiple major and to multiple minor claims. As 
has been our practice in recent years, we also excluded claims that 
contained codes that were viewed as independently or conditionally 
bilateral and that contained the bilateral modifier (Modifier 50 
(Bilateral procedure)) because the line-item cost for the code 
represented the cost of two units of the procedure, notwithstanding 
that the code appeared with a unit of one.
c. Completion of Claim Records and Median Cost Calculations
    We then packaged the costs of packaged HCPCS codes (codes with 
status indicator ``N'' listed in Addendum B to this proposed rule and 
the costs of those lines for codes with status indicator ``Q1'' or 
``Q2'' when they are not separately paid), and the costs of packaged 
revenue codes into the cost of the single major procedure remaining on 
the claim. For CY 2010, this packaging also included the redistributed 
packaged pharmacy overhead cost relative to the units of separately 
payable drugs on each single procedure claim.
    As noted in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation 
that requires CMS to review the final list of packaged revenue codes 
for consistency with OPPS policy and ensure that future versions of the 
I/OCE edit accordingly. We compared the packaged revenue codes in the 
I/OCE to the final list of packaged revenue codes for the CY 2009 OPPS 
(73 FR 68531 through 68532) that we used for packaging costs in median 
calculation. As a result of that analysis, we are proposing to use the 
packaged revenue codes for CY 2010 that are displayed in Table 4 below.
    As noted in the CY 2009 OPPS/ASC final rule with comment period (73 
FR 68531), we replaced the NUBC standard abbreviations for the revenue 
codes listed in Table 2 of the CY 2009 OPPS/ASC proposed rule with the 
most current NUBC descriptions of the revenue code categories and 
subcategories to better articulate the meanings of the revenue codes 
without actually changing the proposed list of revenue codes. In the 
course of making the changes in labeling for the revenue codes in Table 
2 of the CY 2009 OPPS/ASC final rule with comment period, we noticed 
some changes to revenue categories and subcategories that we

[[Page 35265]]

believed warranted further review for future OPPS updates. Although we 
finalized the list of packaged revenue codes in Table 2 for CY 2009, we 
indicated in the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68531) that we intended to assess the NUBC revenue codes to determine 
whether any changes to the list of packaged revenue codes should be 
proposed for the CY 2010 OPPS. We specifically requested public input 
and discussion on this issue during the comment period of the CY 2009 
OPPS/ASC final rule with comment period. We did not receive any public 
comments on this issue. As we discuss in section II.A.2.a. of this 
proposed rule, we have completed that analysis for all revenue codes in 
the revenue code-to-cost center crosswalk and, as a result, we are 
proposing to add several revenue codes to the list of packaged revenue 
codes for the CY 2010 OPPS. Specifically, we believe that the costs 
derived from charges reported under revenue codes 0261 (IV Therapy; 
Infusion Pump); 0392 (Administration, Processing and Storage for Blood 
and Blood Components; Processing and Storage); 0623 (Medical Supplies--
Extension of 027X, Surgical Dressings); 0943 (Other Therapeutic 
Services (also see 095X, an extension of 094X), Cardiac 
Rehabilitation); and 0948 (Other Therapeutic Services (also see 095X, 
an extension of 094X), Pulmonary Rehabilitation) are appropriately 
packaged into payment for other OPPS services when charges appear on 
lines with these revenue codes but no HCPCS code appears on the line. 
Revenue codes that we are proposing to add to the CY 2010 packaged 
revenue code list are identified by asterisks (*) in Table 4 below.

            Table 4--Proposed CY 2010 Packaged Revenue Codes
------------------------------------------------------------------------
         Revenue code                          Description
------------------------------------------------------------------------
0250..........................  Pharmacy; General Classification.
0251..........................  Pharmacy; Generic Drugs.
0252..........................  Pharmacy; Non-Generic Drugs.
0254..........................  Pharmacy; Drugs Incident to Other
                                 Diagnostic Services.
0255..........................  Pharmacy; Drugs Incident to Radiology.
0257..........................  Pharmacy; Non-Prescription.
0258..........................  Pharmacy; IV Solutions.
0259..........................  Pharmacy; Other Pharmacy.
0260..........................  IV Therapy; General Classification.
0261 *........................  IV Therapy; Infusion Pump.
0262..........................  IV Therapy; IV Therapy/Pharmacy Svcs.
0263..........................  IV Therapy; IV Therapy/Drug/Supply
                                 Delivery.
0264..........................  IV Therapy; IV Therapy/Supplies.
0269..........................  IV Therapy; Other IV Therapy.
0270..........................  Medical/Surgical Supplies and Devices;
                                 General Classification.
0271..........................  Medical/Surgical Supplies and Devices;
                                 Non-sterile Supply.
0272..........................  Medical/Surgical Supplies and Devices;
                                 Sterile Supply.
0273..........................  Medical/Surgical Supplies and Devices;
                                 Take Home Supplies.
0275..........................  Medical/Surgical Supplies and Devices;
                                 Pacemaker.
0276..........................  Medical/Surgical Supplies and Devices;
                                 Intraocular Lens.
0278..........................  Medical/Surgical Supplies and Devices;
                                 Other Implants.
0279..........................  Medical/Surgical Supplies and Devices;
                                 Other Supplies/Devices.
0280..........................  Oncology; General Classification.
0289..........................  Oncology; Other Oncology.
0343..........................  Nuclear Medicine; Diagnostic
                                 Radiopharmaceuticals.
0344..........................  Nuclear Medicine; Therapeutic
                                 Radiopharmaceuticals.
0370..........................  Anesthesia; General Classification.
0371..........................  Anesthesia; Anesthesia Incident to
                                 Radiology.
0372..........................  Anesthesia; Anesthesia Incident to Other
                                 DX Services.
0379..........................  Anesthesia; Other Anesthesia.
0390..........................  Administration, Processing and Storage
                                 for Blood and Blood Components; General
                                 Classification.
0392 *........................  Administration, Processing and Storage
                                 for Blood and Blood Components;
                                 Processing and Storage.
0399..........................  Administration, Processing and Storage
                                 for Blood and Blood Components; Other
                                 Blood Handling.
0560..........................  Home Health (HH)--Medical Social
                                 Services; General Classification.
0569..........................  Home Health (HH)--Medical Social
                                 Services; Other Med. Social Service.
0621..........................  Medical Surgical Supplies--Extension of
                                 027X; Supplies Incident to Radiology.
0622..........................  Medical Surgical Supplies--Extension of
                                 027X; Supplies Incident to Other DX
                                 Services.
0623 *........................  Medical Supplies--Extension of 027X,
                                 Surgical Dressings.
0624..........................  Medical Surgical Supplies--Extension of
                                 027X; FDA Investigational Devices.
0630..........................  Pharmacy--Extension of 025X; Reserved.
0631..........................  Pharmacy--Extension of 025X; Single
                                 Source Drug.
0632..........................  Pharmacy--Extension of 025X; Multiple
                                 Source Drug.
0633..........................  Pharmacy--Extension of 025X; Restrictive
                                 Prescription.
0681..........................  Trauma Response; Level I Trauma.
0682..........................  Trauma Response; Level II Trauma.
0683..........................  Trauma Response; Level III Trauma.
0684..........................  Trauma Response; Level IV Trauma.
0689..........................  Trauma Response; Other.
0700..........................  Cast Room; General Classification.
0709..........................  Cast Room; Reserved.
0710..........................  Recovery Room; General Classification.
0719..........................  Recovery Room; Reserved.
0720..........................  Labor Room/Delivery; General
                                 Classification.
0721..........................  Labor Room/Delivery; Labor.

[[Page 35266]]

 
0732..........................  EKG/ECG (Electrocardiogram); Telemetry.
0762..........................  Specialty Room--Treatment/Observation
                                 Room; Observation Room.
0801..........................  Inpatient Renal Dialysis; Inpatient
                                 Hemodialysis.
0802..........................  Inpatient Renal Dialysis; Inpatient
                                 Peritoneal Dialysis (Non-CAPD).
0803..........................  Inpatient Renal Dialysis; Inpatient
                                 Continuous Ambulatory Peritoneal
                                 Dialysis (CAPD).
0804..........................  Inpatient Renal Dialysis; Inpatient
                                 Continuous Cycling Peritoneal Dialysis
                                 (CCPD).
0809..........................  Inpatient Renal Dialysis; Other
                                 Inpatient Dialysis.
0810..........................  Acquisition of Body Components; General
                                 Classification.
0819..........................  Inpatient Renal Dialysis; Other Donor.
0821..........................  Hemodialysis--Outpatient or Home;
                                 Hemodialysis Composite or Other Rate.
0824..........................  Hemodialysis--Outpatient or Home;
                                 Maintenance--100%.
0825..........................  Hemodialysis--Outpatient or Home;
                                 Support Services.
0829..........................  Hemodialysis--Outpatient or Home; Other
                                 OP Hemodialysis.
0942..........................  Other Therapeutic Services (also see
                                 095X, an extension of 094x); Education/
                                 Training.
0943 *........................  Other Therapeutic Services (also see
                                 095X, an extension of 094X), Cardiac
                                 Rehabilitation.
0948 *........................  Other Therapeutic Services (also see
                                 095X, an extension of 094X), Pulmonary
                                 Rehabilitation.
------------------------------------------------------------------------

    In addition, we excluded (1) claims that had zero costs after 
summing all costs on the claim and (2) claims containing packaging flag 
number 3. Effective for services furnished on or after July 1, 2004, 
the I/OCE assigned packaging flag number 3 to claims on which hospitals 
submitted token charges for a service with status indicator ``S'' or 
``T'' (a major separately payable service under the OPPS) for which the 
fiscal intermediary or MAC was required to allocate the sum of charges 
for services with a status indicator equaling ``S'' or ``T'' based on 
the relative weight of the APC to which each code was assigned. We do 
not believe that these charges, which were token charges as submitted 
by the hospital, are valid reflections of hospital resources. 
Therefore, we deleted these claims. We also deleted claims for which 
the charges equaled the revenue center payment (that is, the Medicare 
payment) on the assumption that where the charge equaled the payment, 
to apply a CCR to the charge would not yield a valid estimate of 
relative provider cost.
    For the remaining claims, we then standardized 60 percent of the 
costs of the claim (which we have previously determined to be the 
labor-related portion) for geographic differences in labor input costs. 
We made this adjustment by determining the wage index that applied to 
the hospital that furnished the service and dividing the cost for the 
separately paid HCPCS code furnished by the hospital by that wage 
index. As has been our policy since the inception of the OPPS, we are 
proposing to use the pre-reclassified wage indices for standardization 
because we believe that they better reflect the true costs of items and 
services in the area in which the hospital is located than the post-
reclassification wage indices and, therefore, would result in the most 
accurate unadjusted median costs.
    We also excluded claims that were outside 3 standard deviations 
from the geometric mean of units for each HCPCS code on the bypass list 
(because, as discussed above, we used claims that contain multiple 
units of the bypass codes).
    After removing claims for hospitals with error CCRs, claims without 
HCPCS codes, claims for immunizations not covered under the OPPS, and 
claims for services not paid under the OPPS, approximately 54 million 
claims were left for this proposed rule. Using these 54 million claims, 
we created approximately 91 million single and ``pseudo'' single 
claims, of which we used 90 million single bills (after trimming out 
approximately 622,000 claims as discussed above in this section) in the 
proposed CY 2010 median development and ratesetting.
    We used these claims to calculate the proposed CY 2010 median costs 
for each separately payable HCPCS code and each APC. The comparison of 
HCPCS code-specific and APC medians determines the applicability of the 
2 times rule. Section 1833(t)(2) of the Act provides that, subject to 
certain exceptions, the items and services within an APC group cannot 
be considered comparable with respect to the use of resources if the 
highest median (or mean cost, if elected by the Secretary) for an item 
or service in the group is more than 2 times greater than the lowest 
median cost for an item or service within the same group (the 2 times 
rule). Finally, we reviewed the median costs for this proposed rule and 
reassigned HCPCS codes to different APCs where we believed that it was 
appropriate. Section III. of this proposed rule includes a discussion 
of certain HCPCS code assignment changes that resulted from examination 
of the median costs, review of the public comments, and for other 
reasons. The APC medians were recalculated after we reassigned the 
affected HCPCS codes. Both the HCPCS code-specific medians and the APC 
medians were weighted to account for the inclusion of multiple units of 
the bypass codes in the creation of ``pseudo'' single bills.
    In some cases, APC median costs are calculated using variations of 
the process outlined above. Section II.A.2.d. of this proposed rule 
that follows addresses the calculation of single APC criteria-based 
median costs. Section II.A.2.e. of this proposed rule discusses the 
calculation of composite APC criteria-based median costs. Section X.B. 
of this proposed rule addresses the methodology for calculating the 
median cost for partial hospitalization services.
    At the February 2009 APC Panel Meeting, the APC Panel recommended 
that CMS study the claims data for any APC in which the calculated 
payment reduction would be greater than 10 percent. The APC Panel also 
recommended that CMS provide a list of APCs to the APC Panel at the 
next meeting with a proposed payment rate change of greater than 10 
percent. While we recognize the concerns the APC Panel expressed with 
regards to cost variability in the system, we already engage in a 
standard review process for all APCs that experience significant 
changes in median costs. We study all significant changes in estimated 
cost to determine the effect that proposed and final payment policies 
have on the APC payment rates and ensure that these policies are 
appropriate and that the intended cost estimation methodologies have 
been correctly applied. We note that there are a number of factors that 
cause APC median costs to change from one year to the next. Some of 
these are

[[Page 35267]]

a reflection of hospital behavior, and some of them are a reflection of 
fundamental characteristics of the OPPS as defined in the statute. With 
limited exceptions, we are required by law to reassign HCPCS codes to 
APCs where it is necessary to avoid 2 times violations. Thus, there are 
various mechanisms already in place to ensure that we assess changes in 
cost and adjust APC weights accordingly or justify why we have not made 
adjustments. We plan to continue our examination of all APCs that 
experience changes of greater than10 percent, and we will provide the 
APC Panel with a list of the APCs with proposed changes in costs of 
more than 10 percent for CY 2010 at the next CY 2009 APC Panel meeting. 
Accordingly, we are accepting this recommendation of the APC Panel in 
full.
    At the February 2009 APC Panel meeting, we reviewed and examined 
the data process in preparation for the CY 2010 rulemaking cycle. At 
this meeting, the APC Panel recommended that the Data Subcommittee 
continue its work and we are accepting that recommendation. We will 
continue to work closely with the APC Panel's Data Subcommittee to 
prepare and review data and analyses relevant to the APC configurations 
and OPPS payment policies for hospital outpatient items and services.
d. Proposed Calculation of Single Procedure APC Criteria-Based Median 
Costs
(1) Device-Dependent APCs
    Device-dependent APCs are populated by HCPCS codes that usually, 
but not always, require that a device be implanted or used to perform 
the procedure. For a full history of how we have calculated payment 
rates for device-dependent APCs in previous years and a detailed 
discussion of how we developed the standard device-dependent APC 
ratesetting methodology, we refer readers to the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66739 through 66742). Overviews of the 
procedure-to-device edits and device-to-procedure edits used in 
ratesetting for device-dependent APCs are available in the CY 2005 OPPS 
final rule with comment period (69 FR 65761 through 65763) and the CY 
2007 OPPS/ASC final rule with comment period (71 FR 68070 through 
68071).
    For CY 2010, we are proposing to revise our standard methodology 
for calculating median costs for device-dependent APCs, which utilizes 
claims data that generally represent the full cost of the required 
device, to exclude claims that contain the ``FC'' modifier. 
Specifically, we are proposing to calculate the median costs for 
device-dependent APCs for CY 2010 using only the subset of single 
procedure claims from CY 2008 claims data that pass the procedure-to-
device and device-to-procedure edits; do not contain token charges 
(less than $1.01) for devices; do not contain the ``FB'' modifier 
signifying that the device was furnished without cost to the provider, 
supplier, or practitioner, or where a full credit was received; and do 
not contain the ``FC'' modifier signifying that the hospital received 
partial credit for the device. The ``FC'' modifier became effective 
January 1, 2008, and is present for the first time on claims that would 
be used in OPPS ratesetting for CY 2010. We believe that the standard 
methodology for calculating median costs for device-dependent APCs, 
further refined to exclude claims with the ``FC'' modifier, gives us 
the most appropriate proposed median costs for device-dependent APCs in 
which the hospital incurs the full cost of the device.
    The median costs for the majority of device-dependent APCs that are 
calculated using the CY 2010 proposed rule claims data are generally 
stable, with most median costs increasing moderately compared to the 
median costs upon which the CY 2009 OPPS payment rates were based. 
However, the median costs for APC 0225 (Implantation of Neurostimulator 
Electrodes, Cranial Nerve) and APC 0418 (Insertion of Left Ventricular 
Pacing Electrode) demonstrate significant fluctuation. Specifically, 
the CY 2010 proposed median cost for APC 0225 increases approximately 
49 percent compared to the CY 2009 final median cost, although this APC 
median cost had declined by approximately the same proportion from CY 
2008 to CY 2009. The CY 2010 proposed median cost for APC 0418, which 
had decreased approximately 45 percent from CY 2008 to CY 2009, shows 
an increase of approximately 56 percent based on the claims data 
available for the CY 2010 proposed rule. We believe the fluctuations in 
median costs for these two APCs are a consequence of the small number 
of single bills upon which the median costs are based and the small 
number of providers of these services. As we have stated in the past, 
some fluctuation in relative costs from year to year is to be expected 
in a prospective payment system for low volume device-dependent APCs, 
particularly where there are small numbers of single bills from a small 
number of providers. The additional single bills available for 
ratesetting in the CY 2010 final rule data and updated cost report data 
may result in less fluctuation in the median costs for these APCs for 
CY 2010.
    At the February 2009 meeting of the APC Panel, one presenter stated 
that the assignment of the cranial neurostimulator implantation 
procedure described by CPT code 61885 (Insertion or replacement of 
cranial neurostimulator pulse generator or receiver, direct or 
inductive coupling; with connection to a single electrode array) to APC 
0039 (Level I Implantation of Neurostimulator Generator), along with 
the peripheral/gastric neurostimulator implantation procedure described 
by CPT code 64590 (Insertion or replacement of peripheral or gastric 
neurostimulator pulse generator or receiver, direct or inductive 
coupling) is not appropriate, given the clinical and cost differences 
between the two procedures. According to the presenter, the cranial 
procedure described by CPT code 61885 is more similar clinically and in 
terms of resource utilization to the spinal neurostimulator 
implantation procedure described by CPT code 63685 (Insertion or 
replacement of spinal neurostimulator pulse generator or receiver, 
direct or inductive coupling), which is the only CPT code assigned to 
APC 0222 (Level II Implantation of Neurostimulator) for CY 2009. The 
presenter requested that the APC Panel recommend CMS restructure the 
existing configuration of neurostimulator pulse generator implantation 
APCs for CY 2010 by splitting APC 0039, so that procedures involving 
peripheral/gastric neurostimulators and cranial neurostimulators would 
be in distinct APCs, or by reassigning the cranial neurostimulator 
implantation procedure described by CPT code 61885 from APC 0039 to APC 
0222. In response to this request, the APC Panel recommended that CMS 
combine APC 0039 and APC 0222 for CY 2010, given the overall similarity 
in median costs among the cranial, peripheral/gastric, and spinal 
neurostimulator pulse generator implantation procedures assigned to 
these two APCs. The APC Panel also recommended that CMS maintain the 
configuration of APC 0315 (Level III Implantation of Neurostimulator 
Generator) as it currently exists in CY 2009 for CY 2010.
    We agree with the APC Panel that the median costs of the procedures 
described by CPT codes 61885, 63685, and 64590 are sufficiently similar 
to warrant placement of the CPT codes into a single APC, rather than 
two APCs. We are accepting the APC Panel's

[[Page 35268]]

recommendation and, therefore, are proposing to reassign CPT code 63685 
to APC 0039, to delete APC 0222, and to maintain the current 
configuration of APC 0315 for CY 2010. We also are proposing to change 
the title of APC 0315 to ``Level II Implantation of Neurostimulator 
Generator'' to reflect the proposed two-level, rather than three-level, 
structure of the neurostimulator generator implantation APCs.
    In reviewing the APC Panel recommendation for consolidating APC 
0039 and APC 0222, we observed that the median costs of the procedures 
assigned to APC 0425 (Level II Arthroplasty or Implantation with 
Prosthesis) and APC 0681 (Knee Arthroplasty) also are sufficiently 
similar to warrant combining these two APCs into one APC. The proposed 
HCPCS code-specific median cost for the only procedure currently 
assigned to APC 0681, described by CPT code 27446 (Arthroplasty, knee, 
condyle and plateau; medial OR lateral compartment), is approximately 
$7,464 based on the claims data available for the CY 2010 proposed 
rule. This proposed median cost is very similar to the proposed median 
cost of approximately $7,852 calculated for APC 0425, which includes 
other procedures involving the implantation of prosthetic devices into 
bone, similar to the procedure described by CPT code 27446. Given the 
shared resource and clinical characteristics of the procedures included 
in APC 0425 and the only procedure assigned to APC 0681 for CY 2009, we 
are proposing to consolidate these two APCs by reassigning CPT code 
27446 to APC 0425, and deleting APC 0681. We also note that over the 
past several years, the median cost for CPT code 27446 has fluctuated 
due to a low volume of services being performed by a small number of 
providers, and to a single provider performing the majority of services 
(73 FR 68535). We believe that by reassigning CPT code 27446 to APC 
0425 and deleting APC 0681, we can maintain greater stability from year 
to year in the payment rate for this knee arthroplasty service, while 
also paying appropriately for the service.
    Table 5 below lists the APCs for which we are proposing to use our 
standard device-dependent APC rate setting methodology for CY 2010, 
with the proposed amendment to exclude claims that contain the ``FC'' 
modifier. We refer readers to Addendum A to this proposed rule for the 
proposed payment rates for these APCs.

             Table 5--Proposed CY 2010 Device-Dependent APCs
------------------------------------------------------------------------
                         Proposed CY 2010 status   Proposed CY 2010 APC
  Proposed CY 2010 APC           indicator                 title
------------------------------------------------------------------------
0039...................  S......................  Level I Implantation
                                                   of Neurostimulator
                                                   Generator.
0040...................  S......................  Percutaneous
                                                   Implantation of
                                                   Neurostimulator
                                                   Electrodes.
0061...................  S......................  Laminectomy,
                                                   Laparoscopy, or
                                                   Incision for
                                                   Implantation of
                                                   Neurostimulator
                                                   Electrodes.
0082...................  T......................  Coronary or Non-
                                                   Coronary Atherectomy.
0083...................  T......................  Coronary or Non-
                                                   Coronary Angioplasty
                                                   and Percutaneous
                                                   Valvuloplasty.
0084...................  S......................  Level I
                                                   Electrophysiologic
                                                   Procedures.
0085...................  T......................  Level II
                                                   Electrophysiologic
                                                   Procedures.
0086...................  T......................  Level III
                                                   Electrophysiologic
                                                   Procedures.
0089...................  T......................  Insertion/Replacement
                                                   of Permanent
                                                   Pacemaker and
                                                   Electrodes.
0090...................  T......................  Insertion/Replacement
                                                   of Pacemaker Pulse
                                                   Generator.
0104...................  T......................  Transcatheter
                                                   Placement of
                                                   Intracoronary Stents.
0106...................  T......................  Insertion/Replacement
                                                   of Pacemaker Leads
                                                   and/or Electrodes.
0107...................  T......................  Insertion of
                                                   Cardioverter-
                                                   Defibrillator.
0108...................  T......................  Insertion/Replacement/
                                                   Repair of
                                                   Cardioverter-
                                                   Defibrillator Leads.
0115...................  T......................  Cannula/Access Device
                                                   Procedures.
0202...................  T......................  Level VII Female
                                                   Reproductive
                                                   Procedures.
0225...................  S......................  Implantation of
                                                   Neurostimulator
                                                   Electrodes, Cranial
                                                   Nerve.
0227...................  T......................  Implantation of Drug
                                                   Infusion Device.
0229...................  T......................  Transcatheter
                                                   Placement of
                                                   Intravascular Shunts.
0259...................  T......................  Level VII ENT
                                                   Procedures.
0293...................  T......................  Level V Anterior
                                                   Segment Eye
                                                   Procedures.
0315...................  S......................  Level II Implantation
                                                   of Neurostimulator
                                                   Generator.
0384...................  T......................  GI Procedures with
                                                   Stents.
0385...................  S......................  Level I Prosthetic
                                                   Urological
                                                   Procedures.
0386...................  S......................  Level II Prosthetic
                                                   Urological
                                                   Procedures.
0418...................  T......................  Insertion of Left
                                                   Ventricular Pacing
                                                   Electrode.
0425...................  T......................  Level II Arthroplasty
                                                   or Implantation with
                                                   Prosthesis.
0427...................  T......................  Level II Tube or
                                                   Catheter Changes or
                                                   Repositioning.
0622...................  T......................  Level II Vascular
                                                   Access Procedures.
0623...................  T......................  Level III Vascular
                                                   Access Procedures.
0648...................  T......................  Level IV Breast
                                                   Surgery.
0652...................  T......................  Insertion of
                                                   Intraperitoneal and
                                                   Pleural Catheters.
0653...................  T......................  Vascular
                                                   Reconstruction/
                                                   Fistula Repair with
                                                   Device.
0654...................  T......................  Insertion/Replacement
                                                   of a Permanent Dual
                                                   Chamber Pacemaker.
0655...................  T......................  Insertion/Replacement/
                                                   Conversion of a
                                                   Permanent Dual
                                                   Chamber Pacemaker.
0656...................  T......................  Transcatheter
                                                   Placement of
                                                   Intracoronary Drug-
                                                   Eluting Stents.
0674...................  T......................  Prostate Cryoablation.
0680...................  S......................  Insertion of Patient
                                                   Activated Event
                                                   Recorders.
------------------------------------------------------------------------

(2) Blood and Blood Products
    Since the implementation of the OPPS in August 2000, we have made 
separate payments for blood and blood products through APCs rather than 
packaging payment for them into payments for the procedures with which 
they are administered. Hospital payments for the costs of blood and 
blood products, as

[[Page 35269]]

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 2010, we are proposing to continue to establish payment 
rates for blood and blood products using our blood-specific CCR 
methodology, which utilizes actual or simulated CCRs from the most 
recently available hospital cost reports to convert hospital charges 
for blood and blood products to costs. This methodology has been our 
standard ratesetting methodology for blood and blood products since CY 
2005. It was developed in response to data analysis indicating that 
there was a significant difference in CCRs for those hospitals with and 
without blood-specific cost centers, and past comments indicating that 
the former OPPS policy of defaulting to the overall hospital CCR for 
hospitals not reporting a blood-specific cost center often resulted in 
an underestimation of the true hospital costs for blood and blood 
products. Specifically, in order to address the differences in CCRs and 
to better reflect hospitals' costs, we are proposing to continue to 
simulate blood CCRs for each hospital that does not report a blood cost 
center by calculating the ratio of the blood-specific CCRs to 
hospitals' overall CCRs for those hospitals that do report costs and 
charges for blood cost centers. We would then apply this mean ratio to 
the overall CCRs of hospitals not reporting costs and charges for blood 
cost centers on their cost reports in order to simulate blood-specific 
CCRs for those hospitals. We calculated the median costs upon which the 
proposed CY 2010 payment rates for blood and blood products are based 
using the actual blood-specific CCR for hospitals that reported costs 
and charges for a blood cost center and a hospital-specific simulated 
blood-specific CCR for hospitals that did not report costs and charges 
for a blood cost center.
    We continue to believe that the hospital-specific, blood-specific 
CCR methodology better responds to the absence of a blood-specific CCR 
for a hospital than alternative methodologies, such as defaulting to 
the overall hospital CCR or applying an average blood-specific CCR 
across hospitals. Because this methodology takes into account the 
unique charging and cost accounting structure of each provider, we 
believe that it yields more accurate estimated costs for these 
products. We believe that continuing with this methodology in CY 2010 
would result in median costs for blood and blood products that 
appropriately reflect the relative estimated costs of these products 
for hospitals without blood cost centers and, therefore, for these 
products in general.
    We refer readers to Addendum B to this proposed rule for the CY 
2010 proposed payment rates for blood and blood products, which are 
identified with status indicator ``R.'' For more detailed discussion of 
the blood-specific CCR methodology, we refer readers to the CY 2005 
OPPS proposed rule (69 FR 50524 through 50525). For a full history of 
OPPS payment for blood and blood products, we refer readers to the CY 
2008 OPPS/ASC final rule with comment period (72 FR 66807 through 
66810).
(3) Single Allergy Tests
    We are proposing to continue with our methodology of 
differentiating single allergy tests (``per test'') from multiple 
allergy tests (``per visit'') by assigning these services to two 
different APCs to provide accurate payments for these tests in CY 2010. 
Multiple allergy tests are currently assigned to APC 0370 (Allergy 
Tests), with a median cost calculated based on the standard OPPS 
methodology. We provided billing guidance in CY 2006 in Transmittal 804 
(issued on January 3, 2006) specifically clarifying that hospitals 
should report charges for the CPT codes that describe single allergy 
tests to reflect charges ``per test'' rather than ``per visit'' and 
should bill the appropriate number of units of these CPT codes to 
describe all of the tests provided. Our CY 2008 claims data available 
for this proposed rule for APC 0381 do not reflect improved and more 
consistent hospital billing practices of ``per test'' for single 
allergy tests. The median cost of APC 0381, calculated for this 
proposed rule according to the standard single claims OPPS methodology, 
is approximately $55, significantly higher than the CY 2009 median cost 
of APC 0381 of approximately $23 calculated according to the ``per 
unit'' methodology, and greater than we would expect for these 
procedures that are to be reported ``per test'' with the appropriate 
number of units. Some claims for single allergy tests still appear to 
provide charges that represent a ``per visit'' charge, rather than a 
``per test'' charge. Therefore, consistent with our payment policy for 
single allergy tests since CY 2006, we are proposing to calculate a 
``per unit'' median cost for APC 0381, based upon 530 claims containing 
multiple units or multiple occurrences of a single CPT code. The CY 
2010 proposed median cost for APC 0381 using the ``per unit'' 
methodology is approximately $29. For a full discussion of this 
methodology, we refer readers to the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66737).
(4) Echocardiography Services
    In CY 2008, we implemented a policy whereby payment for all 
contrast agents is packaged into the payment for the associated imaging 
procedure, regardless of whether the contrast agent met the OPPS drug 
packaging threshold. Section 1833(t)(2)(G) of the Act requires us to 
create additional APC groups of services for procedures that use 
contrast agents that classify them separately from those procedures 
that do not utilize contrast agents. To reconcile this statutory 
provision with our final policy of packaging all contrast agents, for 
CY 2008, we calculated HCPCS code-specific median costs for all 
separately payable echocardiography procedures that may be performed 
with contrast agents by isolating single and ``pseudo'' single 
echocardiography claims with the following CPT codes where a contrast 
agent was also billed on the claim:
    <bullet> 93303 (Transthoracic echocardiography for congenital 
cardiac anomalies; complete);
    <bullet> 93304 (Transthoracic echocardiography for congenital 
cardiac anomalies; follow-up or limited study);
    <bullet> 93307 (Echocardiography, transthoracic, real-time with 
image documentation (2D) with or without M-mode recording; complete);
    <bullet> 93308 (Echocardiography, transthoracic, real-time with 
image documentation (2D) with or without M-mode recording; follow-up or 
limited study);
    <bullet> 93312 ( Echocardiography, transesophageal, real time with 
image documentation (2D) (with or without M-mode recording); including 
probe placement, image acquisition, interpretation and report);
    <bullet> 93315 (Transesophageal echocardiography for congenital 
cardiac anomalies; including probe placement, image acquisition, 
interpretation and report);
    <bullet> 93318 (Echocardiography, transesophageal (TEE) for 
monitoring purposes, including probe placement, real time 2-dimensional 
image acquisition and interpretation leading to ongoing (continuous) 
assessment of (dynamically changing) cardiac pumping function and to 
therapeutic measures on an immediate time basis); and
    <bullet> 93350 (Echocardiography, transthoracic, real-time with 
image documentation (2D), with or without M-mode recording, during rest 
and cardiovascular stress test using treadmill, bicycle exercise and/or

[[Page 35270]]

pharmacologically induced stress, with interpretation and report).
    After reviewing HCPCS code-specific median costs, we determined 
that all echocardiography procedures that may be performed with 
contrast agents are reasonably similar both clinically and in terms of 
resource use. In CY 2008, we created APC 0128 (Echocardiogram With 
Contrast) to provide payment for echocardiography procedures that are 
performed with a contrast agent. We refer readers to the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66643 through 66646) for more 
information on this methodology.
    In order for hospitals to identify and receive appropriate payment 
for echocardiography procedures performed with contrast beginning in CY 
2008, we created eight new HCPCS codes (C8921 through C8928) that 
corresponded to the related CPT echocardiography codes and assigned 
them to the newly created APC 0128. We instructed hospitals to report 
the CPT codes when performing echocardiography procedures without 
contrast and to report the new HCPCS C-codes when performing 
echocardiography procedures with contrast, or without contrast followed 
by with contrast. As is our standard policy with regard to new codes, 
the APC assignment of these codes was then open to comment in that 
final rule.
    We used the same process to calculate median costs for these codes 
for CY 2009 as we used for CY 2008 to separately identify 
echocardiography services provided with contrast and those provided 
without contrast because the data reported under these new codes were 
not yet available for CY 2009 ratesetting.
    In addition, for CY 2009, the American Medical Association (AMA) 
revised several CPT codes in the 93000 series to more specifically 
describe particular services provided during echocardiography 
procedures. The CY 2009 descriptor for new CPT code 93306 
(Echocardiography, transthoracic real- time with image documentation 
(2D), includes M-mode recording, when performed, complete, with 
spectral Doppler echocardiography, and with color flow Doppler 
echocardiography) includes the services described in CY 2008 by three 
CPT codes: 93307 (Echocardiography, transthoracic, real- time with 
image documentation (2D) with or without M-mode recording; complete); 
93320 (Doppler echocardiography, pulsed wave and/or continuous wave 
with spectral display; complete), and 93325 (Doppler echocardiography 
color flow velocity mapping). Therefore, in CY 2008, the service 
described in CY 2009 by new CPT code 93306 was reported with three CPT 
codes, specifically CPT codes 93307, 93320, and 93325. For CY 2008, the 
hospital received separate payment for CPT code 93307 through APC 0269 
(Level II Echocardiogram Without Contrast Except Transesophageal), into 
which payment for the other two services was packaged. The revised CY 
2009 descriptor of CPT code 93307 (Echocardiography, transthoracic, 
real-time with image documentation (2D), includes M- mode recording, 
when performed, complete, without spectral or color Doppler 
echocardiography) explicitly excludes services described by CPT codes 
93320 and 93325.
    To estimate the hospital costs of CPT codes 93306 and 93307 based 
on their CY 2009 descriptors and the corresponding HCPCS codes C8929 
and C8923 for CY 2009, we used claims data from CY 2007. As described 
in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68542 
through 68544), we manipulated our CY 2007 single and ``pseudo'' single 
claims data to simulate the new CY 2009 definitions of these services. 
Specifically, we selected claims for CPT code 93307 on which CPT codes 
93320 and 93325 were also present and we treated the summed costs on 
these claims as if they were a single procedure claim for CPT code 
93306. Similarly, we selected single claims for CPT code 93307 to 
reflect the newly revised descriptor for CY 2009; that is, we included 
those claims where CPT code 93307 was not billed with packaged CPT code 
93320 or CPT code 93325 on the same claim. We then applied our CY 2009 
methodology for calculating HCPCS code-specific median costs for these 
echocardiography procedures with and without contrast by dividing the 
new set of claims for CPT codes 93306 and 93307 into those billed with 
and without contrast agents. We assigned the costs for simulated CPT 
codes 93306 and 93307 reported without contrast to those CPT codes. We 
then assigned the costs for simulated CPT codes 93306 and 93307 
reported with contrast to new HCPCS code C8929 (Transthoracic 
echocardiography with contrast, or without contrast followed by with 
contrast, real-time with image documentation (2D), includes M-mode 
recording, when performed, complete, with spectral Doppler 
echocardiography, and with color flow Doppler echocardiography) and 
revised HCPCS code C8923 (Transthoracic echocardiography with contrast, 
or without contrast followed by with contrast, real-time with image 
documentation (2D), includes M-mode recording, when performed, 
complete, without spectral or color Doppler echocardiography), 
respectively. In the CY 2009 OPPS/ASC final rule with comment period, 
we assigned these CPT and HCPCS codes to APCs for CY 2009 based on 
their simulated median costs and clinical characteristics. New CY 2009 
CPT code 93306 and HCPCS code C8929 were assigned comment indicator 
``NI'' in that final rule, to signify that they were new codes whose 
interim final OPPS treatment was open to comment on that final rule.
    This CY 2010 proposed rule is the first opportunity that we have 
claims data available from hospitals for echocardiography services 
performed with contrast (or without contrast followed by with contrast) 
and reported with HCPCS codes C8921 through C8928. With the exception 
of HCPCS code C8923, which had a significant change in its code 
descriptor for CY 2009, we are proposing to use our standard 
methodology to set the CY 2010 OPPS payment rates for these 
echocardiography services performed with contrast, taking into 
consideration their HCPCS code-specific median costs from CY 2008 
claims.
    For CY 2010 ratesetting, we are proposing to employ an alternative 
ratesetting methodology for CPT codes 93306 and 93307 and HCPCS codes 
C8929 and C8923 that is similar to the approach we used for CY 2009 in 
order to account for the new codes and revised code descriptors for 
which CY 2008 data are unavailable. However, in the case of the 
proposed CY 2010 cost estimation, our CY 2008 claims for CPT code 93307 
are only for services performed without contrast, and we have CY 2008 
claims for HCPCS C8923 for the comparable services performed with 
contrast. Specifically, we selected claims for CPT code 93307 on which 
CPT codes 93320 and 93325 were also present and we treated the summed 
costs on these claims as if they were a single procedure claim for CPT 
code 93306 in order to simulate the median cost for CPT code 93306, for 
which CY 2008 claims data are not available. We then selected single 
claims for CPT code 93307 to reflect the newly revised descriptor for 
CY 2009; that is, we included those claims where CPT code 93307 was not 
billed with either packaged CPT code 93320 or CPT code 93325 on the 
same claim in order to simulate an appropriate CY 2010 proposed median 
cost for CPT code 93307. We assigned the costs of HCPCS code C8923 when 
reported with CPT codes 93320 and 93325 to HCPCS code C8929 and the 
costs of HCPCS code

[[Page 35271]]

C8923 when reported without CPT code 93320 or 93325 to HCPCS code 
C8923.
    Following publication of the CY 2009 OPPS/ASC final rule with 
comment period, several stakeholders brought a number of concerns to 
our attention, including the interim APC assignment of new CPT code 
93351 (Echocardiography, transthoracic, real-time with image 
documentation (2D), includes M-mode recording, when performed, during 
rest and cardiovascular stress test using treadmill, bicycle exercise 
and/or pharmacologically induced stress, with interpretation and 
report; including performance of continuous electrocardiographic 
monitoring, with physician supervision) and the corresponding new HCPCS 
code C8930 (Transthoracic echocardiography, with contrast, or without 
contrast followed by with contrast, real-time with image documentation 
(2D), includes M-mode recording, when performed, during rest and 
cardiovascular stress test using treadmill, bicycle exercise and/or 
pharmacologically induced stress, with interpretation and report; 
including performance of continuous electrocardiographic monitoring, 
with physician supervision). These stakeholders noted that new CY 2009 
CPT code 93351 was created to include the services reported previously 
by CPT codes 93015 (Cardiovascular stress test using maximal or 
submaximal treadmill or bicycle exercise, continuous 
electrocardiographic monitoring, and/or pharmacological stress; with 
physician supervision, with interpretation and report) and 93350 
(Echocardiography, transthoracic, real-time with image documentation 
(2D), includes M-mode recording, when performed, during rest and 
cardiovascular stress test using treadmill, bicycle exercise and/or 
pharmacologically induced stress, with interpretation and report). 
Because new CY 2009 CPT code 93351 was meant to include the services 
previously reported with both the CPT codes for a transthoracic 
echocardiogram during rest and stress (CPT code 93350 is recognized 
under the OPPS) and a cardiovascular stress test (CPT code 93017 is 
recognized under the OPPS, rather than CPT code 93015), these 
stakeholders disagreed with our assignments of both CPT codes 93350 and 
93351 to APC 0269 for CY 2009.
    Upon review of these concerns and our CY 2008 data, for CY 2010, we 
are proposing to use an alternative methodology to simulate median 
costs for CPT code 93351 and corresponding HCPCS code C8930, for which 
CY 2008 claims data are unavailable, and for CPT code 93350 and 
corresponding HCPCS code C8928 (Transthoracic echocardiography with 
contrast, or without contrast followed by with contrast, real-time with 
image documentation (2D), includes M-mode recording, when performed, 
during rest and cardiovascular stress test using treadmill, bicycle 
exercise and/or pharmacologically induced stress, with interpretation 
and report). That is, we are proposing to use claims that contain both 
CPT codes 93350 and 93017 (Cardiovascular stress test using maximal or 
submaximal treadmill or bicycle exercise, continuous 
electrocardiographic monitoring, and/or pharmacological stress; tracing 
only, without interpretation and report) to simulate the median cost 
for CPT code 93351. We also are proposing to use the remaining claims 
that contain CPT code 93350 but that do not contain CPT code 93017 to 
develop the proposed CY 2010 median cost for CPT code 93350. We 
identified over 74,000 CY 2008 claims with both CPT code 93350 and CPT 
code 93017 on the same date of service and no other separately paid 
services appearing on the same date after applying our bypass 
processing logic, discussed in section II.A.1.b. of this proposed rule, 
that we modified to treat CPT codes 93350 and code 93017 as a single 
service. We calculated a proposed median cost of approximately $604. 
Therefore, for CY 2010, we are proposing to reassign CPT code 93351 to 
revised APC 0270 (Level III Echocardiogram Without Contrast) which has 
a proposed APC median cost of approximately $596. We are proposing to 
continue to assign CPT code 93350 to APC 0269, which has a proposed APC 
median cost of approximately $456, based on its HCPCS code-specific 
median cost of approximately $406 based on approximately 11,000 single 
claims. Furthermore, we are proposing to use claims for HCPCS code 
C8928 that are reported with CPT code 93017 on the same claim to 
simulate the CY 2010 median cost for HCPCS code C8930. We identified 
over 4,000 claims with both HCPCS code C8930 and CPT code 93017 on the 
same date of service and no other separately paid services appearing on 
the same date after applying our bypass processing logic, discussed in 
section II.A.1.b. of this proposed rule, that we modified to treat 
HCPCS code C8930 and CPT code 93017 as a single service. We calculated 
a HCPCS code-specific median cost of approximately $706. Therefore, we 
are proposing to continue to assign HCPCS code C8930 to APC 0128 with a 
proposed APC median cost of approximately $660. We also are proposing 
to continue to assign HCPCS code C8928 to APC 0128, based on its HCPCS 
code-specific median cost of approximately $595 based on approximately 
1,000 single claims.
    Table 6 below shows CY 2009 CPT codes for billing echocardiography 
services without contrast, their proposed APC assignments for CY 2010, 
and the corresponding HCPCS codes for use when echocardiography 
services are performed with contrast (or without contrast followed by 
with contrast), along with their proposed APC assignments for CY 2010.
BILLING CODE 4120-01-P

[[Page 35272]]

[GRAPHIC] [TIFF OMITTED] TP20JY09.317


[[Page 35273]]


[GRAPHIC] [TIFF OMITTED] TP20JY09.318


[[Page 35274]]


[GRAPHIC] [TIFF OMITTED] TP20JY09.319


[[Page 35275]]


[GRAPHIC] [TIFF OMITTED] TP20JY09.320

BILLING CODE 4120-01-C
    Finally, for CY 2010, based upon our proposed APC configurations, 
we also are proposing to revise the titles of our existing series of 
echocardiography APCs to more accurately describe the groups of 
services identified by CPT codes 93303 through 93352 and HCPCS codes 
C8921 through C8930 that are assigned to these APCs. We are proposing 
to rename APCs 0269, 0270, and 0697 as described in Table 7 below.

[[Page 35276]]



             Table 7--Proposed CY 2010 Echocardiography APCs
------------------------------------------------------------------------
                                                        Proposed CY 2010
     Proposed CY 2010 APC        Proposed CY 2010 APC   approximate APC
                                        title             median cost
------------------------------------------------------------------------
0128..........................  Echocardiogram With                 $660
                                 Contrast.
0269..........................  Level II                             456
                                 Echocardiogram
                                 Without Contrast.
0270..........................  Level III                            596
                                 Echocardiogram
                                 Without Contrast.
0697..........................  Level I                              263
                                 Echocardiogram
                                 Without Contrast.
------------------------------------------------------------------------

(5) Nuclear Medicine Services
    In CY 2008, we began packaging payment for diagnostic 
radiopharmaceuticals into the payment for the associated nuclear 
medicine procedure. (For a discussion regarding the distinction between 
diagnostic and therapeutic radiopharmaceuticals, we refer readers to 
the CY 2008 OPPS/ASC final rule with comment period at 72 FR 66636.) 
Prior to the implementation of this policy, diagnostic 
radiopharmaceuticals were subject to the standard OPPS drug packaging 
methodology whereby payments are packaged when the estimated mean per 
day product costs fall at or below the annual packaging threshold for 
drugs, biologicals (other than implantable biologicals), and 
radiopharmaceuticals.
    Packaging costs into a single aggregate payment for a service, 
encounter, or episode-of-care is a fundamental principle that 
distinguishes a prospective payment system from a fee schedule. In 
general, packaging the costs of supportive items and services into the 
payment for the independent procedure or service with which they are 
associated encourages hospital efficiencies and also enables hospitals 
to manage their resources with maximum flexibility. All nuclear 
medicine procedures require the use of at least one radiopharmaceutical 
or other radiolabeled product, and there are only a small number of 
radiopharmaceuticals that may be appropriately billed with each 
diagnostic nuclear medicine procedure. For the OPPS, we distinguish 
diagnostic radiopharmaceuticals from therapeutic radiopharmaceuticals 
for payment purposes, and this distinction is recognized in the Level 
II HCPCS codes for diagnostic radiopharmaceuticals that include the 
term ``diagnostic'' along with a radiopharmaceutical in their HCPCS 
code descriptors. As we stated in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66635), we believe that our policy to package 
payment for diagnostic radiopharmaceuticals (other than those already 
packaged when their per day costs are below the packaging threshold for 
OPPS drugs, biologicals, and radiopharmaceuticals) is consistent with 
OPPS packaging principles, provides greater administrative simplicity 
for hospitals, and encourages hospitals to use the most clinically 
appropriate and cost efficient diagnostic radiopharmaceutical for each 
study. For more background on this policy, we refer readers to 
discussions in the CY 2008 OPPS/ASC proposed rule (72 FR 42667 through 
42672) and the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66635 through 66641).
    For CY 2008 ratesetting, we used only claims for nuclear medicine 
procedures that contained a diagnostic radiopharmaceutical in 
calculating the median costs for APCs that include nuclear medicine 
procedures (72 FR 66639). This is similar to the established 
methodology used for device- dependent APCs before claims reflecting 
the procedure-to-device edits were included in our claims data. For CY 
2008, we also implemented claims processing edits (called procedure-to-
radiolabeled product edits) requiring the presence of a 
radiopharmaceutical (or other radiolabeled product) HCPCS code when a 
separately payable nuclear medicine procedure is present on a claim. 
Similar to our practice regarding the procedure-to-device edits that 
have been in place for some time, we continually review comments and 
requests for changes related to these edits and, based on our review, 
may update the edit list during our quarterly update process if 
necessary. The radiolabeled product and procedure HCPCS codes that are 
included in these edits can be viewed on the CMS Web site at:  http://www.cms.hhs.gov/HospitalOutpatientPPS/01_overview.asp.
    The CY 2008 OPPS claims that are subject to the procedure-to-
radiolabeled product edits were not available for setting payment rates 
in CY 2009. Therefore, as described in the CY 2009 OPPS/ASC final rule 
with comment period (73 FR 68545), we continued to use our established 
CY 2008 methodology for setting the payment rates for APCs that 
included nuclear medicine procedures for CY 2009. We used an updated 
list of radiolabeled products, including but not limited to diagnostic 
radiopharmaceuticals, from the procedure-to-radiolabeled product edit 
file to identify single and ``pseudo'' single claims for nuclear 
medicine procedures that also included at least one eligible 
radiolabeled product. Using this subset of claims, we followed our 
standard OPPS ratesetting methodology to calculate median costs for 
nuclear medicine procedures and their associated APCs. As in CY 2008, 
when we set APC median costs based on single and ``pseudo'' single 
claims that also included at least one radiolabeled product on our edit 
file, we observed an equivalent or higher median cost than that 
calculated from all single and ``pseudo'' single bills. We believe that 
this methodology appropriately ensured that the costs of diagnostic 
radiopharmaceuticals were included in the CY 2009 ratesetting process 
for these APCs.
    As discussed in section II.A.4.b.(1) of this proposed rule, during 
the September 2007 APC Panel meeting, the APC Panel requested that CMS 
evaluate the impact of expanded packaging on beneficiaries. Also, 
during the March 2008 APC Panel meeting, the APC Panel requested that 
CMS report to the APC Panel at the first meeting in CY 2009 regarding 
the impact of packaging on net payments for patient care. In response 
to these requests, we shared data with the APC Panel at the February 
2009 APC Panel meeting that compared the frequency of the billing of 
diagnostic radiopharmaceuticals billed under the OPPS in CY 2007, 
before the packaging of all diagnostic radiopharmaceuticals went into 
effect, to the frequency of the billing of those same products in 
CY2008, their first year of packaged payment. We also reviewed 
information about the aggregate payment for diagnostic 
radiopharmaceuticals and nuclear medicine procedures during those same 
2 years. A summary of these data analyses is provided in section 
II.A.4.b.(1) of this proposed rule.
    In addition to these aggregate analyses of total frequency and 
payment, we also presented our analyses of the number of hospitals 
performing nuclear medicine scans and the specific diagnostic

[[Page 35277]]

radiopharmaceuticals appearing with cardiac and tumor imaging nuclear 
medicine procedures, excluding positron emission tomography (PET) 
scans, by classes of hospitals between the CY 2007 claims processed 
through September 30, 2007 and the CY 2008 claims processed through 
September 30, 2008. At the March 2008 APC Panel meeting, the APC Panel 
also recommended that we evaluate the usage and frequency, geographic 
distribution, and size and type of hospitals performing nuclear 
medicine studies using radioisotopes to assess beneficiaries' access 
and that we present these analyses at the first APC Panel meeting in CY 
2009. The number of all hospitals reporting any nuclear medicine 
procedure declined by 2 percent between the CY 2007 claims data and the 
CY 2008 claims data. Across several classes of hospitals (urban and 
rural, teaching and nonteaching, and small and large OPPS service 
volume), the number of hospitals billing any nuclear medicine procedure 
declined by up to 4 percent over that same time period. With regard to 
the specific diagnostic radiopharmaceuticals reported with cardiac and 
tumor imaging nuclear medicine procedure, we generally observed 
comparable distributions of radiopharmaceuticals between the CY 2007 
claims data and the CY 2008 claims data. However, the utility of this 
analysis was limited due to the introduction of the procedure-to-
radiolabeled product claims processing edits discussed above. There are 
nuclear medicine procedures reported with a diagnostic 
radiopharmaceutical HCPCS code on the CY 2008 claims that would have 
not necessarily been billed with a diagnostic radiopharmaceutical HCPCS 
code on the CY 2007 claims. Specifically, we observed an increase in 
billing for many radiopharmaceuticals, some new and costly, between the 
CY 2007 claims data and the CY 2008 claims data. We do not know how 
much of this was attributable to changes in hospitals' use of 
radiopharmaceuticals or to the CY 2008 introduction of the procedure-
to-radiolabeled product edits that require a radiolabeled product on 
the claim for payment of the nuclear medicine procedure. With the 
exception of the notable increases in the frequencies of certain 
radiopharmaceutical HCPCS codes that potentially resulted from the 
introduction of these edits, in general, hospital billing patterns for 
diagnostic radiopharmaceuticals associated with cardiac and tumor 
imaging nuclear medicine scans did not change dramatically between CY 
2007 and CY 2008 for all hospitals and classes of hospitals. We 
concluded that very few hospitals stopped providing nuclear medicine 
procedures as a result of our CY 2008 policy to package payment for 
diagnostic radiopharmaceuticals and that, in general, hospitals did not 
decrease their use of expensive radiopharmaceuticals.
    As a result of the discussions of the APC Panel following our 
presentation of the analyses of the impact of packaging payment for all 
diagnostic radiopharmaceuticals in the OPPS, the APC Panel further 
recommended that CMS continue to analyze the impact on beneficiaries of 
increased packaging of diagnostic radiopharmaceuticals and provide more 
detailed analyses at the next APC Panel meeting. Further, the APC Panel 
requested that, in the more detailed analyses of packaging of 
diagnostic radiopharmaceuticals by type of nuclear medicine scan, CMS 
analyze the data according to the specific CPT codes billed with the 
diagnostic radiopharmaceuticals. We are accepting the APC Panel's 
recommendation and will provide additional data to the APC Panel at an 
upcoming meeting.
    For CY 2010 ratesetting, we are able to use CY 2008 OPPS claims 
that were subject to the procedure-to-radiolabeled product claims 
processing edits incorporated into the I/OCE prior to payment of claims 
in order to develop single and ``pseudo'' single claims for nuclear 
medicine procedures according to our standard methodology. We believe 
that using the CY 2008 claims for these services without further 
editing for the presence of a radiolabeled product is now appropriate 
for CY 2010 because these claims reflect all possible relationships 
between the nuclear medicine procedures and their associated 
radiolabeled products that we have accommodated for payment of nuclear 
medicine procedures. Moreover, as we indicated in the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68548 through 68549), in the rare 
circumstance where a diagnostic radiopharmaceutical is not provided in 
association with a nuclear medicine procedure, for example, because a 
beneficiary receives a therapeutic radiopharmaceutical as part of a 
hospital inpatient stay and then returns to the HOPD for a nuclear 
medicine scan without needing a diagnostic radiopharmaceutical to be 
administered again for the study, we believe it is appropriate to use 
these claims for ratesetting purposes. We believe that just as these 
situations are representative of the performance of a nuclear medicine 
scan, it is also appropriate to include them for ratesetting purposes.
(6) Hyperbaric Oxygen Therapy
    Since the implementation of the OPPS in August 2000, the OPPS has 
recognized HCPCS code C1300 (Hyperbaric oxygen under pressure, full 
body chamber, per 30 minute interval) for hyperbaric oxygen therapy 
(HBOT) provided in the hospital outpatient setting. In the CY 2005 OPPS 
final rule with comment period (69 FR 65758 through 65759), we 
finalized a ``per unit'' median cost calculation for APC 0659 
(Hyperbaric Oxygen) using only claims with multiple units or multiple 
occurrences of HCPCS code C1300 because delivery of a typical HBOT 
service requires more than 30 minutes. We observed that claims with 
only a single occurrence of the code were anomalies, either because 
they reflected terminated sessions or because they were incorrectly 
coded with a single unit. In the same rule, we also established that 
HBOT would not generally be furnished with additional services that 
might be packaged under the standard OPPS APC median cost methodology. 
This enabled us to use claims with multiple units or multiple 
occurrences. Finally, we also used each hospital's overall CCR to 
estimate costs for HCPCS code C1300 from billed charges rather than the 
CCR for the respiratory therapy or other departmental cost centers. The 
public comments on the CY 2005 OPPS proposed rule effectively 
demonstrated that hospitals report the costs and charges for HBOT in a 
wide variety of cost centers. Since CY 2005, we have used this 
methodology to estimate the median cost for HBOT. The median costs of 
HBOT using this methodology have been relatively stable for the last 4 
years. We are proposing to continue using the same methodology to 
estimate a ``per unit'' median cost for HCPCS code C1300 for CY 2010 of 
approximately $108, using 279,139 claims with multiple units or 
multiple occurrences.
(7) Payment for Ancillary Outpatient Services When Patient Expires (-CA 
Modifier)
    In the November 1, 2002 final rule with comment period (67 FR 
66798), we discussed the creation of the new HCPCS -CA modifier to 
address situations where a procedure on the OPPS inpatient list must be 
performed to resuscitate or stabilize a patient (whose status is that 
of an outpatient) with an emergent, life-threatening condition, and the 
patient dies before being admitted as an inpatient. In

[[Page 35278]]

Transmittal A-02-129, issued on January 3, 2003, we instructed 
hospitals on the use of this modifier. For a complete description of 
the history of the policy and the development of the payment 
methodology for these services, we refer readers to the CY 2007 OPPS/
ASC final rule with comment period (71 FR 68157 through 68158).
    For CY 2010, we are proposing to continue to use our established 
ratesetting methodology for calculating the median cost of APC 0375 
(Ancillary Outpatient Services When Patient Expires) and to continue to 
make one payment under APC 0375 for the services that meet the specific 
conditions for using modifier -CA. We are proposing to calculate the 
relative payment weight for APC 0375 by using all claims reporting a 
status indicator ``C'' procedure appended with the -CA modifier, using 
estimated costs from claims data for line-items with a HCPCS code 
assigned status indicator ``G,'' ``H,'' ``K,'' ``N,'' ``Q1,'' ``Q2,'' 
``Q3,'' ``R,'' ``S,'' ``T,'' ``U,'' ``V,'' and ``X'' and charges for 
packaged revenue codes without a HCPCS code. We continue to believe 
that this methodology results in the most appropriate aggregate median 
cost for the ancillary services provided in these unusual clinical 
situations.
    We believe that hospitals are reporting the -CA modifier according 
to the policy initially established in CY 2003. We note that the claims 
frequency for APC 0375 has been decreasing over the past few years. For 
this proposed rule, there are only 131 claims for this APC. Although 
the median cost for APC 0375 has increased in recent years, the median 
in the data for this proposed rule is only slightly higher than the 
final median cost for CY 2009. Variation in the median cost for APC 
0375 is expected because of the small number of claims and because the 
specific cases are grouped by the presence of the -CA modifier appended 
to an inpatient procedure and not according to the standard APC 
criteria of clinical and resource homogeneity. Cost variation for APC 
0375 from year to year is anticipated and acceptable as long as 
hospitals continue judicious reporting of the -CA modifier. Table 8 
below shows the number of claims and the final median costs for APC 
0375 for CYs 2007, 2008 and 2009. For CY 2010, we are proposing a 
median cost for APC 0375 of approximately $5,784.

Table 8--Claims for Ancillary Outpatient Services When Patient Expires (-
                 Ca Modifier) for CYs 2007 Through 2009
------------------------------------------------------------------------
                                             Number of      APC median
        Prospective payment year              claims           cost
------------------------------------------------------------------------
CY 2007.................................             260          $3,549
CY 2008.................................             183           4,945
CY 2009.................................             168           5,545
------------------------------------------------------------------------

e. Proposed Calculation of Composite APC Criteria-Based Median Costs
    As discussed in the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66613), we believe it is important that the OPPS enhance 
incentives for hospitals to provide only necessary, high quality care 
and to provide that care as efficiently as possible. For CY 2008, we 
developed composite APCs to provide a single payment for groups of 
services that are typically performed together during a single clinical 
encounter and that result in the provision of a complete service. 
Combining payment for multiple independent services into a single OPPS 
payment in this way enables hospitals to manage their resources with 
maximum flexibility by monitoring and adjusting the volume and 
efficiency of services themselves. An additional advantage to the 
composite APC model is that we can use data from correctly coded 
multiple procedure claims to calculate payment rates for the specified 
combinations of services, rather than relying upon single procedure 
claims which may be low in volume and/or incorrectly coded. Under the 
OPPS, we currently have composite APC policies for extended assessment 
and management services, low dose rate (LDR) prostate brachytherapy, 
cardiac electrophysiologic evaluation and ablation services, mental 
health services, and multiple imaging services. We refer readers to the 
CY 2008 OPPS/ASC final rule with comment period for a full discussion 
of the development of the composite APC methodology (72 FR 66611 
through 66614 and 66650 through 66652).
    While we continue to consider the development and implementation of 
larger payment bundles, such as composite APCs (a long-term policy 
objective for the OPPS), and continue to explore other areas where this 
payment model may be utilized, we are not proposing any new composite 
APCs for CY 2010 so that we may monitor the effects of the existing 
composite APCs on utilization and payment. In response to our CY 2009 
proposal to apply a composite payment methodology to multiple imaging 
procedures provided on the same date of service, several public 
commenters stated that we should proceed cautiously as we expand 
service bundling. They commented that we should not implement 
additional composite methodologies until adequate data are available to 
evaluate the composite policies' effectiveness and impact on 
beneficiary access to care (73 FR 68561 through 68562).
    In response to the concerns of the public commenters and the APC 
Panel, we reviewed the CY 2008 claims data for claims processed through 
September 30, 2008, for the services in the following composite APCs: 
APC 8000 (Cardiac Electrophysiologic Evaluation and Ablation 
Composite); APC 8001 (Low Dose Rate Prostate Brachytherapy Composite); 
APC 8002 (Level I Extended Assessment and Evaluation Composite); and 
APC 8003 (Level II Extended Assessment and Evaluation Composite). Our 
analyses did not consider inflation, changes in beneficiary population, 
or other comparable variables that can affect changes in aggregate 
payment from year to year. We found that the average payment for the 
package of services in both APC 8000 and APC 8001 increased from CY 
2007, when payments were made for all individual services, to CY 2008 
under the composite payment methodology. We also note that the proposed 
median costs for these composite APCs for CY 2010 are higher than the 
median costs upon which the CY 2009 payments are based. We believe 
that, in part, this is because we are using more claims data for common 
clinical scenarios to calculate the median costs of these APCs than we 
were prior to the implementation of the composite payment methodology.
    With regard to APCs 8002 and 8003, we compared payment for all 
visits appearing with observation services in CY 2007 with payments for 
all visits appearing with observation services in CY 2008 and found 
that total payment

[[Page 35279]]

for visits and observation services increased from approximately $197 
million to $270 million for claims processed through September 30 in 
each year. We attribute this increase in payments, in part, to the 
introduction of a composite payment for visits and observation through 
the extended assessment and management composite methodology that 
occurred for CY 2008 and that did not incorporate the International 
Classification of Diseases, Ninth Edition, Clinical Modification (ICD-
9-CM) diagnosis criteria previously necessary for separate payment of 
observation.
    We will continue to review the claims data for the impact of all of 
the composite APCs on payments to hospitals and on services to 
beneficiaries and will take such data into consideration before 
proposing new composite APCs. As stated in the CY 2009 OPPS/ASC final 
rule with comment period, we believe that we proceeded with an 
appropriate level of caution by implementing multiple imaging composite 
APCs as the one new composite APC policy for CY 2009 (73 FR 68563). 
However, we do recognize the concerns expressed by the public 
commenters that moving ahead too quickly with any nonstandard OPPS 
payment methodology (even one such as composite APCs that may improve 
the accuracy of the OPPS payment rates by utilizing more complete and 
valid claims in ratesetting) could have unintended consequences and 
requires close monitoring. Because the multiple imaging composite APCs 
were implemented for the first time in CY 2009, we will not have data 
available for such monitoring until early CY 2010. Therefore, we 
believe that it is in the best interest of hospitals and the integrity 
of the OPPS that we do not propose any new composite APC policies for 
at least one year.
    At its February 2009 meeting, the APC Panel recommended that CMS 
evaluate the implications of creating composite APCs for cardiac 
resynchronization therapy with a defibrillator or pacemaker and report 
its findings to the APC Panel. While we are not proposing any new 
composite APCs for CY2010, we are accepting this APC Panel 
recommendation, and we will evaluate the implications of creating 
composite APCs for cardiac resynchronization therapy services and 
report our findings to the APC Panel at a future meeting. We also will 
consider bringing other potential composite APCs to the APC Panel for 
further discussion.
    For CY 2010, we are proposing to continue our established composite 
APC policies for extended assessment and management, LDR prostate 
brachytherapy, cardiac electrophysiologic evaluation and ablation, 
mental health services, and multiple imaging services, as discussed in 
sections II.A.2.e.(1), II.A.2.e.(2), II.A.2.e.(3), II.A.2.e.(4), and 
II.A.2.e.(5), respectively, of this proposed rule.
(1) Extended Assessment and Management Composite APCs (APCs 8002 and 
8003)
    For CY 2010, we are proposing to continue to include composite APC 
8002 (Level I Extended Assessment and Management Composite) and 
composite APC 8003 (Level II Extended Assessment and Management 
Composite) in the OPPS. For CY 2008, we created these two new composite 
APCs to provide payment to hospitals in certain circumstances when 
extended assessment and management of a patient occur (an extended 
visit). In most circumstances, observation services are supportive and 
ancillary to the other services provided to a patient. In the 
circumstances when observation care is provided in conjunction with a 
high level visit or direct referral and is an integral part of a 
patient's extended encounter of care, payment is made for the entire 
care encounter through one of two composite APCs as appropriate.
    As defined for the CY 2008 OPPS, composite APC 8002 describes an 
encounter for care provided to a patient that includes a high level 
(Level 5) clinic visit or direct referral to observation in conjunction 
with observation services of substantial duration (72 FR 66648 through 
66649). Composite APC 8003 describes an encounter for care provided to 
a patient that includes a high level (Level 4 or 5) Type A emergency 
department visit, a high level (Level 5) Type B emergency department 
visit or critical care services in conjunction with observation 
services of substantial duration. HCPCS code G0378 (Observation 
services, per hour) is assigned status indicator ``N,'' signifying that 
its payment is always packaged. As noted in the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66648 through66649), the Integrated 
Outpatient Code Editor (I/OCE) evaluates every claim received to 
determine if payment through a composite APC is appropriate. If payment 
through a composite APC is inappropriate, the I/OCE, in conjunction 
with the OPPS Pricer, determines the appropriate status indicator, APC, 
and payment for every code on a claim. The specific criteria that must 
be met for the two extended assessment and management composite APCs to 
be paid are provided below in the description of the claims that were 
selected for the calculation of the proposed CY 2010 median costs for 
these composite APCs. We are not proposing to change these criteria for 
the CY 2010 OPPS.
    When we created composite APCs 8002 and 8003 for CY 2008, we 
retained as general reporting requirements for all observation services 
those criteria related to physician order and evaluation, 
documentation, and observation beginning and ending time as listed in 
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66812). 
These are more general requirements that encourage hospitals to provide 
medically reasonable and necessary care and help to ensure the proper 
reporting of observation services on correctly coded hospital claims 
that reflect the full charges associated with all hospital resources 
utilized to provide the reported services. We are not proposing to 
change these reporting requirements for the CY 2010 OPPS. However, as 
discussed below, the APC Panel at its February 2009 meeting requested 
that CMS issue guidance clarifying the correct method for reporting the 
starting time for observation services. The APC Panel noted that the 
descriptions of the start time for observation services located in the 
Medicare Claims Processing Manual (Pub. 100-4), Chapter 4, sections 
290.2.2 through 290.5, cause confusion for hospitals. We are accepting 
this recommendation and plan to issue clarifying guidance in the Claims 
Processing Manual through a future quarterly update of the OPPS.
    As noted in detail in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66802 through 66805 and 66814), we saw a normal and 
stable distribution of clinic and emergency department visit levels in 
the OPPS claims data through CY 2006 available at that time. We stated 
that we did not expect to see an increase in the proportion of visit 
claims for high level visits as a result of the new composite APCs 
adopted for CY 2008. Similarly, we stated that we expected that 
hospitals would not purposely change their visit guidelines or 
otherwise upcode clinic and emergency department visits reported with 
observation care solely for the purpose of composite payment. As stated 
in the CY2008 OPPS/ASC final rule with comment period (72 FR 66648), we 
expect to carefully monitor any changes in billing practices on a 
service-specific and hospital-specific level to determine whether there 
is reason to request that Quality Improvement Organizations (QIOs) 
review the quality of care furnished, or to request that Benefit

[[Page 35280]]

Integrity contractors or other contractors review the claims against 
the medical record.
    As noted above, we observed a 37 percent increase in total payments 
for all visits appearing with observation services for claims processed 
through September 30 in CY 2007 and CY 2008. We believe this increase 
is, in part, attributable to the expansion of payment under the 
extended assessment and management composites to all ICD-9-CM 
diagnoses. To confirm this, we calculated the percentage of visit HCPCS 
codes billed with HCPCS code G0378 (Observation services, per hour) 
between CY 2007 and CY 2008 and compared the percentage associated with 
visit codes included in the extended assessment and management 
composites in each year. If hospitals had inappropriately changed their 
visit reporting behavior to maximize payment through the new composite 
APCs, we would expect to see significant changes in the percentage of 
visit HCPCS codes included in the composite APCs billed with 
observation services relative to all other visit HCPCS codes billed 
with observation services between CY 2007 and CY 2008. We did not 
observe a sizable increase in the proportion of visit HCPCS codes 
included in the composite APCs relative to the proportion of all other 
visit HCPCS codes billed with observation services. For example, the 
percentage of claims billed with CPT code 99285 (Emergency department 
visit for the evaluation and management of a patient (Level 5)) and 
HCPCS code G0378 was 51 percent in the CY 2007 data and 54 percent in 
the CY 2008 data. Similarly, the percentage of claims billed with CPT 
code 99284 (Emergency department visit for the evaluation and 
management of a patient (Level 4)) and HCPCS code G0378 decreased only 
slightly from 28 percent in the CY 2007 data to 27 percent in the CY 
2008 data. We conclude that although the volume of visits billed with 
HCPCS code G0378 increased between CY 2007 and CY2008, the overall 
pattern of billing visit levels did not change significantly. We will 
continue to carefully monitor any changes in billing practices on a 
service-specific and hospital-specific level.
    For CY 2010, we are proposing to continue the extended assessment 
and management composite APC payment methodology for APCs 8002 and 
8003. As stated earlier, we also are proposing to continue the general 
reporting requirements for observation services reported with HCPCS 
code G0378. We continue to believe that the composite APCs 8002 and 
8003 and related policies provide the most appropriate means of paying 
for these services. We are proposing to calculate the median costs for 
APCs 8002 and8003 using all single and ``pseudo'' single procedure 
claims for CY 2008 that meet the criteria for payment of each composite 
APC.
    Specifically, to calculate the proposed median costs for composite 
APCs 8002 and 8003, we selected single and ``pseudo'' single claims 
that met each of the following criteria:
    1. Did not contain a HCPCS code to which we have assigned status 
indicator ``T'' that is reported with a date of service 1 day earlier 
than the date of service associated with HCPCS code G0378. (By 
selecting these claims from single and ``pseudo'' single claims, we had 
already assured that they would not contain a code for a service with 
status indicator ``T'' on the same date of service.);
    2. Contained 8 or more units of HCPCS code G0378; and
    3. Contained one of the following codes:
    <bullet> In the case of composite APC 8002, HCPCS code G0379 
(Direct referral of patient for hospital observation care) on the same 
date of service as G0378; or CPT code 99205 (Office or other outpatient 
visit for the evaluation and management of a new patient (Level 5)); or 
CPT code 99215 (Office or other outpatient visit for the evaluation and 
management of an established patient (Level 5)) provided on the same 
date of service or one day before the date of service for HCPCS code 
G0378. We refer readers to section XII.F. of this proposed rule for a 
full discussion of our proposed revision of the code descriptor for 
HCPCS code G0379 for CY 2010.
    <bullet> In the case of composite APC 8003, CPT code 99284 
(Emergency department visit for the evaluation and management of a 
patient (Level 4)); CPT code 99285 (Emergency department visit for the 
evaluation and management of a patient (Level 5)); CPT code 99291 
(Critical care, evaluation and management of the critically ill or 
critically injured patient; first 30-74 minutes); or HCPCS code G0384 
(Level 5 Hospital Emergency Department Visit Provided in a Type B 
Emergency Department) provided on the same date of service or one day 
before the date of service for HCPCS code G0378. (As discussed in 
detail in the CY2009 OPPS/ASC final rule with comment period (73 FR 
68684), we finalized our proposal to add HCPCS code G0384 to the 
eligibility criteria for composite APC 8003 for CY 2009.)
    We applied the standard packaging and trimming rules to the claims 
before calculating the proposed CY2010 median costs. The proposed CY 
2010 median cost resulting from this process for composite APC8002 is 
approximately $384, which was calculated from 14,981 single and 
``pseudo'' single bills that met the required criteria. The proposed CY 
2010 median cost for composite APC 8003 is approximately $709, which 
was calculated from 154,843 single and ``pseudo'' single bills that met 
the required criteria. This is the same methodology we used to 
calculate the medians for composite APCs 8002 and 8003 for the CY 2008 
OPPS (72 FR 66649).
    As discussed further in sections III.D and IX. of this proposed 
rule, and consistent with our CY 2008 and CY 2009 final policies, when 
calculating the median costs for the clinic, Type A emergency 
department visit, Type B emergency department visit, and critical care 
APCs (0604 through 0617 and 0626 through 0629), we are utilizing our 
methodology that excludes those claims for visits that are eligible for 
payment through the two extended assessment and management composite 
APCs, that is APC 8002 or APC 8003. We believe that this approach 
results in the most accurate cost estimates for APCs 0604 through 0617 
and 0626 through 0629 for CY 2010.
    At the February 2009 meeting of the APC Panel, the APC Panel 
recommended that CMS present at the next APC Panel meeting an analysis 
of CY 2008 claims data for clinic, emergency department (Types A and 
B), and extended assessment and management composite APCs. We are 
accepting this recommendation, and we will share the requested claims 
data with the APC Panel at its next meeting.
    In summary, for CY 2010, we are proposing to continue to include 
composite APC 8002 (Level I Extended Assessment and Management 
Composite) and composite APC 8003 (Level II Extended Assessment and 
Management Composite) in the OPPS. We are proposing to continue the 
extended assessment and management composite APC payment methodology 
and criteria that we finalized for CY 2009. We also are proposing to 
calculate the median costs for APCs 8002 and 8003 using all single and 
``pseudo'' single procedure claims from CY 2008 that meet the criteria 
for payment of each composite APC. We are not proposing to change the 
reporting requirements for observation services for the CY 2010 OPPS. 
However, we plan to issue further clarifying guidance in the Medicare 
Claims Processing Manual related to observation start time, as 
recommended by the APC Panel.

[[Page 35281]]

(2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001)
    LDR prostate brachytherapy is a treatment for prostate cancer in 
which hollow needles or catheters are inserted into the prostate, 
followed by permanent implantation of radioactive sources into the 
prostate through the needles/catheters. At least two CPT codes are used 
to report the composite treatment service because there are separate 
codes that describe placement of the needles/catheters and the 
application of the brachytherapy sources: CPT code 55875 (Transperineal 
placement of needles or catheters into prostate for interstitial 
radioelement application, with or without cystoscopy) and CPT code 
77778 (Interstitial radiation source application; complex). Generally, 
the component services represented by both codes are provided in the 
same operative session in the same hospital on the same date of service 
to the Medicare beneficiary being treated with LDR brachytherapy for 
prostate cancer. As discussed in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66653), OPPS payment rates for CPT code 77778, in 
particular, had fluctuated over the years. We were frequently informed 
by the public that reliance on single procedure claims to set the 
median costs for these services resulted in use of only incorrectly 
coded claims for LDR prostate brachytherapy because a correctly coded 
claim should include, for the same date of service, CPT codes for both 
needle/catheter placement and application of radiation sources, as well 
as separately coded imaging and radiation therapy planning services 
(that is, a multiple procedure claim).
    In order to base payment on claims for the most common clinical 
scenario, and to further our goal of providing payment under the OPPS 
for a larger bundle of component services provided in a single hospital 
encounter, beginning in CY 2008, we provide a single payment for LDR 
prostate brachytherapy when the composite service, reported as CPT 
codes 55875 and 77778, is furnished in a single hospital encounter. We 
base the payment for composite APC 8001 (LDR Prostate Brachytherapy 
Composite) on the median cost derived from claims for the same date of 
service that contain both CPT codes 55875 and 77778 and that do not 
contain other separately paid codes that are not on the bypass list. In 
uncommon occurrences in which the services are billed individually, 
hospitals continue to receive separate payments for the individual 
services. We refer readers to the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66652 through 66655) for a full history of OPPS 
payment for LDR prostate brachytherapy and a detailed description of 
how we developed the LDR prostate brachytherapy composite APC.
    For CY 2010, we are proposing to continue paying for LDR prostate 
brachytherapy services using the composite APC methodology proposed and 
implemented for CY 2008 and CY 2009. That is, we are proposing to use 
CY 2008 claims on which both CPT codes 55875 and 77778 were billed on 
the same date of service with no other separately paid procedure codes 
(other than those on the bypass list) to calculate the payment rate for 
composite APC 8001. Consistent with our CY 2008 and CY 2009 practice, 
we would not use the claims that meet these criteria in the calculation 
of the median costs for APCs 0163 (Level IV Cystourethroscopy and Other 
Genitourinary Procedures) and 0651 (Complex Interstitial Radiation 
Source Application), the APCs to which CPT codes 55875 and 77778 are 
assigned, respectively. The median costs for APCs 0163 and 0651 would 
continue to be calculated using single and ``pseudo'' single procedure 
claims. We continue to believe that this composite APC contributes to 
our goal of creating hospital incentives for efficiency and cost 
containment, while providing hospitals with the most flexibility to 
manage their resources. We also continue to believe that data from 
claims reporting both services required for LDR prostate brachytherapy 
provide the most accurate median cost upon which to base the composite 
APC payment rate.
    Using partial year CY 2008 claims data available for this proposed 
rule, we were able to use 669 claims that contained both CPT codes 
77778 and 55875 to calculate the median cost upon which the proposed CY 
2010 payment for composite APC 8001 is based. The proposed median cost 
for composite APC 8001 for CY 2010 is approximately $3,106. This is an 
increase compared to the CY2009 OPPS/ASC final rule with comment period 
in which we calculated a final median cost for this composite APC of 
approximately $2,967 based on a full year of CY 2007 claims data. The 
CY 2010 proposed median cost for this composite APC is slightly less 
than $3,268, the sum of the proposed median costs for APCs 0163 and 
0651 ($2,453+$815), the APCs to which CPT codes 55875 and 77778 map if 
one service is billed on a claim without the other. We believe the 
proposed CY 2010 median cost for composite APC 8001 of approximately 
$3,106 calculated from claims we believe to be correctly coded results 
in a reasonable and appropriate payment rate for this service in CY 
2010.
(3) Cardiac Electrophysiologic Evaluation and Ablation Composite APC 
(APC 8000)
    Cardiac electrophysiologic evaluation and ablation services 
frequently are performed in varying combinations with one another 
during a single episode-of-care in the hospital outpatient setting. 
Therefore, correctly coded claims for these services often include 
multiple codes for component services that are reported with different 
CPT codes and that, prior to CY 2008, were always paid separately 
through different APCs (specifically, APC 0085 (Level II 
Electrophysiologic Evaluation), APC 0086 (Ablate Heart Dysrhythm 
Focus), and APC 0087 (Cardiac Electrophysiologic Recording/Mapping)). 
As a result, there would never be many single bills for cardiac 
electrophysiologic evaluation and ablation services, and those that are 
reported as single bills would often represent atypical cases or 
incorrectly coded claims. As described in the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66655 through 66659), the APC Panel and 
the public expressed persistent concerns regarding the limited and 
reportedly unrepresentative single bills available for use in 
calculating the median costs for these services according to our 
standard OPPS methodology.
    Effective January 1, 2008, we established APC 8000 (Cardiac 
Electrophysiologic Evaluation and Ablation Composite) to pay for a 
composite service made up of at least one specified electrophysiologic 
evaluation service and one specified electrophysiologic ablation 
service. Calculating a composite APC for these services allowed us to 
utilize many more claims than were available to establish the 
individual APC median costs for these services, and we also saw this 
composite APC as an opportunity to advance our stated goal of promoting 
hospital efficiency through larger payment bundles. In order to 
calculate the median cost upon which the payment rate for composite APC 
8000 is based, we used multiple procedure claims that contained at 
least one CPT code from group A for evaluation services and at least 
one CPT code from group B for ablation services reported on the same 
date of service on an individual claim. Table 9 in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66656) identified the CPT codes 
that are

[[Page 35282]]

assigned to groups A and B. For a full discussion of how we identified 
the group A and group B procedures and established the payment rate for 
the cardiac electrophysiologic evaluation and ablation composite APC, 
we refer readers to the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66655 through 66659). Where a service in group A is furnished on 
a date of service that is different from the date of service for a code 
in group B for the same beneficiary, payments are made under the 
appropriate single procedure APCs and the composite APC does not apply.
    For CY 2010, we are proposing to continue paying for cardiac 
electrophysiologic evaluation and ablation services using the composite 
APC methodology proposed and implemented for CY 2008 and CY 2009. 
Consistent with our CY 2008 and CY 2009 practice, we would not use the 
claims that meet the composite payment criteria in the calculation of 
the median costs for APC 0085 and APC 0086, to which the CPT codes in 
both groups A and B for composite APC 8000 are otherwise assigned. 
Median costs for APCs 0085 and 0086 continue to be calculated using 
single procedure claims. We continue to believe that the composite APC 
methodology for cardiac electrophysiologic evaluation and ablation 
services is the most efficient and effective way to use the claims data 
for the majority of these services and best represents the hospital 
resources associated with performing the common combinations of these 
services that are clinically typical. Furthermore, this approach 
creates incentives for efficiency by providing a single payment for a 
larger bundle of major procedures when they are performed together, in 
contrast to continued separate payment for each of the individual 
procedures.
    Using partial year CY 2008 claims data available for this proposed 
rule, we were able to use 6,975 claims containing a combination of 
group A and group B codes and calculated a proposed median cost of 
approximately $10,105 for composite APC 8000. This is an increase 
compared to the CY 2009 OPPS/ASC final rule with comment period in 
which we calculated a final median cost for this composite APC of 
approximately $9,206 based on a full year of CY 2007 claims data. We 
believe that the proposed median cost of $10,105 calculated from a high 
volume of correctly coded multiple procedure claims results in an 
accurate and appropriate proposed payment for cardiac 
electrophysiologic evaluation and ablation services when at least one 
evaluation service is furnished during the same clinical encounter as 
at least one ablation service. Table 9 below lists the groups of 
procedures upon which we are proposing to base composite APC 8000 for 
CY 2010.

 Table 9--Proposed Groups of Cardiac Electrophysiologic Evaluation and Ablation Procedures Upon Which Composite
                                                APC 8000 Is Based
----------------------------------------------------------------------------------------------------------------
                                                                                        Proposed     Proposed CY
   Codes used in combinations: at least one in Group A and one in     CY 2009 HCPCS    single code     2010 SI
                              Group B                                     code        CY 2010  APC   (composite)
----------------------------------------------------------------------------------------------------------------
                                                     Group A
----------------------------------------------------------------------------------------------------------------
Comprehensive electrophysiologic evaluation with right atrial                 93619            0085          Q3
 pacing and recording, right ventricular pacing and recording, His
 bundle recording, including insertion and repositioning of
 multiple electrode catheters, without induction or attempted
 induction of arrhythmia...........................................
Comprehensive electrophysiologic evaluation including insertion and           93620            0085          Q3
 repositioning of multiple electrode catheters with induction or
 attempted induction of arrhythmia; with right atrial pacing and
 recording, right ventricular pacing and recording, His bundle
 recording.........................................................
----------------------------------------------------------------------------------------------------------------
                                                     Group B
----------------------------------------------------------------------------------------------------------------
Intracardiac catheter ablation of atrioventricular node function,             93650            0085          Q3
 atrioventricular conduction for creation of complete heart block,
 with or without temporary pacemaker placement.....................
Intracardiac catheter ablation of arrhythmogenic focus; for                   93651            0086          Q3
 treatment of supraventricular tachycardia by ablation of fast or
 slow atrioventricular pathways, accessory atrioventricular
 connections or other atrial foci, singly or in combination........
Intracardiac catheter ablation of arrhythmogenic focus; for                   93652            0086          Q3
 treatment of ventricular tachycardia..............................
----------------------------------------------------------------------------------------------------------------

(4) Mental Health Services Composite APC (APC 0034)
    For CY 2010, we are proposing to continue our longstanding policy 
of limiting the aggregate payment for specified less resource-intensive 
mental health services furnished on the same date to the payment for a 
day of partial hospitalization, which we consider to be the most 
resource-intensive of all outpatient mental health treatment for CY 
2010. We refer readers to the April 7, 2000 OPPS final rule with 
comment period (65 FR 18455) for the initial discussion of this 
longstanding policy. We continue to believe that the costs associated 
with administering a partial hospitalization program represent the most 
resource-intensive of all outpatient mental health treatment. 
Therefore, we do not believe that we should pay more for a day of 
individual mental health services under the OPPS than the partial 
hospitalization per diem payment.
    For CY 2010, as discussed further in section X.B. of this proposed 
rule, we are proposing to continue using the two tiered payment 
approach for partial hospitalization services that we implemented in CY 
2009: One APC for days with three services (APC 0172) (Level I Partial 
Hospitalization (3 services)) and one APC for days with four or more 
services (APC 0173) (Level II Partial Hospitalization (4 or more 
services)). When a CMHC or hospital provides three units of partial 
hospitalization services and meets all other partial hospitalization 
payment criteria, we are proposing that the CMHC or hospital be paid 
through APC 0172. When the CMHC or hospital provides 4 or more units of 
partial hospitalization services and meets all other partial 
hospitalization payment criteria, we are proposing that the CMHC or 
hospital be paid through APC 0173. We are proposing to set the CY 2010 
payment rate for mental health services composite APC 0034 (Mental 
Health Services Composite) at the same

[[Page 35283]]

rate as we are proposing for APC 0173, which is the maximum partial 
hospitalization per diem payment. We believe this APC payment rate 
would provide the most appropriate payment for composite APC 0034, 
taking into consideration the intensity of the mental health services 
and the differences in the HCPCS codes for mental health services that 
could be paid through this composite APC compared with the HCPCS codes 
that could be paid through partial hospitalization APC 0173. When the 
aggregate payment for specified mental health services provided by one 
hospital to a single beneficiary on one date of service based on the 
payment rates associated with the APCs for the individual services 
exceeds the maximum per diem partial hospitalization payment, we are 
proposing that those specified mental health services would be assigned 
to APC 0034. We are proposing that APC 0034 would continue to have the 
same payment rate as APC 0173, and that the hospital would continue to 
be paid one unit of APC 0034. The I/OCE currently determines, and we 
are proposing for CY 2010 that it would continue to determine, whether 
to pay these specified mental health services individually or to make a 
single payment at the same rate as the APC 0173 per diem rate for 
partial hospitalization for all of the specified mental health services 
furnished by the hospital on that single date of service.
    For CY 2010, we are proposing to continue assigning status 
indicator ``Q3'' (Codes that May be Paid Through a Composite APC) to 
the HCPCS codes that are assigned to composite APC 0034 in Addendum M 
to this proposed rule. We also are proposing to continue assigning 
status indicator ``S'' (Significant Procedure, Not Discounted when 
Multiple), as adopted for CY 2009, to APC 0034 for CY 2010.
(5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 
8008)
    Prior to CY 2009, hospitals received a full APC payment for each 
imaging service on a claim, regardless of how many procedures were 
performed during a single session using the same imaging modality. 
Based on extensive data analysis, we determined that this practice 
neither reflected nor promoted the efficiencies hospitals can achieve 
when performing multiple imaging procedures during a single session (73 
FR 41448 through 41450). As a result of our data analysis, and in 
response to ongoing requests from MedPAC to improve payment accuracy 
for imaging services under the OPPS, we expanded the composite APC 
model developed in CY 2008 to multiple imaging services. Effective 
January 1, 2009, we provide a single payment each time a hospital bills 
more than one imaging procedure within an imaging family on the same 
date of service. We utilize three imaging families based on imaging 
modality for purposes of this methodology: Ultrasound, computed 
tomography (CT) and computed tomographic angiography (CTA), and 
magnetic resonance imaging (MRI) and magnetic resonance angiography 
(MRA). The HCPCS codes subject to the multiple imaging composite 
policy, and their respective families, are listed in Table 8 of the CY 
2009 OPPS/ASC final rule with comment period (73 FR 68567 through 
68569).
    While there are three imaging families, there are five multiple 
imaging composite APCs due to the statutory requirement at section 
1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging 
services provided with and without contrast. While the ultrasound 
procedures included in the policy do not involve contrast, both CT/CTA 
and MRI/MRA scans can be provided either with or without contrast. The 
five multiple imaging composite APCs established in CY 2009 are: APC 
8004 (Ultrasound Composite); APC 8005 (CT and CTA without Contrast 
Composite); APC 8006 (CT and CTA with Contrast Composite); APC 8007 
(MRI and MRA without Contrast Composite); and APC 8008 (MRI and MRA 
with Contrast Composite). We define the single imaging session for the 
``with contrast'' composite APCs as having at least one or more imaging 
procedures from the same family performed with contrast on the same 
date of service. For example, if the hospital performs an MRI without 
contrast during the same session as at least one other MRI with 
contrast, the hospital will receive payment for APC 8008, the ``with 
contrast'' composite APC.
    Hospitals continue to use the same HCPCS codes to report imaging 
procedures, and the I/OCE determines when combinations of imaging 
procedures qualify for composite APC payment or map to standard (sole 
service) APCs for payment. We will make a single payment for those 
imaging procedures that qualify for composite APC payment, as well as 
any packaged services furnished on the same date of service. The 
standard (noncomposite) APC assignments continue to apply for single 
imaging procedures and multiple imaging procedures performed across 
families.
    For a full discussion of the development of the multiple imaging 
composite APC methodology, we refer readers to the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68559 through 68569).
    During the February 2009 meeting of the APC Panel, the APC Panel 
heard from stakeholders who claimed that a composite payment is not 
appropriate when multiple imaging procedures are provided on the same 
date of service but at different times. Some APC Panel members 
expressed concern that the same efficiencies that may be gained when 
multiple imaging procedures are performed during the same sitting may 
not be gained if a significant amount of time passes between the second 
and subsequent imaging procedures, when the patient may leave not only 
the scanner, but also the radiology department or hospital. The APC 
Panel recommended that CMS continue to work with stakeholders to 
examine different options for APCs for multiple imaging sessions and 
multiple imaging procedures. We are accepting this recommendation, and 
we will continue to work with any stakeholders who are interested in 
our multiple imaging composite payment methodology. We note that we 
routinely seek broad public input on OPPS payment rates and payment 
policies, including the multiple imaging composite APCs, through a 
variety of forums. Through our annual rulemaking process, we consider 
all timely public comments received from interested organizations and 
individuals, and respond to each of those public comments in the final 
rule for the forthcoming year. We also seek input from the public at 
meetings of the APC Panel, and consider opinions expressed in 
correspondences received outside of the annual rulemaking cycle. 
Furthermore, we note that we regularly accept requests from all 
interested parties to discuss with us their views about OPPS payment 
policy issues, and that we do not work exclusively with any single 
stakeholder or stakeholder group.
    While we are accepting the APC Panel recommendation that CMS 
continue to work with stakeholders to examine different options for 
APCs for multiple imaging sessions and multiple imaging procedures, we 
do not believe it is appropriate to propose modifications to the 
multiple imaging composite policy for CY 2010. As stated in the CY 2009 
OPPS/ASC final rule with comment period (73 FR 68565), we continue to 
believe that composite payment is appropriate even when procedures are 
provided on the same date of service but at different times, because 
hospitals do

[[Page 35284]]

not expend the same facility resources each and every time a patient is 
seen for a distinct imaging service in a separate imaging session. In 
most cases, we expect that patients in those circumstances would 
receive imaging procedures at different times during a single prolonged 
hospital outpatient encounter, and that the efficiencies that may be 
gained from providing multiple imaging procedures during a single 
session are achieved in such ways as not having to register the patient 
again, or not having to re-establish new intravenous access for an 
additional study when contrast is required. Furthermore, we stated that 
even if the same level of efficiencies could not be gained for multiple 
imaging procedures performed on the same date of service but at 
different times, we expect that any higher costs associated with these 
cases would be reflected in the claims data and cost reports we use to 
calculate the median costs for the multiple imaging composite APCs and, 
therefore, in their payment rates.
     In summary, for CY 2010, we are proposing to continue paying for 
all multiple imaging procedures within an imaging family performed on 
the same date of service using the multiple imaging composite payment 
methodology, without modification. The proposed CY 2010 payment rates 
for the five multiple imaging composite APCs (APC 8004, APC 8005, APC 
8006, APC 8007, and APC 8008) are based on median costs calculated from 
the partial year CY 2008 claims available for the proposed rule that 
would have qualified for composite payment under the current policy 
(that is, those claims with more than one procedure within the same 
family on a single date of service). To calculate the proposed median 
costs, we used the same methodology that we used to calculate the final 
CY 2009 median costs for these composite APCs. That is, we removed any 
HCPCS codes in the OPPS imaging families that overlapped with codes on 
our bypass list (``overlap bypass codes'') to avoid splitting claims 
with multiple units or multiple occurrences of codes in an OPPS imaging 
family into new ``pseudo'' single claims. The imaging HCPCS codes that 
we removed from the bypass list for purposes of calculating the 
proposed multiple imaging composite APC median costs appear in Table 11 
below. We integrated the identification of imaging composite ``single 
session'' claims, that is, claims with multiple imaging procedures 
within the same family on the same date of service, into the creation 
of ``pseudo'' single claims to ensure that claims were split in the 
``pseudo'' single process into accurate reflections of either a 
composite ``single session'' imaging service or a standard sole imaging 
service resource cost. Like all single bills, the new composite 
``single session'' claims were for the same date of service and 
contained no other separately paid services in order to isolate the 
session imaging costs. Our last step after processing all claims 
through the ``pseudo'' single process was to reassess the remaining 
multiple procedure claims using the full bypass list and bypass process 
in order to determine if we could make other ``pseudo'' single bills. 
That is, we assessed whether a single separately paid service remained 
on the claim after removing line items for the ``overlap bypass 
codes.''
    We were able to identify 1.7 million ``single session'' claims out 
of an estimated 2.5 million potential composite cases from our 
ratesetting claims data, or well over half of all eligible claims, to 
calculate the proposed CY 2010 median costs for the multiple imaging 
composite APCs. The HCPCS codes subject to the proposed multiple 
imaging composite policy, and their respective families, are listed 
below in Table 10.

 Table 10--Proposed OPPS Imaging Families and Multiple Imaging Procedure
                             Composite APCs
------------------------------------------------------------------------
   Proposed CY 2010 APC 8004 (ultrasound    Proposed CY 2010 approximate
                composite)                     APC median cost = $197.
------------------------------------------------------------------------
                          Family 1--Ultrasound
------------------------------------------------------------------------
76604.....................................  Us exam, chest.
76700.....................................  Us exam, abdom, complete.
76705.....................................  Echo exam of abdomen.
76770.....................................  Us exam abdo back wall,
                                             comp.
76775.....................................  Us exam abdo back wall, lim.
76776.....................................  Us exam k transpl w/Doppler.
76831.....................................  Echo exam, uterus.
76856.....................................  Us exam, pelvic, complete.
76870.....................................  Us exam, scrotum.
76857.....................................  Us exam, pelvic, limited.
------------------------------------------------------------------------
             Family 2--CT and CTA with and without Contrast
------------------------------------------------------------------------


------------------------------------------------------------------------
   Proposed CY 2010 APC 8005 (CT and CTA    Proposed CY 2010 approximate
       without contrast composite)*            APC median cost = $429
------------------------------------------------------------------------
0067T.....................................  Ct colonography; dx.
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.


------------------------------------------------------------------------
Proposed CY 2010 APC 8006 (CT and CTA with  Proposed CY 2010 approximate
            contrast composite)                APC median cost = $634
------------------------------------------------------------------------
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.

[[Page 35285]]

 
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.
75635.....................................  Ct angio abdominal arteries.
------------------------------------------------------------------------
  * If a ``without contrast'' CT or CTA procedure is performed during
   the same session as a ``with contrast'' CT or CTA procedure, the I/
   OCE will assign APC 8006 rather than APC 8005.
------------------------------------------------------------------------
             Family 3--MRI and MRA with and without Contrast
------------------------------------------------------------------------


------------------------------------------------------------------------
  Proposed CY 2010 APC 8007 (MRI and MRA    Proposed CY 2010 approximate
       without contrast composite) *           APC median cost = $732
------------------------------------------------------------------------
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.


------------------------------------------------------------------------
  Proposed CY 2010 APC 8008 (MRI and MRA    Proposed CY 2010 approximate
         with contrast composite)             APC median cost = $1,013
------------------------------------------------------------------------
70549.....................................  Mr angiograph neck w/o & w/
                                             dye.
70542.....................................  Mri orbit/face/neck w/dye.
70543.....................................  Mri orbt/fac/nck w/o & w/
                                             dye.
70545.....................................  Mr angiography head w/dye.
70546.....................................  Mr angiograph head w/o&w/
                                             dye.
70548.....................................  Mr angiography neck w/dye.
70552.....................................  Mri brain w/dye.
70553.....................................  Mri brain w/o & w/dye.
71551.....................................  Mri chest w/dye.
71552.....................................  Mri chest w/o & w/dye.
72142.....................................  Mri neck spine w/dye.
72147.....................................  Mri chest spine w/dye.
72149.....................................  Mri lumbar spine w/dye.
72156.....................................  Mri neck spine w/o & w/dye.
72157.....................................  Mri chest spine w/o & w/dye.
72158.....................................  Mri lumbar spine w/o & w/
                                             dye.
72196.....................................  Mri pelvis w/dye.
72197.....................................  Mri pelvis w/o & w/dye.
73219.....................................  Mri upper extremity w/dye.
73220.....................................  Mri uppr extremity w/o & w/
                                             dye.
73222.....................................  Mri joint upr extrem w/dye.
73223.....................................  Mri joint upr extr w/o & w/
                                             dye.
73719.....................................  Mri lower extremity w/dye.
73720.....................................  Mri lwr extremity w/o & w/
                                             dye.
73722.....................................  Mri joint of lwr extr w/dye.
73723.....................................  Mri joint lwr extr w/o & w/
                                             dye.
74182.....................................  Mri abdomen w/dye.
74183.....................................  Mri abdomen w/o & w/dye.
75561.....................................  Cardiac mri for morph w/dye.
75563.....................................  Card mri w/stress img & dye.
C8900.....................................  MRA w/cont, abd.
C8902.....................................  MRA w/o fol w/cont, abd.
C8903.....................................  MRI w/cont, breast, uni.
C8905.....................................  MRI w/o fol w/cont, brst,
                                             un.
C8906.....................................  MRI w/cont, breast, bi.
C8908.....................................  MRI w/o fol w/cont, breast.
C8909.....................................  MRA w/cont, chest.
C8911.....................................  MRA w/o fol w/cont, chest.
C8912.....................................  MRA w/cont, lwr ext.
C8914.....................................  MRA w/o fol w/cont, lwr ext.
C8918.....................................  MRA w/cont, pelvis.
C8920.....................................  MRA w/o fol w/cont, pelvis.
------------------------------------------------------------------------
  * If a ``without contrast'' MRI or MRA procedure is performed during
   the same session as a ``with contrast'' MRI or MRA procedure, the I/
   OCE will assign APC 8008 rather than 8007.
------------------------------------------------------------------------


 Table 11--Proposed OPPS Imaging Family Services Overlapping With HCPCS
                Codes on the Proposed CY 2010 Bypass List
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                          Family 1--Ultrasound
------------------------------------------------------------------------
76700.....................................  Us exam, abdom, complete.
76705.....................................  Echo exam of abdomen.
76770.....................................  Us exam abdo back wall,
                                             comp.
76775.....................................  Us exam abdo back wall, lim.
76776.....................................  Us exam k transpl w/doppler.
76856.....................................  Us exam, pelvic, complete.
76870.....................................  Us exam, scrotum.
76857.....................................  Us exam, pelvic, limited.
------------------------------------------------------------------------
             Family 2--CT and CTA With and Without Contrast
------------------------------------------------------------------------
70450.....................................  Ct head/brain w/o dye.
70480.....................................  Ct orbit/ear/fossa w/o dye.
70486.....................................  Ct maxillofacial w/o dye.
70490.....................................  Ct soft tissue neck w/o dye.
71250.....................................  Ct thorax w/o dye.
72125.....................................  Ct neck spine w/o dye.
72128.....................................  Ct chest spine w/o dye.
72131.....................................  Ct lumbar spine w/o dye.
72192.....................................  Ct pelvis w/o dye.
73200.....................................  Ct upper extremity w/o dye.
73700.....................................  Ct lower extremity
                                            w/o dye.
74150.....................................  Ct abdomen
                                            w/o dye.
------------------------------------------------------------------------
            Family 3--MRI and MRA With and Without Contrast.
------------------------------------------------------------------------
70336.....................................  Magnetic image, jaw joint.
70544.....................................  Mr angiography head w/o dye.
70551.....................................  Mri brain w/o dye.

[[Page 35286]]

 
72141.....................................  Mri neck spine w/o dye.
72146.....................................  Mri chest spine w/o dye.
72148.....................................  Mri lumbar spine w/o dye.
73218.....................................  Mri upper extremity w/o dye.
73221.....................................  Mri joint upr extrem w/o
                                             dye.
73718.....................................  Mri lower extremity w/o dye.
73721.....................................  Mri jnt of lwr extre w/o
                                             dye.
------------------------------------------------------------------------

3. Proposed Calculation of OPPS Scaled Payment Weights
    Using the APC median costs discussed in sections II.A.1. and 2. of 
this proposed rule, we calculated the proposed relative payment weights 
for each APC for CY 2010 shown in Addenda A and B to this proposed 
rule. In years prior to CY 2007, we standardized all the relative 
payment weights to APC 0601 (Mid Level Clinic Visit) because mid-level 
clinic visits were among the most frequently performed services in the 
hospital outpatient setting. We assigned APC 0601 a relative payment 
weight of 1.00 and divided the median cost for each APC by the median 
cost for APC 0601 to derive the relative payment weight for each APC.
    Beginning with the CY 2007 OPPS (71 FR 67990), we standardized all 
of the relative payment weights to APC 0606 (Level 3 Clinic Visits) 
because we deleted APC 0601 as part of the reconfiguration of the 
clinic visit APCs. We selected APC 0606 as the base because APC 0606 
was the mid-level clinic visit APC (that is, Level 3 of five levels). 
Therefore, for CY 2010, to maintain consistency in using a median for 
calculating unscaled weights representing the median cost of some of 
the most frequently provided services, we are proposing to continue to 
use the median cost of the mid-level clinic visit APC, APC 0606, to 
calculate unscaled weights. Following our standard methodology, but 
using the proposed CY2010 median cost for APC 0606, for CY 2010 we 
assigned APC 0606 a relative payment weight of 1.00 and divided the 
median cost of each APC by the proposed median cost for APC 0606 to 
derive the proposed unscaled relative payment weight for each APC. The 
choice of the APC on which to base the proposed relative weights for 
all other APCs does not affect the payments made under the OPPS because 
we scale the weights for budget neutrality.
    Section 1833(t)(9)(B) of the Act requires that APC reclassification 
and recalibration changes, wage index changes, and other adjustments be 
made in a budget neutral manner. Budget neutrality ensures that 
estimated aggregate weight under the OPPS for CY 2010 is neither 
greater than nor less than the estimated aggregate weight that would 
have been made without the changes. To comply with this requirement 
concerning the APC changes, we are proposing to compare estimated 
aggregate weight using the CY 2009 scaled relative weights to estimated 
aggregate weight using the CY 2010 unscaled relative weights. For CY 
2009, we multiply the CY 2009 scaled APC relative weight applicable to 
a service paid under the OPPS by the volume of that service from CY 
2008 claims to calculate the total weight for each service. We then add 
together the total weight for each of these services in order to 
calculate an estimated aggregate weight for the year. For CY 2010, we 
perform the same process using the CY 2010 unscaled weights rather than 
scaled weights. We then calculate the weight scaler by dividing the CY 
2009 estimated aggregate weight by the CY 2010 estimated aggregate 
weight. The service mix is the same in the current and prospective 
years because we use the same set of claims for service volume in 
calculating the aggregate weight for each year. For a detailed 
discussion of the weight scaler calculation, we refer readers to the 
OPPS claims accounting document available on the CMS Web site at: 
http://www.cms.hhs.gov/HospitalOutpatientPPS/. Again this year, we 
included payments to CMHCs in our comparison of estimated unscaled 
weight in CY 2010 to estimated total weight in CY 2009 using CY 2008 
claims data and holding all other things constant. Based on this 
comparison, we adjusted the unscaled relative weights for purposes of 
budget neutrality. The CY 2010 unscaled relative payment weights were 
adjusted by multiplying them by a proposed weight scaler of 1.2863 to 
ensure budget neutrality of the proposed CY 2010 relative weights in 
this proposed rule.
    Section 1833(t)(14)(H) of the Act, as added by section 621(a)(1) of 
Public Law 108-173, states that, ``Additional expenditures resulting 
from this paragraph shall not be taken into account in establishing the 
conversion factor, weighting and other adjustment factors for 2004 and 
2005 under paragraph (9) but shall be taken into account for subsequent 
years.'' Section 1833(t)(14) of the Act provides the payment rates for 
certain ``specified covered outpatient drugs.'' Therefore, the cost of 
those specified covered outpatient drugs (as discussed in section V. of 
this proposed rule) is included in the proposed budget neutrality 
calculations for the CY 2010 OPPS.
4. Proposed Changes to Packaged Services
a. Background
    The OPPS, like other prospective payment systems, relies on the 
concept of averaging, where the payment may be more or less than the 
estimated cost of providing a service or bundle of services for a 
particular patient, but with the exception of outlier cases, the 
payment is adequate to ensure access to appropriate care. Packaging and 
bundling payment for multiple interrelated services into a single 
payment create incentives for providers to furnish services in the most 
efficient way by enabling hospitals to manage their resources with 
maximum flexibility, thereby encouraging long-term cost containment. 
For example, where there are a variety of supplies that could be used 
to furnish a service, some of which are more expensive than others, 
packaging encourages hospitals to use the least expensive item that 
meets the patient's needs, rather than to routinely use a more 
expensive item. Packaging also encourages hospitals to negotiate 
carefully with manufacturers and suppliers to reduce the purchase price 
of items and services or to explore alternative group purchasing 
arrangements, thereby encouraging the most economical health care. 
Similarly, packaging encourages hospitals to establish protocols that 
ensure that necessary services are furnished, while carefully 
scrutinizing the services ordered by practitioners to maximize the 
efficient use of hospital resources. Finally, packaging payments into 
larger payment bundles promotes the stability of payment for services 
over time. Packaging and bundling also may reduce the importance of 
refining service-specific payment because there is more opportunity for 
hospitals to average payment across higher cost cases requiring many 
ancillary services and lower cost cases requiring fewer ancillary 
services.
    Decisions about packaging and bundling payment involve a balance 
between ensuring that payment is adequate to enable the hospital to 
provide quality care and establishing incentives for efficiency through 
larger units of payment. In the CY 2008 OPPS/

[[Page 35287]]

ASC final rule with comment period (72 FR66610 through 66659), we 
adopted the packaging of payment for items and services in the seven 
categories listed below into the payment for the primary diagnostic or 
therapeutic modality to which we believe these items and services are 
typically ancillary and supportive. The seven categories are guidance 
services, image processing services, intraoperative services, imaging 
supervision and interpretation services, diagnostic 
radiopharmaceuticals, contrast media, and 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 the HCPCS codes that are typically ancillary 
and supportive to a primary diagnostic or therapeutic modality and, in 
those cases, are an integral part of the primary service they support.
    We assign status indicator ``N'' to those HCPCS codes that we 
believe are always integral to the performance of the primary modality; 
therefore, we always package their costs into the costs of the 
separately paid primary services with which they are billed. Services 
assigned status indicator ``N'' are unconditionally packaged.
    We assign status indicator ``Q1'' (``STVX-Packaged Codes''), ``Q2'' 
(``T-Packaged Codes''), or ``Q3'' (Codes that may be paid through a 
composite APC) to each conditionally packaged HCPCS code. An ``STVX-
packaged code'' describes a HCPCS code whose payment is packaged when 
one or more separately paid primary services with the status indicator 
of ``S,'' ``T,'' ``V,'' or ``X'' are furnished in the hospital 
outpatient encounter. A ``T-packaged code'' describes a code whose 
payment is packaged when one or more separately paid surgical 
procedures with the status indicator of ``T'' are provided during the 
hospital encounter. ``STVX-packaged codes'' and ``T-packaged codes'' 
are paid separately in those uncommon cases when they do not meet their 
respective criteria for packaged payment. ``STVX-packaged codes'' and 
``T-packaged HCPCS codes'' are conditionally packaged. We refer readers 
to section XIII.A.1. of this proposed rule for a complete listing of 
status indicators.
    We use the term ``dependent service'' to refer to the HCPCS codes 
that represent services that are typically ancillary and supportive to 
a primary diagnostic or therapeutic modality. We use the term 
``independent service'' to refer to the HCPCS codes that represent the 
primary therapeutic or diagnostic modality into which we package 
payment for the dependent service. We note that, in future years as we 
consider the development of larger payment groups that more broadly 
reflect services provided in an encounter or episode-of-care, it is 
possible that we might propose to bundle payment for a service that we 
now refer to as ``independent.''
    In addition, in the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66650 through 66659), we finalized additional packaging for the 
CY 2008 OPPS, which included the establishment of new composite APCs 
for CY 2008, specifically APC 8000 (Cardiac Electrophysiologic 
Evaluation and Ablation Composite), APC 8001 (LDR Prostate 
Brachytherapy Composite), APC 8002 (Level I Extended Assessment & 
Management Composite), and APC 8003 (Level II Extended Assessment & 
Management Composite). In the CY 2009 OPPS/ASC final rule with comment 
period (73 FR 68559 through 68569), we expanded the composite APC model 
to one new clinical area, multiple imaging services. We created five 
multiple imaging composite APCs for payment in CY 2009 that incorporate 
statutory requirements to differentiate between imaging services 
provided with contrast and without contrast as required by section 
1833(t)(2)(G) of the Act. The multiple imaging composite APCs are: 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 discuss composite APCs in more detail in 
section II.A.2.e. of this proposed rule.
    Hospitals include charges for packaged services on their claims, 
and the estimated costs associated with those packaged services are 
then added to the costs of separately payable procedures on the same 
claims in establishing payment rates for the separately payable 
services. We encourage hospitals to report all HCPCS codes that 
describe packaged services that were provided, unless the CPT Editorial 
Panel or CMS provides other guidance. If a HCPCS code is not reported 
when a packaged service is provided, it can be challenging to track 
utilization patterns and resource costs.
b. Service-Specific Packaging Issues
(1) Packaged Services Addressed by the APC Panel Recommendations
    The Packaging Subcommittee of the APC Panel was established to 
review packaged HCPCS codes. In deciding whether to package a service 
or pay for a code separately, we have historically considered a variety 
of factors, including whether the service is normally provided 
separately or in conjunction with other services; how likely it is for 
the costs of the packaged code to be appropriately mapped to the 
separately payable codes with which it was performed; and whether the 
expected cost of the service is relatively low. As discussed in section 
II.A.4.a. of this proposed rule regarding our packaging approach for CY 
2008, we established packaging criteria that apply to seven categories 
of codes whose payments are packaged.
    During the September 2007 APC Panel meeting, the APC Panel 
requested that CMS evaluate the impact of expanded packaging on 
beneficiaries. During the March 2008 APC Panel meeting, the APC Panel 
requested that CMS report to the Panel at the first Panel meeting in CY 
2009 regarding the impact of packaging on net payments for patient 
care. In response to these requests, we shared data with the APC Panel 
at the February 2009 APC Panel meeting that compared the frequency of 
specific categories of services billed under the OPPS in CY 2007, 
before the expanded packaging went into effect, to the frequency of 
those same categories of services in CY 2008, their first year of 
packaged payment. In each category, the HCPCS codes that we compared 
are the ones that we identified in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66659 through 66664) as fitting into one of the 
seven packaging categories listed in section II.A.4.a. of this proposed 
rule. The data shared with the APC Panel at the February 2009 APC Panel 
meeting compared CY 2007 claims processed through September 30, 2007 to 
CY 2008 claims processed through September 30, 2008. We did not make 
any adjustments for inflation, changes in Medicare population, or other 
variables that potentially influenced billing between CY 2007 and CY 
2008. These data represent about 60 percent of the full year data. A 
summary of these data analyses is provided below.
    Analysis of the diagnostic radiopharmaceuticals category showed 
that the frequency of the reporting of diagnostic radiopharmaceuticals 
increased by 1 percent between the first 9 months of CY 2007 and the 
first 9 months of CY 2008. In CY 2007, some diagnostic 
radiopharmaceuticals were packaged and others were separately payable, 
depending on whether their per day mean costs fell above or below the 
$55 drug packaging threshold for CY 2007. All diagnostic

[[Page 35288]]

radiopharmaceuticals were uniformly packaged in CY 2008. Two percent 
more hospitals reported one or more diagnostic radiopharmaceuticals 
during CY 2008 as compared to CY 2007. Effective for CY 2008, we first 
required reporting of a radiolabeled product (including diagnostic 
radiopharmaceuticals) when billing a nuclear medicine procedure, and we 
believe that the increases in frequency and the number of reporting 
hospitals reflect hospitals meeting this reporting requirement.
    We also found that nuclear medicine procedures (into which 
diagnostic radiopharmaceuticals were packaged) and associated 
diagnostic radiopharmaceuticals were billed approximately 3 million 
times during the first 9 months of both CY 2007 and CY 2008. Further 
analysis revealed that we paid hospitals over $637 million for nuclear 
medicine procedures and diagnostic radiopharmaceuticals during the 
first 9 months of CY 2007, when diagnostic radiopharmaceuticals were 
separately payable, and over $619 million for nuclear medicine 
procedures and diagnostic radiopharmaceuticals during the first 9 
months of CY 2008, when payment for diagnostic radiopharmaceuticals was 
packaged. This represents a 3 percent decrease in aggregate payment 
between the first 9 months of CY 2007 and the first 9 months of CY 
2008.
    Using the same data, we calculated an average payment per service 
or item billed (including nuclear medicine procedures and packaged or 
separately payable diagnostic radiopharmaceuticals) of $203 in CY 2007 
and $198 in CY 2008 for nuclear medicine procedures. This represents a 
decrease of 2 percent in average payment per item or service billed 
between CY 2007 and CY 2008. It is unclear how much of the decrease in 
estimated aggregate or average per service or item billed payment may 
be due to packaging payment for diagnostic radiopharmaceuticals (and 
other services that were newly packaged for CY 2008) and how much may 
be due to the usual annual APC recalibration and typical fluctuations 
in service frequency. However, we believe that all of these factors 
likely contributed to the slight decrease in aggregate payment in CY 
2008, as compared to CY 2007. Overall, the observed changes between CY 
2007 and CY 2008 are very small and indicate that there has been very 
little change in frequency or aggregate payment in this clinical area 
between CY 2007 and CY 2008.
    We similarly analyzed 9 months of CY 2007 and CY 2008 data related 
to all services that were packaged during CY 2008 because they were 
categorized as guidance services. Analysis of the guidance category 
(which includes image-guided radiation therapy services) showed that 
the frequency of guidance services increased by 2 percent between the 
first 9 months of CY 2007 and the first 9 months of CY 2008. One 
percent fewer hospitals reported one or more guidance services during 
CY 2007 as compared to CY 2008.
    We further analyzed 9 months of CY 2007 and CY 2008 claims data for 
radiation oncology services that would be accompanied by radiation 
oncology guidance. We found that radiation oncology services (including 
radiation oncology guidance services) were billed approximately 4 
million times in CY 2007 and 3.9 million times in CY 2008, representing 
a decrease in frequency of approximately 5 percent between CY 2007 and 
CY 2008. These numbers represent each instance where a radiation 
oncology service or a radiation oncology guidance service was billed. 
Our analysis indicates that hospitals were paid over $818 million for 
radiation oncology services and radiation oncology guidance services 
under the OPPS during the first 9 months of CY 2007, when radiation 
oncology guidance services were separately payable. During the first 9 
months of CY 2008, when payments for radiation oncology guidance were 
packaged, hospitals were paid over $740 million for radiation oncology 
services under the OPPS. This $740 million includes packaged payment 
for radiation oncology guidance services and represents a 10 percent 
decrease in aggregate payment from CY 2007 to CY 2008. Using the first 
9 months of data for both CY 2007 and CY 2008, we calculated an average 
payment per radiation oncology service or item billed of $201 in CY 
2007 and $190 in CY 2008, representing a decrease of 5 percent from CY 
2007 to CY 2008. It is unclear how much of the decrease in aggregate 
payment and the decrease in average payment per service provided may be 
due to packaging payment for radiation oncology guidance services (and 
other services that were newly packaged for CY 2008) and how much may 
be due to the usual annual APC recalibration and typical fluctuations 
in service frequency. This analysis is discussed in further detail 
below, under ``Recommendation 1'' in this section of this proposed 
rule. In that analysis, we demonstrate that the volume of some packaged 
radiation oncology guidance services increased during the period, 
leading us to conclude that, irrespective of the decline in the 
frequency of radiation oncology services in general, hospitals do not 
appear to be changing their practice patterns specifically in response 
to packaged payment for radiation oncology guidance services.
    We similarly analyzed 9 months of CY 2007 and CY 2008 data related 
to all services that were packaged during CY 2008 because they were 
categorized as intraoperative services. Analysis of the intraoperative 
category (which includes intravascular ultrasound (IVUS), intracardiac 
echocardiography (ICE), and coronary fractional flow reserve (FFR)) 
showed minimal changes in the frequency and the number of reporting 
hospitals between CY 2007 and CY 2008.
    We found that cardiac catheterization and other percutaneous 
vascular procedures that would typically be accompanied by IVUS, ICE 
and FFR (including IVUS, ICE, and FFR) were billed approximately 
375,000 times in CY 2007 and approximately 400,000 times in CY 2008, 
representing an increase of 8 percent in the number of services and 
items billed between CY 2007 and CY 2008. Further analysis revealed 
that the OPPS paid hospitals over $912 million for cardiac 
catheterizations, other related services, and IVUS, ICE, and FFR in CY 
2007, when IVUS, ICE, and FFR were separately payable. In the first 9 
months of CY 2008, the OPPS paid hospitals approximately $1.1 billion 
for cardiac catheterization and other percutaneous vascular procedures 
and IVUS, ICE, and FFR, when payments for IVUS, ICE, and FFR were 
packaged. This represents a 25 percent increase in payment from CY 2007 
to CY 2008. Using the 9 months of data for both CY 2007 and CY 2008, we 
calculated an average payment per service or item provided of $2,430 in 
CY 2007 and $2,800 in CY 2008 for cardiac catheterization and other 
related services. This represents an increase of 15 percent in average 
payment per item or service from CY 2007 to CY 2008.
    We cannot determine how much of the 25 percent increase in 
aggregate payment for these services may be due to the packaging of 
payment for IVUS, ICE, and FFR (and other services that were newly 
packaged for CY 2008) and how much may be due to the usual annual APC 
recalibration and typical fluctuations in service frequency. However, 
we believe that all of these factors contributed to the increase in 
payment between these 2 years.
    The three remaining packaging categories (excluding observation 
services, which are further discussed in section II.A.2.e.(1) of this 
proposed

[[Page 35289]]

rule), contrast agents, image processing services, and imaging 
supervision and interpretation services, show minimal changes in 
frequency between CY 2007 and CY 2008, ranging from a 2 percent 
increase to a 1 percent decrease in frequency. Similarly, when 
examining the number of hospitals reporting these services, the data 
show similar numbers of hospitals reporting these services in CY 2007, 
when these services were separately payable, and CY2008, when they were 
packaged. Specifically, the percentage change in the number of 
reporting hospitals for these categories between CY 2007 and CY 2008 
ranges from 0 percent to a decrease of 1 percent.
    In summary, these preliminary data indicate that hospitals in 
aggregate do not appear to have significantly changed their service 
reporting patterns as a result of the expanded packaging adopted for 
the OPPS beginning in CY 2008.
    The APC Panel's Packaging Subcommittee reviewed the packaging 
status of several CPT codes and reported its findings to the APC Panel 
at its February 2009 meeting. The full report of the February 18-19, 
2009 APC Panel meeting can be found on the CMS Web site at: http://www.cms.hhs.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp. The APC Panel 
accepted the report of the Packaging Subcommittee, heard several 
presentations related to packaged services, discussed the deliberations 
of the Packaging Subcommittee, and recommended that--
    1. CMS pay separately for radiation therapy guidance services 
performed in the treatment room for 2 years and then reevaluate 
packaging on the basis of claims data. (Recommendation 1)
    2. CMS continue to analyze the impact of increased packaging on 
beneficiaries and provide more detailed versions of the analyses 
presented at the February 2009 meeting of services initially packaged 
in CY 2008 at the next Panel meeting. In addition, the Panel requested 
that, in the more detailed analyses of radiation oncology services that 
would be accompanied by radiation oncology guidance, CMS stratify the 
data according to the type of radiation oncology service, specifically, 
intensity modulated radiation therapy, stereotactic radiosurgery, 
brachytherapy, and conventional radiation therapy. (Recommendation 2)
    3. CMS continue to analyze the impact on beneficiaries of increased 
packaging of diagnostic radiopharmaceuticals and provide more detailed 
analyses at the next Panel meeting. In addition, the Panel requested 
that, in the more detailed analyses of packaging of diagnostic 
radiopharmaceuticals by type of nuclear medicine scan, CMS break down 
the data according to the specific CPT codes billed with the diagnostic 
radiopharmaceuticals. (Recommendation 3)
    4. CPT code 36592 (Collection of blood specimen using established 
central or peripheral catheter, venous, not otherwise specified) remain 
assigned to APC 0624 (Phlebotomy and Minor Vascular Access Device 
Procedures) for CY 2010. (Recommendation 4)
    5. The Packaging Subcommittee continue its work until the next APC 
Panel meeting. (Recommendation 5)
    We address each of these recommendations in turn in the discussion 
that follows.
Recommendation 1
    We are not proposing to pay separately for radiation therapy 
guidance services provided in the treatment room for CY 2010, which 
would be consistent with the APC Panel's recommendation. Instead, we 
are proposing to maintain the packaged status of radiation therapy 
guidance services performed in the treatment room for CY 2010.
    As discussed above in this section, during the February 2009 APC 
Panel meeting, we presented data that estimated that aggregate payment 
for radiation oncology services, including the payment for radiation 
oncology guidance services, decreased by approximately 10 percent 
between the first 9 months of CY 2007 (before the expanded packaging 
went into effect) and the first 9 months of CY 2008 (after the expanded 
packaging went into effect). This decline may be attributable to many 
factors, including lower payment rates for common radiation oncology 
services in CY 2008 specifically and generally reduced volume for 
separately paid radiation oncology services. The APC Panel expressed 
concern that this aggregate payment decrease could inhibit patient 
access to technologically advanced and clinically valuable radiation 
oncology guidance services whose payment became packaged effective 
January 1, 2008.
    While we presented data to the APC Panel comparing payment between 
CY 2007 and CY 2008 in response to past APC Panel recommendations, we 
note that we made changes to the bypass list for CY 2009 to ensure that 
we more fully captured all packaged costs on each claim, which resulted 
in significantly increased payment rates for many of these radiation 
oncology services for CY 2009, as compared to the CY 2008 payment rates 
for these services.
    Specifically, as discussed in detail in the CY 2009 OPPS/ASC final 
rule with comment period (73 FR 68575), in response to public comments 
received, several radiation oncology CPT codes had been included on the 
bypass list for the CY 2008 OPPS although they failed to meet the 
empirical criteria for inclusion on the bypass list. For CY 2009, we 
removed from the bypass list those radiation oncology codes that did 
not meet the empirical criteria. As a result of these changes to the 
bypass list, the CY 2009 median costs for several common radiation 
oncology APCs increased by more than 9 percent as compared to the CY 
2008 median costs, while the median costs for some of the other lower 
volume radiation oncology APCs, most notably the brachytherapy source 
application APCs, declined. For example, as noted in the CY 2009 OPPS/
ASC final rule with comment period (73 FR 68575), these changes to the 
bypass list resulted in payment for the common combination of intensity 
modulated radiation therapy (IMRT) and image guided radiation therapy 
(IGRT) increasing from $348 in CY 2008 to $411 in CY 2009. Notably, the 
CY 2007 total payment rate for this combination of services, before the 
expanded packaging went into effect, was $403.
    We do not yet have CY 2009 claims data reflecting utilization based 
on the payment rates in effect for CY 2009. However, we do not expect 
that an overall per service payment comparison between CY 2007 and CY 
2009 would likely demonstrate a significant decrease in payment for 
radiation oncology services because we have adopted a significant 
increase in the CY 2009 payment rates for the most common radiation 
oncology services. In addition, we note that CY 2010 proposed rule data 
indicate that the CY 2010 APC median costs applicable to most radiation 
oncology services experience increases of approximately 2 to 15 percent 
when compared to their CY 2009 median costs. Although a small number of 
other lower volume radiation oncology APCs, most notably the 
brachytherapy and stereotactic radiosurgery APCs, experience declines 
in median costs, we do not expect that an overall per service payment 
comparison between CY 2007 and CY 2010 would likely demonstrate a 
significant decrease in payment for radiation oncology services over 
this time period.
    While we understand that the CY 2007 to CY 2008 aggregate payment

[[Page 35290]]

comparison provided to the APC Panel during the February 2009 meeting 
may have contributed to the APC Panel's particular concern about 
payment for radiation oncology services for CY 2010, we do not believe 
that packaging payment for radiation oncology guidance services has 
primarily caused this decline. In addition, we do not believe that 
beneficiaries' access to these services has been limited as a result of 
packaging payment for radiation oncology guidance services. In the data 
presented to the APC Panel at the February 2009 meeting, the number of 
all packaged guidance services provided during the first 9 months of CY 
2008 represented a 2 percent increase from the number of guidance 
services provided during the first 9 months of CY 2007. Further, 
although the CY 2008 volume of the radiation oncology guidance codes 
that we newly packaged for CY 2008 varied, with some of the services 
experiencing increases in volume and others experiencing decreases in 
volume, in aggregate, the reporting of radiation oncology guidance 
services increased by 4 percent in the first 9 months of claims for CY 
2008, as compared to the first 9 months of CY 2007, and the number of 
hospitals reporting these services also increased. This further 
supports our belief that, irrespective of the decline in the frequency 
of radiation oncology services in general, hospitals do not appear to 
be changing their practice patterns specifically in response to 
packaged payment for radiation oncology guidance services.
    Therefore, we are not proposing to pay separately for radiation 
therapy guidance services performed in the treatment room for 2 years 
as the APC Panel recommended. Instead, for CY 2010, we are proposing to 
maintain the packaged status of all radiation therapy guidance 
services, including those radiation therapy guidance services performed 
in the treatment room.
Recommendation 2
    We are accepting the APC Panel recommendation to continue to 
analyze the impact of increased packaging on beneficiaries and to share 
more data with the APC Panel. We will carefully consider which 
additional data would be most informative for the APC Panel and will 
discuss these data with the APC Panel at the next CY 2009 APC Panel 
meeting and/or the first CY 2010 APC Panel meeting. Similarly, we will 
determine what additional detailed data related to radiation oncology 
services would be helpful to the APC Panel and will share these data at 
the next CY 2009 APC Panel meeting and/or the first CY 2010 APC Panel 
meeting.
Recommendation 3
    We are accepting the APC Panel's recommendation that CMS continue 
to analyze the impact on beneficiaries of increased packaging of 
diagnostic radiopharmaceuticals and provide more detailed analyses at 
the next APC Panel meeting. In these analyses of diagnostic 
radiopharmaceuticals by type of nuclear medicine scan, the APC Panel 
further recommended that CMS analyze the data according to the specific 
CPT codes billed with the diagnostic radiopharmaceuticals. This APC 
Panel recommendation is discussed in detail in section II.A.2.d (5) of 
this proposed rule. We are accepting the APC Panel's recommendation and 
will provide additional data to the APC Panel at an upcoming meeting.
Recommendation 4
    For CY 2010, we are proposing to continue to treat CPT code 36592 
(Collection of blood specimen using established central or peripheral 
catheter, venous, not otherwise specified) as an ``STVX packaged code'' 
and to assign it to APC 0624 (Phlebotomy and Minor Vascular Access 
Device Procedures), the same APC to which CPT code 36591 (Collection of 
blood specimen from a completely implantable venous access device) is 
currently assigned as the APC Panel recommended. CPT code 36592 became 
effective January 1, 2008 and was assigned interim status indicator 
``N'' in the CY 2008 OPPS/ASC final rule with comment period. For CY 
2009, in response to public comments, we proposed to treat CPT code 
36592 as a conditionally packaged code, with assignment to APC 0624. In 
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68576), we 
discussed the public comments we received regarding our proposed 
treatment of CPT code 36592. Several of these commenters supported our 
proposal to treat CPT code 36592 as a conditionally packaged code with 
assignment to APC 0624. We stated in the CY 2009 OPPS/ASC final rule 
with comment period that when cost data for CPT code 36592 became 
available for the CY 2010 OPPS annual update, we would reevaluate 
whether assignment to APC 0624 continued to be appropriate.
    Based on our analysis of claims data, our clinical understanding of 
the service, and our discussion with the APC Panel Packaging 
Subcommittee, we are proposing to maintain the assignment of CPT code 
36592 to APC 0624 for CY 2010, consistent with the APC Panel 
recommendation, and we are proposing to continue to treat CPT code 
36592 as an ``STVX packaged code'' and assign it to APC 0624. We note 
that we expect hospitals to follow the CPT guidance related to CPT 
codes 36591 and 36592 regarding when these services should be 
appropriately reported.
Recommendation 5
    In response to the APC Panel's recommendation for the Packaging 
Subcommittee to remain active until the next APC Panel meeting, we note 
that we have accepted this recommendation and the APC Panel Packaging 
Subcommittee remains active. Additional issues and new data concerning 
the packaging status of codes will be shared for its consideration as 
information becomes available. We continue to encourage submission of 
common clinical scenarios involving currently packaged HCPCS codes to 
the Packaging Subcommittee for its ongoing review. We also encourage 
recommendations of specific services or procedures whose payment would 
be most appropriately packaged under the OPPS. Additional detailed 
suggestions for the Packaging Subcommittee should be submitted by e-
mail to <a href="/cdn-cgi/l/email-protection#9ddccddecdfcf3f8f1ddfef0eeb3f5f5eeb3faf2eb"><span class="__cf_email__" data-cfemail="d796879487b6b9b2bb97b4baa4f9bfbfa4f9b0b8a1">[email protected]</span></a> with Packaging Subcommittee in the subject 
line.
(2) Other Service-Specific Packaging Issues
    The APC Panel also recommended that CMS reassign CPT code 76098 
(Radiological examination, surgical specimen) from APC 0317 (Level II 
Miscellaneous Radiology Procedures) to APC 0260 (Level I Plain Film), 
and to place CPT code 76098 on the bypass list. Based on our analysis 
of the CY 2010 claims containing CPT 76098 and clinical review of the 
services being furnished, we are proposing to treat CPT code 76098 as a 
``T-packaged'' code for CY 2010 with continued assignment to APC 0317. 
As discussed above, a ``T-packaged code,'' identified with status 
indicator ``Q2,'' describes a code whose payment is packaged when one 
or more separately paid surgical procedures with a status indicator of 
``T'' are provided during the hospital encounter. The assignment of 
status indicator ``Q2'' to CPT code 76098 would result in more claims 
data being available to set the median costs for the surgical 
procedures with which CPT code 76098 is most commonly billed (for 
example, CPT code 19101 (Biopsy of breast, percutaneous, needle core, 
not using image guidance; open incisional)), while continuing to 
provide appropriate

[[Page 35291]]

separate payment that reflects the costs of the service, including its 
packaged costs, when it is not billed with a surgical procedure. 
Further discussion related to this proposal is included in section 
II.A.1.b. of this proposed rule.

B. Proposed Conversion Factor Update

    Section 1833(t)(3)(C)(ii) of the Act requires us to update the 
conversion factor used to determine payment rates under the OPPS on an 
annual basis. Section 1833(t)(3)(C)(iv) of the Act provides that, for 
CY 2010, the update is equal to the hospital inpatient market basket 
percentage increase applicable to hospital discharges under section 
1886(b)(3)(B)(iii) of the Act. The proposed hospital market basket 
increase for FY 2010 published in the FY 2010 IPPS/LTCH PPS proposed 
rule (74 FR24239 through 24241) is 2.1 percent. To set the proposed 
OPPS conversion factor for CY 2010, we increased the CY 2009 conversion 
factor of $66.059, as specified in the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68584 through 68585), by 2.1 percent. Hospitals 
that fail to meet the reporting requirements of the Hospital Outpatient 
Quality Data Reporting Program (HOP QDRP) are subject to a reduction of 
2.0 percentage points from the market basket update to the conversion 
factor. For a complete discussion of the HOP QDRP requirements and the 
payment reduction for hospitals that fail to meet those requirements, 
we refer readers to section XVI. of this proposed rule.
    In accordance with section 1833(t)(9)(B) of the Act, we further 
adjusted the conversion factor for CY 2010 to ensure that any revisions 
we are proposing to make to our updates for a revised wage index and 
rural adjustment are made on a budget neutral basis. We calculated an 
overall budget neutrality factor of 1.0000 for wage index changes by 
comparing total payments from our simulation model using the FY 2010 
IPPS proposed wage index values to those payments using the current (FY 
2009) IPPS wage index values. For CY 2010, we are not proposing a 
change to our rural adjustment policy. Therefore, the proposed budget 
neutrality factor for the rural adjustment is 1.0000.
    For this proposed rule, we estimate that pass-through spending for 
both drugs and biologicals and devices for CY 2010 would equal 
approximately $38 million, which represents 0.12 percent of total 
projected CY 2010 OPPS spending. Therefore, the conversion factor is 
also adjusted by the difference between the 0.11 percent estimate of 
pass-through spending set aside for CY 2009 and the 0.12 percent 
estimate of CY 2010 pass-through spending. Finally, estimated payments 
for outliers remain at 1.0 percent of total OPPS payments for CY 2010.
    The proposed market basket increase update factor of 2.1 percent 
for CY 2010 and the adjustment of 0.01 percent of projected OPPS 
spending for the difference in the pass-through spending set aside 
resulted in a full proposed market basket conversion factor for CY 2010 
of $67.439. To calculate the proposed CY 2010 reduced market basket 
conversion factor for those hospitals that fail to meet the 
requirements of the HOP QDRP for the full CY 2010 payment update, we 
made all other adjustments discussed above, but used a proposed reduced 
market basket increase update factor of 0.1 percent. This resulted in a 
proposed reduced market basket conversion factor for CY 2010 of $66.118 
for those hospitals that fail to meet the HOP QDRP requirements.

C. Proposed Wage Index Changes

    Section 1833(t)(2)(D) of the Act requires the Secretary to 
determine a wage adjustment factor to adjust, for geographic wage 
differences, the portion of the OPPS payment rate, which includes the 
copayment standardized amount, that is attributable to labor and labor-
related cost. This adjustment must be made in a budget neutral manner 
and budget neutrality is discussed in section II.B. of this proposed 
rule.
    The OPPS labor-related share is 60 percent of the national OPPS 
payment. This labor-related share is based on a regression analysis 
that determined that approximately 60 percent of the costs of services 
paid under the OPPS were attributable to wage costs. We confirmed that 
this labor-related share for outpatient services is still appropriate 
during our regression analysis for the payment adjustment for rural 
hospitals in the CY 2006 OPPS final rule with comment period (70 FR 
68553). Therefore, we are not proposing to revise this policy for the 
CY 2010 OPPS. We refer readers to section II.G. of this proposed rule 
for a description and example of how the wage index for a particular 
hospital is used to determine the payment for the hospital.
    As discussed in section II.A.2.c. of this proposed rule, for 
estimating national median APC costs, we standardize 60 percent of 
estimated claims costs for geographic area wage variation using the 
same FY 2010 pre-reclassified wage indices that the IPPS uses to 
standardize costs. This standardization process removes the effects of 
differences in area wage levels from the determination of a national 
unadjusted OPPS payment rate and the copayment amount.
    As published in the original OPPS April 7, 2000 final rule with 
comment period (65 FR 18545), the OPPS has consistently adopted the 
final IPPS wage indices as the wage indices for adjusting the OPPS 
standard payment amounts for labor market differences. Thus, the wage 
index that applies to a particular acute care short-stay hospital under 
the IPPS would also apply to that hospital under the OPPS. As initially 
explained in the September 8, 1998 OPPS proposed rule, we believed and 
continue to believe that using the IPPS wage index as the source of an 
adjustment factor for the OPPS is reasonable and logical, given the 
inseparable, subordinate status of the HOPD within the hospital 
overall. In accordance with section 1886(d)(3)(E) of the Act, the IPPS 
wage index is updated annually. Therefore, in accordance with our 
established policy, we are proposing to use the final FY 2010 version 
of the IPPS wage indices used to pay IPPS hospitals to adjust the CY 
2010 OPPS payment rates and copayment amounts for geographic 
differences in labor cost for all providers that participate in the 
OPPS, including providers that are not paid under the IPPS (referred to 
in this section as ``non-IPPS'' providers).
    We note that the proposed FY 2010 IPPS wage indices continue to 
reflect a number of adjustments implemented over the past few years, 
including revised Office of Management and Budget (OMB) standards for 
defining geographic statistical areas (Core-Based Statistical Areas or 
CBSAs), reclassification to different geographic areas, rural floor 
provisions and the accompanying budget neutrality adjustment, an 
adjustment for out-migration labor patterns, an adjustment for 
occupational mix, and a policy for allocating hourly wage data among 
campuses of multicampus hospital systems that cross CBSAs. For the FY 
2010 wage indices, these changes include a continuing transition to the 
new reclassification threshold criteria that were finalized in the FY 
2009 IPPS final rule (73 FR 48568 through 48570), updated 2007-2008 
occupational mix survey data, and a continuing transition to State-
level budget neutrality for the rural and imputed floors. We refer 
readers to the FY 2010 IPPS/LTCH PPS proposed rule (74 FR 24137 through 
24153) for a detailed discussion of all proposed changes to the FY 2010 
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

[[Page 35292]]

rules for a detailed discussion of the history of these wage index 
adjustments as applied under the OPPS.
    The IPPS wage indices that we are proposing to adopt in this 
proposed rule include all reclassifications that are approved by the 
Medicare Geographic Classification Review Board (MGCRB) for FY 2010. We 
note that reclassifications under section 508 of Public Law 108-173 and 
certain special exception reclassifications that were extended by 
section 106(a) of Public Law 109-432 (MIEA-TRHCA) and section 117(a)(1) 
of Public Law 110-173 (MMSEA) were set to terminate September 30, 2008, 
but were further extended by section 124 of Public Law 110-275 (MIPPA) 
through September 30, 2009.
    As noted in the CY 2009 OPPS/ASC final rule with comment period (73 
FR 68585), after issuance of the CY 2009 OPPS/ASC proposed rule, 
section 124 of Public Law 110-275 further extended geographic 
reclassifications under section 508 and certain special exception 
reclassifications until September 30, 2009. We did not make any 
proposals related to these provisions for the CY 2009 OPPS wage indices 
in our CY 2009 proposed rule because Public Law 110-275 was enacted 
after issuance of the CY 2009 OPPS/ASC proposed rule. In accordance 
with section 124 of Public Law 110-275, for CY 2009, we adopted all 
section 508 geographic reclassifications through September 30, 2009. 
Similar to our treatment of section 508 reclassifications extended 
under Public Law 110-173 as described in the CY 2009 OPPS/ASC final 
rule with comment period (73 FR 68586), hospitals with section 508 
reclassifications revert to their home area wage index, with out-
migration adjustment if applicable, from October 1, 2009, to December 
31, 2009. As we did for CY 2008, we also have extended the special 
exception wage indices for certain hospitals through December 31, 2009, 
under the OPPS, in order to give these hospitals the special exception 
wage indices under the OPPS for the same time period as under the IPPS. 
We refer readers to the Federal Register notice published subsequent to 
the FY 2009 IPPS final rule for a detailed discussion of the changes to 
the wage indices as required by section 124 of Public Law 110-275 (73 
FR 57888). Because the provisions of section 124 of Public Law 110-275 
expire in 2009 and are not applicable to FY 2010, we are not making any 
proposals related to those provisions for the OPPS wage indices for CY 
2010.
    For purposes of the OPPS, we are proposing to continue our policy 
in CY 2010 to allow non-IPPS hospitals paid under the OPPS to qualify 
for the out-migration adjustment if they are located in a section 505 
out-migration county. We note that because non-IPPS hospitals cannot 
reclassify, they are eligible for the out-migration wage adjustment. 
Table 4J in the Federal Register for the FY 2010 IPPS proposed wage 
indices (74 FR 24446 through 24462) identifies counties eligible for 
the out-migration adjustment and providers receiving the adjustment. As 
we have done in prior years, we are reprinting Table 4J as Addendum L 
to this proposed rule, with the addition of non-IPPS hospitals that 
would receive the section 505 out-migration adjustment under the CY 
2010 OPPS.
    As stated earlier in this section, we continue to believe that 
using the IPPS wage indices as the source of an adjustment factor for 
the OPPS is reasonable and logical, given the inseparable, subordinate 
status of the HOPD within the hospital overall. Therefore, we are 
proposing to use the final FY 2010 IPPS wage indices for calculating 
the OPPS payments in CY 2010. With the exception of the out-migration 
wage adjustment table (Addendum L to this proposed rule), which 
includes non-IPPS hospitals paid under the OPPS, we are not reprinting 
the FY 2010 IPPS proposed 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.hhs.gov/providers/hopps. At this link, readers will find 
a link to the FY 2010 IPPS proposed wage index tables.

D. Proposed Statewide Average Default CCRs

    In addition to using CCRs to estimate costs from charges on claims 
for ratesetting, CMS uses CCRs to determine outlier payments, payments 
for pass-through devices, and monthly interim transitional corridor 
payments under the OPPS during the PPS year. Medicare contractors 
cannot calculate a CCR for some hospitals because there is no cost 
report available. For these hospitals, CMS uses the statewide average 
default CCRs to determine the payments mentioned above until a 
hospital's Medicare contractor is able to calculate the hospital's 
actual CCR from its most recently submitted Medicare cost report. These 
hospitals include, but are not limited to, hospitals that are new, have 
not accepted assignment of an existing hospital's provider agreement, 
and have not yet submitted a cost report. CMS also uses the statewide 
average default CCRs to determine payments for hospitals that appear to 
have a biased CCR (that is, the CCR falls outside the predetermined 
ceiling threshold for a valid CCR) or for hospitals whose most recent 
cost report reflects an all-inclusive rate status (Medicare Claims 
Processing Manual, Pub. 100-04, Chapter 4, Section 10.11). We are 
proposing to update the default ratios for CY 2010 using the most 
recent cost report data. We discuss our policy for using default CCRs, 
including setting the ceiling threshold for a valid CCR, in the CY 2009 
OPPS/ASC final rule with comment period (73 FR 68594 through 68599) in 
the context of our adoption of an outlier reconciliation policy for 
cost reports beginning on or after January 1, 2009.
    For CY 2010, we used our standard methodology of calculating the 
statewide average default CCRs using the same hospital overall CCRs 
that we use to adjust charges to costs on claims data for setting the 
CY 2010 proposed OPPS relative weights. Table 12 below lists the 
proposed CY 2010 default urban and rural CCRs by State and compares 
them to last year's default CCRs. These proposed CCRs are the ratio of 
total costs to total charges from each hospital's most recently 
submitted cost report, for those cost centers relevant to outpatient 
services weighted by Medicare Part B charges. We also adjusted ratios 
from submitted cost reports to reflect final settled status by applying 
the differential between settled to submitted costs and charges from 
the most recent pair of final settled and submitted cost reports. We 
then weighted each hospital's CCR by the volume of separately paid 
line-items on hospital claims corresponding to the year of the majority 
of cost reports used to calculate the overall CCRs. We refer readers to 
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66680 
through 66682) and prior OPPS rules for a more detailed discussion of 
our established methodology for calculating the statewide average 
default CCRs, including the hospitals used in our calculations and our 
trimming criteria.
    For this proposed rule, approximately 85 percent of the submitted 
cost reports utilized in the default ratio calculations represented 
data for cost reporting periods ending in CY 2007 and 14 percent were 
for cost reporting periods ending in CY 2006. For Maryland, we used an 
overall weighted average CCR for all hospitals in the nation as a 
substitute for Maryland CCRs. Few hospitals in Maryland are eligible to 
receive payment under the OPPS, which limits the data available to 
calculate an accurate and representative CCR. In

[[Page 35293]]

general, observed changes in the statewide average default CCRs between 
CY 2009 and CY 2010 are modest and the few significant changes are 
associated with areas that have a small number of hospitals.

                                Table 12--Proposed CY 2010 Statewide Average CCRs
----------------------------------------------------------------------------------------------------------------
                                                                                                     Previous
                                                                                    Proposed CY     default CCR
                    State                                 Urban/rural              2010 default    (CY 2009 OPPS
                                                                                        CCR         Final rule)
----------------------------------------------------------------------------------------------------------------
ALASKA.......................................  RURAL............................           0.511           0.562
ALASKA.......................................  URBAN............................           0.334           0.345
ALABAMA......................................  RURAL............................           0.218           0.221
ALABAMA......................................  URBAN............................           0.202           0.202
ARKANSAS.....................................  RURAL............................           0.256           0.256
ARKANSAS.....................................  URBAN............................           0.259           0.268
ARIZONA......................................  RURAL............................           0.260           0.267
ARIZONA......................................  URBAN............................           0.219           0.226
CALIFORNIA...................................  RURAL............................           0.210           0.219
CALIFORNIA...................................  URBAN............................           0.212           0.218
COLORADO.....................................  RURAL............................           0.343           0.346
COLORADO.....................................  URBAN............................           0.251           0.248
CONNECTICUT..................................  RURAL............................           0.371           0.372
CONNECTICUT..................................  URBAN............................           0.333           0.322
DISTRICT OF COLUMBIA.........................  URBAN............................           0.327           0.329
DELAWARE.....................................  RURAL............................           0.320           0.302
DELAWARE.....................................  URBAN............................           0.382           0.349
FLORIDA......................................  RURAL............................           0.205           0.204
FLORIDA......................................  URBAN............................           0.189           0.189
GEORGIA......................................  RURAL............................           0.267           0.267
GEORGIA......................................  URBAN............................           0.247           0.251
HAWAII.......................................  RURAL............................           0.357           0.367
HAWAII.......................................  URBAN............................           0.307           0.344
IOWA.........................................  RURAL............................           0.332           0.439
IOWA.........................................  URBAN............................           0.292           0.294
IDAHO........................................  RURAL............................           0.477           0.449
IDAHO........................................  URBAN............................           0.425           0.419
ILLINOIS.....................................  RURAL............................           0.277           0.280
ILLINOIS.....................................  URBAN............................           0.261           0.266
INDIANA......................................  RURAL............................           0.295           0.298
INDIANA......................................  URBAN............................           0.297           0.295
KANSAS.......................................  RURAL............................           0.297           0.300
KANSAS.......................................  URBAN............................           0.238           0.238
KENTUCKY.....................................  RURAL............................           0.233           0.236
KENTUCKY.....................................  URBAN............................           0.260           0.255
LOUISIANA....................................  RURAL............................           0.281           0.283
LOUISIANA....................................  URBAN............................           0.265           0.258
MARYLAND.....................................  RURAL............................           0.299           0.303
MARYLAND.....................................  URBAN............................           0.271           0.276
MASSACHUSETTS................................  URBAN............................           0.325           0.328
MAINE........................................  RURAL............................           0.451           0.452
MAINE........................................  URBAN............................           0.436           0.428
MICHIGAN.....................................  RURAL............................           0.319           0.317
MICHIGAN.....................................  URBAN............................           0.319           0.321
MINNESOTA....................................  RURAL............................           0.485           0.488
MINNESOTA....................................  URBAN............................           0.330           0.348
MISSOURI.....................................  RURAL............................           0.274           0.269
MISSOURI.....................................  URBAN............................           0.276           0.282
MISSISSIPPI..................................  RURAL............................           0.261           0.261
MISSISSIPPI..................................  URBAN............................           0.198           0.209
MONTANA......................................  RURAL............................           0.468           0.455
MONTANA......................................  URBAN............................           0.466           0.439
NORTH CAROLINA...............................  RURAL............................           0.272           0.272
NORTH CAROLINA...............................  URBAN............................           0.288           0.292
NORTH DAKOTA.................................  RURAL............................           0.349           0.369
NORTH DAKOTA.................................  URBAN............................           0.352           0.354
NEBRASKA.....................................  RURAL............................           0.346           0.345
NEBRASKA.....................................  URBAN............................           0.264           0.283
NEW HAMPSHIRE................................  RURAL............................           0.350           0.350
NEW HAMPSHIRE................................  URBAN............................           0.288           0.296
NEW JERSEY...................................  URBAN............................           0.251           0.257
NEW MEXICO...................................  RURAL............................           0.264           0.263
NEW MEXICO...................................  URBAN............................           0.337           0.328
NEVADA.......................................  RURAL............................           0.311           0.312
NEVADA.......................................  URBAN............................           0.192           0.192
NEW YORK.....................................  RURAL............................           0.421           0.412

[[Page 35294]]

 
NEW YORK.....................................  URBAN............................           0.385           0.388
OHIO.........................................  RURAL............................           0.348           0.353
OHIO.........................................  URBAN............................           0.254           0.258
OKLAHOMA.....................................  RURAL............................           0.275           0.278
OKLAHOMA.....................................  URBAN............................           0.238           0.238
OREGON.......................................  RURAL............................           0.311           0.318
OREGON.......................................  URBAN............................           0.353           0.374
PENNSYLVANIA.................................  RURAL............................           0.282           0.284
PENNSYLVANIA.................................  URBAN............................           0.224           0.232
PUERTO RICO..................................  URBAN............................           0.487           0.519
RHODE ISLAND.................................  URBAN............................           0.293           0.294
SOUTH CAROLINA...............................  RURAL............................           0.243           0.242
SOUTH CAROLINA...............................  URBAN............................           0.245           0.240
SOUTH DAKOTA.................................  RURAL............................           0.328           0.336
SOUTH DAKOTA.................................  URBAN............................           0.263           0.267
TENNESSEE....................................  RURAL............................           0.237           0.244
TENNESSEE....................................  URBAN............................           0.220           0.221
TEXAS........................................  RURAL............................           0.256           0.257
TEXAS........................................  URBAN............................           0.230           0.238
UTAH.........................................  RURAL............................           0.406           0.413
UTAH.........................................  URBAN............................           0.409           0.430
VIRGINIA.....................................  RURAL............................           0.253           0.257
VIRGINIA.....................................  URBAN............................           0.263           0.266
VERMONT......................................  RURAL............................           0.412           0.406
VERMONT......................................  URBAN............................           0.422           0.422
WASHINGTON...................................  RURAL............................           0.354           0.349
WASHINGTON...................................  URBAN............................           0.336           0.342
WISCONSIN....................................  RURAL............................           0.402           0.399
WISCONSIN....................................  URBAN............................           0.334           0.346
WEST VIRGINIA................................  RURAL............................           0.292           0.293
WEST VIRGINIA................................  URBAN............................           0.348           0.349
WYOMING......................................  RURAL............................           0.413           0.418
WYOMING......................................  URBAN............................           0.315           0.331
----------------------------------------------------------------------------------------------------------------

E. Proposed OPPS Payment to Certain Rural and Other Hospitals

1. Hold Harmless Transitional Payment Changes Made by Public Law 110-
275 (MIPPA)
    When the OPPS was implemented, every provider was eligible to 
receive an additional payment adjustment (called either transitional 
corridor payments or transitional outpatient payments (TOPs)) if the 
payments it received for covered OPD services under the OPPS were less 
than the payments it would have received for the same services under 
the prior reasonable cost-based system (referred to as the pre-BBA 
amount). Section 1833(t)(7) of the Act provides that the transitional 
corridor payments are temporary payments for most providers and were 
intended to ease their transition from the prior reasonable cost-based 
payment system to the OPPS system. There are two exceptions to this 
provision, cancer hospitals and children's hospitals, and those 
hospitals receive the transitional corridor payments on a permanent 
basis. Section 1833(t)(7)(D)(i) of the Act originally provided for 
transitional corridor payments to rural hospitals with 100 or fewer 
beds for covered OPD services furnished before January 1, 2004. 
However, section 411 of Public Law 108-173 amended section 
1833(t)(7)(D)(i) of the Act to extend these payments through December 
31, 2005, for rural hospitals with 100 or fewer beds. Section 411 also 
extended the transitional corridor payments to SCHs located in rural 
areas for services furnished during the period that began with the 
provider's first cost reporting period beginning on or after January 1, 
2004, and ended on December 31, 2005. Accordingly, the authority for 
making transitional corridor payments under section 1833(t)(7)(D)(i) of 
the Act, as amended by section 411 of Public Law 108-173, for rural 
hospitals having 100 or fewer beds and SCHs located in rural areas 
expired on December 31, 2005.
    Section 5105 of Public Law 109-171 reinstituted the TOPs for 
covered OPD services furnished on or after January 1, 2006, and before 
January 1, 2009, for rural hospitals having 100 or fewer beds that are 
not SCHs. When the OPPS payment was less than the provider's pre-BBA 
amount, the amount of payment was increased by 95 percent of the amount 
of the difference between the two payment systems for CY 2006, by 90 
percent of the amount of that difference for CY 2007, and by 85 percent 
of the amount of that difference for CY 2008.
    For CY 2006, we implemented section 5105 of Public Law 109-171 
through Transmittal 877, issued on February 24, 2006. In the 
Transmittal, we did not specifically address whether TOPs apply to 
essential access community hospitals (EACHs), which are considered to 
be SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Accordingly, 
under the statute, EACHs are treated as SCHs. In the CY 2007 OPPS/ASC 
final rule with comment period (71 FR 68010), we stated that EACHs were 
not eligible for TOPs under Public Law 109-171. However, we stated they 
were eligible for the adjustment for rural SCHs. In the CY 2007 OPPS/
ASC final rule with comment period (71 FR 68010 and 68228), we updated 
Sec.  419.70(d) of our regulations to reflect the requirements of 
Public Law 109-171.

[[Page 35295]]

    In the CY 2009 OPPS/ASC proposed rule (73 FR 41461), we stated 
that, effective for services provided on or after January 1, 2009, 
rural hospitals having 100 or fewer beds that are not SCHs would no 
longer be eligible for TOPs, in accordance with section 5105 of Public 
Law 109-171. However, subsequent to issuance of the CY 2009 OPPS/ASC 
proposed rule, section 147 of Public Law 110-275 amended section 
1833(t)(7)(D)(i) of the Act by extending the period of TOPs to rural 
hospitals with 100 beds or fewer for 1 year, for services provided 
before January 1, 2010. Section 147 of Public Law 110-275 also extended 
TOPs to SCHs (including EACHs) with 100 or fewer beds for covered OPD 
services provided on or after January 1, 2009, and before January 1, 
2010. In accordance with section 147 of Public Law 110-275, when the 
OPPS payment is less than the provider's pre-BBA amount, the amount of 
payment is increased by 85 percent of the amount of the difference 
between the two payment systems for CY 2009.
    For CY 2009, we revised Sec. Sec.  419.70(d)(2) and (d)(4) and 
added a new paragraph (d)(5) to incorporate the provisions of section 
147 of Public Law 110-275. In addition, we made other technical changes 
to Sec.  419.70(d)(2) to more precisely capture our existing policy and 
to correct an inaccurate cross-reference. We also made technical 
corrections to the cross-references in paragraphs (e), (g), and (i) of 
Sec.  419.70. For CY 2010, we are proposing to make a technical 
correction to the heading of Sec.  419.70(d)(5) to correctly identify 
the policy as described in the subsequent regulation text. The 
paragraph heading should indicate that the adjustment applies to small 
SCHs, rather than to rural SCHs.
    Effective for services provided on or after January 1, 2010, rural 
hospitals and SCHs (including EACHs) having 100 or fewer beds will no 
longer be eligible for hold harmless TOPs, in accordance with section 
147 of Public Law 110-275.
2. Proposed Adjustment for Rural SCHs Implemented in CY 2006 Related to 
Public Law 108-173 (MMA)
    In the CY 2006 OPPS final rule with comment period (70 FR 68556), 
we finalized a payment increase for rural SCHs of 7.1 percent for all 
services and procedures paid under the OPPS, excluding drugs, 
biologicals, brachytherapy sources, and devices paid under the pass-
through payment policy in accordance with section 1833(t)(13)(B) of the 
Act, as added by section 411 of Public Law 108-173. Section 411 gave 
the Secretary the authority to make an adjustment to OPPS payments for 
rural hospitals, effective January 1, 2006, if justified by a study of 
the difference in costs by APC between hospitals in rural and hospitals 
in urban areas. Our analysis showed a difference in costs for rural 
SCHs. Therefore, for the CY 2006 OPPS, we finalized a payment 
adjustment for rural SCHs of 7.1 percent for all services and 
procedures paid under the OPPS, excluding separately payable drugs and 
biologicals, brachytherapy sources, and devices paid under the pass-
through payment policy, in accordance with section 1833(t)(13)(B) of 
the Act.
    In CY 2007, we became aware that we did not specifically address 
whether the adjustment applies to EACHs, which are considered to be 
SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Thus, under the 
statute, EACHs are treated as SCHs. Therefore, in the CY 2007 OPPS/ASC 
final rule with comment period (71 FR 68010 and 68227), for purposes of 
receiving this rural adjustment, we revised Sec.  419.43(g) to clarify 
that EACHs are also eligible to receive the rural SCH adjustment, 
assuming these entities otherwise meet the rural adjustment criteria. 
Currently, fewer than 10 hospitals are classified as EACHs and as of CY 
1998, under section 4201(c) of Public Law 105-33, a hospital can no 
longer become newly classified as an EACH.
    This adjustment for rural SCHs is budget neutral and applied before 
calculating outliers and copayment. As stated in the CY 2006 OPPS final 
rule with comment period (70 FR 68560), we would not reestablish the 
adjustment amount on an annual basis, but we may review the adjustment 
in the future and, if appropriate, would revise the adjustment. We 
provided the same 7.1 percent adjustment to rural SCHs, including 
EACHs, again in CY 2008 and CY 2009. Further, in the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68590), we updated the 
regulations at Sec.  419.43(g)(4) to specify, in general terms, that 
items paid at charges adjusted to costs by application of a hospital-
specific CCR are excluded from the 7.1 percent payment adjustment.
    For the CY 2010 OPPS, we are proposing to continue our policy of a 
budget neutral 7.1 percent payment adjustment for rural SCHs, including 
EACHs, for all services and procedures paid under the OPPS, excluding 
separately payable drugs and biologicals, devices paid under the pass-
through payment policy, and items paid at charges reduced to costs. We 
intend to reassess the 7.1 percent adjustment in the near future by 
examining differences between urban and rural hospitals' costs using 
updated claims, cost, and provider information.

F. Proposed Hospital Outpatient Outlier Payments

1. Background
    Currently, the OPPS pays outlier payments on a service-by-service 
basis. For CY 2009, the outlier threshold is met when the cost of 
furnishing a service or procedure by a hospital exceeds 1.75 times the 
APC payment amount and exceeds the APC payment rate plus a $1,800 
fixed-dollar threshold. We introduced a fixed-dollar threshold in CY 
2005 in addition to the traditional multiple threshold in order to 
better target outliers to those high cost and complex procedures where 
a very costly service could present a hospital with significant 
financial loss. If the cost of a service meets both of these 
conditions, the multiple threshold and the fixed-dollar threshold, the 
outlier payment is calculated as 50 percent of the amount by which the 
cost of furnishing the service exceeds 1.75 times the APC payment rate. 
Before CY 2009, this outlier payment had historically been considered a 
final payment by longstanding OPPS policy. We implemented a 
reconciliation process similar to the IPPS outlier reconciliation 
process for cost reports with cost reporting periods beginning on or 
after January 1, 2009 (73 FR 68594 through 68599).
    It has been our policy for the past several years to report the 
actual amount of outlier payments as a percent of total spending in the 
claims being used to model the proposed OPPS. We previously estimated 
that CY 2008 outlier payments were approximately 0.73 percent of the 
total CY 2008 OPPS payments (73 FR 68592). Our current estimate of 
total outlier payments as a percent of total CY 2008 OPPS payment, 
using available CY 2008 claims and the revised OPPS expenditure 
estimate, is approximately 1.2 percent of the total aggregated OPPS 
payments. Therefore, for CY 2008, we estimate that we paid 
approximately 0.2 percent more than the CY 2008 outlier target of 1.0 
percent of total aggregated OPPS payments. We will update our estimate 
of CY 2008 outlier spending in the CY 2010 OPPS/ASC final rule with 
comment period.
    As explained in the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68594), we set our projected target for aggregate outlier 
payments at 1.0 percent of the aggregate total payments under the OPPS 
for CY 2009. The outlier thresholds were set so that estimated CY 2009 
aggregate outlier payments would equal 1.0 percent of

[[Page 35296]]

the total aggregated payments under the OPPS. Using the same set of CY 
2008 claims and CY 2009 payment rates, we currently estimate that the 
aggregate outlier payments for CY 2009 would be approximately 1.08 
percent of the total CY 2009 OPPS payments. The difference between 1.0 
percent and 1.08 percent is reflected in the regulatory impact analysis 
in section XXI.B. of this proposed rule. We note that we provide 
estimated CY 2010 outlier payments for hospitals and CMHCs with claims 
included in the claims data that we used to model impacts in the 
Hospital-Specific Impacts--Provider-Specific Data file on the CMS Web 
site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/.
2. Proposed Outlier Calculation
    For CY 2010, we are proposing to continue our policy of estimating 
outlier payments to be 1.0 percent of the estimated aggregate total 
payments under the OPPS for outlier payments. We are proposing that a 
portion of that 1.0 percent, specifically 0.02 percent, would be 
allocated to CMHCs for PHP outlier payments. This is the amount of 
estimated outlier payments that would result from the proposed CMHC 
outlier threshold as a proportion of total estimated outlier payments. 
As discussed in section X.C. of this proposed rule, for CMHCs, we are 
proposing that if a CMHC's cost for partial hospitalization services, 
paid under either APC 0172 (Level I Partial Hospitalization (3 
services)) or APC 0173 (Level II Partial Hospitalization (4 or more 
services)), exceeds 3.40 times the payment for APC 0173, the outlier 
payment would be calculated as 50 percent of the amount by which the 
cost exceeds 3.40 times the APC 0173 payment rate. For further 
discussion of CMHC outlier payments, we refer readers to section X.C. 
of this proposed rule. To ensure that the estimated CY 2010 aggregate 
outlier payments would equal 1.0 percent of estimated aggregate total 
payments under the OPPS, we are proposing that the hospital outlier 
threshold be set so that outlier payments would be triggered when the 
cost of furnishing a service or procedure by a hospital exceeds 1.75 
times the APC payment amount and exceeds the APC payment rate plus a 
$2,225 fixed-dollar threshold. This proposed threshold reflects the 
methodology discussed below in this section, as well as the proposed 
APC recalibration for CY 2010.
    We calculated the fixed-dollar threshold for this proposed rule 
using largely the same methodology as we did in CY 2009 (73 FR 41462). 
For purposes of estimating outlier payments for this proposed rule, we 
used the CCRs available in the April 2009 update to the Outpatient 
Provider Specific File (OPSF). The OPSF contains provider-specific 
data, such as the most current CCR, which are maintained by the 
Medicare contractors and used by the OPPS Pricer to pay claims. The 
claims that we use to model each OPPS update lag by 2 years. For this 
proposed rule, we used CY 2008 claims to model the CY 2010 OPPS. In 
order to estimate the CY 2010 hospital outlier payments for this 
proposed rule, we inflated the charges on the CY 2008 claims using the 
same inflation factor of 1.1511 that we used to estimate the IPPS 
fixed-dollar outlier threshold for the FY 2010 IPPS/LTCH PPS proposed 
rule (74 FR 24245). For 1 year, the inflation factor we used is 1.0729. 
The methodology for determining this charge inflation factor was 
discussed in the FY 2010 IPPS/LTCH PPS proposed rule (74 FR 24245). As 
we stated in the CY 2005 OPPS final rule with comment period (69 FR 
65845), we believe that the use of this charge inflation factor is 
appropriate for the OPPS because, with the exception of the routine 
service cost centers, hospitals use the same cost centers to capture 
costs and charges across inpatient and outpatient services.
    As noted in the CY 2007 OPPS/ASC final rule with comment period (71 
FR 68011), we are concerned that we could systematically overestimate 
the OPPS hospital outlier threshold if we did not apply a CCR inflation 
adjustment factor. Therefore, we are proposing to apply the same CCR 
inflation adjustment factor that we proposed to apply for the FY 2010 
IPPS outlier calculation to the CCRs used to simulate the CY 2010 OPPS 
outlier payments that determine the fixed-dollar threshold. 
Specifically, for CY 2010, we are proposing to apply an adjustment of 
0.9840 to the CCRs that were in the April 2009 OPSF to trend them 
forward from CY 2009 to CY 2010. The methodology for calculating this 
adjustment is discussed in the FY 2010 IPPS/LTCH PPS proposed rule (74 
FR 24245 through 24247).
    Therefore, to model hospital outlier payments for this proposed 
rule, we applied the overall CCRs from the April 2009 OPSF file after 
adjustment (using the proposed CCR inflation adjustment factor of 
0.9840 to approximate CY 2010 CCRs) to charges on CY 2008 claims that 
were adjusted (using the proposed charge inflation factor of 1.1511 to 
approximate CY 2010 charges). We simulated aggregated CY 2010 hospital 
outlier payments using these costs for several different fixed-dollar 
thresholds, holding the 1.75 multiple threshold constant and assuming 
that outlier payment would continue to be made at 50 percent of the 
amount by which the cost of furnishing the service would exceed 1.75 
times the APC payment amount, until the total outlier payments equaled 
1.0 percent of aggregated estimated total CY 2010 OPPS payments. We 
estimate that a proposed fixed-dollar threshold of $2,225, combined 
with the proposed multiple threshold of 1.75 times the APC payment 
rate, would allocate 1.0 percent of aggregated total OPPS payments to 
outlier payments. We are proposing to continue to make an outlier 
payment that equals 50 percent of the amount by which the cost of 
furnishing the service exceeds 1.75 times the APC payment amount when 
both the 1.75 multiple threshold and the proposed fixed-dollar $2,225 
threshold are met. For CMHCs, if a CMHC's cost for partial 
hospitalization services, paid under either APC 0172 or APC 0173, 
exceeds 3.40 times the payment for APC 0173, the outlier payment would 
be calculated as 50 percent of the amount by which the cost exceeds 
3.40 times the APC 0173 payment rate.
    Section 1833(t)(17)(A) of the Act, which applies to hospitals as 
defined under section 1886(d)(1)(B) of the Act, requires that hospitals 
that fail to report data required for the quality measures selected by 
the Secretary, in the form and manner required by the Secretary under 
1833(t)(17)(B) of the Act, incur a 2.0 percentage point reduction to 
their OPD fee schedule increase factor, that is, the annual payment 
update factor. The application of a reduced OPD fee schedule increase 
factor results in reduced national unadjusted payment rates that will 
apply to certain outpatient items and services furnished by hospitals 
that are required to report outpatient quality data and that fail to 
meet the HOP QDRP requirements. For hospitals that fail to meet the HOP 
QDRP requirements, we are proposing to continue our policy that we 
implemented in CY 2009 that the hospitals' costs would be compared to 
the reduced payments for purposes of outlier eligibility and payment 
calculation. For more information on the HOP QDRP, we refer readers to 
section XVI. of this proposed rule.
3. Outlier Reconciliation
    In the CY 2009 OPPS/ASC final rule with comment period (73 CFR 
68599), we adopted as final policy a process to reconcile hospital or 
CMHC outlier payments at cost report settlement for services furnished 
during cost reporting periods beginning in CY 2009. OPPS outlier 
reconciliation ensures accurate

[[Page 35297]]

outlier payments for those facilities whose CCRs fluctuate 
significantly relative to the CCRs of other facilities, and who receive 
a significant amount of outlier payments. OPPS outlier reconciliation 
thresholds are provided in section 10.7.2.1 of Chapter 4 of the 
Medicare Claims Processing Manual (Pub. 100-4), reevaluated annually, 
and modified if necessary. When the cost report is settled, 
reconciliation of outlier payments will be based on the overall CCR, 
calculated as the ratio of costs and charges computed from the cost 
report at the time the cost report coinciding with the service dates is 
settled. Reconciling outlier payments ensures that the outlier payments 
made are appropriate and that final outlier payments reflect the most 
accurate cost data. In the CY 2009 OPPS/ASC finale rule with comment 
period (73 FR 68599), we also finalized a proposal to adjust the amount 
of final outlier payments determined during reconciliation for the time 
value of money. The OPPS outlier reconciliation process will require 
recalculating outlier payments for individual claims in order to 
accurately determine the net effect of a change in an overall CCR on a 
facility's total outlier payments. For cost reporting periods beginning 
in CY 2009, Medicare contractors will begin to identify cost reports 
that require outlier reconciliation as a component of cost report 
settlement. At this time, CMS continues to develop a method for 
reexamining claims to calculate the change in total outlier payments in 
order to reconcile outlier payments for these cost reports.
    As under the IPPS, we do not adjust the fixed-dollar threshold or 
amount of total OPPS payment set aside for outlier payments for 
reconciliation activity. The predictability of the fixed-dollar 
threshold is an important component of a prospective payment system. We 
do not adjust the prospectively set outlier threshold for the amount of 
outlier payment reconciled at cost report settlement because such 
action would be contrary to the prospective nature of the system. Our 
outlier threshold calculation assumes that CCRs accurately estimate 
hospital costs based on the information available to us at the time we 
set the prospective fixed-dollar outlier threshold. For these reasons, 
we are not incorporating any assumptions about the effects of 
reconciliation into our calculation of the proposed OPPS fixed-dollar 
outlier threshold.

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

    The basic methodology for determining prospective payment rates for 
HOPD services under the OPPS is set forth in existing regulations at 42 
CFR Part 419, subparts C and D. The payment rate for most services and 
procedures for which payment is made under the OPPS is the product of 
the conversion factor calculated in accordance with section II.B. of 
this proposed rule and the relative weight determined under section 
II.A. of this proposed rule. Therefore, the proposed national 
unadjusted payment rate for most APCs contained in Addendum A to this 
proposed rule and for most HCPCS codes to which separate payment under 
the OPPS has been assigned in Addendum B to this proposed rule was 
calculated by multiplying the proposed CY 2010 scaled weight for the 
APC by the proposed CY 2010 conversion factor.
    We note that section 1833(t)(17) of the Act, which applies to 
hospitals as defined under section 1886(d)(1)(B) of the Act, requires 
that hospitals that fail to submit data required to be submitted on 
quality measures selected by the Secretary, in the form and manner and 
at a time specified by the Secretary, receive a 2.0 percentage point 
reduction to their OPD fee schedule increase factor, that is, the 
annual payment update factor. The application of a reduced OPD fee 
schedule increase factor results in reduced national unadjusted payment 
rates that apply to certain outpatient items and services provided by 
hospitals that are required to report outpatient quality data and that 
fail to meet the Hospital Outpatient Quality Data Reporting Program 
(HOP QDRP) requirements. For further discussion of the proposed payment 
reduction for hospitals that fail to meet the requirements of the HOP 
QDRP, we refer readers to section XVI.D. of this proposed rule.
    We demonstrate in the steps below how to determine the APC payments 
that would be made in a calendar year under the OPPS to a hospital that 
fulfills the HOP QDRP requirements and to a hospital that fails to meet 
the HOP QDRP requirements for a service that has any of the following 
status indicator assignments: ``P,'' ``Q1,'' ``Q2,'' ``Q3,'' ``R,'' 
``S,'' ``T,'' ``U,'' ``V,'' or ``X'' (as defined in Addendum D1 to this 
proposed rule), in a circumstance in which the multiple procedure 
discount does not apply and the procedure is not bilateral.
    Individual providers interested in calculating the payment amount 
that they would receive for a specific service from the proposed 
national unadjusted payment rates presented in Addenda A and B to this 
proposed rule should follow the formulas presented in the following 
steps. For purposes of the payment calculations below, we refer to the 
national unadjusted payment rate for hospitals that meet the 
requirements of the HOP QDRP 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 HOP QDRP as the 
``reduced'' national unadjusted payment rate. The reduced national 
unadjusted payment rate is calculated by multiplying the reporting 
ratio of 0.98 times the ``full'' national unadjusted payment rate. The 
national unadjusted payment rate used in the calculations below is 
either the full national unadjusted payment rate or the reduced 
national unadjusted payment rate, depending on whether the hospital met 
its HOP QDRP requirements in order to receive the full CY 2010 OPPS 
increase factor.
    Step 1. Calculate 60 percent (the labor-related portion) of the 
proposed national unadjusted payment rate. Since the initial 
implementation of the OPPS, we have used 60 percent to represent our 
estimate of that portion of costs attributable, on average, to labor. 
We refer readers to the April 7, 2000 OPPS final rule with comment 
period (65 FR 18496 through 18497) for a detailed discussion of how we 
derived this percentage. We confirmed that this labor-related share for 
hospital outpatient services is still appropriate during our regression 
analysis for the payment adjustment for rural hospitals in the CY 2006 
OPPS final rule with comment period (70 FR 68553).
    The formula below is a mathematical representation of Step 1 and 
identifies the labor-related portion of a specific payment rate for a 
specific service.

X is the labor-related portion of the national unadjusted payment rate.
X = .60 * (national unadjusted payment rate)

    Step 2. Determine the wage index area in which the hospital is 
located and identify the wage index level that applies to the specific 
hospital. The wage index values assigned to each area reflect the 
geographic statistical areas (which are based upon OMB standards) to 
which hospitals are assigned for FY 2010 under the IPPS, 
reclassifications through the MGCRB, section 1886(d)(8)(B) of the Act, 
as well as ``Lugar'' reclassifications under section

[[Page 35298]]

1886(d)(8)(B) of the Act. We note that the reclassifications of 
hospitals under section 508 of Public Law 108-173, as extended by 
section 124 of Public Law 110-275, will expire on September 30, 2009, 
and will not be applicable under the IPPS for FY 2010. Therefore, these 
reclassifications will not apply to the CY 2010 OPPS. For further 
discussion of the proposed changes to the FY 2010 IPPS wage indices, as 
applied to the CY 2010 OPPS, we refer readers to section II.C. of this 
proposed rule. The proposed wage index values include the occupational 
mix adjustment described in section II.C. of this proposed rule that 
was developed for the FY 2010 IPPS proposed payment rates appearing in 
the Federal Register on May 22, 2009 (74 FR 24140 through 24144).
    Step 3. Adjust the wage index of hospitals located in certain 
qualifying counties that have a relatively high percentage of hospital 
employees who reside in the county, but who work in a different county 
with a higher wage index, in accordance with section 505 of Public Law 
108-173. Addendum L to this proposed rule contains the qualifying 
counties and the proposed wage index increase developed for the FY 2010 
IPPS published in the FY 2010 IPPS/LTCH PPS proposed rule as Table 4J 
(74 FR 24446 through24462). This step is to be followed only if the 
hospital has chosen not to accept reclassification under Step 2 above.
    Step 4. Multiply the applicable wage index determined under Steps 2 
and 3 by the amount determined under Step 1 that represents the labor-
related portion of the national unadjusted payment rate.
    The formula below is a mathematical representation of Step 4 and 
adjusts the labor-related portion of the national payment rate for the 
specific service by the wage index.

X<INF>a</INF> is the labor-related portion of the national unadjusted 
payment rate (wage adjusted).
X<INF>a</INF> = .60 * (national unadjusted payment rate) * applicable 
wage index.

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

Y is the nonlabor-related portion of the national unadjusted payment 
rate.
Y = .40 * (national unadjusted payment rate)
Adjusted Medicare Payment = Y + X<INF>a</INF>

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

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

    We have provided examples below of the calculation of both the 
proposed full and reduced national unadjusted payment rates that would 
apply to certain outpatient items and services performed by hospitals 
that meet and that fail to meet the HOP QDRP requirements, using the 
steps outlined above. For purposes of this example, we will use a 
provider that is located in Wayne, New Jersey that is assigned to CBSA 
35644. This provider bills one service that is assigned to APC 0019 
(Level I Excision/Biopsy). The proposed CY 2010 full national 
unadjusted payment rate for APC 0019 is $292.33. The proposed reduced 
national unadjusted payment rate for a hospital that fails to meet the 
HOP QDRP requirements is $286.48. This reduced rate is calculated by 
multiplying the reporting ratio of 0.98 by the full unadjusted payment 
rate for APC 0019.
    The proposed FY 2010 wage index for a provider located in CBSA 
35644 in New Jersey is 1.2986. The labor portion of the full national 
unadjusted payment is $227.77 (.60 * $292.33 *1.2986). The labor 
portion of the reduced national unadjusted payment is $223.21 (.60 * 
$286.48 *1.2986). The nonlabor portion of the full national unadjusted 
payment is $116.93 (.40 * $292.33). The nonlabor portion of the reduced 
national unadjusted payment is $114.59 (.40 * $286.48). The sum of the 
labor and nonlabor portions of the full national adjusted payment is 
$344.70 ($227.77 + $116.93). The sum of the reduced national adjusted 
payment is $337.80 ($223.21 + $114.59).

H. Proposed Beneficiary Copayments

1. Background
    Section 1833(t)(3)(B) of the Act requires the Secretary to set 
rules for determining the unadjusted copayment amounts to be paid by 
beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of 
the Act specifies that the Secretary must reduce the national 
unadjusted copayment amount for a covered OPD service (or group of such 
services) furnished in a year in a manner so that the effective 
copayment rate (determined on a national unadjusted basis) for that 
service in the year does not exceed a specified percentage. As 
specified in section 1833(t)(8)(C)(ii)(V) of the Act, for all services 
paid under the OPPS in CY 2010, and in calendar years thereafter, the 
percentage is 40 percent of the APC payment rate. Section 
1833(t)(3)(B)(ii) of the Act provides that, for a covered OPD service 
(or group of such services) furnished in a year, the national 
unadjusted copayment amount cannot be less than 20 percent of the OPD 
fee schedule amount. Sections 1834(d)(2)(C)(ii) and (d)(3)(C)(ii) of 
the Act further require that the copayment for screening flexible 
sigmoidoscopies and screening colonoscopies be equal to 25 percent of 
the payment amount. Since the beginning of the OPPS, we have applied 
the 25-percent copayment to screening flexible sigmoidoscopies and 
screening colonoscopies.
2. Proposed Copayment Policy
    For CY 2010, we are proposing to determine copayment amounts for 
new and revised APCs using the same methodology that we implemented 
beginning in CY 2004. (We refer readers to the November 7, 2003 OPPS 
final rule with comment period (68 FR 63458)). In addition, we are 
proposing to use the same standard rounding principles that we have 
historically used in instances where the application of our standard 
copayment methodology would result in a copayment amount that is less 
than 20 percent and cannot be rounded, under standard rounding 
principles, to 20 percent. (We refer readers to the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66687) in which we discuss our 
rationale for applying these rounding principles.) The national 
unadjusted copayment amounts for services payable under the OPPS that 
would be effective January 1, 2010, are shown in Addenda A and B to 
this proposed rule. As discussed in section XVI.D. of this proposed 
rule, we are proposing that for CY 2010, the Medicare beneficiary's 
minimum unadjusted copayment and national unadjusted copayment for a 
service to which a reduced national unadjusted payment rate applies 
would equal the product of the reporting ratio and the national 
unadjusted copayment, or the product of the reporting ratio and the 
minimum unadjusted copayment, respectively, for the service.

[[Page 35299]]

3. Proposed Calculation of an Adjusted Copayment Amount for an APC 
Group
    Individuals interested in calculating the national copayment 
liability for a Medicare beneficiary for a given service provided by a 
hospital that met or failed to meet its HOP QDRP requirements should 
follow the formulas presented in the following steps.
    Step 1. Calculate the beneficiary payment percentage for the APC by 
dividing the APC's national unadjusted copayment by its payment rate. 
For example, using APC 0019, $64.13 is 22 percent of the full national 
unadjusted payment rate of $292.33.
    The formula below is a mathematical representation of Step 1 and 
calculates national copayment as a percentage of national payment for a 
given service.

B is the beneficiary payment percentage.
B = National unadjusted copayment for APC/national unadjusted payment 
rate for APC

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

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

    Step 4. For a hospital that failed to meet its HOP QDRP 
requirements, multiply the copayment calculated in Step 3 by the 
reporting ratio of 0.98.
    The proposed unadjusted copayments for services payable under the 
OPPS that would be effective January 1, 2010 are shown in Addenda A and 
B to this proposed rule. We note that the proposed national unadjusted 
payment rates and copayment rates shown in Addenda A and B to this 
proposed rule reflect the full market basket conversion factor 
increase, as discussed in section XVI.D. of this proposed rule.

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

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

    CPT and Level II HCPCS codes are used to report procedures, 
services, items, and supplies under the hospital OPPS. Specifically, 
CMS recognizes the following codes on OPPS claims: (1) Category I CPT 
codes, which describe medical services and procedures; (2) Category III 
CPT codes, which describe new and emerging technologies, services, and 
procedures; and (3) Level II HCPCS codes, which are used primarily to 
identify products, supplies, temporary procedures, and services not 
described by CPT codes. CPT codes are established by the AMA and the 
Level II HCPCS codes are established by the CMS HCPCS Workgroup. These 
codes are updated and changed throughout the year. CPT and HCPCS code 
changes that affect the OPPS are published both through the annual 
rulemaking cycle and through the OPPS quarterly update Change Requests 
(CRs). CMS releases new Level II HCPCS codes to the public or 
recognizes the release of new CPT codes by the AMA and makes these 
codes effective (that is, the codes can be reported on Medicare claims) 
outside of the formal rulemaking process via OPPS quarterly update CRs. 
This quarterly process offers hospitals access to codes that may more 
accurately describe items or services furnished and/or provides payment 
or more accurate payment for these items or services in a more timely 
manner than if CMS waited for the annual rulemaking process. We solicit 
comments on these new codes and finalize our proposals related to these 
codes through our annual rulemaking process. In Table 13 below, we 
summarize our proposed process for updating codes through our OPPS 
quarterly update CRs, seeking public comment, and finalizing their 
treatment under the OPPS.

                           Table 13--Comment Timeframe for New or Revised HCPCS CODES
----------------------------------------------------------------------------------------------------------------
    OPPS quarterly update CR         Type of code       Effective date      Comments sought     When finalized
----------------------------------------------------------------------------------------------------------------
April 1, 2009...................  Level II HCPCS      April 1, 2009.....  CY 2010 OPPS/ASC    CY 2010 OPPS/ASC
                                   Codes.                                  proposed rule.      final rule with
                                                                                               comment period.
July 1, 2009....................  Level II HCPCS      July 1, 2009......  CY 2010 OPPS/ASC    CY 2010 OPPS/ASC
                                   Codes.                                  proposed rule.      final rule with
                                                                                               comment period.
                                  Category I          July 1, 2009......  CY 2010 OPPS/ASC    CY 2010 OPPS/ASC
                                   (certain vaccine                        proposed rule.      final rule with
                                   codes) and III                                              comment period.
                                   CPT Codes.
October 1, 2009.................  Level II HCPCS      October 1, 2009...  CY 2010 OPPS/ASC    CY 2011 OPPS/ASC
                                   Codes.                                  final rule with     final rule with
                                                                           comment period.     comment period.
January 1, 2010.................  Level II HCPCS      January 1, 2010...  CY 2010 OPPS/ASC    CY 2011 OPPS/ASC
                                   Codes.                                  final rule with     final rule with
                                                                           Comment Period.     comment period.
                                  Category I and III  January 1, 2010...  CY 2010 OPPS/ASC    CY 2011 OPPS/ASC
                                   CPT Codes.                              final rule with     final rule with
                                                                           comment period.     comment period.
----------------------------------------------------------------------------------------------------------------

    This process is discussed in detail below and we have separated our 
discussion into two sections based on whether we are proposing to 
solicit public comments in this CY 2010 proposed rule on a specific 
group of the CPT and Level II HCPCS codes or whether we are proposing 
to solicit public comments on another specific group of the codes in 
the CY 2010 final rule with comment period. We note that we sought 
public comments in the CY 2009 OPPS/ASC final rule with comment period 
on the new CPT and Level II HCPCS codes that were effective January 1, 
2009. Earlier, the AMA had released the new Category I vaccine codes 
and Category III CPT codes effective January 1, 2009, on the AMA Web 
site in July 2009. The new Level II HCPCS codes and Category I and III 
CPT codes were included in our January 2009 OPPS quarterly update CR. 
We also sought public comments in the CY2009 OPPS/ASC final rule with 
comment period on the new Level II HCPCS codes effective October 1, 
2008.

[[Page 35300]]

These new codes with effective dates of October 1, 2008, or January 1, 
2009, were flagged with comment indicator ``NI'' (New code, interim APC 
assignment; comments will be accepted on the interim APC assignment for 
the new code) in Addendum B to the CY 2009 OPPS/ASC final rule with 
comment period to indicate that we were assigning them an interim 
payment status and an APC and payment rate, if applicable, which were 
subject to public comment following publication of the CY2009 OPPS/ASC 
final rule with comment period. We will respond to public comments and 
finalize our proposed OPPS treatment of these codes in the CY 2010 
OPPS/ASC final rule with comment period.
1. Proposed Treatment of New Level II HCPCS Codes and Category I CPT 
Vaccine Codes and Category III CPT Codes for Which We Are Soliciting 
Public Comments in this Proposed Rule
    Effective April 1 and July 1 of CY 2009, we made effective a total 
of 13 new Level II HCPCS codes and 5 new Category I vaccine and 
Category III CPT codes that were not addressed in the CY 2009 OPPS/ASC 
final rule with comment period that updated the OPPS. Thirteen new 
Level II HCPCS codes were made effective for the April and July 2009 
updates, and 13 Level II HCPCS codes were newly recognized for separate 
payment. Although one of the new Level II HCPCS codes is not payable 
under the OPPS, we changed the OPPS status indicator for one existing 
Level II HCPCS code from the interim status indicator designated in the 
CY 2009 OPPS/ASC final rule with comment period.
    Through the April 2009 OPPS quarterly update CR (Transmittal 1702, 
Change Request 6416, dated March 13, 2009), we allowed separate payment 
for a total of 2 additional Level II HCPCS codes, specifically existing 
HCPCS code C9247 (Iobenguane, I-123, diagnostic, per study dose, up to 
10 millicuries) and new HCPCS code C9249 (Injection, certolizumab 
pegol, 1 mg). HCPCS code C9249, which received separate payment as a 
result of its pass-through status under the OPPS, was made effective on 
April 1, 2009. HCPCS code C9247 was released January 1, 2009, through 
the January 2009 OPPS quarterly update CR (Transmittal 1657, Change 
Request 6320, dated December 31, 2008). From January 1, 2009, through 
March 31, 2009, because HCPCS code C9247 is a nonpass-through 
diagnostic radiopharmaceutical, and nonpass-through diagnostic 
radiopharmaceutical are always packaged under the CY 2009 OPPS, it was 
packaged under the OPPS and assigned status indicator ``N'' (Items and 
Services Packaged into APC Rates. Paid under OPPS; payment is packaged 
into payment for other services, including outliers). Therefore, there 
was no separate APC payment for HCPCS code C9247 from January 1, 2009, 
through March 31, 2009. Effective April 1, 2009, HCPCS code C9247 was 
allowed separate pass-through payment and its status indicator was 
changed from ``N'' to ``G'' (Pass-Through Drugs and Biologicals. Paid 
under OPPS; separate APC payment includes pass-through amount).
    Through the July 2009 OPPS quarterly update CR (Transmittal 107, 
Change Request 6492, dated May 22, 2009) which included HCPCS codes 
that were made effective July 1, 2009, we allowed separate payment for 
a total of 11 new Level II HCPCS codes for pass-through drugs and 
biologicals and new nonpass-through drugs and nonimplantable 
biologicals. Specifically, we provided separate payment for HCPCS codes 
C9250 (Human plasma fibrin sealant, vapor-heated, solvent-detergent 
(Artiss), 2ml); C9251 (Injection, C1 esterase inhibitor (human), 10 
units); C9252 (Injection, plerixafor, 1 mg); C9253 (Injection, 
temozolomide, 1 mg); C9360 (Dermal substitute, native, non-denatured 
collagen, neonatal bovine origin (SurgiMend Collagen Matrix), per 0.5 
square centimeters); C9361 (Collagen matrix nerve wrap (NeuroMend 
Collagen Nerve Wrap), per 0.5 centimeter length); C9362 (Porous 
purified collagen matrix bone void filler (Integra Mozaik 
Osteoconductive Scaffold Strip), per 0.5 cc); C9363 (Skin substitute, 
Integra Meshed Bilayer Wound Matrix, per square centimeter); C9364 
(Porcine implant, Permacol, per square centimeter); Q2023 (Injection, 
factor viii (antihemophilic factor, recombinant) (Xyntha), per i.u.); 
and Q4116 (Skin substitute, Alloderm, per square centimeter).
    Although HCPCS code Q4115 (Skin substitute, Alloskin, per square 
centimeter) was initially assigned status indicator ``K'' (Nonpass-
Through Drugs and Biologicals) for July 2009 to signify its separate 
payment, we are correcting its status indicator assignment to ``M'' 
(Items and Services Not Billable to the Fiscal Intermediary/MAC) 
retroactive to July 2009 because no July 2009 pricing information is 
available for the ASP payment methodology that applies to payment of 
new HCPCS codes for drugs and biologicals. If ASP information becomes 
available for a later quarter in CY 2009 or for a quarter in CY 2010, 
we would reassign HCPCS code Q4115 status indicator ``K'' for that 
quarter and pay separately for the new biological HCPCS code at ASP+4 
percent, consistent with the final CY 2009 policy and the proposed CY 
2010 policy for payment of new drug and biological HCPCS codes.
    For CY 2010, we are proposing to continue our established policy of 
recognizing Category I CPT vaccine codes for which FDA approval is 
imminent and Category III CPT codes that the AMA releases in January of 
each year for implementation in July through the OPPS quarterly update 
process. Under the OPPS, Category I vaccine codes and Category III CPT 
codes that are released on the AMA Web site in January are made 
effective in July of the same year through the July OPPS quarterly 
update CR, consistent with the AMA's implementation date for the codes. 
Through the July 2009 OPPS quarterly update CR, we allowed separate 
payment for 3 of the 5 new Category I vaccine and Category III CPT 
Codes effective July 1, 2009. Specifically, as displayed in Table 16, 
we allowed payment for CPT codes 0199T (Physiologic recording of tremor 
using accelerometer(s) and gyroscope(s), (including frequency and 
amplitude) including interpretation and report); 0200T (Percutaneous 
sacral augmentation (sacroplasty), unilateral injection(s), including 
the use of a balloon or mechanical device (if utilized), one or more 
needles); and 0201T (Percutaneous sacral augmentation (sacroplasty), 
bilateral injections, including the use of a balloon or mechanical 
device (if utilized), two or more needles). We note that CPT code 0202T 
(Posterior vertebral joint(s) arthroplasty (e.g. , facet joint[s] 
replacement) including facetectomy, laminectomy, foraminotomy and 
vertebral column fixation, with or without injection of bone cement, 
including fluoroscopy, single level, lumbar spine) was assigned status 
indicator ``C'' (Inpatient procedures. Not paid under OPPS. Admit 
patient. Bill as inpatient.) because we believe that this procedure may 
only be safely performed on Medicare beneficiaries in the hospital 
inpatient setting. In addition, CPT code 90670 (Pneumococcal conjugate 
vaccine, 13 valent, for intramuscular use), a Category I CPT vaccine 
code, was assigned status indicator ``E'' (Items, Codes, and Services * 
* * Not paid by Medicare when submitted on outpatient claims (any 
outpatient bill type)) because the drug has not yet been approved by 
the FDA for marketing.
    In this proposed rule, we are soliciting public comments on the 
proposed status indicators and the

[[Page 35301]]

proposed APC assignments and payment rates, if applicable, for the 14 
Level II HCPCS codes and the 5 Category I vaccine and Category III CPT 
codes that were newly recognized or had a change in OPPS status 
indicator in April or July 2009 through the respective OPPS quarterly 
update CRs. These codes are listed in Tables 14, 15, and 16 of this 
proposed rule. We are proposing to finalize their status indicators and 
their APC assignments and payment rates, if applicable, in the CY 2010 
OPPS/ASC final rule with comment period. Because the July 2009 OPPS 
quarterly update CR was issued close to the publication of this 
proposed rule, the Level II HCPCS codes and the Category I vaccine and 
Category III CPT codes implemented through the July 2009 OPPS quarterly 
update CR could not be included in Addendum B to this proposed rule, 
but these codes are listed in Tables 15 and 16, respectively. We are 
proposing to incorporate them into Addendum B to the CY 2010 OPPS/ASC 
final rule with comment period, which is consistent with our annual 
OPPS update policy. The Level II HCPCS codes implemented or modified 
through the April 2009 OPPS update CR and displayed in Table 14 are 
included in Addendum B to this proposed rule, where their proposed CY 
2010 payment rates also are shown.

    Table 14--Level II HCPCS Codes With a Change in OPPS Status Indicator or Newly Implemented in April 2009
----------------------------------------------------------------------------------------------------------------
                                                                       Proposed CY 2010 Status      Proposed CY
       CY 2009 HCPCS Code              CY 2009 Long Descriptor                Indicator              2010 APC
----------------------------------------------------------------------------------------------------------------
C9247...........................  Iobenguane, I-123, diagnostic,    G...........................            9247
                                   per study dose, up to 10
                                   millicuries.
C9249...........................  Injection, certolizumab pegol, 1  G...........................            9249
                                   mg.
----------------------------------------------------------------------------------------------------------------


                           Table 15--New Level II HCPCS Codes Implemented in July 2009
----------------------------------------------------------------------------------------------------------------
                                                     Proposed CY 2010     Proposed CY 2010     Proposed CY 2010
   CY 2009 HCPCS Code     CY 2009 Long Descriptor    Status Indicator           APC             Payment Rate*
----------------------------------------------------------------------------------------------------------------
C9250...................  Human plasma fibrin      G..................  9250...............  $155.00
                           sealant, vapor-heated,
                           solvent-detergent
                           (Artiss), 2ml.
C9251...................  Injection, C1 esterase   G..................  9251...............  41.34
                           inhibitor (human), 10
                           units.
C9252...................  Injection, plerixafor,   G..................  9252...............  276.04
                           1 mg.
C9253...................  Injection,               G..................  9253...............  5.00
                           temozolomide, 1 mg.
C9360...................  Dermal substitute,       G..................  9360...............  14.31
                           native, non-denatured
                           collagen, neonatal
                           bovine origin
                           (SurgiMend Collagen
                           Matrix), per 0.5
                           square centimeters.
C9361...................  Collagen matrix nerve    G..................  9361...............  124.55
                           wrap (NeuroMend
                           Collagen Nerve Wrap),
                           per 0.5 centimeter
                           length.
C9362...................  Porous purified          G..................  9362...............  56.71
                           collagen matrix bone
                           void filler (Integra
                           Mozaik Osteoconductive
                           Scaffold Strip), per
                           0.5 cc.
C9363...................  Skin substitute,         G..................  9363...............  11.13
                           Integra Meshed Bilayer
                           Wound Matrix, per
                           square centimeter.
C9364...................  Porcine implant,         G..................  9364...............  18.57
                           Permacol, per square
                           centimeter.
Q2023...................  Injection, factor viii   K..................  1268...............  1.15
                           (antihemophilic
                           factor, recombinant)
                           (Xyntha), per i.u.
Q4115...................  Skin substitute,         M..................  Not Applicable.....  Not Applicable
                           Alloskin, per square
                           centimeter.
Q4116...................  Skin substitute,         K..................  1270...............  32.42
                           Alloderm, per square
                           centimeter.
----------------------------------------------------------------------------------------------------------------
*Based on July 2009 ASP information.


                Table 16--Category I Vaccine and Category III CPT Codes Implemented in July 2009
----------------------------------------------------------------------------------------------------------------
                                                     Proposed CY 2010     Proposed CY 2010     Proposed CY 2010
   CY 2009 HCPCS code     CY 2009 long descriptor    status indicator           APC              payment rate
----------------------------------------------------------------------------------------------------------------
0199T...................  Physiologic recording    S..................  0215...............  $40.79
                           of tremor using
                           accelerometer(s) and
                           gyroscope(s),
                           (including frequency
                           and amplitude)
                           including
                           interpretation and
                           report.
0200T...................  Percutaneous sacral      T..................  0049...............  1,489.69
                           augmentation
                           (sacroplasty),
                           unilateral
                           injection(s),
                           including the use of a
                           balloon or mechanical
                           device (if utilized),
                           one or more needles.
0201T...................  Percutaneous sacral      T..................  0050...............  2,134.51
                           augmentation
                           (sacroplasty),
                           bilateral injections,
                           including the use of a
                           balloon or mechanical
                           device (if utilized),
                           two or more needles.
0202T...................  Posterior vertebral      C..................  Not applicable.....  Not applicable
                           joint(s) arthroplasty
                           (e.g., facet joint[s]
                           replacement) including
                           facetectomy,
                           laminectomy,
                           foraminotomy and
                           vertebral column
                           fixation, with or
                           without injection of
                           bone cement, including
                           fluoroscopy, single
                           level, lumbar spine.
90670...................  Pneumococcal conjugate   E..................  Not applicable.....  Not applicable
                           vaccine, 13 valent,
                           for intramuscular use.
----------------------------------------------------------------------------------------------------------------


[[Page 35302]]

2. Proposed Process for New Level II HCPCS Codes and Category I and III 
CPT Codes for Which We Will Be Soliciting Public Comments in the CY 
2010 OPPS/ASC Final Rule With Comment Period
    As has been our practice in the past, we incorporate those new 
Category I and III CPT codes and new Level II HCPCS codes that are 
effective January 1 in the final rule with comment period updating the 
OPPS for the following calendar year. These codes are released to the 
public via the CMS HCPCS (for Level II HCPCS codes) and AMA Web sites 
(for CPT codes), and also through the January OPPS quarterly update 
CRs. In the past, we also have released new Level II HCPCS codes that 
are effective October 1 through the October OPPS quarterly update CRs 
and incorporated these new codes in the final rule with comment period 
updating the OPPS for the following calendar year. All of these codes 
are flagged with comment indicator ``NI'' in Addendum B to the OPPS/ASC 
final rule with comment period to indicate that we are assigning them 
an interim payment status which is subject to public comment. 
Specifically, the status indicator and the APC assignment, and payment 
rate, if applicable, for all such codes flagged with comment indicator 
``NI'' are open to public comment in the 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 2010. Specifically, for CY 
2010, we are proposing to include in Addendum B to the CY 2010 OPPS/ASC 
final rule with comment period the new Category I and III CPT codes 
effective January 1, 2010 (including those Category I vaccine and 
Category III CPT codes that were released by the AMA in July 2009) that 
would be incorporated in the January 2010 OPPS quarterly update CR and 
the new Level II HCPCS codes, effective October 1, 2009 or January 1, 
2010, that would be released by CMS in its October 2009 and January 
2010 OPPS quarterly update CRs. These codes would be flagged with 
comment indicator ``NI'' in Addendum B to the CY 2010 OPPS/ASC final 
rule with comment period to indicate that we have assigned them an 
interim OPPS payment status. Their status indicators and their APC 
assignments and payment rates, if applicable, would be open to public 
comment in the CY 2010 OPPS/ASC final rule with comment period and 
would be finalized in the CY 2011 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 outpatient department services. 
Section 1833(t)(2)(B) of the Act provides that the Secretary may 
establish groups of covered outpatient department services within this 
classification system, so that services classified within each group 
are comparable clinically and with respect to the use of resources (and 
so that an implantable item is classified to the group that includes 
the service to which the item relates). In accordance with these 
provisions, we developed a grouping classification system, referred to 
as APCs, as set forth in Sec.  419.31 of the regulations. We use Level 
I and Level II HCPCS codes and descriptors to identify and group the 
services within each APC. The APCs are organized such that each group 
is homogeneous both clinically and in terms of resource use. Using this 
classification system, we have established distinct groups of similar 
services, as well as medical visits. We also have developed separate 
APC groups for certain medical devices, drugs, biologicals, therapeutic 
radiopharmaceuticals, and brachytherapy devices.
    We have packaged into payment for each procedure or service within 
an APC group the costs associated with those items or services that are 
directly related to and supportive of performing the main independent 
procedures or furnishing the services. Therefore, we do not make 
separate payment for these packaged items or services. For example, 
packaged items and services include: (1) Use of an operating, 
treatment, or procedure room; (2) use of a recovery room; (3) 
observation services; (4) anesthesia; (5) medical/surgical supplies; 
(6) pharmaceuticals (other than those for which separate payment may be 
allowed under the provisions discussed in section V. of this proposed 
rule); (7) incidental services such as venipuncture; and (8) guidance 
services, image processing services, intraoperative services, imaging 
supervision and interpretation services, diagnostic 
radiopharmaceuticals, and contrast media. Further discussion of 
packaged services is included in section II.A.4. of this proposed rule.
    In CY 2008 (72 FR 66650), we implemented composite APCs to provide 
a single payment for groups of services that are typically performed 
together during a single clinical encounter and that result in the 
provision of a complete service. Under our CY 2009 OPPS policy, we 
provide composite APC payment for certain extended assessment and 
management services, low dose rate (LDR) prostate brachytherapy, 
cardiac electrophysiologic evaluation and ablation, mental health 
services, and multiple imaging services. Further discussion of 
composite APCs is included in section II.A.2.e. of this proposed rule.
    Under the OPPS, we generally pay for hospital outpatient services 
on a rate-per-service basis, where the service may be reported with one 
or more HCPCS codes. Payment varies according to the APC group to which 
the independent service or combination of services is assigned. Each 
APC weight represents the hospital median cost of the services included 
in that APC relative to the hospital median cost of the services 
included in APC 0606 (Level 3 Hospital Clinic Visits). The APC weights 
are scaled to APC 0606 because it is the middle level clinic visit APC 
(that is, where the Level 3 clinic visit CPT code of five levels of 
clinic visits is assigned), and because middle level clinic visits are 
among the most frequently furnished services in the hospital outpatient 
setting.
    Section 1833(t)(9)(A) of the Act requires the Secretary to review 
not less often than annually and revise the groups, relative payment 
weights, and the wage and other adjustments under the OPPS to take into 
account changes in medical practice, changes in technology, the 
addition of new services, new cost data, and other relevant information 
and factors. Section 1833(t)(9)(A) of the Act, as amended by section 
201(h) of the BBRA, also requires the Secretary to consult with an 
outside panel of experts to review (and advise the Secretary 
concerning) the clinical integrity of the APC groups and the relative 
payment weights (the APC Panel recommendations for specific services 
for the CY 2010 OPPS and our responses to them are discussed in the 
relevant specific sections throughout this proposed rule).
    Finally, section 1833(t)(2) of the Act provides that, subject to 
certain exceptions, the items and services within an APC group cannot 
be considered comparable with respect to the use of resources if the 
highest median cost (or mean cost as elected by the Secretary) for an 
item or service in the group is more than 2 times greater than the 
lowest median cost (or mean cost, if so elected) for an item or service 
within the same group (referred to as the ``2 times rule''). We use the 
median cost

[[Page 35303]]

of the item or service in implementing this provision. Section 
1833(t)(2) of the Act authorizes the Secretary to make exceptions to 
the 2 times rule in unusual cases, such as low-volume items and 
services (but the Secretary may not make such an exception in the case 
of a drug or biological that has been designated as an orphan drug 
under section 526 of the Federal Food, Drug, and Cosmetic Act).
2. Application of the 2 Times Rule
    In accordance with section 1833(t)(2) of the Act and Sec.  419.31 
of the regulations, we annually review the items and services within an 
APC group to determine, with respect to comparability of the use of 
resources, if the median cost of the highest cost item or service 
within an APC group is more than 2 times greater than the median of the 
lowest cost item or service within that same group. We are proposing to 
make exceptions to this limit on the variation of costs within each APC 
group in unusual cases, such as low-volume items and services for CY 
2010.
    During the APC Panel's February 2009 meeting, we presented median 
cost and utilization data for services furnished during the period of 
January 1, 2008 through September 30, 2008, about which we had concerns 
or about which the public had raised concerns regarding their APC 
assignments, status indicator assignments, or payment rates. The 
discussions of most service-specific issues, the APC Panel 
recommendations, and our proposals for CY 2010 are contained mainly in 
sections III.C. and III.D. of this proposed rule.
    In addition to the assignment of specific services to APCs that we 
discussed with the APC Panel, we also identified APCs with 2 times 
violations that were not specifically discussed with the APC Panel but 
for which we are proposing changes to their HCPCS codes APC assignments 
in Addendum B to this proposed rule. In these cases, to eliminate a 2 
times violation or to improve clinical and resource homogeneity, we are 
proposing to reassign the codes to APCs that contain services that are 
similar with regard to both their clinical and resource 
characteristics. We also are proposing to rename existing APCs or 
create new clinical APCs to complement proposed HCPCS code 
reassignments. In many cases, the proposed HCPCS code reassignments and 
associated APC reconfigurations for CY 2010 included in this proposed 
rule are related to changes in median costs of services that were 
observed in the CY 2008 claims data newly available for CY 2010 
ratesetting. In addition, we are proposing changes to the status 
indicators for some codes that are not specifically and separately 
discussed in this proposed rule. In these cases, we are proposing to 
change the status indicators for some codes because we believe that 
another status indicator would more accurately describe their payment 
status from an OPPS perspective based on the policies that we are 
proposing for CY 2010.
    Addendum B to this proposed rule identifies with comment indicator 
``CH'' those HCPCS codes for which we are proposing a change to the APC 
assignment or status indicator that were initially assigned in the 
April 2009 Addendum B update (Transmittal 1702, Change Request 6416, 
dated March13, 2009).
3. Proposed Exceptions to the 2 Times Rule
    As discussed earlier, we may make exceptions to the 2 times limit 
on the variation of costs within each APC group in unusual cases such 
as low-volume items and services. Taking into account the APC changes 
that we are proposing for CY 2010 based on the APC Panel 
recommendations discussed mainly in sections III.C. and III.D. of this 
proposed rule, the other proposed changes to status indicators and APC 
assignments as identified in Addendum B to this proposed rule, and the 
use of CY 2008 claims data to calculate the median costs of procedures 
classified in the APCs, we reviewed all the APCs to determine which 
APCs would not satisfy the 2 times rule and to determine which APCs 
should be proposed as exceptions to the 2 times rule for CY 2010. We 
used the following criteria to decide whether to propose exceptions to 
the 2 times rule for affected APCs:
    <bullet> Resource homogeneity
    <bullet> Clinical homogeneity
    <bullet> Hospital outpatient setting
    <bullet> Frequency of service (volume)
    <bullet> 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).
    Table 17 of this proposed rule lists 14 APCs that we are proposing 
to exempt from the 2 times rule for CY 2010 based on the criteria cited 
above. For cases in which a recommendation by the APC Panel appeared to 
result in or allow a violation of the 2 times rule, we generally 
accepted the APC Panel's recommendation because those recommendations 
were based on explicit consideration of resource use, clinical 
homogeneity, hospital specialization, and the quality of the CY 2008 
claims data used to determine the APC payment rates that we are 
proposing for CY 2010. The median costs for hospital outpatient 
services for these and all other APCs that were used in the development 
of this proposed rule can be found on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/01_overview.asp.

    Table 17--Proposed APC Exceptions to the 2 Times Rule for CY 2010
------------------------------------------------------------------------
            Proposed CY 2010 APC              Proposed CY 2010 APC title
------------------------------------------------------------------------
0080........................................  Diagnostic Cardiac
                                               Catheterization.
0105........................................  Repair/Revision/Removal of
                                               Pacemakers, AICDs, or
                                               Vascular Devices.
0128........................................  Echocardiogram with
                                               Contrast.
0141........................................  Level I Upper GI
                                               Procedures.
0142........................................  Small Intestine Endoscopy.
0237........................................  Level II Posterior Segment
                                               Eye Procedures.
0245........................................  Level I Cataract
                                               Procedures without IOL
                                               Insert.
0303........................................  Treatment Device
                                               Construction.
0325........................................  Group Psychotherapy.
0381........................................  Single Allergy Tests.
0432........................................  Health and Behavior
                                               Services.
0436........................................  Level I Drug
                                               Administration.
0604........................................  Level 1 Hospital Clinic
                                               Visits.
0664........................................  Level I Proton Beam
                                               Radiation Therapy.
------------------------------------------------------------------------


[[Page 35304]]

C. New Technology APCs

1. Background
    In the November 30, 2001 final rule (66 FR 59903), we finalized 
changes to the time period a service was eligible for payment under a 
New Technology APC. Beginning in CY 2002, we retain services within New 
Technology APC groups until we gather sufficient claims data to enable 
us to assign the service to a clinically appropriate APC. This policy 
allows us to move a service from a New Technology APC in less than 2 
years if sufficient data are available. It also allows us to retain a 
service in a New Technology APC for more than 2 years if sufficient 
data upon which to base a decision for reassignment have not been 
collected.
    We note that the cost bands for New Technology APCs range from $0 
to $50 in increments of $10, from $50 to $100 in increments of $50, 
from $100 through $2,000 in increments of $100, and from $2,000 through 
$10,000 in increments of $500. These cost bands identify the APCs to 
which new technology procedures and services with estimated service 
costs that fall within those cost bands are assigned under the OPPS. 
Payment for each APC is made at the mid-point of the APC's assigned 
cost band. For example, payment for New Technology APC 1507 (New 
Technology--Level VII ($500-$600)) is made at $550. Currently, there 
are 82 New Technology APCs, ranging from the lowest cost band assigned 
to APC 1491 (New Technology--Level IA ($0-$10)) through the highest 
cost band assigned to APC 1574 (New Technology--Level XXXVII ($9,500-
$10000). In CY 2004 (68 FR 63416), we last restructured the New 
Technology APCs to make the cost intervals more consistent across 
payment levels and refined the cost bands for these APCs to retain two 
parallel sets of New Technology APCs, one set with a status indicator 
of ``S'' (Significant Procedures, Not Discounted when Multiple. Paid 
under OPPS; separate APC payment) and the other set with a status 
indicator of ``T'' (Significant Procedure, Multiple Reduction Applies. 
Paid under OPPS; separate APC payment). These current New Technology 
APC configurations allow us to price new technology services more 
appropriately and consistently.
2. Proposed Movement of Procedures from New Technology APCs to Clinical 
APCs
    As we explained in the November 30, 2001 final rule (66 FR 59902), 
we generally keep a procedure in the New Technology APC to which it is 
initially assigned until we have collected sufficient data to enable us 
to move the procedure to a clinically appropriate APC. However, in 
cases where we find that our original New Technology APC assignment was 
based on inaccurate or inadequate information (although it was the best 
information available at the time), or where the New Technology APCs 
are restructured, we may, based on more recent resource utilization 
information (including claims data) or the availability of refined New 
Technology APC cost bands, reassign the procedure or service to a 
different New Technology APC that most appropriately reflects its cost.
    Consistent with our current policy, in this proposed rule, for CY 
2010 we are proposing to retain services within New Technology APC 
groups until we gather sufficient claims data to enable us to assign 
the service to a clinically appropriate APC. The flexibility associated 
with this policy allows us to move a service from a New Technology APC 
in less than 2 years if sufficient data are available. It also allows 
us to retain a service in a New Technology APC for more than 2 years if 
sufficient hospital claims data upon which to base a decision for 
reassignment have not been collected.
    Table 18 below lists the HCPCS code and its associated status 
indicator that we are proposing to reassign from a New Technology APC 
to a clinically appropriate APC for CY 2010. Based on the CY2008 OPPS 
claims data available for this proposed rule, we believe we have 
sufficient claims data to propose reassignment of CPT code 0182T to a 
clinically appropriate APC. Specifically, we are proposing to reassign 
this electronic brachytherapy service from APC 1519 (New Technology--
Level IXX ($1700-$1800)) to APC 0313 (Brachytherapy), where other 
brachytherapy services also reside. Based on hospital claims data for 
CPT code 0182T, its hospital resource costs are similar to those of 
other services assigned to APC 0313.

             Table 18--Proposed CY 2010 Reassignment of a New Technology Procedure to a Clinical APC
----------------------------------------------------------------------------------------------------------------
                                                                                        Proposed CY  Proposed CY
    CY 2009 HCPCS code          CY 2009 short descriptor       CY 2009 SI  CY 2009 APC    2010 SI      2010 APC
----------------------------------------------------------------------------------------------------------------
0182T.....................  Hdr elect brachytherapy.........            S         1519            S         0313
----------------------------------------------------------------------------------------------------------------

D. Proposed OPPS APC Specific Policies: Insertion of Posterior Spinous 
Process Distraction Device (APC 0052)

    For CY 2009 (73 FR 68620), we reassigned CPT codes 0171T (Insertion 
of posterior spinous process distraction device (including necessary 
removal of bone or ligament for insertion and imaging guidance), 
lumbar, single level) and 0172T (Insertion of posterior spinous process 
distraction device (including necessary removal of bone or ligament for 
insertion and imaging guidance), lumbar, each additional level) from 
APC 0050 (Level II Musculoskeletal Procedures Except Hand and Foot) to 
APC 0052 (Level IV Musculoskeletal Procedures Except Hand and Foot). 
For CY 2007 and CY 2008, the device implanted in procedures described 
by CPT codes 0171T and 0172T, HCPCS code C1821 (Interspinous process 
distraction device (implantable)), was assigned pass-through payment 
status and, therefore, was paid separately at charges adjusted to cost. 
The period of pass-through payment for HCPCS code C1821 expired after 
December 31, 2008. According to our established methodology, the costs 
of devices no longer eligible for pass-through payments are packaged 
into the costs of the procedures with which the devices are reported in 
the claims data used to set the payment rates for those procedures. 
Therefore, the costs of the implanted device identified by HCPCS code 
C1821 are packaged into the costs of CPT codes 0171T and 0172T 
beginning in CY 2009.
    At the February 2009 meeting, the APC Panel heard a public 
presentation that recommended reassignment of CPT codes 0171T and 0172T 
from APC 0052 to APC 0425 (Level II Arthroplasty or Implantation with 
Prosthesis). The presenter believed that APC resource homogeneity would 
be improved if CPT codes 0171T and 0172T were reassigned to APC 0425. 
The presenter asserted, based on its analysis of CY 2007 claims

[[Page 35305]]

data, that the median cost of CPT code 0171T was significantly higher 
than the median cost of APC 0052, while only slightly lower than the 
median cost of APC 0425. The presenter indicated that, while the median 
cost of APC 0052 was significantly higher than the median cost of 
device HCPCS code C1821, device costs are only one element of the 
overall procedure cost and other associated procedure costs are more 
than $3,200. Regarding clinical homogeneity, the presenter stated that 
kyphoplasty is the only spine procedure currently assigned to APC 0052 
other than CPT codes 0171T and 0172T. The presenter also claimed that 
36 percent of claims for CPT code 0171T are reported without HCPCS code 
C1821, which identified a device that is always implanted in procedures 
reported with CPT codes 0171T and 0172T. The presenter requested 
reassignment of CPT codes 0171T and 0172T to APC 0425 because this APC 
is a device-dependent APC, and CPT codes 0171T and 0172T would then be 
subject to procedure-to-device claims processing edits.
    The APC Panel recommended that CMS continue the assignment of CPT 
codes 0171T and 0172T to APC 0052 for CY 2010, institute procedure-to-
device claims processing edits for HCPCS code C1821, and then 
reevaluate the APC assignments of CPT codes 0171T and 0172T in one 
year.
    Under our existing policy, we generally do not identify any 
individual HCPCS codes as device-dependent codes under the OPPS. We 
create device edits, when appropriate, for procedures assigned to 
device-dependent APCs, where those APCs have been historically 
identified under the OPPS as having very high device costs. As we noted 
in the CY 2009 OPPS/ASC final rule with comment period regarding APC 
0052 (73 FR 68621), we typically do not implement procedure-to-device 
edits for an APC where there are not device HCPCS codes for all 
possible devices that could be used to perform a procedure that always 
requires a device, and the APC is not designated as a device-dependent 
APC. APC 0052 is not a device-dependent APC because a number of the 
procedures assigned to the APC do not require the use of implantable 
devices. Furthermore, in some cases, there may not be HCPCS codes that 
describe all devices that may be used to perform the procedures in APC 
0052.
    We examined the CY 2008 claims data available for this proposed 
rule to determine the frequency of billing CPT code 0171T (which is the 
main procedure code reported with HCPCS code C1821) with and without 
device HCPCS code C1821. CPT code 0172T is an add-on code to CPT code 
0171T. We recognize that our single claims for CPT code 0172T may not 
be correctly coded claims and, therefore, our cost estimation for CPT 
code 0172T may not be accurate. Our analysis shows that the CY 2010 
proposed rule median cost for CPT code 0171T is approximately $7,717 
based on over 800 single claims. The CY 2010 proposed rule claims data 
for CPT code 0171T reveal a median cost of approximately $7,916 based 
on over 500 single claims with HCPCS code C1821, and a median cost of 
approximately $7,387 based on about 300 single claims without HCPCS 
code C1821. Therefore, the median cost of claims for CPT code 0171T 
reported with HCPCS code C1821 is similar to the median cost of claims 
for the procedure reported without HCPCS code C1821. We have no reason 
to believe that those hospitals not reporting the device HCPCS code 
have failed to consider the cost of the device in charging for the 
procedure. Furthermore, claims for CPT code 0171T reported with HCPCS 
code C1821 account for about two-thirds of the single claims available 
for ratesetting. The overall median cost of CPT code 0171T falls within 
an appropriate range of HCPCS code-specific median costs for those 
services proposed for CY 2010 assignment to APC 0052, which has a 
proposed APC median cost of approximately $5,939 and no 2 times 
violation. Moreover, we do not believe that procedure-to-device claims 
processing edits are necessary to ensure accurate cost estimation for 
CPT code 0171T.
    The CY 2010 proposed rule line-item median cost for HCPCS code 
C1821 is approximately $4,625, while the CY 2010 proposed rule median 
cost of APC 0052 is approximately $1,300 more than this device cost. 
Previous estimates of procedure time presented to us at the time of the 
device pass-through application for the interspinous process 
distraction device described by HCPCS code C1821 were approximately 30 
to 60 minutes of procedure time for the service currently described by 
CPT code 0171T. This is reasonably comparable to the typical procedure 
time for kyphoplasty described by CPT code 22523 (Percutaneous 
vertebral augmentation, including cavity creation (fracture reduction 
and bone biopsy included when performed) using mechanical device, one 
vertebral body, unilateral or bilateral cannulation (e.g., 
kyphoplasty); thoracic) and CPT code 22524 (Percutaneous vertebral 
augmentation, including cavity creation (fracture reduction and bone 
biopsy included when performed) using mechanical device, one vertebral 
body, unilateral or bilateral cannulation (e.g., kyphoplasty); lumbar), 
which are also assigned to APC 0052.
    In summary, because we believe that APC 0052 pays appropriately for 
the procedure cost of CPT codes 0171T and 0172T, we are proposing to 
maintain the assignment of CPT codes 0171T and 0172T to APC0052 for CY 
2010 and not to implement device edits for these procedures. We are 
accepting one part of the APC Panel's recommendation regarding the 
continued assignment of CPT codes 0171T and 0172T to APC 0052, but we 
are not accepting the APC Panel's further recommendation to institute 
procedure-to-device edits for these services for CY 2010. As we do for 
all OPPS services, we will reevaluate the APC assignments of CPT codes 
0171T and 0172T when additional claims data become available for CY 
2011 ratesetting, in accordance with the final part of the APC Panel's 
recommendation for these procedures.

IV. Proposed OPPS Payment for Devices

A. Pass-Through Payments for Devices

1. Expiration of Transitional Pass-Through Payments for Certain Devices
    Section 1833(t)(6)(B)(iii) of the Act requires that, under the 
OPPS, a category of devices be eligible for transitional pass-through 
payments for at least 2, but not more than 3, years. This pass-through 
payment eligibility period begins with the first date on which 
transitional pass-through payments may be made for any medical device 
that is described by the category. We may establish a new device 
category for pass-through payment in any quarter. Under our established 
policy, we base the pass-through status expiration dates for the 
category codes on the date on which a category is in effect. The date 
on which a category is in effect is the first date on which pass-
through payment may be made for any medical device that is described by 
such category. We propose and finalize the dates for expiration of 
pass-through status for device categories as part of the OPPS annual 
update.
    We also have an established policy to package the costs of the 
devices no longer eligible for pass-through payments into the costs of 
the procedures with which the devices are reported in the claims data 
used to set the payment rates (67 FR 66763). Brachytherapy sources, 
which are now separately paid in accordance with

[[Page 35306]]

section 1833(t)(2)(H) of the Act, are an exception to this established 
policy.
    There currently are no device categories eligible for pass-through 
payment, and there are no categories for which we would propose 
expiration of pass-through status. If we create new device categories 
for pass-through payment status during the remainder of CY 2009 or 
during CY 2010, we will propose future expiration dates in accordance 
with the statutory requirement that they be eligible for pass-through 
payments for at least 2, but not more than 3, years from the date on 
which pass-through payment for any medical device described by the 
category may first be made.
2. Proposed Provisions for Reducing Transitional Pass-Through Payments 
to Offset Costs Packaged into APC Groups
a. Background
    We have an established policy to estimate the portion of each APC 
payment rate that could reasonably be attributed to the cost of the 
associated devices that are eligible for pass-through payments (66 FR 
59904). We deduct from the pass-through payments for identified device 
categories eligible for pass-through payments an amount that reflects 
the portion of the APC payment amount that we determine is associated 
with the cost of the device, defined as the device APC offset amount, 
as required by section 1833(t)(6)(D)(ii) of the Act. We have 
consistently employed an established methodology to estimate the 
portion of each APC payment rate that could reasonably be attributed to 
the cost of an associated device eligible for pass-through payment, 
using claims data from the period used for the most recent 
recalibration of the APC rates (72 FR 66751 through 66752). We 
establish and update the applicable device APC offset amounts for 
eligible pass-through device categories through the transmittals that 
implement the quarterly OPPS updates.
    We currently have published a list of all procedural APCs with the 
CY 2009 portions (both percentages and dollar amounts) of the APC 
payment amounts that we determine are associated with the cost of 
devices, on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/01_overview.asp. The dollar amounts are used as 
the device APC offset amounts. In addition, in accordance with our 
established practice, the device APC offset amounts in a related APC 
are used in order to evaluate whether the cost of a device in an 
application for a new device category for pass-through payment is not 
insignificant in relation to the APC payment amount for the service 
related to the category of devices, as specified in our regulations at 
Sec.  419.66(d).
b. Proposed Policy
    For CY 2010, we are proposing to continue our established policies 
for calculating and setting the device APC offset amounts for each 
device category eligible for pass-through payment. We also are 
proposing to continue to review each new device category on a case-by-
case basis to determine whether device costs associated with the new 
category are already packaged into the existing APC structure. If 
device costs packaged into the existing APC structure are associated 
with the new category, we would deduct the device APC offset amount 
from the pass-through payment for the device category. As stated 
earlier, these device APC offset amounts also would be used in order to 
evaluate whether the cost of a device in an application for a new 
device category for pass-through payment is not insignificant in 
relation to the APC payment amount for the service related to the 
category of devices (Sec.  419.66(d)).
    We are proposing in section V.A.4. of this proposed rule to specify 
that, beginning in CY 2010, the pass-through evaluation process and 
pass-through payment methodology for implantable biologicals that are 
surgically inserted or implanted (through a surgical incision or a 
natural orifice) would be the device pass-through process and payment 
methodology only. As a result of that proposal, we are proposing in 
this section that, beginning in CY 2010, we would include implantable 
biologicals in our calculation of the device APC offset amounts. As of 
CY 2009, the costs of implantable biologicals not eligible for pass-
through payment are packaged into the costs of the procedures in which 
they are implanted because nonpass-through implantable biologicals are 
not separately paid. We are proposing to calculate and set any device 
APC offset amount for a new device pass-through category that includes 
a newly eligible implantable biological beginning in CY 2010 using the 
same methodology we have historically used to calculate and set device 
APC offset amounts for device categories eligible for pass-through 
payment (72 FR 66751 through 66752), with one modification. Because 
implantable biologicals would be considered devices rather than drugs 
for purposes of pass-through evaluation and payment under this proposal 
for CY 2010, the device APC offset amounts would include the costs of 
implantable biologicals for the first time. We also would utilize these 
revised device APC offset amounts to evaluate whether the cost of an 
implantable biological in an application for a new device category for 
pass-through payment is not insignificant in relation to the APC 
payment amount for the service related to the category of devices. 
Further, we are proposing to no longer use the ``policy-packaged'' drug 
APC offset amounts for evaluating the cost significance of implantable 
biological pass-through applications under review and for setting the 
APC offset amounts that would apply to pass-through payment for those 
implantable biologicals, effective for new pass-through status 
determinations beginning in CY 2010. In addition, we are proposing to 
update, on the CMS Web site at http://www.cms.hhs.gov/HospitalOutpatientPPS, the list of all procedural APCs with the final 
CY 2010 portions of the APC payment amounts that we determine are 
associated with the cost of devices so that this information is 
available for use by the public in developing potential CY2010 device 
pass-through payment applications and by CMS in reviewing those 
applications.

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

1. Background
    In recent years, there have been several field actions on and 
recalls of medical devices as a result of implantable device failures. 
In many of these cases, the manufacturers have offered devices without 
cost to the hospital or with credit for the device being replaced if 
the patient required a more expensive device. In order to ensure that 
payment rates for procedures involving devices reflect only the full 
costs of those devices, our standard ratesetting methodology for 
device-dependent APCs uses only claims that contain the correct device 
code for the procedure, do not contain token charges, and do not 
contain the ``FB'' modifier signifying that the device was furnished 
without cost or with a full credit. As discussed in section 
II.A.2.d.(1) of this proposed rule, we are proposing to refine further 
our standard ratesetting methodology for device-dependent APCs for CY 
2010 by also excluding claims with the ``FC'' modifier signifying that 
the device was furnished with partial credit.
    To ensure equitable payment when the hospital receives a device 
without cost or with full credit, in CY 2007 we implemented a policy to 
reduce the payment for specified device-dependent

[[Page 35307]]

APCs by the estimated portion of the APC payment attributable to device 
costs (that is, the device offset) when the hospital receives a 
specified device at no cost or with full credit (71 FR 68071 through 
68077). Hospitals are instructed to report no cost/full credit cases 
using the ``FB'' modifier on the line with the procedure code in which 
the no cost/full credit device is used. In cases in which the device is 
furnished without cost or with full credit, the hospital is instructed 
to report a token device charge of less than $1.01. In cases in which 
the device being inserted is an upgrade (either of the same type of 
device or to a different type of device) with a full credit for the 
device being replaced, the hospital is instructed to report as the 
device charge the difference between its usual charge for the device 
being implanted and its usual charge for the device for which it 
received full credit. In CY 2008, we expanded this payment adjustment 
policy to include cases in which hospitals receive partial credit of 50 
percent or more of the cost of a specified device. Hospitals are 
instructed to append the ``FC'' modifier to the procedure code that 
reports the service provided to furnish the device when they receive a 
partial credit of 50 percent or more of the cost of the new device. We 
reduce the OPPS payment for the implantation procedure by 100 percent 
of the device offset for no cost/full credit cases when both a 
specified device code is present on the claim and the procedure code 
maps to a specified APC. Payment for the implantation procedure is 
reduced by 50 percent of the device offset for partial credit cases 
when both a specified device code is present on the claim and the 
procedure code maps to a specified APC. Beneficiary copayment is based 
on the reduced payment amount when either the ``FB'' or the ``FC'' 
modifier is billed and the procedure and device codes appear on the 
lists of procedures and devices to which this policy applies. We refer 
readers to the CY 2008 OPPS/ASC final rule with comment period for more 
background information on the ``FB'' and ``FC'' payment adjustment 
policies (72 FR 66743 through 66749).
2. Proposed APCs and Devices Subject to the Adjustment Policy
    For CY 2010, we are proposing to continue the policy of reducing 
OPPS payment for specified APCs by 100 percent of the device offset 
amount when a hospital furnishes a specified device without cost or 
with a full credit and by 50 percent of the device offset amount when 
the hospital receives partial credit in the amount of 50 percent or 
more of the cost for the specified device. Because the APC payments for 
the related services are specifically constructed to ensure that the 
full cost of the device is included in the payment, we continue to 
believe that it is appropriate to reduce the APC payment in cases in 
which the hospital receives a device without cost, with full credit, or 
with partial credit, in order to provide equitable payment in these 
cases. (We refer readers to section II.A.2.d.(1) of this proposed rule 
for a description of our standard ratesetting methodology for device-
dependent APCs.) Moreover, the payment for these devices comprises a 
large part of the APC payment on which the beneficiary copayment is 
based, and we continue to believe it is equitable that the beneficiary 
cost sharing reflects the reduced costs in these cases.
    We also are proposing to continue using the three criteria 
established in the CY 2007 OPPS/ASC final rule with comment period for 
determining the APCs to which this policy applies (71 FR 68072 through 
68077). Specifically, (1) all procedures assigned to the selected APCs 
must involve implantable devices that would be reported if device 
insertion procedures were performed; (2) the required devices must be 
surgically inserted or implanted devices that remain in the patient's 
body after the conclusion of the procedure (at least temporarily); and 
(3) the device offset amount must be significant, which, for purposes 
of this policy, is defined as exceeding 40 percent of the APC cost. We 
are proposing to continue to restrict the devices to which the APC 
payment adjustment would apply to a specific set of costly devices to 
ensure that the adjustment would not be triggered by the implantation 
of an inexpensive device whose cost would not constitute a significant 
proportion of the total payment rate for an APC. We continue to believe 
that these criteria are appropriate because free devices and device 
credits are likely to be associated with particular cases only when the 
device must be reported on the claim and is of a type that is implanted 
and remains in the body when the beneficiary leaves the hospital. We 
believe that the reduction in payment is appropriate only when the cost 
of the device is a significant part of the total cost of the APC into 
which the device cost is packaged, and that the 40-percent threshold is 
a reasonable definition of a significant cost.
    We examined the offset amounts calculated from the CY 2010 proposed 
rule data and the clinical characteristics of APCs to determine whether 
the APCs to which the no cost/full credit and partial credit device 
adjustment policy applies in CY 2009 continue to meet the criteria for 
CY 2010, and to determine whether other APCs to which the policy does 
not apply in CY 2009 would meet the criteria for CY 2010. Based on the 
CY 2008 claims data available for this proposed rule, we are not 
proposing any changes to the APCs and devices to which this policy 
applies. Table 19 below lists the proposed APCs to which the payment 
reduction policy for no cost/full credit and partial credit devices 
would apply in CY 2010 and displays the proposed payment reduction 
percentages for both no cost/full credit and partial credit 
circumstances. Table 20 below lists the proposed devices to which this 
policy would apply in CY 2010. We will update the lists of APCs and 
devices to which the no cost/full credit and partial credit device 
adjustment policy would apply in CY 2010, consistent with the three 
selection criteria discussed earlier in this section, based on the 
final CY 2008 claims data available for the CY 2010 OPPS/ASC final rule 
with comment period.

  Table 19--Proposed APCs to Which the No Cost/Full Credit and Partial
               Credit Device Adjustment Policy Would Apply
------------------------------------------------------------------------
                                                Proposed CY
                                                2010 device  Proposed CY
                                                   offset    2010 device
     Proposed CY 2010 APC        Proposed CY     percentage     offset
                                2010 APC title  for no cost/  percentage
                                                full credit  for partial
                                                    case     credit case
------------------------------------------------------------------------
0039.........................  Level I                   85           43
                                Implantation
                                of
                                Neurostimulato
                                r Generator.

[[Page 35308]]

 
0040.........................  Percutaneous              58           29
                                Implantation
                                of
                                Neurostimulato
                                r Electrodes.
0061.........................  Laminectomy,              63           31
                                Laparoscopy,
                                or Incision
                                for
                                Implantation
                                of
                                Neurostimulato
                                r Electrodes.
0089.........................  Insertion/                71           35
                                Replacement of
                                Permanent
                                Pacemaker and
                                Electrodes.
0090.........................  Insertion/                73           37
                                Replacement of
                                Pacemaker
                                Pulse
                                Generator.
0106.........................  Insertion/                41           20
                                Replacement of
                                Pacemaker
                                Leads and/or
                                Electrodes.
0107.........................  Insertion of              88           44
                                Cardioverter-
                                Defibrillator.
0108.........................  Insertion/                88           44
                                Replacement/
                                Repair of
                                Cardioverter-
                                Defibrillator
                                Leads.
0225.........................  Implantation of           73           37
                                Neurostimulato
                                r Electrodes,
                                Cranial Nerve.
0227.........................  Implantation of           82           41
                                Drug Infusion
                                Device.
0259.........................  Level VII ENT             85           42
                                Procedures.
0315.........................  Level II                  88           44
                                Implantation
                                of
                                Neurostimulato
                                r Generator.
0385.........................  Level I                   58           29
                                Prosthetic
                                Urological
                                Procedures.
0386.........................  Level II                  70           35
                                Prosthetic
                                Urological
                                Procedures.
0418.........................  Insertion of              81           40
                                Left
                                Ventricular
                                Pacing Elect.
0425.........................  Level II                  57           28
                                Arthroplasty
                                or
                                Implantation
                                with
                                Prosthesis.
0648.........................  Level IV Breast           47           23
                                Surgery.
0654.........................  Insertion/                74           37
                                Replacement of
                                a permanent
                                dual chamber
                                pacemaker.
0655.........................  Insertion/                75           37
                                Replacement/
                                Conversion of
                                a permanent
                                dual chamber
                                pacemaker.
0680.........................  Insertion of              73           36
                                Patient
                                Activated
                                Event
                                Recorders.
------------------------------------------------------------------------


 Table 20--Proposed Devices to Which the No Cost/Full Credit and Partial
               Credit Device Adjustment Policy Would Apply
------------------------------------------------------------------------
     CY 2009 device HCPCS code             CY 2009 short descriptor
------------------------------------------------------------------------
C1721..............................  AICD, dual chamber.
C1722..............................  AICD, single chamber.
C1728..............................  Cath, brachytx seed adm.
C1764..............................  Event recorder, cardiac.
C1767..............................  Generator, neurostim, imp.
C1771..............................  Rep dev, urinary, w/sling.
C1772..............................  Infusion pump, programmable.
C1776..............................  Joint device (implantable).
C1777..............................  Lead, AICD, endo single coil.
C1778..............................  Lead, neurostimulator.
C1779..............................  Lead, pmkr, transvenous VDD.
C1785..............................  Pmkr, dual, rate-resp.
C1786..............................  Pmkr, single, rate-resp.
C1789..............................  Prosthesis, breast, imp.
C1813..............................  Prosthesis, penile, inflatab.
C1815..............................  Pros, urinary sph, imp.
C1820..............................  Generator, neuro rechg bat sys.
C1881..............................  Dialysis access system.
C1882..............................  AICD, other than sing/dual.
C1891..............................  Infusion pump, non-prog, perm.
C1895..............................  Lead, AICD, endo dual coil.
C1896..............................  Lead, AICD, non sing/dual.
C1897..............................  Lead, neurostim, test kit.
C1898..............................  Lead, pmkr, other than trans.
C1899..............................  Lead, pmkr/AICD combination.
C1900..............................  Lead coronary venous.
C2619..............................  Pmkr, dual, non rate-resp.
C2620..............................  Pmkr, single, non rate-resp.
C2621..............................  Pmkr, other than sing/dual.
C2622..............................  Prosthesis, penile, non-inf.
C2626..............................  Infusion pump, non-prog, temp.
C2631..............................  Rep dev, urinary, w/o sling.
L8600..............................  Implant breast silicone/eq.
L8614..............................  Cochlear device/system.
L8685..............................  Implt nrostm pls gen sng rec.
L8686..............................  Implt nrostm pls gen sng non.
L8687..............................  Implt nrostm pls gen dua rec.
L8688..............................  Implt nrostm pls gen dua non.
L8690..............................  Aud osseo dev, int/ext comp.
------------------------------------------------------------------------

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

A. Proposed OPPS Transitional Pass-Through Payment for Additional Costs 
of Drugs, Biologicals, and Radiopharmaceuticals

1. Background
    Section 1833(t)(6) of the Act provides for temporary additional 
payments or ``transitional pass-through payments'' for certain drugs 
and biological agents. As enacted by the Medicare, Medicaid, and SCHIP 
Balanced Budget Refinement Act (BBRA) of 1999 (Pub. L. 106-113), this 
provision requires the Secretary to make additional payments to 
hospitals for current orphan drugs, as designated under section 526 of 
the Federal Food, Drug, and Cosmetic Act (Pub. L. 107-186); current 
drugs and biological agents and brachytherapy sources used for the 
treatment of cancer; and current radiopharmaceutical drugs and 
biological products. For those drugs and biological agents referred to 
as ``current,'' the transitional pass-through payment began on the 
first date the hospital OPPS was implemented.
    Transitional pass-through payments also are provided for certain 
``new'' drugs and biological agents that were not being paid for as an 
HOPD service as of December 31, 1996, and whose cost is ``not 
insignificant'' in relation to the OPPS payments for the procedures or 
services associated with the new drug or biological. For pass-through 
payment purposes, radiopharmaceuticals are included as ``drugs.'' Under 
the statute, transitional pass-through payments for a drug or 
biological described in section 1833(t)(6)(C)(i)(II) of the Act can be 
made for at least 2 years but not more than 3 years after the product's 
first payment as a hospital outpatient service under Part B. The pass-
through payment eligibility period is discussed in detail in section 
V.A.5. of this proposed rule. Proposed CY 2010 pass-through drugs and 
biologicals and their designated APCs are assigned status indicator 
``G''

[[Page 35309]]

as indicated in Addenda A and B to this proposed rule.
    Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through 
payment amount, in the case of a drug or biological, is the amount by 
which the amount determined under section 1842(o) of the Act (or, if 
the drug or biological is covered under a competitive acquisition 
contract under section 1847B of the Act, an amount determined by the 
Secretary to be equal to the average price for the drug or biological 
for all competitive acquisition areas and the year established under 
such section as calculated and adjusted by the Secretary) for the drug 
or biological exceeds the portion of the otherwise applicable Medicare 
OPD fee schedule that the Secretary determines is associated with the 
drug or biological. This methodology for determining the pass-through 
payment amount is set forth in Sec.  419.64 of the regulations, which 
specifies that the pass-through payment equals the amount determined 
under section 1842(o) of the Act minus the portion of the APC payment 
that CMS determines is associated with the drug or biological. Section 
1847A of the Act establishes the use of the average sales price (ASP) 
methodology as the basis for payment for drugs and biologicals 
described in section 1842(o)(1)(C) of the Act that are furnished on or 
after January 1, 2005. The ASP methodology, as applied under the OPPS, 
uses several sources of data as a basis for payment, including the ASP, 
wholesale acquisition cost (WAC), and average wholesale price (AWP). In 
this proposed rule, the term ``ASP methodology'' and ``ASP-based'' are 
inclusive of all data sources and methodologies described therein. 
Additional information on the ASP methodology can be found on the CMS 
Web site at: http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice.
    As noted above, section 1833(t)(6)(D)(i) of the Act also states 
that if a drug or biological is covered under a competitive acquisition 
contract under section 1847B of the Act, the payment rate is equal to 
the average price for the drug or biological for all competitive 
acquisition areas and the year established as calculated and adjusted 
by the Secretary. Section 1847B of the Act establishes the payment 
methodology for Medicare Part B drugs and biologicals under the 
competitive acquisition program (CAP). The Part B drug CAP was 
implemented on July 1, 2006, and included approximately 190 of the most 
common Part B drugs provided in the physician's office setting. As we 
noted in the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68633), the Part B drug CAP program was suspended beginning in CY 2009 
(Medicare Learning Network (MLN) Matters Special Edition 0833, 
available via the Web site: http://www.medicare.gov). Therefore, there 
is no effective Part B drug CAP rate for pass-through drugs and 
biologicals as of January 1, 2009. As we noted in the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68633), if the program is 
reinstituted during CY 2010 and Part B drug CAP rates become available, 
we would again use the Part B drug CAP rate for pass-through drugs and 
biologicals if they are a part of the Part B drug CAP program. 
Otherwise, we would continue to use the rate that would be paid in the 
physician's office setting for drugs and biologicals with pass-through 
status. We note that the June 2009 CY 2010 MPFS proposed rule (CMS-
1413-P; Medicare Program; Payment Policies under the Physician Fee 
Schedule and Other Revisions to Part B for CY 2010) includes proposed 
changes to the operation of the Part B drug CAP program, including a 
proposal to change the frequency of CAP drug pricing updates.
    For CYs 2005, 2006, and 2007, we estimated the OPPS pass-through 
payment amount for drugs and biologicals to be zero based on our 
interpretation that the ``otherwise applicable Medicare OPD fee 
schedule'' amount was equivalent to the amount to be paid for pass-
through drugs and biologicals under section 1842(o) of the Act (or 
section 1847B of the Act, if the drug or biological is covered under a 
competitive acquisition contract). We concluded for those years that 
the resulting difference between these two rates would be zero. For CYs 
2008 and 2009, we estimated the OPPS pass-through payment amount for 
drugs and biologicals to be $6.6 million and $23.3 million, 
respectively. Our proposed OPPS pass-through payment estimate for drugs 
and biologicals in CY 2010 is $28 million, which is discussed in 
section VI.B. of this proposed rule.
    The pass-through application and review process for drugs and 
biologicals is explained on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/04_passthrough_payment.asp.
2. Proposed Drugs and Biologicals With Expiring Pass-Through Status in 
CY 2009
    We are proposing that the pass-through status of 6 drugs and 
biologicals would expire on December 31, 2009, as listed in Table 21 
below. All of these drugs and biologicals will have received OPPS pass-
through payment for at least 2 years and no more than 3 years by 
December 31, 2009. These items were approved for pass-through status on 
or before January 1, 2008. With the exception of those groups of drugs 
and biologicals that are always packaged when they do not have pass-
through status, specifically diagnostic radiopharmaceuticals, contrast 
agents, and implantable biologicals, our standard methodology for 
providing payment for drugs and biologicals with expiring pass-through 
status in an upcoming calendar year is to determine the product's 
estimated per day cost and compare it with the OPPS drug packaging 
threshold for that calendar year (which is proposed at $65 for CY 
2010), as discussed further in section V.B.2. of this proposed rule. If 
the drug's or biological's estimated per day cost is less than or equal 
to the applicable OPPS drug packaging threshold, we would package 
payment for the drug or biological into the payment for the associated 
procedure in the upcoming calendar year. If the estimated per day cost 
is greater than the OPPS drug packaging threshold, we would provide 
separate payment at the applicable relative ASP-based payment amount 
(which is proposed at ASP+4 percent for CY 2010). Section V.B.2.d. of 
this proposed rule discusses the packaging of all nonpass-through 
contrast agents, diagnostic radiopharmaceuticals, and implantable 
biologicals.

      Table 21--Proposed Drugs and Biologicals for Which Pass-Through Status Would Expire December 31, 2009
----------------------------------------------------------------------------------------------------------------
                                                                                                        Proposed
            CY 2009 HCPCS code               CY 2009 short descriptor         Proposed CY 2010 SI       CY 2010
                                                                                                          APC
----------------------------------------------------------------------------------------------------------------
C9354....................................  Veritas collagen matrix, cm2  N...........................        N/A
C9355....................................  Neuromatrix nerve cuff, cm..  N...........................        N/A
J1300....................................  Eculizumab injection........  K...........................       9236

[[Page 35310]]

 
J3488....................................  Reclast injection...........  K...........................       0951
J9261....................................  Nelarabine injection........  K...........................       0825
J9330....................................  Temsirolimus injection......  K...........................       1168
----------------------------------------------------------------------------------------------------------------

3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With New or 
Continuing Pass-Through Status in CY 2010
    We are proposing to continue pass-through status in CY 2010 for 31 
drugs and biologicals. None of these products will have received OPPS 
pass-through payment for at least 2 years and no more than 3 years by 
December 31, 2009. These items, which were approved for pass-through 
status between April 1, 2008 and July 1, 2009, are listed in Table 22 
below. The APCs and HCPCS codes for these drugs and biologicals are 
assigned status indicator ``G'' in Addenda A and B to this proposed 
rule.
    Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through 
payment for pass-through drugs and biologicals (the pass-through 
payment amount) as the difference between the amount authorized under 
section 1842(o) of the Act (or, if the drug or biological is covered 
under a CAP under section 1847B of the Act, an amount determined by the 
Secretary equal to the average price for the drug or biological for all 
competitive acquisition areas and the year established under such 
section as calculated and adjusted by the Secretary) and the portion of 
the otherwise applicable OPD fee schedule that the Secretary determines 
is associated with the drug or biological. Payment for drugs and 
biologicals with pass-through status under the OPPS is currently made 
at the physician's office payment rate of ASP+6 percent. We believe it 
is consistent with the statute to continue to provide payment for drugs 
and biologicals with pass-through status at a rate of ASP+6 percent in 
CY 2010, the amount that drugs and biologicals receive under section 
1842(o) of the Act. Thus, for CY 2010, we are proposing to pay for 
pass-through drugs and biologicals at ASP+6 percent, equivalent to the 
rate these drugs and biologicals would receive in the physician's 
office setting in CY 2010. The difference between ASP+4 percent that we 
are proposing to pay for nonpass-through separately payable drugs under 
the CY 2010 OPPS and ASP+6 percent, therefore, would be the CY 2010 
pass-through payment amount for these drugs and biologicals. In the 
case of pass-through contrast agents, diagnostic radiopharmaceuticals, 
and implantable biologicals, their pass-through payment amount would be 
equal to ASP+6 percent because, if not on pass-through status, payment 
for these products would be packaged into the associated procedures.
    In addition, we are proposing to update pass-through payment rates 
on a quarterly basis on the CMS Web site during CY 2010 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. If the Part B drug CAP 
is reinstated during CY 2010, and a drug or biological that has been 
granted pass-through status for CY 2010 becomes covered under the Part 
B drug CAP, we are proposing to provide pass-through payment at the 
Part B drug CAP rate and to make the appropriate adjustments to the 
payment rates for these drugs and biologicals on a quarterly basis as 
appropriate.
    In CY 2010, consistent with our CY 2009 policy for diagnostic 
radiopharmaceuticals, we are proposing to provide payment for both 
diagnostic and therapeutic radiopharmaceuticals that are granted pass-
through status based on the ASP methodology. As stated above, for 
purposes of pass-through payment, we consider radiopharmaceuticals to 
be drugs under the OPPS and, therefore, if a diagnostic or therapeutic 
radiopharmaceutical receives pass-through status during CY 2010, we are 
proposing to follow the standard ASP methodology to determine its pass-
through payment rate under the OPPS. If ASP information is available, 
the payment rate would be equivalent to the payment rate that drugs 
receive under section 1842(o) of the Act, that is, ASP+6 percent. If 
ASP data are not available for a radiopharmaceutical, we are proposing 
to provide pass-through payment at WAC+6 percent, the equivalent 
payment provided to nonradiopharmaceutical pass-through drugs and 
biologicals without ASP information. If WAC information is also not 
available, we are proposing to provide payment for the pass-through 
radiopharmaceutical at 95 percent of its most recent AWP.

 Table 22--Proposed Drugs and Biologicals With Pass-Through Status in CY
                                  2010
------------------------------------------------------------------------
                                CY 2009 short   Proposed CY  Proposed CY
      CY 2009 HCPCS code          descriptor      2010 SI      2010 APC
------------------------------------------------------------------------
C9245........................  Injection,                 G         9245
                                romiplostim.
C9246........................  Inj, gadoxetate            G         9246
                                disodium.
C9247........................  Inj,                       G         9247
                                iobenguane, I-
                                123, dx.
C9248........................  Inj,                       G         9248
                                clevidipine
                                butyrate.
C9249........................  Inj,                       G         9249
                                certolizumab
                                pegol.
C9250........................  Artiss fibrin              G         9250
                                sealant.
C9251........................  Inj, C1                    G         9251
                                esterase
                                inhibitor.
C9252........................  Injection,                 G         9252
                                plerixafor.
C9253........................  Injection,                 G         9253
                                temozolomide.
C9356........................  TendoGlide                 G         9356
                                Tendon Prot,
                                cm2.
C9358........................  SurgiMend,                 G         9358
                                fetal.
C9359........................  Implnt, bon                G         9359
                                void filler-
                                putty.

[[Page 35311]]

 
C9360........................  SurgiMend,                 G         9360
                                neonatal.
C9361........................  NeuraMend nerve            G         9361
                                wrap.
C9362........................  Implnt, bon                G         9362
                                void filler-
                                strip.
C9363........................  Integra Meshed             G         9363
                                Bil Wound Mat.
C9364........................  Porcine                    G         9364
                                implant,
                                Permacol.
J0641........................  Levoleucovorin             G         1236
                                injection.
J1267........................  Doripenem                  G         9241
                                injection.
J1453........................  Fosaprepitant              G         9242
                                injection.
J1459........................  Inj IVIG                   G         1214
                                privigen 500
                                mg.
J1571........................  Hepagam b im               G         0946
                                injection.
J1573........................  Hepagam b                  G         1138
                                intravenous,
                                inj.
J1953........................  Levetiracetam              G         9238
                                injection.
J2785........................  Injection,                 G         9244
                                regadenoson.
J8705........................  Topotecan oral.            G         1238
J9033........................  Bendamustine               G         9243
                                injection.
J9207........................  Ixabepilone                G         9240
                                injection.
J9225........................  Vantas implant.            G         1711
J9226........................  Supprelin LA               G         1142
                                implant.
Q4114........................  Flowable Wound             G         1251
                                Matrix, 1 cc.
------------------------------------------------------------------------

    As discussed in more detail in section V.B.2.d. of this proposed 
rule, over the last 2 years, we implemented a policy whereby payment 
for all nonpass-through diagnostic radiopharmaceuticals, contrast 
agents, and implantable biologicals is packaged into payment for the 
associated procedure, and we are proposing to continue the packaging of 
these items, regardless of their per-day cost, in CY 2010. As stated 
earlier, pass-through payment is the difference between the amount 
authorized under section 1842(o) of the Act (or, if the drug or 
biological is covered under a CAP under section 1847B of the Act, an 
amount determined by the Secretary equal to the average price for the 
drug or biological for all competitive acquisition areas and the year 
established under such section as calculated and adjusted by the 
Secretary) and the portion of the otherwise applicable OPD fee schedule 
that the Secretary determines is associated with the drug or 
biological. Because payment for a drug that is either a diagnostic 
radiopharmaceutical or a contrast agent (identified as a ``policy-
packaged'' drug, first described in the CY 2009 OPPS/ASC final rule 
with comment period (73 FR 68639)) or for an implantable biological 
(which we are proposing to consider to be a device for all payment 
purposes beginning in CY2010 as discussed in sections V.A.4. and 
V.B.2.d. of this proposed rule) 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 or the device APC offset amount for the associated 
clinical APC in which the drug or biological is utilized. The 
calculation of the ``policy-packaged'' drug and the device APC offset 
amounts are described in more detail in sections V.A.6.b. and IV.A.2. 
of this proposed rule, respectively. It follows that the copayment for 
the nonpass-through payment portion (the otherwise applicable fee 
schedule amount that we would also offset from payment for the drug or 
biological if a payment offset applies) of the total OPPS payment for 
this subset of drugs and biologicals would, therefore, be accounted for 
in the copayment for the associated clinical APC in which the drug or 
biological is used. According to section 1833(t)(8)(E) of the Act, the 
amount of copayment associated with pass-through items is equal to the 
amount of copayment that would be applicable if the pass-through 
adjustment was not applied. Therefore, beginning in CY 2010, we are 
proposing to set the associated copayment amount for pass-through 
diagnostic radiopharmaceuticals, contrast agents, and implantable 
biologicals that would otherwise be packaged if the item did not have 
pass-through status to zero. The separate OPPS payment to a hospital 
for the pass-through diagnostic radiopharmaceutical, contrast agent, or 
implantable biological, after taking into account any applicable 
payment offset for the item due to the device or ``policy-packaged'' 
APC offset policy, is the item's pass-through payment, which is not 
subject to a copayment according to the statute. Therefore, we are not 
publishing a copayment amount for these items in Addendum A and B to 
this proposed rule.
4. Pass-Through Payment for Implantable Biologicals
a. Background
    Section 1833(t)(6)(A)(iv) of the Act authorizes transitional pass-
through payments for new medical devices, drugs, and biologicals, for 
those items where payment was not being made as a hospital outpatient 
service under Part B as of December 31, 1996, and whose cost is not 
insignificant in relation to the OPD fee schedule amount payable for 
the service (or group of services) involved. These pass-through 
payments are in addition to the usual APC payments for services in 
which the product is used. Coding and payment for drugs and biologicals 
with pass-through status are generally provided on a product-specific 
basis, while coding and payment for devices with pass-through status 
are provided for categories of devices that may describe numerous 
products. The Act specifies that the duration of transitional pass-
through payments for devices must be no less than 2 and no more than 3 
years from the first date on which payment is made for any medical 
device that is described by the category. For drugs and biologicals, as 
further discussed in section V.A.5. of this proposed rule, generally 
beginning in CY 2010 we are specifying, consistent with the statute, 
that the pass-through payment eligibility period for drugs and 
biologicals is no less than 2 and no more than 3 years from the first 
date on which payment is made for the drug or biological under Part B 
as an outpatient

[[Page 35312]]

hospital service. Therefore, we utilize separate pass-through 
application and evaluation processes and criteria for drugs and 
biologicals and device categories because the statutory provisions are 
not the same for all items that may receive pass-through payment. These 
processes and the applicable evaluation criteria are available on the 
CMS Web site at:  http://www.cms.hhs.gov/HospitalOutpatientPPS/04_passthrough_payment.asp#TopOf Page. The regulations that govern pass-
through payment for drugs and biologicals are found in Sec.  419.64 and 
those applicable to pass-through device categories are found in Sec.  
419.66.
    Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through 
payment amount, in the case of a drug or biological, is the amount by 
which the amount determined under section 1842(o) of the Act (or, if 
the drug or biological is covered under a competitive acquisition 
contract under section 1847B of the Act, an amount determined by the 
Secretary equal to the average price for the drug or biological for all 
competitive acquisition areas and the year established under such 
section as calculated and adjusted by the Secretary) for the drug or 
biological exceeds the portion of the otherwise applicable Medicare OPD 
fee schedule that the Secretary determines is associated with the drug 
or biological. For the drugs and biologicals that would have otherwise 
been paid under the Part B drug CAP, because the Part B drug CAP has 
been suspended beginning January 1, 2009, pass-through payment for 
these drugs and biologicals is currently made at the physician's office 
payment rate of ASP+6 percent. In the case of diagnostic 
radiopharmaceuticals, where all products without pass-through status 
are packaged into payment for nuclear medicine procedures, the pass-
through payment is reduced by an amount that reflects the diagnostic 
radiopharmaceutical portion of the APC payment amount for the 
associated nuclear medicine procedure (the ``policy-packaged'' drug APC 
offset) that we determine is associated with the cost of predecessor 
diagnostic radiopharmaceuticals. We are proposing a similar payment 
offset policy for contrast agents beginning in CY 2010, as discussed in 
section V.A.6. of this proposed rule. Pass-through payment for a 
category of devices is made at the hospital's charge for the device 
adjusted to cost by application of the hospital's CCR. If applicable, 
the device payment is reduced by an amount that reflects the portion of 
the APC payment amount for the associated surgical procedure that we 
determine is associated with the cost of the device, called the device 
APC offset and discussed further in section IV.A.2. of this proposed 
rule.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68633 
through 68636), we finalized a policy to package payment for 
implantable biologicals without pass-through status that are surgically 
inserted or implanted (through a surgical incision or a natural 
orifice) into payment for the associated surgical procedure. Prior to 
our implementation of this policy for nonpass-through implantable 
biologicals, we adopted in the CY 2003 OPPS final rule with comment 
period (67 FR 66763) the current OPPS policy that packages payment for 
an implantable device into the associated surgical procedures when its 
pass-through payment period ends because payment for all implantable 
devices without pass-through status under the OPPS is packaged. We 
consider nonpass-through implantable devices to be integral and 
supportive items for which packaged payment is most appropriate. As we 
stated in the CY2009 OPPS/ASC final rule with comment period (73 FR 
68634), we believe this policy to package payment for implantable 
devices that are integral to the performance of procedures paid 
separately through an APC payment should also apply to payment for 
implantable biologicals without pass-through status, when those 
biologicals function as implantable devices. Implantable biologicals 
may be used in place of other implantable nonbiological devices whose 
costs are already accounted for in the associated procedural APC 
payments for surgical procedures. We reasoned that if we were to 
provide separate payment for nonpass-through implantable biologicals, 
we would potentially be providing duplicate device payment, both 
through the packaged nonbiological device cost included in the surgical 
procedure's payment and the separate biological payment.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68634), we stated our belief that the three implantable biologicals 
with expiring pass-through status for CY 2009 differ from other 
biologicals paid under the OPPS in that they specifically always 
function as surgically implanted devices. We noted that both 
implantable nonbiological devices under the OPPS and the three 
biologicals with expiring pass-through status in CY 2009 are surgically 
inserted or implanted (including through a surgical incision or a 
natural orifice). These three biologicals are approved by the FDA as 
devices, and they are solely surgically implanted according to their 
FDA-approved indications. Furthermore, in some cases, these implantable 
biologicals can substitute for implantable nonbiological devices (such 
as for synthetic nerve conduits or synthetic mesh used in tendon 
repair).
    For other nonpass-through biologicals paid under the OPPS that may 
sometimes be used as implantable devices, we have instructed hospitals, 
beginning via Transmittal 1336, Change Request 5718, dated September 
14, 2007, to not separately bill the HCPCS codes for the products when 
using these items as implantable devices (including as a scaffold or an 
alternative to human or nonhuman connective tissue or mesh used in a 
graft) during surgical procedures. In such cases, we consider payment 
for the biological used as an implantable device in a specific clinical 
case to be included in payment for the surgical procedure. We stated 
that hospitals may include the charge for the biological in their 
charge for the procedure, report the charge on an uncoded revenue 
center line, or report the charge under a device HCPCS code, if one 
exists, so that the biological costs may be considered in future 
ratesetting for the associated surgical procedures.
    Several commenters to the CY 2009 OPPS/ASC proposed rule supported 
CMS' proposal to package payment for implantable biologicals without 
pass-through status into payment for the associated surgical procedure 
(73 FR 68635). One commenter also recommended that CMS treat 
biologicals that are always surgically implanted or inserted and have 
FDA device approval, as devices for purposes of pass-through payment, 
rather than as drugs. The commenter observed that this would allow all 
implantable devices, biological and otherwise, to be subject to a 
single pass-through payment policy. The commenter concluded that this 
policy change would provide consistency in billing and payment for 
these products functioning as implantable devices during their pass-
through payment period, as well as after the expiration of pass-through 
status.
    We finalized in the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68635) our proposal to package payment for any nonpass-through 
biological that is surgically inserted or implanted (through a surgical 
incision or a natural orifice) into the payment for the associated 
surgical procedure, just as we package payment for all nonpass-through, 
implantable, nonbiological devices. As a result of this final policy, 
the three implantable biologicals with

[[Page 35313]]

expiring pass-through status in CY 2009 were packaged and assigned 
status indicator ``N'' as of January 1, 2009. In addition, any new 
biologicals without pass-through status that are surgically inserted or 
implanted (through a surgical incision or a natural orifice) are also 
packaged beginning in CY 2009. Hospitals continue to report the HCPCS 
codes that describe biologicals that are always used as implantable 
devices on their claims, and we package the costs of those biologicals 
into the associated procedures, according to the standard OPPS 
ratesetting methodology that is described in section II.A.2. of this 
proposed rule. Moreover, for nonpass-through biologicals that may 
sometimes be used as implantable devices, we continue to instruct 
hospitals to not bill separately for the HCPCS codes for the products 
when used as implantable devices. This reporting ensures that the costs 
of these products that may be, but are not always, used as implanted 
biologicals are appropriately packaged into payment for the associated 
implantation procedures when the products are used as implantable 
devices.
b. Proposed Policy for CY 2010
    Some implantable biologicals are described by device category codes 
for expired pass-through categories, including HCPCS code C1781 (Mesh 
(implantable)), HCPCS code C1762 (Connective tissue, human), and HCPCS 
code C1763 (Connective tissue, non-human). All implantables described 
by the latter two categories are biologicals, while HCPCS code C1781 
describes both implantable biological and nonbiological devices. 
Historically, these category codes included biological products that we 
approved for pass-through payment under the device pass-through 
process, initially when we paid for pass-through devices on a brand-
specific basis from CY 2000 through March 31, 2001, and later through 
the device categories described by HCPCS codes C1781, C1762, and C1763 
which were developed effective April 1, 2001.
    We believe that it is most appropriate for a product to be eligible 
for a single period of OPPS pass-through payment, rather than a period 
of device pass-through payment and a period of drug or biological pass-
through payment. The limited timeframe for transitional pass-through 
payment ensures that new devices, drugs, and biologicals may receive 
special payment consideration under the OPPS for the first few years 
after their initial use, in order to allow sufficient time for their 
cost information to be reflected in hospital claims data and, 
therefore, to be available for OPPS ratesetting. After the pass-through 
payment period ends, like other existing services, we have cost 
information regarding these new products provided to us by hospitals 
from claims and cost report data. We then utilize that information when 
packaging the costs of the items (all devices, diagnostic 
radiopharmaceuticals, contrast agents, and implantable biologicals, and 
other drugs with an estimated per day cost equal to or less than the 
annual drug packaging threshold) or paying separately for the products 
(drugs except contrast agents and diagnostic radiopharmaceuticals and 
also nonimplantable biologicals with estimated per day costs above the 
annual drug packaging threshold). Further, although implantable 
biologicals with pass-through status may substitute for nonpass-through 
implantable devices whose costs are packaged into procedural APC 
payments, our existing APC offset policies for the costs of predecessor 
items packaged into APC payment for the associated services do not 
apply to pass-through payment for biologicals. We note that the APC 
offset amount that would be most applicable to implantable biologicals, 
were we to establish such an offset policy for them, would be the 
device APC offset amount, based on their similarity of function to the 
implantable devices whose costs have been included in establishing the 
procedural APC payment, not the ``policy-packaged'' or ``threshold-
packaged'' drug APC offset amounts that one would expect to apply to 
pass-through drugs and biologicals. Similarly, when we currently 
evaluate a pass-through implantable biological application for the cost 
significance of the product, our methodology utilizes the ``policy-
packaged'' APC offset amount to assess the candidate implantable 
biological, not the device APC offset amount that would be more 
reflective of the costs of predecessor devices related to the candidate 
implantable biological, such as those of device category HCPCS codes 
C1781, C1762, and C1763.
    Many implantable biologicals, such as the three biologicals that 
expired from pass-through status after CY 2008, have FDA approval as 
devices. A number of other implantable biologicals with FDA approval as 
devices have also been approved for OPPS pass-through payment over the 
past several years, based on their product-specific pass-through 
applications as biologicals, not devices. Moreover, outside of the 
period of pass-through payment, the costs of implantable biologicals, 
like the costs of implantable devices, are now packaged into the cost 
of the procedure in which they are used. Implantable biologicals may be 
used in place of other implantable nonbiological devices whose costs 
are already accounted for in the associated procedural APC payments. 
Payment is made for nonpass-through implantable biologicals, like for 
devices, through the APC payment for the associated surgical procedure.
    In view of these considerations, we are proposing that the pass-
through evaluation process and pass-through payment methodology for 
implantable biologicals that are surgically inserted or implanted 
(through a surgical incision or a natural orifice) and that are newly 
approved for pass-through status beginning on or after January 1, 2010, 
be the device pass-through process and payment methodology only. Given 
the shared payment methodologies for implantable biological and 
nonbiological devices during their nonpass-through payment periods, as 
well as their overlapping and sometimes identical clinical uses and 
their similar regulation by the FDA as devices, we believe that the 
most consistent pass-through payment policy for these different types 
of items that are surgically inserted or implanted and that may 
sometimes substitute for one another is to evaluate all such devices, 
both biological and nonbiological, only under the device pass-through 
process. As a result, implantable biologicals would no longer be 
eligible to submit biological pass-through applications and to receive 
biological pass-through payment at ASP+6 percent. While we understand 
that implantable biologicals have characteristics that result in their 
meeting the definitions of both devices and biologicals, we believe 
that biologicals are most similar to devices because of their required 
surgical insertion or implantation and that it would be appropriate to 
only evaluate them as devices because they share significant clinical 
similarity with implantable nonbiological devices. We refer readers to 
the CMS Web site specified previously in this section to view the 
device pass-through application requirements and review criteria that 
would apply to the evaluation of all implantable biologicals for pass-
through status when their pass-through payment would begin on or after 
January 1, 2010.
    However, those implantable biologicals that are surgically inserted 
or implanted (through a surgical incision or natural orifice) and that 
are receiving pass-through payment as biologicals prior to January 1, 
2010, would continue

[[Page 35314]]

to be considered pass-through biologicals for the duration of their 
period of pass-through payment. These products have already been 
evaluated for pass-through status based on their application as 
biologicals and have been approved for pass-through status based on the 
established criteria for biological pass-through payment. We believe it 
would be most appropriate for them to complete their 2- to 3-year 
period of pass-through payment as biologicals in accordance with the 
pass-through payment policies that were applicable at the time their 
pass-through status was initially approved.
    We note that, in conducting our pass-through review of implantable 
biologicals as devices beginning for CY 2010 pass-through payment, we 
would apply the portions of APC payment amounts associated with devices 
(that is, the device APC offset amounts) to assess the cost 
significance of the candidate implantable biologicals, as we do for 
other devices. The CY 2009 device APC offset amounts are posted on the 
CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/04_passthrough_payment.asp. The result of evaluating all implantable 
biological items only for device pass-through payment is that payment 
for implantable biologicals eligible for pass-through payment beginning 
on or after January 1, 2010, would be based on hospital charges 
adjusted to cost, rather than the ASP methodology that is applicable to 
pass-through drugs and biologicals. Treating implantable biologicals as 
devices for pass-through payment evaluation and payment would result in 
their consistent treatment with respect to coding and payment during 
their pass-through and nonpass-through periods of payment. This 
proposed policy would allow us to appropriately offset the pass-through 
payment for an implantable biological using the device APC offset 
amounts, which would incorporate the costs of predecessor devices (both 
biological and nonbiological) that are similar to the implantable 
biological item with pass-through status. Finally, this proposed policy 
would ensure that each implantable biological is eligible for OPPS 
pass-through payment for only one 2- to 3-year time period (as a device 
only, not as a biological), so that once OPPS claims data incorporate 
cost information for the implantable biological, the product would not 
be again eligible for OPPS pass-through payment in the future.
    Further, because we are proposing that the pass-through evaluation 
process for CY 2010 pass-through status approvals and pass-through 
payment methodology for implantable biologicals that are surgically 
inserted or implanted (through a surgical incision or a natural 
orifice) beginning in CY 2010 be the device pass-through process and 
payment methodology only, we also are proposing to revise our 
regulations at Sec. Sec.  419.64 and 419.66 to conform to this new 
policy. Specifically, we are proposing to amend Sec.  419.64 by adding 
a new paragraph (a)(4)(iii) and language under a new paragraph (c)(3) 
to exclude implantable biologicals from consideration for drug and 
biological pass-through payment. Furthermore, proposed new paragraph 
(a)(4)(iv) of Sec.  419.64 would specify the continued inclusion of 
implantable biologicals for which pass-through payment as a biological 
is made on or before December 31, 2009, as eligible for biological 
pass-through payment, consistent with our proposal to allow these 
products to complete their period of pass-through payment as 
biologicals.
    Moreover, in light of our CY 2010 proposal that implantable 
biological applications approved for pass-through status beginning on 
or after January 1, 2010, would be considered only for device pass-
through evaluation and payment, we believe it would also be appropriate 
to clarify the current example in Sec.  419.66(b)(4)(iii) of the 
regulations regarding the exclusion of materials, for example 
biological or synthetic materials, that may be used to replace human 
skin from device pass-through payment eligibility. While, by 
definition, implantable biologicals that are surgically implanted or 
inserted would not be biological materials that replace human skin, we 
are proposing to more precisely state this in the regulations. 
Therefore, we are proposing to revise Sec.  419.66(b)(4) (iii), which 
currently states that a device is not a material that may be used to 
replace human skin and provides an example of such a material as ``a 
biological or synthetic material.'' We are proposing to revise Sec.  
419.66(b)(4)(iii) to specify that the biological materials be a 
``biological skin replacement material'' rather than a ``biological'' 
and the synthetic materials be a ``synthetic skin replacement 
material'' rather than a ``synthetic material'' because we do not 
believe this example should refer to biologicals or synthetic materials 
that are used for purposes other than as a skin replacement material, 
given that the regulatory provision in Sec.  419.66(b)(4)(iii) applies 
only to a material that may be used to replace human skin.
5. Definition of Pass-Through Payment Eligibility Period for New Drugs 
and Biologicals
    Section 1833(t)(6) of the Act provides for transitional pass-
through payments for medical devices, drugs, and biologicals. Section 
1833(t)(6)(A) of the Act generally describes two groups of services--
``current'' and ``new''--that are eligible for pass-through payments, 
depending, in part, on when they were first paid. One of the criteria 
for ``new'' drugs and biologicals to receive pass-through payments 
under section 1833(t)(6)(A)(iv)(I) of the Act is that payment for the 
item as an outpatient hospital service under Part B was not being made 
as of December 31, 1996. For those ``new'' drugs and biologicals, 
section 1833(t)(6)(C)(i)(II) of the Act specifies that there is a 2- to 
3-year limitation on the pass-through period that begins on the first 
date on which payment is made under Part B for the drug or biological 
as an outpatient hospital service.
    Section 419.64 of the regulations codifies the transitional pass-
through payment provisions for drugs and biologicals. Section 419.64(a) 
describes the drugs and biologicals that are eligible for pass-through 
payments, essentially capturing the distinction between ``new'' and 
``current'' services. Section 419.64(c)(2) provides that the pass-
through payment eligibility period for drugs and biologicals that fall 
into the ``new'' category begins on the date that CMS makes its first 
pass-through payment for the drug or biological.
    It has come to our attention that our pass-through payment 
eligibility period for ``new'' drugs and biologicals in Sec.  
419.64(c)(2) does not most accurately reflect the statutory 
requirements of section1833(t)(6)(C)(i)(II) of the Act. Where our 
regulations indicate that the pass-through payment eligibility period 
for ``new'' drugs and biologicals begins on the first date on which 
pass-through payment is made for the item, section 1833(t)(6)(c)(i)(II) 
of the Act specifies that the pass-through period of 2 to 3 years for 
``new'' drugs and biologicals begins on the first date on which payment 
is made under Part B for the drug or biological as an outpatient 
hospital service. In order to better reflect the statutory requirement 
for the pass-through period for a ``new'' drug or biological, we are 
proposing to revise paragraph (c)(2) of Sec.  419.64 and add a new 
paragraph (c)(3) to Sec.  419.64 of the regulations.
    In order to conform the regulations to the statutory provisions, we 
are proposing to change the start date of the pass-through payment 
eligibility period

[[Page 35315]]

for a drug or biological from the first date on which pass-through 
payment is made to the date on which payment is first made for a drug 
or biological as an outpatient hospital service under Part B. Under 
this proposal, we would need to identify a first date of payment for a 
drug or biological as an outpatient hospital service under Part B. 
(Under our current policy, we have not needed to establish a first date 
on which payment is made under Part B for the drug or biological as an 
outpatient hospital service because the pass-through payment 
eligibility period begins on the first date pass-through payment is 
made for the item.) Due to the 2-year delay in the availability of 
claims data, under our CY 2010 proposal we would not be able to 
identify an exact date of first payment for a drug or biological as an 
outpatient hospital service under Part B in order to determine the 
start date of the pass-through payment eligibility period until years 
after an application for pass-through payment for a ``new'' drug or 
biological has been submitted. At that later point in time, the pass-
through payment eligibility period may be close to expiring, and the 
result of relying upon our claims data to evaluate an item for its 
eligibility for pass-through status could be a very short period of 
pass-through payment for the new drug or biological. Consequently, we 
believe it would be desirable to identify an appropriate and timely 
proxy for the date of first payment for the drug or biological as an 
outpatient hospital service under Part B. We believe the date of first 
sale for a drug or biological in the U.S. following FDA approval is an 
appropriate proxy, as explained below, and we are proposing this as the 
date on which the pass-through payment eligibility period would begin. 
We also note that, in light of our CY 2010 proposal, described in 
section V.A.4. of this proposed rule, to treat implantable biologicals 
as medical devices for purposes of pass-through eligibility and payment 
under section 1833(t)(6) of the Act, these proposed revisions to the 
pass-through payment eligibility period for a drug or biological 
approved for pass-through payment beginning on or after January 1, 
2010, would not apply to implantable biologicals, but rather only to 
nonimplantable biologicals.
    We believe that the date of first sale of the drug or 
nonimplantable biological in the U.S. following FDA approval is an 
appropriate proxy for the first date of payment for the drug or 
nonimplantable biological as an outpatient hospital service under Part 
B for several reasons. We anticipate that Medicare beneficiaries would 
be among the first to use these drugs and nonimplantable biologicals 
and that the date of first sale is the date upon which a drug or 
nonimplantable biological would become available to those beneficiaries 
and be paid under Part B as an outpatient hospital service. Further, we 
already use the date of first sale of a drug or biological in the U.S. 
following FDA approval under the ASP methodology and in the existing 
OPPS pass-through payment eligibility determination. In determining the 
ASP for a drug under the ASP payment methodology in section 1847A of 
the Act, we use the date of first sale of a drug or biological in the 
U.S. following FDA approval to identify ``single source drugs'' and 
``biological products'' when determining a payment amount. We also use 
the date of first sale of a drug or biological in the U.S. under our 
current OPPS pass-through payment application process to determine if a 
drug or biological is ``new,'' that is, whether the item was paid as an 
outpatient hospital service on or after January 1, 1997. Finally, we do 
not believe that there is a more accurate and readily available proxy 
for the first date of payment for a drug or biological under Part B as 
an outpatient hospital service. In summary, we believe that the date of 
first sale of the drug or nonimplantable biological in the U.S. 
following FDA approval is an appropriate proxy for the first date on 
which payment is made under Part B for the item as an outpatient 
hospital service because it is an accepted and available indicator of 
initial payment for the Medicare program.
    In proposed new Sec.  419.64(c)(3), we indicate that the date of 
first sale of a drug or nonimplantable biological in the U.S. following 
FDA approval would be the start date of the pass-through payment 
eligibility period for drugs or nonimplantable biologicals approved for 
pass-through payment beginning on or after January 1, 2010. We also are 
proposing modifications to Sec.  419.64(c) (2) to specify that our 
current policy--that the pass-through payment eligibility period of 2 
to 3 years begins on the first date that pass-through payment is made 
for the drug or biological--applies only to drugs and biologicals 
approved for and receiving pass-through payment on or before December 
31, 2009. Although we believe that we have the authority to stop pass-
through payments and to recover pass-through payments already made for 
such drugs and biologicals, we are proposing in these specific limited 
circumstances to permit pass-through status to continue.
    We currently implement new approvals of pass-through status for 
drugs and biologicals on a quarterly basis, and for CY 2010, we would 
continue to implement these new approvals on a quarterly basis. We 
describe our quarterly process for reviewing and approving applications 
for drugs and biologicals to receive pass-through payment on the CMS 
Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/04_passthrough_payment.asp. Interested parties may submit a complete 
application at any time. We typically review and make pass-through 
status approval decisions about complete applications for initiation of 
pass-through payment within 4 months of their submission and implement 
new pass-through status approvals on a quarterly basis through the next 
available OPPS quarterly update. The CMS Web site provides a timeline 
showing the relationship between the date of submission of a complete 
application and the earliest date of pass-through payment that would 
result from approval of pass-through status for the drug or biological.
    Under our current policy, the pass-through payment eligibility 
period and period of pass-through payment are the same. However, the 
pass-through payment eligibility period and the period of pass-through 
payment would not be identical under our proposed policy. For our 
proposed policy, we need to identify both the pass-through payment 
eligibility period as well as the period during which pass-through 
payments would be made, including the respective start and expiration 
dates of the pass-through payment eligibility period and the period of 
pass-through payment. The period of pass-through payment would coincide 
with the time period during which the drug or biological is designated 
as having pass-through status. (We note that being within the pass-
through payment eligibility period alone does not qualify a ``new'' 
drug or biological for pass-through payment; the drug or biological 
must also meet the other requirements for pass-through payment, 
including that CMS determines that the cost of a drug or biological is 
not insignificant.) Under our proposal, the pass-through payment 
eligibility period would run for at least 2 years but no more than 3 
years. For example, for a drug with a first date of sale in the United 
States after FDA approval of May 3, 2009, the pass-through payment 
eligibility period would start on May 3, 2009. If the pass-through 
payment eligibility period ran

[[Page 35316]]

for 3 years, it would expire on May 2, 2012. We are proposing to modify 
Sec.  419.64 accordingly by adding new paragraph (c)(3) to state: ``For 
a drug or nonimplantable biological described in paragraph (a)(4) of 
this section and approved for pass-through payment beginning on or 
after January 1, 2010--[the pass-through payment eligibility period 
begins on] the date of first sale of the drug or nonimplantable 
biological in the United States after FDA approval.'' Next, we are 
proposing that pass-through payment would start on the first day of the 
calendar quarter following the calendar quarter during which the 
completed application was approved. We would reflect this in regulation 
text, in proposed new Sec.  419.64(c)(3), as follows. ``Pass-through 
payment for the drug or nonimplantable biological begins on the first 
day of the hospital outpatient prospective payment system update (for 
example, calendar quarter) following the update period during which the 
drug or nonimplantable biological was approved for pass-through 
status.'' The start date for the period of pass-through payment would 
be specified in a letter to the applicant conveying pass-through status 
approval for the new drug or biological and would be the first day of 
the calendar quarter following the calendar quarter during which a 
complete pass-through application is approved by CMS for pass-through 
status.
    We also are proposing to expire pass-through status on a quarterly 
basis. We would use the pass-through payment eligibility period 
expiration date to determine when the period of pass-through payment 
would expire. The way we would operationalize this would be to make the 
last date of the period of pass-through payment be the last day of the 
calendar quarter that preceded the pass-through payment eligibility 
period expiration date. This proposal to expire the pass-through status 
of drugs and nonimplantable biologicals on a quarterly basis would be a 
departure from our current policy for expiring the pass-through status 
of drugs and biologicals. Presently, we expire the pass-through status 
of drugs and biologicals at the end of the calendar year preceding the 
year of the applicable annual OPPS update. (We discuss our CY 2010 
proposal to expire the pass-through status of drugs and biologicals 
currently receiving pass-through payment that will have already 
received between 2 and 3 years of pass-through payment by January 1, 
2010, in section V.A.2. of this proposed rule.) Because our current 
pass-through payment eligibility period policy effectively aligns the 
start of pass-through payment with the beginning of the 2- to 3-year 
pass-through payment eligibility period, expiration of pass-through 
status on a calendar year basis affords those drugs and biologicals at 
least 2 but not more than 3 years of pass-through payment. This would 
continue to be the case for drugs and biologicals that have been 
approved for pass-through status and that are receiving pass-through 
payment on or before December 31, 2009, as reflected in our proposed 
revision to Sec.  419.64(c) (2). However, beginning in CY 2010, for 
``new'' drugs and nonimplantable biologicals with a pass-through 
payment eligibility period described by proposed new Sec.  
419.64(c)(3), we would expire pass-through status on a quarterly basis. 
Under the proposed revised definition of the pass-through payment 
eligibility period, the pass-through payment eligibility period may 
begin well before application is made for pass-through payment for the 
drug or nonimplantable biological and pass-through status is approved, 
which could have the effect of a shorter period of pass-through payment 
for some drugs and biologicals than would be the case under our current 
policy. Therefore, we are proposing to expire pass-through status on a 
quarterly basis to ensure that drugs and nonimplantable biologicals for 
which a pass-through payment application has been made after the pass-
through payment eligibility period has begun can most benefit from 
pass-through payment. We provide the following examples to illustrate 
how our proposed policies would work.
    First, if CMS receives a complete pass-through payment application 
on March 1, 2010, for a ``new'' drug with a date of first sale in the 
United States after FDA approval of December 15, 2009, the pass-through 
payment eligibility period would begin on December 15, 2009. If the 
pass-through payment eligibility period ran for 3 years, it would 
expire on December 14, 2012. If we process the application and approve 
pass-through status within 4 months, the period of pass-through payment 
for that drug would begin on July 1, 2010, because that would be the 
first day of the calendar quarter following the calendar quarter during 
which the completed application was approved for pass-through status. 
The period of pass-through payment would expire no later than September 
30, 2012, because that would be the last day of the calendar quarter 
that preceded the pass-through eligibility period expiration date. We 
would indicate the drug's change from pass-through to nonpass-through 
status, as discussed below, in the October 2012 OPPS quarterly update.
    In another example, if CMS receives a complete pass-through payment 
application on December 1, 2009, for a ``new'' drug with a date of 
first sale of the drug in the United States after FDA approval of May 
3, 2009, the pass-through payment eligibility period for that drug 
would begin on May 3, 2009, and would end no later than May 2, 2012. If 
we process the application and approve pass-through status within 4 
months, the period of pass-through payment would begin on April 1, 
2010, because that would be the first day of the calendar quarter 
following the calendar quarter during which the completed application 
was approved for pass-through status, and would end no later than March 
31, 2012, because that would be the last day of the calendar quarter 
that preceded the pass-through payment eligibility period expiration 
date. We would indicate the drug's change from pass-through to nonpass-
through status, as discussed below, in the April 2012 OPPS quarterly 
update.
    In another example, in the case of a complete application for a 
``new'' drug, with a date of first sale of the drug in the United 
States after FDA approval of November 16, 2006, that is received by 
December 1, 2009, the pass-through payment eligibility period for that 
drug would have begun on November 16, 2006. The pass-through payment 
eligibility period would expire no later than November 15, 2009, 
because that would be 3 years from the date on which the pass-through 
payment eligibility period began. In this example, the drug would not 
be approved for pass-through status because the pass-through payment 
eligibility period would have already expired. The earliest date that 
the period of pass-through payment for the drug could have begun would 
have been April 1, 2010, which would be after the expiration of the 
pass-through payment eligibility period.
    As noted above, for those ``new'' drugs or biologicals approved for 
pass-through status beginning in a calendar quarter prior to CY 2010 
that are described by Sec.  419.64(c)(2), we would continue our current 
policy. That means that we would expire pass-through status for the 
drug or biological at the end of the calendar year after the drug or 
biological has received at least 2 but not more than 3 years of pass-
through payment.
    In addition to proposing to expire the pass-through status of 
``new'' drugs and nonimplantable biologicals described by

[[Page 35317]]

proposed new Sec.  419.64(c)(3) on a quarterly basis, we also would 
continue our established policy of determining whether a drug or 
biological would receive separate payment or packaged payment, after 
the expiration of the period of pass-through payment, on a calendar 
year basis through the annual OPPS rulemaking process as described in 
section V.B.2. of this proposed rule. Under our current drug payment 
policies, we propose and finalize packaging determinations for drugs 
and biologicals subject to the OPPS annual drug packaging threshold 
only once a year based on the most updated claims data and ASP 
information available for the annual rulemaking cycle. We are not 
proposing to change this annual packaging determination process. 
Therefore, after the expiration of pass-through status of a ``new'' 
drug or biological in a given year's calendar quarter, we would 
continue to make separate payment through the end of that calendar year 
for those drugs and nonimplantable biologicals that would be subject to 
the drug packaging threshold when they did not have pass-through status 
(therefore, excluding contrast agents and diagnostic 
radiopharmaceuticals for CY 2010 which would always be packaged when 
not on pass-through status) at the applicable OPPS payment rate for 
separately payable drugs and biologicals without pass-through status 
for that year, proposed to be ASP+4 percent for CY 2010. We would 
change their status indicator from ``G'' (Pass-Through Drugs and 
Biologicals) to ``K'' (Nonpass-Through Drugs and Nonimplantable 
Biologicals) in the applicable quarterly OPPS update that immediately 
followed the last day of the calendar quarter in which the pass-through 
status of the drug or nonimplantable biological expired. In our 
proposed rule for the upcoming prospective payment year that is after 
the calendar year quarter in which the pass-through status of a drug or 
nonimplantable biological expired, we would use ASP information and our 
claims data to assess whether the drug or biological would be packaged 
or separately payable in the upcoming calendar year. For those drugs 
with expiring pass-through status that are always packaged when not on 
pass-through status (``policy-packaged''), specifically diagnostic 
radiopharmaceuticals and contrast agents for CY 2010 as discussed in 
section V.B.2.d. of this proposed rule, we would make packaged payment 
for them for the remainder of the calendar year after the expiration of 
pass-through payment. We would change their status indicator from ``G'' 
to ``N'' (Items and Services Packaged into APC Rates) in the applicable 
quarterly OPPS update that immediately followed the last day of the 
calendar quarter in which the pass-through status of the drug or 
nonimplantable biological expired. For example, for a drug (excluding 
contrast agents and diagnostic radiopharmaceuticals) described by 
proposed new Sec.  419.64(c)(3) with pass-through status expiring on 
September 30, 2010, we would make separate pass-through payment for the 
drug at ASP+6 percent until September 30, 2010, and we would then make 
separate nonpass-through payment for the drug at ASP+4 percent between 
October 1, 2010 and December 31, 2010. For CY2011, we would use ASP 
information and our claims data to propose whether the drug would be 
packaged or separately payable.
6. Proposed Provisions for Reducing Transitional Pass-Through Payments 
for Diagnostic Radiopharmaceuticals and Contrast Agents to Offset Costs 
Packaged Into APC Groups
a. Background
    Prior to CY 2008, diagnostic radiopharmaceuticals and contrast 
agents were paid separately under the OPPS if their mean per day costs 
were greater than the applicable year's drug packaging threshold. In CY 
2008 (72 FR 66768), we began a policy of packaging payment for all 
nonpass-through diagnostic radiopharmaceuticals and contrast agents as 
ancillary and supportive items and services into their associated 
nuclear medicine procedures. Therefore, beginning in CY2008, nonpass-
through diagnostic radiopharmaceuticals and contrast agents were not 
subject to the annual OPPS drug packaging threshold to determine their 
packaged or separately payable payment status, and instead all nonpass-
through diagnostic radiopharmaceuticals and contrast agents were 
packaged as a matter of policy. For CY 2010, we are proposing to 
continue to package payment for all nonpass-through diagnostic 
radiopharmaceuticals and contrast agents as discussed in section 
V.B.2.d. of this proposed rule.
b. Payment Offset Policy for Diagnostic Radiopharmaceuticals
    As previously noted, radiopharmaceuticals are considered to be 
drugs for OPPS pass-through payment purposes. As described above, 
section 1833(t)(6)(D)(i) of the Act specifies that the transitional 
pass-through payment amount for pass-through drugs and biologicals is 
the difference between the amount paid under section 1842(o) (or the 
Part B drug CAP rate) and the otherwise applicable OPD fee schedule 
amount. There is currently one radiopharmaceutical with pass-through 
status under the OPPS, HCPCS code C9247 (Iobenguane, I-123, diagnostic, 
per study dose, up to 10 millicuries). HCPCS code C9247 was granted 
pass-through status beginning April 1, 2009, and will continue to 
receive pass-through status in CY 2010. 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, new pass-through diagnostic radiopharmaceuticals 
would be paid at ASP+6 percent, while those without ASP information 
would be paid at WAC+6 percent or, if WAC is not available, based on 95 
percent of the product's most recently published AWP.
    As a payment offset is necessary in order to provide an appropriate 
transitional pass-through payment, we deduct from the payment for pass-
through radiopharmaceuticals an amount that reflects the portion of the 
APC payment associated with predecessor radiopharmaceuticals in order 
to ensure no duplicate radiopharmaceutical payment. In CY 2009, we 
established a policy to estimate the portion of each APC payment rate 
that could reasonably be attributed to the cost of predecessor 
diagnostic radiopharmaceuticals when considering a new diagnostic 
radiopharmaceutical for pass-through payment (73 FR 68638 through 
68641). Specifically, we utilize the ``policy-packaged'' drug offset 
fraction for APCs containing nuclear medicine procedures, calculated as 
1 minus (the cost from single procedure claims in the APC after 
removing the cost for ``policy-packaged'' drugs divided by the cost 
from single procedure claims in the APC). We have previously defined 
``policy-packaged'' drugs and biologicals as nonpass-through diagnostic 
radiopharmaceuticals, contrast agents, and implantable biologicals (73 
FR 68639). We are proposing for CY 2010 to redefine ``policy-packaged'' 
drugs as only nonpass-through diagnostic radiopharmaceuticals and 
contrast agents, as a result of the CY 2010 proposals discussed in 
sections V.A.4. and V.B.2.d. of this proposed rule that would treat 
nonpass-through implantable biologicals that are surgically inserted or 
implanted (through a surgical incision or a natural

[[Page 35318]]

orifice) and implantable biologicals that are surgically inserted or 
implanted (through a surgical incision or a natural orifice) with newly 
approved pass-through status beginning in CY 2010 or later as devices, 
rather than drugs. To determine the actual APC offset amount for pass-
through diagnostic radiopharmaceuticals that takes into consideration 
the otherwise applicable OPPS payment amount, we multiply the ``policy-
packaged'' drug offset fraction by the APC payment amount for the 
nuclear medicine procedure with which the pass-through diagnostic 
radiopharmaceutical is used and, accordingly, reduce the separate OPPS 
payment for the pass-through diagnostic radiopharmaceutical by this 
amount.
    We will continue to post annually on the CMS Web site at http://www.cms.hhs.gov/HospitalOutpatientPPS, a file that contains the APC 
offset amounts that would be used for that year for purposes of both 
evaluating cost significance for candidate pass-through device 
categories and drugs and biologicals, including diagnostic 
radiopharmaceuticals, and establishing any appropriate APC offset 
amounts. Specifically, the file will continue to provide, for every 
OPPS clinical APC, the amounts and percentages of APC payment 
associated with packaged implantable devices, ``policy-packaged'' 
drugs, and ``threshold-packaged'' drugs and biologicals.
    Table 23 below displays the proposed APCs to which nuclear medicine 
procedures would be assigned in CY 2010 and for which we expect that an 
APC offset could be applicable in the case of new diagnostic 
radiopharmaceuticals with pass-through status.

  Table 23--Proposed APCs to Which Nuclear Medicine Procedures Would Be
                          Assigned for CY 2010
------------------------------------------------------------------------
      Proposed CY 2010 APC              Proposed CY 2010 APC title
------------------------------------------------------------------------
0307...........................  Myocardial Positron Emission Tomography
                                  (PET) imaging.
0308...........................  Non-Myocardial Positron Emission
                                  Tomography (PET) imaging.
0377...........................  Level II Cardiac Imaging.
0378...........................  Level II Pulmonary Imaging.
0389...........................  Level I Non-imaging Nuclear Medicine.
0390...........................  Level I Endocrine Imaging.
0391...........................  Level II Endocrine Imaging.
0392...........................  Level II Non-imaging Nuclear Medicine.
0393...........................  Hematologic Processing & Studies.
0394...........................  Hepatobiliary Imaging.
0395...........................  GI Tract Imaging.
0396...........................  Bone Imaging.
0397...........................  Vascular Imaging.
0398...........................  Level I Cardiac Imaging.
0400...........................  Hematopoietic Imaging.
0401...........................  Level I Pulmonary Imaging.
0402...........................  Level II Nervous System Imaging.
0403...........................  Level I Nervous System Imaging.
0404...........................  Renal and Genitourinary Studies.
0406...........................  Level I Tumor/Infection Imaging.
0408...........................  Level III Tumor/Infection Imaging.
0414...........................  Level II Tumor/Infection Imaging.
------------------------------------------------------------------------

c. Proposed Payment Offset Policy for Contrast Agents
    As described above, section 1833(t)(6)(D)(i) of the Act specifies 
that the transitional pass-through payment amount for pass-through 
drugs and biologicals is the difference between the amount paid under 
section 1842(o) (or the Part B drug CAP rate) and the otherwise 
applicable OPD fee schedule amount. There is currently one contrast 
agent with pass-through status under the OPPS, HCPCS code C9246 
(Injection, gadoxetate disodium, per ml). HCPCS code C9246 was granted 
pass-through status beginning January 1, 2009, and will continue to 
receive pass-through status in CY 2010. As described earlier in section 
V.A.3. of this proposed rule, new pass-through contrast agents would be 
paid at ASP+6 percent, while those without ASP information would be 
paid at WAC+6 percent or, if WAC is not available, paid based on 95 
percent of the product's most recently published AWP.
    We believe that a payment offset, similar to the offset currently 
in place for pass-through devices and diagnostic radiopharmaceuticals, 
is necessary in order to provide an appropriate transitional pass-
through payment for contrast agents because all of these items are 
packaged when they do not have pass-through status. In accordance with 
our standard offset methodology, we are proposing to deduct from the 
payment for pass-through contrast agents an amount that reflects the 
portion of the APC payment associated with predecessor contrast agents 
in order to ensure no duplicate contrast agent payment is made.
    In CY 2009, we established a policy to estimate the portion of each 
APC payment rate that could reasonably be attributed to the cost of 
predecessor diagnostic radiopharmaceuticals when considering a new 
diagnostic radiopharmaceutical for pass-through payment (73 FR 68638 
through 68641). For CY 2010, we are proposing to apply this same policy 
to contrast agents. Specifically, we are proposing to utilize the 
``policy-packaged'' drug offset fraction for clinical APCs calculated 
as 1 minus (the cost from single procedure claims in the APC after 
removing the cost for ``policy-packaged'' drugs divided by the cost 
from single procedure claims in the APC). As discussed above, while we 
have previously defined the ``policy-packaged'' drugs and biologicals 
as nonpass-through diagnostic radiopharmaceuticals, contrast agents, 
and implantable biologicals (73 FR 68639), we are proposing for CY 2010 
to redefine ``policy-packaged'' drugs as only nonpass-through 
diagnostic radiopharmaceuticals and contrast agents, as a result of the 
CY 2010 proposal discussed in sections V.A.4. and V.B.2.d. of this 
proposed rule that would treat all implantable biologicals as devices, 
rather than drugs. To determine the actual APC offset amount for pass-
through contrast agents that takes into consideration the otherwise 
applicable OPPS payment amount, we are proposing to multiply the 
``policy-packaged'' drug offset fraction by the APC payment amount for 
the procedure with which the pass-through contrast agent is used and, 
accordingly, reduce the separate OPPS payment for the pass-through 
contrast agent by this amount.
    We are proposing to continue to post annually on the CMS Web site 
at http://www.cms.hhs.gov/HospitalOutpatientPPS, a file that contains 
the APC offset amounts that would be used for that year for purposes of 
both evaluating cost significance for candidate pass-through device 
categories and drugs and biologicals, including contrast agents, and 
establishing any appropriate APC offset amounts. Specifically, the file 
will continue to provide, for every OPPS clinical APC, the amounts and 
percentages of APC payment associated with packaged implantable 
devices, ``policy-packaged'' drugs, and ``threshold-packaged'' drugs 
and biologicals.

B. Proposed OPPS Payment for Drugs, Biologicals, and 
Radiopharmaceuticals Without Pass-Through Status

1. Background
    Under the CY 2009 OPPS, we currently pay for drugs, biologicals, 
and

[[Page 35319]]

radiopharmaceuticals that do not have pass-through status in one of two 
ways: packaged payment into the payment for the associated service; or 
separate payment (individual APCs). We explained in the April 7, 2000 
OPPS final rule with comment period (65 FR 18450) that we generally 
package the cost of drugs and radiopharmaceuticals into the APC payment 
rate for the procedure or treatment with which the products are usually 
furnished. Hospitals do not receive separate payment for packaged items 
and supplies, and hospitals may not bill beneficiaries separately for 
any packaged items and supplies whose costs are recognized and paid 
within the national OPPS payment rate for the associated procedure or 
service. (Transmittal A-01-133, issued on November 20, 2001, explains 
in greater detail the rules regarding separate payment for packaged 
services.)
    Packaging costs into a single aggregate payment for a service, 
procedure, or episode-of-care is a fundamental principle that 
distinguishes a prospective payment system from a fee schedule. In 
general, packaging the costs of items and services into the payment for 
the primary procedure or service with which they are associated 
encourages hospital efficiencies and also enables hospitals to manage 
their resources with maximum flexibility.
    Section 1833(t)(16)(B) of the Act, as added by section 621(a)(2) of 
Public Law 108-173, set the threshold for establishing separate APCs 
for drugs and biologicals at $50 per administration for CYs 2005 and 
2006. Therefore, for CYs 2005 and 2006, we paid separately for drugs, 
biologicals, and radiopharmaceuticals whose per day cost exceeded $50 
and packaged the costs of drugs, biologicals, and radiopharmaceuticals 
whose per day cost was equal to or less than $50 into the procedures 
with which they were billed. For CY 2007, the packaging threshold for 
drugs, biologicals, and radiopharmaceuticals that were not new and did 
not have pass-through status was established at $55. For CYs 2008 and 
2009, the packaging threshold for drugs, biologicals, and 
radiopharmaceuticals that are not new and do not have pass-through 
status was established at $60. The methodology used to establish the 
$55 threshold for CY 2007, the $60 threshold for CYs 2008 and 2009, and 
our proposed approach for CY 2010 are discussed in more detail in 
section V.B.2.b. of this proposed rule.
2. Proposed Criteria for Packaging Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
a. Background
    As indicated in section V.B.1. of this proposed rule, in accordance 
with section 1833(t)(16)(B) of the Act, the threshold for establishing 
separate APCs for payment of drugs and biologicals was set to $50 per 
administration during CYs 2005 and 2006. In CY 2007, we used the fourth 
quarter moving average Producer Price Index (PPI) levels for 
prescription preparations to trend the $50 threshold forward from the 
third quarter of CY 2005 (when the Pub. L. 108-173 mandated threshold 
became effective) to the third quarter of CY 2007. We then rounded the 
resulting dollar amount to the nearest $5 increment in order to 
determine the CY 2007 threshold amount of $55. Using the same 
methodology as that used in CY 2007 (which is discussed in more detail 
in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68085 
through 68086)), we set the packaging threshold for establishing 
separate APCs for drugs and biologicals at $60 for CYs 2008 and 2009.
    Following the CY 2007 methodology, for CY 2010 we used updated 
fourth quarter moving average PPI levels to trend the $50 threshold 
forward from the third quarter of CY 2005 to the third quarter of CY 
2009 and again rounded the resulting dollar amount ($65.07) to the 
nearest $5 increment, which yielded a figure of $65. In performing this 
calculation, we used the most up-to-date forecasted, quarterly PPI 
estimates from CMS' Office of the Actuary (OACT). As actual inflation 
for past quarters replaced forecasted amounts, the PPI estimates for 
prior quarters have been revised (compared with those used in the CY 
2007 OPPS/ASC final rule with comment period) and have been 
incorporated into our calculation. Based on the calculations described 
above, we are proposing a packaging threshold for CY 2010 of $65. (For 
a more detailed discussion of the OPPS drug packaging threshold and the 
use of the PPI for prescription drugs, we refer readers to the CY 2007 
OPPS/ASC final rule with comment period (71 FR 68085 through 68086).)
b. Proposed Cost Threshold for Packaging of Payment for HCPCS Codes 
That Describe Certain Drugs, Nonimplantable Biologicals, and 
Therapeutic Radiopharmaceuticals (``Threshold-Packaged Drugs'')
    To determine their proposed CY 2010 packaging status, for this 
proposed rule we calculated the per day cost of all drugs on a HCPCS 
code-specific basis (with the exception of those drugs and biologicals 
with multiple HCPCS codes that include different dosages as described 
in section V.B.2.c. of this proposed rule and excluding diagnostic 
radiopharmaceuticals and contrast agents that we are proposing to 
continue to package in CY 2010 as discussed in section V.B.2.d. of this 
proposed rule), nonimplantable biologicals, and therapeutic 
radiopharmaceuticals (collectively called ``threshold-packaged'' drugs) 
that had a HCPCS code in CY 2008 and were paid (via packaged or 
separate payment) under the OPPS, using CY 2008 claims data processed 
before January 1, 2009. In order to calculate the per day costs for 
drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals 
to determine their proposed packaging status in CY 2010, we used the 
methodology that was described in detail in the CY 2006 OPPS proposed 
rule (70 FR 42723 through 42724) and finalized in the CY 2006 OPPS 
final rule with comment period (70 FR 68636 through 70 FR 68638).
    To calculate the CY 2010 proposed rule per day costs, we used an 
estimated payment rate for each drug and nonimplantable biological 
HCPCS code of ASP+4 percent (which is the payment rate we are proposing 
for separately payable drugs and nonimplantable biologicals in CY 2010, 
as discussed in more detail in section V.B.3.b. of this proposed rule). 
We used the manufacturer submitted ASP data from the fourth quarter of 
CY 2008 (data that were used for payment purposes in the physician's 
office setting, effective April 1, 2009) to determine the proposed rule 
per day cost.
    As is our standard methodology, for CY 2010, we are proposing to 
use payment rates based on the ASP data from the fourth quarter of CY 
2008 for budget neutrality estimates, packaging determinations, impact 
analyses, and completion of Addenda A and B to this proposed rule 
because these are the most recent data available for use at the time of 
development of this proposed rule. These data are also the basis for 
drug payments in the physician's office setting, effective April 1, 
2009. For items that did not have an ASP-based payment rate, such as 
therapeutic radiopharmaceuticals, we used their mean unit cost derived 
from the CY 2008 hospital claims data to determine their proposed per 
day cost. We packaged items with a per day cost less than or equal to 
$65 and identified items with a per day cost greater than $65 as 
separately payable. Consistent with our past practice, we crosswalked

[[Page 35320]]

historical OPPS claims data from the CY 2008 HCPCS codes that were 
reported to the CY 2009 HCPCS codes that we display in Addendum B to 
this proposed rule for payment in CY 2010.
    Our policy during previous cycles of the OPPS has been to use 
updated ASP and claims data to make final determinations of the 
packaging status of HCPCS codes for drugs, nonimplantable biologicals, 
and therapeutic radiopharmaceuticals for the final rule with comment 
period. We note that it is also our policy to make an annual packaging 
determination for a HCPCS code only when we develop the OPPS/ASC final 
rule for the update year. Only HCPCS codes that are identified as 
separately payable in the final rule with comment period are subject to 
quarterly updates. For our calculation of per day costs of HCPCS codes 
for drugs and nonimplantable biologicals in the CY 2010 OPPS/ASC final 
rule with comment period, we are proposing to use ASP data from the 
first quarter of CY 2009, 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, 2009, along with updated 
hospital claims data from CY 2008. We note that we also would use these 
data for budget neutrality estimates and impact analyses for the CY 
2010 OPPS/ASC final rule with comment period. Payment rates for HCPCS 
codes for separately payable drugs and nonimplantable biologicals 
included in Addenda A and B to that final rule with comment period 
would be based on ASP data from the second quarter of CY 2009, which 
are the basis for calculating payment rates for drugs and biologicals 
in the physician's office setting using the ASP methodology, effective 
October 1, 2009. These rates would then be updated in the January 2010 
OPPS update, based on the most recent ASP data to be used for 
physician's office and OPPS payment as of January 1, 2010. For items 
that do not currently have an ASP-based payment rate, such as 
therapeutic radiopharmaceuticals, we would recalculate their mean unit 
cost from all of the CY 2008 claims data and updated cost report 
information available for the CY 2010 final rule to determine their 
final per day cost.
    Consequently, the packaging status of some HCPCS codes for drugs, 
nonimplantable biologicals, and therapeutic radiopharmaceuticals in the 
CY 2010 OPPS/ASC final rule with comment period using the updated data 
may be different from the same drug HCPCS code's packaging status 
determined based on the data used for this proposed rule. Under such 
circumstances, we are proposing to continue the established policies 
initially adopted for the CY 2005 OPPS (69 FR 65780) in order to more 
equitably pay for those drugs whose median costs fluctuate relative to 
the CY 2010 OPPS drug packaging threshold and the drugs' payment status 
(packaged or separately payable) in CY 2009. Specifically, we are 
proposing for CY 2010 to apply the following policies to these HCPCS 
codes for drugs, nonimplantable biologicals, and therapeutic 
radiopharmaceuticals whose relationship to the $65 drug packaging 
threshold changes based on the final updated data:
    <bullet> HCPCS codes for drugs and nonimplantable biologicals that 
were paid separately in CY 2009 and that were proposed for separate 
payment in CY 2010, and then have per day costs equal to or less than 
$65, based on the updated ASPs and hospital claims data used for the CY 
2010 final rule with comment period, would continue to receive separate 
payment in CY 2010.
    <bullet> HCPCS codes for drugs and nonimplantable biologicals that 
were packaged in CY 2009 and that were proposed for separate payment in 
CY 2010, and then have per day costs equal to or less than $65, based 
on the updated ASPs and hospital claims data used for the CY 2010 final 
rule with comment period, would remain packaged in CY 2010.
    <bullet> HCPCS codes for drugs and nonimplantable biologicals for 
which we proposed packaged payment in CY 2010 but then have per day 
costs greater than $65, based on the updated ASPs and hospital claims 
data used for the CY 2010 final rule with comment period, would receive 
separate payment in CY 2010.
    In CY 2005 (69 FR 65779 through 65780), we implemented a policy 
that exempted the oral and injectable forms of 5-HT3 antiemetic 
products from our packaging policy, providing separate payment for 
these drugs regardless of their estimated per day costs through CY 
2009. There are currently seven Level II HCPCS codes for 5-HT3 
antiemetics that describe four different drugs, specifically dolasetron 
mesylate, granisetron hydrochloride, ondansetron hydrochloride, and 
palonosetron hydrochloride. Each of these drugs except palonosetron 
hydrochloride is available in both injectable and oral forms, so seven 
HCPCS codes are available to describe the four drugs in all of their 
forms. As of 2008, both odansetron hydrochloride and granisetron 
hydrochloride were available in generic versions. We have now paid 
separately for all 5-HT3 antimetics for 5 years. While we continue to 
believe that use of these antiemetics is an integral part of an 
anticancer treatment regimen and that OPPS claims data demonstrate 
their increasingly common hospital outpatient utilization, we no longer 
believe that a specific exemption to our standard drug payment 
methodology is necessary for CY 2010 to ensure access to the most 
appropriate antiemetic product for Medicare beneficiaries.
    We analyzed historical hospital outpatient claims data for the 
seven 5-HT3 antiemetic products that have been subject to this 
packaging exemption, and we found that HCPCS code J2405 (Injection, 
ondansetron hydrochloride, per 1 mg) was the dominant product used in 
the hospital outpatient setting both before and after the adoption of 
our 5-HT3 packaging exemption in CY 2005. Prior to this packaging 
exemption, payment for HCPCS code J2405 was packaged in CY 2004. HCPCS 
code J2405 was modestly costly relative to the other 5-HT3 antiemetics 
in CY 2004, but its per day cost still fell below the applicable 
packaging threshold of $50. Since CY 2005, the injectable form of 
ondansetron hydrochloride has experienced a significant change in its 
pricing structure as generic versions of the drug have become 
available, including a steady decline in its estimated per day cost. 
Notwithstanding this change in price, we have observed continued growth 
in its OPPS utilization. For CY 2008, HCPCS code J2405 was the least 
costly of the seven 5-HT3 antiemetics, with an estimated per day cost 
of only approximately $1 in CY 2008 (based on July 2008 ASP 
information), yet we observed that it constituted 88 percent of all 
treatment days of 5-HT3 antiemetics in the CY 2008 OPPS claims data. 
Using updated April 2009 ASP information for this CY 2010 proposed 
rule, we continue to estimate a per day cost of only approximately $1 
for HCPCS code J2405. For the five modestly priced 5-HT3 antiemetics, 
we estimate CY 2010 per day costs between approximately $7 and $50, 
while we estimate a per day cost for the most costly 5-HT3 antiemetic, 
J2469 (Injection, palonosetron hcl, 25 mcg), of $174 per day. In light 
of an anticipated relatively constant pricing structure for these drugs 
in CY 2010, combined with our experience that prescribing patterns for 
these 5-HT3 antiemetics are not very sensitive to changes in price, we 
do not believe that continuing to exempt these drugs from our standard 
OPPS drug packaging methodology is appropriate for CY 2010. Therefore, 
for CY 2010,

[[Page 35321]]

because we are proposing to no longer exempt the 5-HT3 antiemetic 
products from our standard packaging methodology, we are proposing to 
package payment for all of the 5-HT3 antiemetics except palonosetron 
hydrochloride, consistent with their estimated per day costs from CY 
2008 claims data.
c. Proposed Packaging Determination for HCPCS Codes That Describe the 
Same Drug or Biological But Different Dosages
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66776), we began recognizing, for OPPS payment purposes, multiple HCPCS 
codes reporting different dosages for the same covered Part B drugs or 
biologicals in order to reduce hospitals' administrative burden by 
permitting them to report all HCPCS codes for drugs and biologicals. In 
general, prior to CY 2008, the OPPS recognized for payment only the 
HCPCS code that described the lowest dosage of a drug or biological. We 
extended this recognition to multiple HCPCS codes for several other 
drugs under the CY 2009 OPPS (73 FR 68665). During CYs 2008 and 2009, 
we applied a policy that assigned the status indicator of the 
previously recognized HPCCS code to the associated newly recognized 
code(s), reflecting the new code(s)' packaged or separately payable 
status. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66775), we explained that once claims data were available for these 
previously unrecognized HCPCS codes, we would determine the packaging 
status and resulting status indicator for each HCPCS code according to 
the general, established HCPCS code-specific methodology for 
determining a code's packaging status for a given update year. However, 
we also stated that we planned to closely follow our claims data to 
ensure that our annual packaging determinations for the different HCPCS 
codes describing the same drug or biological did not create 
inappropriate payment incentives for hospitals to report certain HCPCS 
codes instead of others.
    CY 2008 is the first year of claims data for the HCPCS codes 
describing different dosages of the same drug or biological that were 
newly recognized in CY 2008. Applying our standard HCPCS code-specific 
packaging determination methodology as described in section V.B.2.b. of 
this proposed rule, we found that our CY 2008 claims data would result 
in several different packaging determinations for different codes 
describing the same drug or biological. Furthermore, our claims data 
include few units and days for a number of these newly recognized HCPCS 
codes, resulting in our concern that these data reflect claims from 
only a small number of hospitals, even though the drug or biological 
itself may be reported by many other hospitals under the most common 
HCPCS code. We are concerned about proposing different packaging 
determinations for multiple HCPCS codes for the same drug or biological 
driven by different costs associated with the varying dosages of the 
same drug or biological and a small number of claims for the less 
common dosages that are not representative of the costs of all 
hospitals billing for the drug or biological. This is especially true 
when the general policy of the current CMS HCPCS Workgroup is to 
establish a single HCPCS code for a drug or biological, with a dosage 
that would allow accurate reporting of a patient dose for all 
anticipated clinical uses of the drug or biological.
    Based on these findings from our first available claims data for 
the newly recognized HCPCS codes, we believe that adopting our standard 
HCPCS code-specific packaging determinations for these codes could lead 
to payment incentives for hospitals to report certain HCPCS codes 
instead of others, particularly because we do not currently require 
hospitals to report all drug and biological HCPCS codes under the OPPS 
in consideration of our previous policy that generally recognized only 
the lowest dosage HCPCS code for a drug or biological for OPPS payment. 
Therefore, for CY 2010 we are proposing to make packaging 
determinations on a drug-specific basis, rather than a HCPCS code-
specific basis, for those HCPCS codes that describe the same drug or 
biological but different dosages. To identify all HCPCS codes for drugs 
and biologicals to which this proposed policy would apply, we first 
included the drugs and biologicals with multiple HCPCS codes that we 
newly recognized for payment in CY 2008 and CY 2009. We then reviewed 
all of the remaining drug and biological HCPCS codes to identify other 
drugs and biologicals for which longstanding OPPS policy recognized for 
payment multiple HCPCS codes for different dosages of the same drug or 
biological, so that our CY 2010 proposal would apply to the packaging 
determinations for these drugs and biologicals and their associated 
HCPCS codes. All of the drug and biological HCPCS codes that we are 
proposing to be subject to this drug-specific packaging determination 
methodology are listed in Table 24 below.
    In order to propose a packaging determination that is consistent 
across all HCPCS codes that describe different dosages of the same drug 
or biological, we aggregated both our CY 2008 claims data and our 
pricing information at ASP+4 percent across all of the HCPCS codes that 
describe each distinct drug or biological in order to determine the 
mean units per day of the drug or biological in terms of the HCPCS code 
with the lowest dosage descriptor. We then multiplied the weighted 
average ASP+4 percent payment amount across all dosage levels of a 
specific drug or biological by the estimated units per day for all 
HCPCS codes that describe each drug or biological from our claims data 
to determine the estimated per day cost of each drug or biological at 
less than or equal to $65 (whereupon all HCPCS codes for the same drug 
or biological would be packaged) or greater than $65 (whereupon all 
HCPCS codes for the same drug or biological would be separately 
payable). The proposed packaging status of each drug and biological 
HCPCS code to which this methodology would apply is displayed in Table 
24.

    Table 24--HCPCS Codes to Which the Proposed CY 2010 Drug-Specific
               Packaging Determination Methodology Applies
------------------------------------------------------------------------
                                                        Proposed CY 2010
   CY 2009 HCPCS code        CY 2009 long descriptor           SI
------------------------------------------------------------------------
J0530...................  Injection, penicillin g       N
                           benzathine and penicillin g
                           procaine, up to 600,000
                           units.
J0540...................  Injection, penicillin g       N
                           benzathine and penicillin g
                           procaine, up to 1,200,000
                           units.
J0550...................  Injection, penicillin g       N
                           benzathine and penicillin g
                           procaine, up to 2,400,000
                           units.
J0560...................  Injection, penicillin g       N
                           benzathine, up to 600,000
                           units.
J0570...................  Injection, penicillin g       N
                           benzathine, up to 1,200,000
                           units.
J0580...................  Injection, penicillin g       N
                           benzathine, up to 2,400,000
                           units.

[[Page 35322]]

 
J1380...................  Injection, estradiol          N
                           valerate, up to 10 mg.
J0970...................  Injection, estradiol          N
                           valerate, up to 40 mg.
J1390...................  Injection, estradiol          N
                           valerate, up to 20 mg.
J1020...................  Injection,                    N
                           methylprednisolone acetate,
                           20 mg.
J1030...................  Injection,                    N
                           methylprednisolone acetate,
                           40 mg.
J1040...................  Injection,                    N
                           methylprednisolone acetate,
                           80 mg.
J1070...................  Injection, testosterone       N
                           cypionate, up to 100 mg.
J1080...................  Injection, testosterone       N
                           cypionate, 1 cc, 200 mg.
J1440...................  Injection, filgrastim (g-     K
                           csf), 300 mcg.
J1441...................  Injection, filgrastim (g-     K
                           csf), 480 mcg.
J1460...................  Injection, gamma globulin,    K
                           intramuscular, 1 cc.
J1470...................  Injection, gamma globulin,    K
                           intramuscular, 2 cc.
J1480...................  Injection, gamma globulin,    K
                           intramuscular, 3 cc.
J1490...................  Injection, gamma globulin,    K
                           intramuscular, 4 cc.
J1500...................  Injection, gamma globulin,    K
                           intramuscular, 5 cc.
J1510...................  Injection, gamma globulin,    K
                           intramuscular, 6 cc.
J1520...................  Injection, gamma globulin,    K
                           intramuscular, 7 cc.
J1530...................  Injection, gamma globulin,    K
                           intramuscular, 8 cc.
J1540...................  Injection, gamma globulin,    K
                           intramuscular, 9 cc.
J1550...................  Injection, gamma globulin,    K
                           intramuscular, 10 cc.
J1560...................  Injection, gamma globulin,    K
                           intramuscular, over 10 cc.
J1642...................  Injection, heparin sodium,    N
                           (heparin lock flush), per
                           10 units.
J1644...................  Injection, heparin sodium,    N
                           per 1000 units.
J1850...................  Injection, kanamycin          N
                           sulfate, up to 75 mg.
J1840...................  Injection, kanamycin          N
                           sulfate, up to 500 mg.
J2270...................  Injection, morphine sulfate,  N
                           up to 10 mg.
J2271...................  Injection, morphine sulfate,  N
                           100mg.
J2320...................  Injection, nandrolone         K
                           decanoate, up to 50 mg.
J2321...................  Injection, nandrolone         K
                           decanoate, up to 100 mg.
J2322...................  Injection, nandrolone         K
                           decanoate, up to 200 mg.
J2788...................  Injection, rho d immune       K
                           globulin, human, minidose,
                           50 micrograms (250 i.u.).
J2790...................  Injection, rho d immune       K
                           globulin, human, full dose,
                           300 micrograms (1500 i.u.).
J2920...................  Injection,                    N
                           methylprednisolone sodium
                           succinate, up to 40 mg.
J2930...................  Injection,                    N
                           methylprednisolone sodium
                           succinate, up to 125 mg.
J3120...................  Injection, testosterone       N
                           enanthate, up to 100 mg.
J3130...................  Injection, testosterone       N
                           enanthate, up to 200 mg.
J3471...................  Injection, hyaluronidase,     N
                           ovine, preservative free,
                           per 1 usp unit (up to 999
                           usp units).
J3472...................  Injection, hyaluronidase,     N
                           ovine, preservative free,
                           per 1000 usp units.
J7050...................  Infusion, normal saline       N
                           solution, 250 cc.
J7040...................  Infusion, normal saline       N
                           solution, sterile (500 ml=1
                           unit).
J7030...................  Infusion, normal saline       N
                           solution, 1000 cc.
J7515...................  Cyclosporine, oral, 25 mg...  N
J7502...................  Cyclosporine, oral, 100 mg..  N
J8520...................  Capecitabine, oral, 150 mg..  K
J8521...................  Capecitabine, oral, 500 mg..  K
J9060...................  Injection, cisplatin, powder  N
                           or solution, per 10 mg.
J9062...................  Cisplatin, 50 mg............  N
J9070...................  Injection, cyclophosphamide,  N
                           100 mg.
J9080...................  Cyclophosphamide, 200 mg....  N
J9090...................  Cyclophosphamide, 500 mg....  N
J9091...................  Injection, cyclophosphamide,  N
                           1.0 gram.
J9092...................  Cyclophosphamide, 2.0 gram..  N
J9093...................  Injection, cyclophosphamide,  N
                           lyophilized, 100 mg.
J9094...................  Cyclophosphamide,             N
                           lyophilized, 200 mg.
J9095...................  Cyclophosphamide,             N
                           lyophilized, 500 mg.
J9096...................  Injection, cyclophosphamide,  N
                           lyophilized, 1.0 gram.
J9097...................  Cyclophosphamide,             N
                           lyophilized, 2.0 gram.
J9100...................  Injection, cytarabine, 100    N
                           mg.
J9110...................  Injection, cytarabine, 500    N
                           mg.
J9130...................  Injection, dacarbazine, 100   N
                           mg.
J9140...................  Injection, dacarbazine, 200   N
                           mg.
J9250...................  Injection, methotrexate       N
                           sodium, 5 mg.
J9260...................  Methotrexate sodium, 50 mg..  N
J9280...................  Injection, mitomycin, 5 mg..  K
J9290...................  Mitomycin, 20 mg............  K
J9291...................  Mitomycin, 40 mg............  K
J9370...................  Injection, vincristine        N
                           sulfate, 1 mg.
J9375...................  Vincristine sulfate, 2 mg...  N
J9380...................  Vincristine sulfate, 5 mg...  N

[[Page 35323]]

 
Q0164...................  Prochlorperazine maleate, 5   N
                           mg, oral, fda approved
                           prescription anti-emetic,
                           for use as a complete
                           therapeutic substitute for
                           an iv anti-emetic at the
                           time of chemotherapy
                           treatment, not to exceed a
                           48 hour dosage regimen.
Q0165...................  Prochlorperazine maleate, 10  N
                           mg, oral, fda approved
                           prescription anti-emetic,
                           for use as a complete
                           therapeutic substitute for
                           an iv anti-emetic at the
                           time of chemotherapy
                           treatment, not to exceed a
                           48 hour dosage regimen.
Q0167...................  Dronabinol, 2.5 mg, oral,     N
                           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.
Q0168...................  Dronabinol, 5 mg, oral, fda   N
                           approved prescription anti-
                           emetic, for use as a
                           complete therapeutic
                           substitute for an iv anti-
                           emetic at the time of
                           chemotherapy treatment, not
                           to exceed a 48 hour dosage
                           regimen.
Q0169...................  Promethazine hydrochloride,   N
                           12.5 mg, oral, fda approved
                           prescription anti-emetic,
                           for use as a complete
                           therapeutic substitute for
                           an iv anti-emetic at the
                           time of chemotherapy
                           treatment, not to exceed a
                           48 hour dosage regimen.
Q0170...................  Promethazine hydrochloride,   N
                           25 mg, oral, fda approved
                           prescription anti-emetic,
                           for use as a complete
                           therapeutic substitute for
                           an iv anti-emetic at the
                           time of chemotherapy
                           treatment, not to exceed a
                           48 hour dosage regimen.
Q0171...................  Chlorpromazine                N
                           hydrochloride, 10 mg, oral,
                           fda approved prescription
                           anti-emetic, for use as a
                           complete therapeutic
                           substitute for an iv anti-
                           emetic at the time of
                           chemotherapy treatment, not
                           to exceed a 48 hour dosage
                           regimen.
Q0172...................  Chlorpromazine                N
                           hydrochloride, 25 mg, oral,
                           fda approved prescription
                           anti-emetic, for use as a
                           complete therapeutic
                           substitute for an iv anti-
                           emetic at the time of
                           chemotherapy treatment, not
                           to exceed a 48 hour dosage
                           regimen.
Q0175...................  Perphenazine, 4 mg, oral,     N
                           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,     N
                           fda approved prescription
                           anti-emetic, for use as a
                           complete therapeutic
                           substitute for an iv anti-
                           emetic at the time of
                           chemotherapy treatment, not
                           to exceed a 48 hour dosage
                           regimen.
Q0177...................  Hydroxyzine pamoate, 25 mg,   N
                           oral, fda approved
                           prescription anti-emetic,
                           for use as a complete
                           therapeutic substitute for
                           an iv anti-emetic at the
                           time of chemotherapy
                           treatment, not to exceed a
                           48 hour dosage regimen.
Q0178...................  Hydroxyzine pamoate, 50 mg,   N
                           oral, fda approved
                           prescription anti-emetic,
                           for use as a complete
                           therapeutic substitute for
                           an iv anti-emetic at the
                           time of chemotherapy
                           treatment, not to exceed a
                           48 hour dosage regimen.
------------------------------------------------------------------------

d. Proposed Packaging of Payment for Diagnostic Radiopharmaceuticals, 
Contrast Agents, and Implantable Biologicals (``Policy-Packaged'' Drugs 
and Devices)
    Prior to CY 2008, the methodology of calculating a product's 
estimated per day cost and comparing it to the annual OPPS drug 
packaging threshold was used to determine the packaging status of 
drugs, biologicals, and radiopharmaceuticals under the OPPS (except for 
our CY 2005 through 2009 exemption for 5-HT3 antiemetics). However, as 
established in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66766 through 66768), we began packaging payment for all diagnostic 
radiopharmaceuticals and contrast agents into the payment for the 
associated procedure, regardless of their per day costs. In addition, 
in CY 2009 we adopted a policy that packaged the payment for nonpass-
through implantable biologicals into payment for the associated 
surgical procedure on the claim (73 FR 68633 through 68636). We refer 
to diagnostic radiopharmaceuticals and contrast agents collectively as 
``policy-packaged'' drugs and to implantable biologicals as devices 
because we are proposing to treat implantable biologicals as devices 
for all OPPS payment purposes beginning in CY 2010.
    According to our regulations at Sec.  419.2(b), as a prospective 
payment system, the OPPS establishes a national payment rate that 
includes operating and capital-related costs that are directly related 
and integral to performing a procedure or furnishing a service on an 
outpatient basis including, but not limited to, implantable 
prosthetics, implantable durable medical equipment, and medical and 
surgical supplies. Packaging costs into a single aggregate payment for 
a service, encounter, or episode-of-care is a fundamental principle 
that distinguishes a prospective payment system from a fee schedule. In 
general, packaging the costs of items and services into the payment for 
the primary procedure or service with which they are associated 
encourages hospital efficiencies and also enables hospitals to manage 
their resources with maximum flexibility.
    Prior to CY 2008, we noted that the proportion of drugs, 
biologicals, and radiopharmaceuticals that were separately paid under 
the OPPS had increased in recent years, a pattern that we also observed 
for procedural services under the OPPS. Our final CY 2008 policy that 
packaged payment for all nonpass-through diagnostic 
radiopharmaceuticals and contrast agents, regardless of their per day 
costs, contributed significantly to expanding the size of the OPPS 
payment bundles and is consistent with the principles of a prospective 
payment system.
    We believe that packaging the payment for diagnostic 
radiopharmaceuticals and contrast agents into the payment for their 
associated procedures continues to be appropriate for CY 2010. As 
discussed in more detail the CY 2009 OPPS/ASC final rule with comment 
period (73 FR 68645 through 68649), we presented several reasons 
supporting our initial policy to package payment of diagnostic 
radiopharmaceuticals and contrast agents into their associated 
procedures on a claim. Specifically, we stated that we believed 
packaging was appropriate because: (1) The statutory requirement that 
we must pay separately for drugs

[[Page 35324]]

and biologicals for which the per day cost exceeds $50 under section 
1833(t)(16)(B) of the Act has expired; (2) we believe that diagnostic 
radiopharmaceuticals and contrast agents function effectively as 
supplies that enable the provision of an independent service; and (3) 
section 1833(t)(14)(A)(iii) of the Act requires that payment for 
specified covered outpatient drugs (SCODs) be set prospectively based 
on a measure of average hospital acquisition cost. For these reasons, 
we continue to believe that our proposal to continue to treat 
diagnostic radiopharmaceuticals and contrast agents differently from 
other SCODs is appropriate for CY 2010. Therefore, we are proposing to 
continue packaging payment for all contrast agents and diagnostic 
radiopharmaceuticals, collectively referred to as ``policy-packaged'' 
drugs, regardless of their per day costs, for CY 2010.
    For more information on how we are proposing to set CY 2010 payment 
rates for nuclear medicine procedures in which diagnostic 
radiopharmaceuticals are used and echocardiography services provided 
with and without contrast agents, we refer readers to sections 
II.A.2.d.(5) and (4), respectively, of this proposed rule.
    In CY 2009 (73 FR 68634), we began packaging the payment for all 
nonpass-through implantable biologicals into payment for the associated 
surgical procedure. Because implantable biologicals may sometimes 
substitute for nonbiological devices, we noted that if we were to 
provide separate payment for implantable biologicals without pass-
through status, we would potentially be providing duplicate device 
payment, both through the packaged nonbiological device cost already 
included in the surgical procedure's payment and separate biological 
payment. We concluded that we saw no basis for treating implantable 
biological and nonbiological devices without pass-through status 
differently for OPPS payment purposes because both are integral to and 
supportive of the separately paid surgical procedures in which either 
may be used. Therefore, in CY 2009, we adopted a final policy to 
package payment for all nonpass-through implantable biologicals that 
are surgically inserted or implanted (through a surgical incision or a 
natural orifice), like our longstanding policy that packages payment 
for all implantable nonbiological devices without pass-through status.
    For CY 2010, we continue to believe that the policy to package 
payment for implantable devices that are integral to the performance of 
separately paid procedures should also apply to payment for all 
implantable biologicals without pass-through status, when those 
biologicals function as implantable devices. Therefore, we are 
proposing to continue to package payment for nonpass-through 
implantable biologicals that are surgically inserted or implanted 
(through a surgical incision or a natural orifice) into the body, 
referred to as devices, in CY 2010. In accordance with this proposal, 
two of the products with expiring pass-through status for CY 2010 are 
biologicals that are solely surgically implanted according to their 
FDA-approved indications. These products are described by HCPCS codes 
C9354 (Acellular pericardial tissue matrix of non-human origin 
(Veritas), per square centimeter) and C9355 (Collagen nerve cuff 
(NeuroMatrix), per 0.5 centimeter length). Like the three implantable 
biologicals with expiring pass-through status in CY 2009 that were 
discussed in the CY2009 OPPS/ASC final rule with comment period (73 FR 
68633 through 68634), we believe that the two biologicals specified 
above with expiring pass-through status for CY 2010 differ from other 
biologicals paid under the OPPS in that they specifically function as 
surgically implanted devices. As a result of the proposed CY 2010 
packaged payment methodology for all nonpass-through implantable 
biologicals, we are proposing to package payment for HCPCS codes C9354 
and C9355 and assign them status indicator ``N'' for CY 2010. In 
addition, any new biologicals without pass-through status that are 
surgically inserted or implanted (through a surgical incision or a 
natural orifice) would be packaged in CY 2010. Moreover, for nonpass-
through biologicals that may sometimes be used as implantable devices, 
we would continue to instruct hospitals to not bill separately for the 
HCPCS codes for the products when used as implantable devices. This 
reporting would ensure that the costs of these products that may be, 
but are not always, used as implanted biologicals are appropriately 
packaged into payment for the associated implantation procedures.
3. Proposed Payment for Drugs and Biologicals Without Pass-Through 
Status That Are Not Packaged
a. Proposed Payment for Specified Covered Outpatient Drugs (SCODs) and 
Other Separately Payable and Packaged Drugs and Biologicals
    Section 1833(t)(14) of the Act defines certain separately payable 
radiopharmaceuticals, drugs, and biologicals and mandates specific 
payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a 
``specified covered outpatient drug'' is a covered outpatient drug, as 
defined in section 1927(k)(2) of the Act, for which a separate APC has 
been established and that either is a radiopharmaceutical agent or is a 
drug or biological for which payment was made on a pass-through basis 
on or before December 31, 2002.
    Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and 
biologicals are designated as exceptions and are not included in the 
definition of ``specified covered outpatient drugs,'' known as SCODs. 
These exceptions are--
    <bullet> 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.
    <bullet> A drug or biological for which a temporary HCPCS code has 
not been assigned.
    <bullet> During CYs 2004 and 2005, an orphan drug (as designated by 
the Secretary).
    Section 1833(t)(14)(A)(iii) of the Act requires that payment for 
SCODs in CY 2006 and subsequent years be equal to the average 
acquisition cost for the drug for that year as determined by the 
Secretary, subject to any adjustment for overhead costs and taking into 
account the hospital acquisition cost survey data collected by the 
Government Accountability Office (GAO) in CYs 2004 and 2005. 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.
    Section 1833(t)(14)(E) of the Act provides for an adjustment in 
OPPS payment rates for overhead and related expenses, such as pharmacy 
services and handling costs. Section 1833(t)(14)(E)(i) of the Act 
required MedPAC to study pharmacy overhead and to make recommendations 
to the Secretary regarding whether, and if so how, a payment adjustment 
should be made to compensate hospitals for them. Section 
1833(t)(14)(E)(ii) of the Act authorizes the Secretary to adjust the 
weights for ambulatory procedure classifications for SCODs to take into 
account the findings of the MedPAC study.
    In the CY 2006 OPPS proposed rule (70 FR 42728), we discussed the 
June 2005 report by MedPAC regarding pharmacy overhead costs in HOPDs 
and summarized the findings of that study:

[[Page 35325]]

    <bullet> Handling costs for drugs, biologicals, and 
radiopharmaceuticals administered in the HOPD are not insignificant;
    <bullet> Little information is available about the magnitude of 
pharmacy overhead costs;
    <bullet> Hospitals set charges for drugs, biologicals, and 
radiopharmaceuticals at levels that reflect their respective handling 
costs; and
    <bullet> Hospitals vary considerably in their likelihood of 
providing services which utilize drugs, biologicals, or 
radiopharmaceuticals with different handling costs.
    As a result of these findings, MedPAC developed seven drug 
categories for pharmacy and nuclear medicine handling costs based on 
the estimated level of hospital resources used to prepare the products 
(70 FR 42729). Associated with these categories were two 
recommendations for accurate payment of pharmacy overhead under the 
OPPS.
    1. CMS should establish separate, budget neutral payments to cover 
the costs hospitals incur for handling separately payable drugs, 
biologicals, and radiopharmaceuticals.
    2. CMS should define a set of handling fee APCs that group drugs, 
biologicals, and radiopharmaceuticals based on attributes of the 
products that affect handling costs; CMS should instruct hospitals to 
submit charges for these APCs and base payment rates for the handling 
fee APCs on submitted charges reduced to costs.
    In response to the MedPAC findings, in the CY 2006 OPPS proposed 
rule (70 FR 42729), we discussed our belief that, because of the varied 
handling resources required to prepare different forms of drugs, it 
would be impossible to exclusively and appropriately assign a drug to a 
certain overhead category that would apply to all hospital outpatient 
uses of the drug. Therefore, our CY 2006 OPPS proposal included a 
proposal to establish three distinct Level II HCPCS C-codes and three 
corresponding APCs for drug handling categories to differentiate 
overhead costs for drugs and biologicals (70 FR 42730). We also 
proposed: (1) To combine several overhead categories recommended by 
MedPAC; (2) to establish three drug handling categories, as we believed 
that larger groups would minimize the number of drugs that may fit into 
more than one category and would lessen any undesirable payment policy 
incentives to utilize particular forms of drugs or specific preparation 
methods; (3) to collect hospital charges for these C-codes for 2 years; 
and (4) to ultimately base payment for the corresponding drug handling 
APCs on CY 2006 claims data available for the CY 2008 OPPS.
    In the CY 2006 OPPS final rule with comment period (70 FR 68659 
through 68665), we discussed the public comments we received on our 
proposal regarding pharmacy overhead. The overwhelming majority of 
commenters did not support our proposal and urged us not to finalize 
this policy, as it would be administratively burdensome for hospitals 
to establish charges for HCPCS codes for pharmacy overhead and to 
report them. Therefore, we did not finalize this proposal for CY 2006. 
Instead, we established payment for separately payable drugs and 
biologicals at ASP+6 percent, which we calculated by comparing the 
estimated aggregate cost of separately payable drugs and biologicals in 
our claims data to the estimated aggregate ASP dollars for separately 
payable drugs and biologicals, using the ASP as a proxy for average 
acquisition cost (70 FR 68642). Hereinafter, we refer to this 
methodology as our standard drug payment methodology. We concluded that 
payment for drugs and biologicals and pharmacy overhead at a combined 
ASP+6 percent rate would serve as the best proxy for the combined 
acquisition and overhead costs of each of these products.
    In the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68091), we finalized our proposed policy to provide a single payment of 
ASP+6 percent for the hospital's acquisition cost for the drug or 
biological and all associated pharmacy overhead and handling costs. The 
ASP+6 percent rate that we finalized was higher than the equivalent 
average ASP-based amount calculated from claims of ASP+4 percent 
according to our standard drug payment methodology, but we adopted 
payment at ASP+6 percent for stability while we continued to examine 
the issue of the costs of pharmacy overhead in the HOPD.
    In the CY 2008 OPPS/ASC proposed rule (72 FR 42735), in response to 
ongoing discussions with interested parties, we proposed to continue 
our methodology of providing a combined payment rate for drug and 
biological acquisition and pharmacy overhead costs. We also proposed to 
instruct hospitals to remove the pharmacy overhead charge for both 
packaged and separately payable drugs and biologicals from the charge 
for the drug or biological and report the pharmacy overhead charge on 
an uncoded revenue code line on the claim. We believed that this would 
provide us with an avenue for collecting pharmacy handling cost data 
specific to drugs in order to package the overhead costs of these items 
into the associated procedures, most likely drug administration 
services. Similar to the public response to our CY 2006 pharmacy 
overhead proposal, the overwhelming majority of commenters did not 
support our CY 2008 proposal and urged us to not finalize this policy 
(72 FR 66761). At its September 2007 meeting, the APC Panel recommended 
that hospitals not be required to separately report charges for 
pharmacy overhead and handling and that payment for overhead be 
included as part of drug payment. The APC Panel also recommended that 
CMS continue to evaluate alternative methods to standardize the capture 
of pharmacy overhead costs in a manner that is simple to implement at 
the organizational level (72 FR 66761). Because of concerns expressed 
by the APC Panel and public commenters, we did not finalize the 
proposal to instruct hospitals to separately report pharmacy overhead 
charges for CY 2008. Instead, in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66763), we finalized a policy of providing 
payment for separately payable drugs and biologicals and their pharmacy 
overhead at ASP+5 percent as a transition from their CY 2007 payment of 
ASP+6 percent to payment based on the equivalent average ASP-based 
payment rate calculated from hospital claims according to our standard 
drug payment methodology, which was ASP+3 percent for the CY 2008 OPPS/
ASC final rule with comment period. Hospitals continued to include 
charges for pharmacy overhead costs in the line-item charges for the 
associated drugs reported on claims.
    For CY 2009, we proposed to pay separately payable drugs and 
biologicals at ASP+4 percent, including both SCODs and other drugs 
without CY 2009 OPPS pass-through status, based on our standard drug 
payment methodology, and we also proposed to split the Drugs Charged to 
Patients cost center into two cost centers: One for drugs with high 
pharmacy overhead costs and one for drugs with low pharmacy overhead 
costs (73 FR 41492). We noted that we expected that CCRs from the 
proposed new cost centers would be available in 2 to 3 years to refine 
OPPS drug cost estimates by accounting for differential hospital markup 
practices for drugs with high and low overhead costs. After 
consideration of the public comments received and the APC Panel 
recommendations, we finalized a CY 2009 policy (73 FR 68659) to provide 
payment for separately payable

[[Page 35326]]

nonpass-through drugs and biologicals based on costs calculated from 
hospital claims at a 1-year transitional rate of ASP+4 percent, in the 
context of an equivalent average ASP-based payment rate of ASP+2 
percent calculated according to our standard drug payment methodology 
from the final rule claims and cost report data. We did not finalize 
our proposal to split the single standard Drugs Charged to Patients 
cost center into two cost centers largely due to concerns raised to us 
by hospitals about the associated administrative burden. Instead, we 
indicated in the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68659) that we would continue to explore other potential approaches to 
improve our drug cost estimation methodology, thereby increasing 
payment accuracy for separately payable drugs and biologicals.
    In response to the CMS proposals for the CY 2008 and CY 2009 OPPS, 
a group of pharmacy stakeholders (hereinafter referred to as the 
pharmacy stakeholders), including some cancer hospitals, some 
pharmaceutical manufacturers, and some hospital and professional 
associations, commented that CMS should pay an acquisition cost of 
ASP+6 percent for separately payable drugs, should substitute ASP+6 
percent for the packaged cost of all packaged drugs and biologicals on 
procedure claims, and should redistribute the difference between the 
aggregate estimated packaged drug cost in claims and payment for all 
drugs, including packaged drugs at ASP+6 percent, as separate pharmacy 
overhead payments for separately payable drugs. They indicated that 
this approach would preserve the aggregate drug cost observed in the 
claims data, while significantly increasing payment accuracy for 
individual drugs and procedures using packaged drugs. Their suggested 
approach would provide a separate overhead payment for each separately 
payable drug or biological at one of three different levels, depending 
on the pharmacy stakeholders' assessment of the complexity of pharmacy 
handling associated with each specific drug or biological (73 FR 68651 
through 68652). Each separately payable drug or biological HCPCS code 
would be assigned to one of the three overhead categories, and the 
separate pharmacy overhead payment applicable to the category would be 
made when each of the separately payable drugs or biologicals was paid.
    At the February 2009 meeting, the APC Panel recommended that CMS 
pay for the acquisition cost of all separately payable drugs at no less 
than ASP+6 percent. The APC Panel also recommended that CMS package 
payment at ASP+6 percent on claims for all drugs that are not 
separately payable and use the difference between these rates and CMS' 
cost derived from charges to create a pool to provide more appropriate 
payment for pharmacy service costs and that CMS pay for pharmacy 
services costs using this pool, applying a tiered approach to payments 
based on some objective criteria related to the pharmacy resources 
required for groups of drugs. The APC Panel further recommended that, 
if CMS does not implement the drug payment recommendations specified 
above, CMS should exclude data from hospitals that participate in the 
340B Federal drug pricing program from its ratesetting calculations for 
drugs and CMS should pay 340B hospitals in the same manner as it pays 
non-340B hospitals. Hospitals that participate in the 340B program are 
generally hospitals that serve a disproportionate share of low-income 
patients and receive disproportionate share payments under the IPPS. 
These facilities may acquire outpatient drugs and biologicals at prices 
that are substantially below ASP because the 340B program requires drug 
manufacturers to provide outpatient drugs to eligible entities at a 
reduced price and these reduced price sales are not included in the ASP 
submissions of manufacturers to Medicare. Public presenters at the 
February 2009 APC Panel meeting emphasized that the purpose of the 340B 
Federal drug pricing program is to ensure access to drugs for low-
income patients by supplementing the higher cost of providing care to 
low-income patients born by hospitals serving a disproportionate share 
of these patients. The agenda, recommendations, and report from the 
February 2009 APC Panel meeting are posted on the CMS Web site at: 
http://www.cms.hhs.gov/FACA. We respond to these APC Panel 
recommendations in our discussion of the proposed CY 2010 policy that 
follows.
b. Proposed Payment Policy
    Section 1833(t)(14)(A)(iii) of the Act, as described above, 
continues to be applicable to determining payments for SCODs for CY 
2010. This provision requires that payment for SCODs be equal to the 
average acquisition cost for the drug for that year as determined by 
the Secretary, subject to any adjustment for overhead costs and taking 
into account the hospital acquisition cost survey data collected by the 
GAO in CYs 2004 and 2005. 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. In addition, section 1833(t)(14)(E)(ii) of the 
Act authorizes the Secretary to adjust APC weights to take into account 
the 2005 MedPAC report relating to overhead and related expenses, such 
as pharmacy services and handling costs. Since CY 2006, when we first 
adopted our standard methodology of paying for separately payable drugs 
and biologicals based on the equivalent average ASP-based payment rate 
calculated from claims and cost report data, we have applied this 
methodology to payment for all separately payable drugs and biologicals 
without pass-through status, both SCODs and other drugs and biologicals 
that do not meet the statutory definition of SCODs. We have seen no 
reason to distinguish SCODs from these other separately payable drugs 
and biologicals, and under our standard drug payment methodology, we 
have used the costs from hospital claims data as a proxy for the 
average hospital acquisition cost that the statute requires for payment 
of SCODs and to provide payment for the associated pharmacy overhead 
cost.
    We are proposing that, for CY 2010, we would make payment for 
separately payable drugs and biologicals not receiving pass-through 
payment at ASP+4 percent, which would continue to include payment for 
both the acquisition costs of separately payable drugs and biologicals 
and the pharmacy overhead costs applicable to these separately payable 
drugs and biologicals. Based on the rationale described below, we 
believe that approximately $150 million of the estimated $395 million 
total in pharmacy overhead cost, specifically between one-third and 
one-half of that cost, included in our claims data for packaged drugs 
and biologicals above the aggregate ASP dollars of these packaged 
products should be attributed to separately payable drugs and 
biologicals to provide an adjustment for the pharmacy overhead costs of 
these separately payable products. As a result, we also are proposing 
to reduce the cost of packaged drugs and biologicals that is included 
in the payment for procedural APCs to offset the $150 million 
adjustment to payment for separately payable drugs and biologicals. We 
are proposing that any redistribution of pharmacy overhead cost that 
may arise from CY 2010 final rule data would occur only from some drugs 
and

[[Page 35327]]

biologicals to other drugs and biologicals, thereby maintaining the 
estimated total cost of drugs and biologicals (no redistribution of 
cost would occur from other services to drugs and biologicals or vice 
versa) that we calculate based on the charges and costs reported by 
hospitals on claims and cost reports.
    Using our CY 2010 proposed rule data, and applying our longstanding 
methodology for calculating the total cost of separately payable drugs 
and biologicals in our claims compared to the ASP dollars for the same 
drugs and biologicals, without applying the proposed overhead cost 
redistribution, we determined that the estimated aggregate cost of 
separately payable drugs and biologicals (status indicators ``K'' and 
``G''), including acquisition and pharmacy overhead costs, is 
equivalent to ASP-2 percent. Therefore, under our standard drug payment 
methodology, we would pay for separately payable drugs and biologicals 
at ASP-2 percent for CY 2010, their equivalent average ASP-based 
payment rate. We also determined that the estimated aggregate cost of 
packaged drugs and biologicals (status indicator ``N''), including 
acquisition and pharmacy overhead costs, is equivalent to ASP+247 
percent. We found that the estimated aggregate cost for all drugs and 
biologicals (status indicators ``N,'' ``K,'' and ``G''), including 
acquisition and pharmacy overhead costs, is equivalent to ASP+13 
percent. For a detailed explanation of our standard process for these 
calculations, we refer readers to the CY 2006 OPPS proposed rule (70 FR 
42725). Table 25 summarizes these findings.

      Table 25--Standard Drug Payment Methodology Using CY 2010 OPPS Proposed Rule Data: ASP+X Calculation
----------------------------------------------------------------------------------------------------------------
                                          Total ASP
                                         dollars for    Total cost of
                                          drugs and       drugs and
                                       biologicals in  biologicals in   Ratio of cost        ASP+X  percent
                                         claims data     claims data       to ASP
                                        (in millions)   (in millions)
                                              *              **
----------------------------------------------------------------------------------------------------------------
Packaged Drugs and Biologicals.......            $160            $555            3.47  ASP+247
Separately Payable Drugs and                    2,589           2,539            0.98  ASP-2
 Biologicals.
                                      --------------------------------------------------------------------------
    All Drugs and Biologicals........           2,749           3,094            1.13  ASP+13
----------------------------------------------------------------------------------------------------------------
* Total April 2009 ASP dollars (ASP multiplied by drug or biological units in CY 2008 claims) for drugs and
  biologicals with a HCPCS code and ASP information.
** Total cost in the CY 2008 claims data for drugs and biologicals with a HCPCS code and April 2009 ASP
  information.

    We recognize that there may be concern over whether the actual full 
cost (acquisition and pharmacy overhead) of separately payable drugs 
and biologicals could be 2 percent less than ASP for these products, 
although we do not have ASP information specifically for their sales to 
hospitals. Similarly, we acknowledge that a full cost (acquisition and 
pharmacy overhead) of ASP+247 percent for packaged drugs may seem 
relatively high. When we subtract the total ASP dollars for packaged 
drugs and biologicals in the CY 2008 claims data ($160 million), our 
proxy for their acquisition cost, from the total cost of packaged drugs 
and biologicals in the same claims ($555 million), we find that the 
difference, which we view as the pharmacy overhead cost currently 
attributed to packaged drugs and biologicals is $395 million. While we 
currently have no way of assessing whether this current distribution of 
overhead cost to packaged drugs and biologicals is appropriate, we 
acknowledge that the current method of converting billed charges to 
costs has the potential to ``compress'' the calculated costs to some 
degree. Further, we recognize that the attribution of pharmacy overhead 
costs to packaged or separately payable drugs and biologicals through 
our standard drug payment methodology of a combined payment for 
acquisition and pharmacy overhead costs depends, in part, on the 
treatment of all drugs and biologicals each year under our annual drug 
packaging threshold. Changes to the packaging threshold may result in 
changes to payment for the overhead cost of drugs and biologicals that 
do not reflect actual changes in hospital pharmacy overhead cost for 
those products. For these reasons, we believe that some portion, but 
not all, of the $395 million in total overhead cost that is associated 
with packaged drugs and biologicals based on our standard drug payment 
methodology should, at least for CY 2010, be attributed to separately 
payable drugs and biologicals. Although we believe that for CY 2010 it 
would be prudent to redistribute some pharmacy overhead cost between 
packaged drugs and biologicals at ASP+247 percent and separately 
payable drugs at ASP-2 percent that would result from our standard drug 
payment methodology, the amount of overhead cost redistribution that 
would be appropriate between the packaged and separately payable drugs 
and biologicals in a payment system that is fundamentally based on 
averages is not fully evident. Pharmacy overhead cost includes, but is 
not limited to, some costs of indirect overhead that are shared by all 
hospital items and services, such as administrative and general costs, 
capital costs, staff benefits, and other facility costs. With regard to 
these indirect overhead costs, the amount of indirect overhead cost 
that is attributable to an inexpensive (typically packaged) drug is the 
same in dollar value as the amount of indirect overhead cost that is 
attributable to an extremely costly drug (typically separately 
payable). Hence, the indirect overhead costs that are common to all 
drugs and biologicals have no relationship to the cost of an individual 
drug or biological, or to the complexity of the handling, preparation, 
or storage of that individual drug or biological. Therefore, we believe 
that the indirect overhead cost alone for an inexpensive drug or 
biological could be far in excess of the ASP for that inexpensive 
product.
    Layered on these indirect overhead costs are the pharmacy overhead 
direct costs of staff, supplies, and equipment that are directly 
attributable only to the storage, handling, preparation, and 
distribution of drugs and biologicals and which do vary, sometimes 
considerably, depending upon the drug being furnished. As we indicate 
above, in its June 2005 Report to Congress, MedPAC found that drugs can 
be categorized into seven different categories based on the handling 
costs (that is, the direct costs) incurred (70 FR 42729). Similarly, 
the pharmacy stakeholders, whose suggested approach the APC Panel

[[Page 35328]]

recommended that we accept for CY 2010, identified three categories of 
pharmacy overhead complexity with variable costs, to which they 
assigned individual drugs and biologicals for purposes of implementing 
their recommended redistribution of the difference between aggregate 
dollars for all drugs and biologicals at ASP+6 percent and aggregate 
cost for all drugs and biologicals in the claims data as additional 
pharmacy overhead payments.
    We acknowledge that the observed combined payment for acquisition 
and pharmacy overhead costs of ASP-2 percent for separately payable 
drugs and biologicals may be too low and ASP+247 percent for packaged 
drugs and biologicals in the CY 2010 claims data may be too high. 
However, we also believe that the pharmacy stakeholders' recommendation 
to set packaged drug and biologicals dollars to ASP+6 percent is 
inappropriate given our understanding that an equal allocation of 
indirect overhead costs among packaged and separately payable drugs and 
biologicals would lead to a higher observed ASP+X percent than ASP+6 
percent for packaged drugs and biologicals. As discussed above, the 
indirect overhead costs that are common to all drugs and biologicals 
have no relationship to the cost of an individual drug or biological, 
or to the complexity of the handling, preparation, or storage of that 
individual drug or biological. Therefore, we believe that the indirect 
overhead cost alone for an inexpensive drug or biological which would 
be packaged could be far in excess of the ASP for that inexpensive 
product. In contrast, we would expect that the indirect overhead cost 
alone for an expensive drug or biological which would be separately 
paid could be far less than the ASP for that expensive product.
    Therefore, we believe that some middle ground would represent the 
most accurate redistribution of pharmacy overhead cost. The assumption 
that approximately one-third to one-half of the total pharmacy overhead 
cost currently associated with packaged drugs and biologicals is a 
function of both charge compression and our choice of an annual drug 
packaging threshold offers a more appropriate allocation of drug and 
biological cost to separately payable drugs and biologicals. One-third 
of the $395 million of pharmacy overhead cost associated with packaged 
drugs and biologicals is $132 million, whereas one-half is $198 
million. Within the one-third to one-half parameters, we are proposing 
that reallocating $150 million in drug and biological cost observed in 
the claims data from packaged drugs and biologicals to separately 
payable drugs and biologicals for CY 2010 would more appropriately 
distribute pharmacy overhead cost among packaged and separately payable 
drugs and biologicals than either of the two other options, that is, 
paying for separately payable drugs and biologicals at ASP-2 percent 
according to our standard drug payment methodology or adopting the 
pharmacy stakeholders' recommendation. If we attribute $150 million in 
additional cost to the payment for the drugs and biologicals we are 
proposing to pay separately for the CY 2010 OPPS, we calculate a 
payment rate for separately payable drugs and biologicals of ASP+4 
percent as displayed in Table 26. Thus, we are proposing a pharmacy 
overhead adjustment for separately payable drugs and biologicals in CY 
2010 that would result in their payment at ASP+4 percent. We would 
accomplish this adjustment by redistributing one-third to one-half of 
the pharmacy overhead cost of packaged drugs and biologicals ($150 
million), which represents a reduction in the packaged drug and 
biological cost in the CY 2010 claims data of 27 percent.

 Table 26--Proposed CY 2010 Pharmacy Overhead Adjustment Payment Methodology for Separately Payable and Packaged
                                              Drugs and Biologicals
----------------------------------------------------------------------------------------------------------------
                                                        Total cost of
                                          Total ASP       drugs and
                                         dollars for   biologicals in   Ratio of cost
                                          drugs and      claims data       to ASP
                                       biologicals in       after        (column C/          ASP+X  percent
                                         claims data     adjustment       column B)
                                        (in millions)   (in millions)
                                              *              **
----------------------------------------------------------------------------------------------------------------
Packaged Drugs and Biologicals.......            $160            $405            2.53  ASP+153
Separately Payable Drugs and                    2,589           2,689            1.04  ASP+4
 Biologicals.
                                      --------------------------------------------------------------------------
    All Drugs and Biologicals........           2,749           3,094            1.13  ASP+13
----------------------------------------------------------------------------------------------------------------
* Total April 2009 ASP dollars (ASP multiplied by drug or biological units in CY 2008 claims) for drugs and
  biologicals with a HCPCS code and ASP information.
** Total cost in the CY 2008 claims data for drugs and biologicals with a HCPCS code and April 2009 ASP
  information.

    We note that we are not proposing to redistribute pharmacy overhead 
cost from packaged to separately payable drugs and biologicals 
utilizing a methodology that would provide a separate pharmacy overhead 
payment for each separately payable drug and biological based on its 
pharmacy complexity. The OPPS is a prospective payment system that 
provides payment for groups of services and we believe that it is 
important, at a minimum, to maintain the current size of the OPPS 
payment bundles, in order to encourage efficiency in the hospital 
outpatient setting. As we stated in the CY2008 OPPS/ASC final rule with 
comment period (72 FR 66613), we believe it is important that the OPPS 
create incentives for hospitals to provide only necessary, high quality 
care and to provide that care as efficiently as possible. We have 
considered in recent years how we could increase packaging under the 
OPPS in a manner that would create incentives for efficiency while 
providing hospitals with flexibility to provide care in the most 
appropriate way for each Medicare beneficiary. Hospitals have 
repeatedly explained that they consider the acquisition and pharmacy 
overhead costs of drugs in setting their charges for drugs, and we have 
continued to provide a single payment for the acquisition and pharmacy 
overhead costs of separately payable drugs and biologicals under the 
OPPS consistent with this hospital charging practice. While we have 
worked to develop, and are now proposing, a refined payment methodology 
for drugs and biologicals for the CY 2010 OPPS that we believe would 
pay more accurately for the pharmacy overhead cost of packaged

[[Page 35329]]

and separately payable drugs and biologicals, we do not believe it 
would be appropriate to unbundle the current single combined payment 
for the acquisition and overhead costs of a separately payable drug 
into two distinct payments, a drug payment and a pharmacy overhead 
payment. Furthermore, we note that section 1833(t)(14)(E)(ii) of the 
Act specifically authorizes the Secretary to adjust the APC payment 
weights for SCODs to take into account the recommendations of MedPAC on 
pharmacy overhead costs. We believe our proposed CY 2010 approach that 
would adjust the APC payment for separately payable drugs and 
biologicals to more accurately pay for their associated pharmacy 
overhead cost, rather than provide a separate payment for a drug's 
pharmacy overhead cost each time the product is separately paid, is 
consistent with this statutory provision. Therefore, we are proposing 
to continue to make a single bundled payment for the acquisition and 
pharmacy overhead costs of separately payable drugs and biologicals 
under the CY 2010 OPPS, an approach we believe both continues to 
encourage hospital efficiencies in the provision of drugs and 
biologicals to Medicare beneficiaries in the hospital outpatient 
setting and improves payment accuracy for the acquisition and pharmacy 
overhead costs of drugs and biologicals.
    To confirm the portion of the $395 million in estimated pharmacy 
overhead cost currently associated with packaged drugs and biologicals 
that should be attributable to separately payable drugs and 
biologicals, we used information from a variety of sources in order to 
corroborate the appropriateness of our proposal to redistribute between 
one-third and one-half of the difference ($150 million) between the 
aggregate claims cost for packaged drugs and biologicals and ASP 
dollars for the same drugs and biologicals to separately payable drugs 
and biologicals. In order to improve the accuracy of payment for 
separately payable drugs and biologicals, we would incorporate an 
adjustment for pharmacy overhead and pay for these drugs and 
biologicals at ASP+4 percent. We would also improve the accuracy of 
payment for procedures using packaged drugs and biologicals by reducing 
the packaged drug and biological cost by 27 percent. We used our claims 
data, the April 2009 ASP information, and information provided by 
MedPAC and the pharmacy stakeholders to estimate an appropriate portion 
of the pharmacy overhead cost currently associated with packaged drugs 
and biologicals that may be attributed to the pharmacy overhead cost of 
separately payable drugs and biologicals. We conducted two separate 
analyses described below which confirm that our proposal to 
redistribute $150 million in pharmacy overhead cost currently 
associated with the cost of packaged drugs and biologicals is 
appropriate.
    We began this exercise with three fundamental assumptions. The 
first assumption is that the hospital acquisition cost of separately 
payable drugs and biologicals, on average, is not less than 100 percent 
of ASP. We believe that this assumption is valid because we have been 
told that hospitals pay a range of prices for the same drug or 
biological. Some hospitals may be able to take advantage of volume and 
group purchasing to achieve significant discounts for certain drugs and 
biologicals, but other hospitals may pay more than average for drugs 
and biologicals because of their low volume usage or a hospital's 
remote geographic location. Further, hospitals often serve as community 
care resources so they must provide drugs and biologicals to meet the 
needs of all of the patients who present to their facilities for care. 
The amounts and nature of those drugs and biologicals may vary 
significantly and unpredictably over time, particularly for smaller 
hospitals, due to changing availability of other care settings in their 
communities, such as physicians' offices, or emergencies, and this 
variability may constrain hospitals' ability to purchase all necessary 
quantities of certain drugs and biologicals based on best price 
contractual agreements negotiated in advance. Hence, we believe that 
the ASP is likely a fair estimate of hospitals' average acquisition 
cost of drugs and biologicals in general, excluding direct and indirect 
overhead costs.
    The second assumption is that packaged drugs and biologicals, as a 
group, typically have an aggregate absolute pharmacy overhead cost 
(direct and indirect) that exceeds the acquisition cost of the packaged 
drugs and biologicals. We believe that this assumption is appropriate 
because packaged drugs and biologicals carry the same absolute amount 
of indirect overhead cost per drug or biological administered as 
separately payable drugs and biologicals and because many packaged 
drugs and biologicals have extremely low ASPs but some of the same 
direct costs (for example, recordkeeping, storage, safety precautions, 
and disposal requirements) as separately payable drugs and biologicals. 
Our claims data show that the weighted average ASP for the drugs and 
biologicals we are proposing to package for CY 2010 is approximately $7 
per day per packaged drug or biological, and we believe that it is a 
reasonable assumption that the full pharmacy overhead cost for a drug 
or biological (direct and indirect) equals or exceeds that amount.
    Our final assumption is that, on average, the pharmacy overhead 
cost of separately payable drugs and biologicals, as a group, is not 
greater than the acquisition cost of the separately payable drugs and 
biologicals. We believe that this assumption is appropriate because 
separately payable drugs and biologicals carry the same absolute amount 
of indirect pharmacy overhead cost per drug or biological administered 
as packaged drugs and biologicals. While we have been told by MedPAC 
and the pharmacy stakeholders that separately payable drugs and 
biologicals generally have direct pharmacy overhead costs that are 
significantly higher than the direct overhead costs of packaged drugs 
and biologicals, we do not believe that they exceed the acquisition 
cost of separately payable drugs and biologicals. The weighted average 
ASP for the drugs and biologicals we are proposing for separate payment 
for CY 2010 is approximately $954 per day per separately payable drug 
or biological. We do not believe that the full pharmacy overhead cost 
for a separately payable drug or biological would, on average, exceed 
$954 per day for a single drug or biological. Hence, we believe these 
last two assumptions about the relationship of ASP to full pharmacy 
overhead cost (direct and indirect) for packaged and separately payable 
drugs and biologicals are appropriate for purposes of these analyses.
    Having made these assumptions, we reduced the $395 million in 
estimated pharmacy overhead cost that exceeds the ASP dollars for 
packaged drugs and biologicals (their average acquisition cost) by $50 
million. Fifty million dollars in additional cost would be necessary to 
raise the estimated cost calculated for separately payable drugs and 
biologicals from hospital claims data from 98 percent of ASP to 100 
percent of ASP, in order to reach our estimate of the average hospital 
acquisition cost of separately payable drugs and biologicals of ASP. 
This left $345 million in estimated residual pharmacy overhead cost 
that continued to be associated with packaged drugs and biologicals. We 
believe that a portion of this cost has been associated with packaged 
drugs and biologicals in our claims data, both due to charge

[[Page 35330]]

compression and our choice of an annual drug packaging threshold, and 
would continue to be less accurately associated with packaged drugs and 
biologicals were we not to engage in further redistribution of that 
portion of this residual pharmacy overhead cost of packaged drugs and 
biologicals.
    We then performed two analyses using information provided by the 
MedPAC Report (June 2005 Report to Congress) and by the pharmacy 
stakeholders (February 2009 presentation to the APC Panel and other 
meetings with CMS) that we applied to our claims data to estimate the 
amount of residual pharmacy overhead cost associated with packaged 
drugs and biologicals that should more accurately be attributed to 
separately payable drugs and biologicals. To perform these analyses, we 
used claims data only for those drugs and biologicals described by 
HCPCS codes that met the following criteria:
    <bullet> The proposed CY 2010 OPPS status indicator for the HCPCS 
code was ``G'' for pass-through drugs and biologicals (excluding pass-
through radiopharmaceuticals), ``K'' for separately payable drugs and 
biologicals that do not have pass-through status, or ``N'' for packaged 
drugs and biologicals, where the packaging status of these nonpass-
through drugs and biologicals was determined by an estimate of cost per 
day based on ASP+4 percent;
    <bullet> April 2009 pricing information based on the ASP 
methodology (other than mean cost from claims data) was available for 
the HCPCS code, and we would use the ASP methodology to pay for the 
HCPCS code if it had a status indicator of ``K'' or ``G''; and
    <bullet> CY 2008 OPPS claims data included claims for the HCPCS 
code or an equivalent predecessor code.
    We first converted six of the seven categories that MedPAC 
recommended be created for reporting pharmacy overhead costs to three 
CMS categories (low, medium, and high), as we had proposed for the CY 
2006 OPPS (70 FR 42729 through 42730); the seventh MedPAC category was 
not pertinent for this exercise because it is for the overhead cost 
attributable to radiopharmaceuticals. The CMS categories are defined 
as: Low (Orals); medium (Injection/Sterile Preparation; Single IV 
Solution/Sterile Preparation; Compounded Reconstituted IV 
Preparations); and high (Specialty IV or Agents requiring special 
handling in order to preserve their therapeutic value; Cytotoxic Agents 
in all formulations requiring personal protective equipment). We then 
derived a relative overhead weight for each of the three CMS categories 
by averaging the overhead weights for the six pertinent MedPAC 
categories. These averages were not weighted. The derived relative 
overhead weights for the CMS categories are as follows: Low = 1.00 
(corresponding to MedPAC Category 1); medium = 3.61 (corresponding to 
MedPAC Categories 1, 2, and 3); and high = 11.11 (corresponding to 
MedPAC categories 5 and 6).
    We also calculated a relative overhead weight for each of the three 
categories of pharmacy overhead complexity that were provided by the 
pharmacy stakeholders, using the different fixed dollar amounts that 
these stakeholders recommended that CMS pay for pharmacy overhead costs 
if we were to make such payments for ``all drugs'' (packaged and 
separately payable). The pharmacy stakeholders' categories are defined 
as: Low (Dispense without manipulation: e.g., oral drugs, pre-filled 
syringes); medium (Injectable drug with one step manipulation: e.g., 
simple injections); and high (Multiple step injectable products and 
chemotherapy that require safety considerations). The pharmacy 
stakeholders' relative overhead weights are as follows: Low = 1; medium 
= 2.67; and high = 5.50.
    Using the pharmacy stakeholders' overhead categories (low, medium, 
and high) and incorporating the pharmacy stakeholders' assignments of 
specific drugs and biologicals to levels of pharmacy complexity that 
they previously provided to CMS, we then assigned the remaining HCPCS 
codes for drugs and biologicals (approximately 50 percent of all drug 
and biological HCPCS codes qualifying for this exercise) based on our 
understanding of the characteristics of the categories. Similarly, we 
assigned all drug and biological HCPCS codes to the CMS categories 
created from the MedPAC groups for the derived relative overhead 
weights based on the definitions of those categories. Although the 
subsequent analytic processes were identical, we performed these 
analyses separately using the derived CMS overhead category weights 
(results are in Table 27) and using the pharmacy stakeholders' overhead 
category weights (results are in Table 28).
    Specifically, we assigned the overhead weights to each drug and 
biological in the set of drugs and biologicals qualifying for this 
exercise. We then calculated a per unit overhead cost by dividing the 
total relative weight for all drugs and biologicals in this exercise 
(low, medium, and high) into the residual pharmacy overhead cost from 
packaged drugs and biologicals of $345 million. Using the relative 
weights for each scenario, we estimated the exact per unit pharmacy 
overhead cost reallocation for each low, medium, and high pharmacy 
overhead category. We then added this payment amount to ASP for each 
drug and biological and reassessed the amount of total claims cost for 
separately payable and packaged drugs and biologicals and calculated 
our standard ratio of aggregate claims cost to aggregate ASP dollars 
for separately payable and packaged drugs and biologicals. The results 
of these analyses are shown in Tables 27 and 28 below.

    Table 27--Estimated Redistribution of Pharmacy Overhead Costs Using Relative Weights Derived From MedPAC
                        Pharmacy Overhead Categories and CY 2010 OPPS Proposed Rule Data
----------------------------------------------------------------------------------------------------------------
                                          Total ASP     Total cost of
                                         dollars for      drugs and
                                          drugs and    biologicals in   Ratio of cost
                                       biologicals in    claims data       to ASP            ASP+X  percent
                                         claims data        after        (column C/
                                        (in millions)  adjustment (in     column B)
                                              *         millions) **
----------------------------------------------------------------------------------------------------------------
Packaged Drugs and Biologicals.......            $160            $390            2.44  ASP+144
Separately Payable Drugs and                    2,589           2,704            1.04  ASP+4
 Biologicals.
                                      --------------------------------------------------------------------------
    All Drugs........................           2,749           3,094            1.13  ASP+13
----------------------------------------------------------------------------------------------------------------
* Total April 2009 ASP dollars (ASP multiplied by drug or biological units in CY 2008 claims) for drugs and
  biologicals with a HCPCS code and ASP information.

[[Page 35331]]

 
** Total cost in the CY 2008 claims data after adjustment for drugs and biologicals with a HCPCS code and April
  2009 ASP information.


  Table 28--Estimated Redistribution of Pharmacy Overhead Cost Using Relative Weights Calculated From Pharmacy
            Stakeholders Recommended Pharmacy Overhead Payment Levels and CY 2010 Propposed Rule Data
----------------------------------------------------------------------------------------------------------------
                                          Total ASP     Total cost of
                                         dollars for      drugs and
                                          drugs and    biologicals in   Ratio of cost
                                       biologicals in    claims data       to ASP            ASP+X  percent
                                         claims data        after        (column C/
                                        (in millions)  adjustment (in     column B)
                                              *         millions) **
----------------------------------------------------------------------------------------------------------------
Packaged Drugs and Biologicals.......            $160            $402            2.51  ASP+151
Separately Payable Drugs and                    2,589           2,692            1.04  ASP+4
 Biologicals.
                                      --------------------------------------------------------------------------
    All Drugs and Biologicals........           2,749           3,094            1.13  ASP+13
----------------------------------------------------------------------------------------------------------------
* Total April 2009 ASP dollars (ASP multiplied by drug units in CY 2008 claims) for drugs with a HCPCS code and
  ASP information.
** Total cost in the CY 2008 claims data after adjustment for drugs with a HCPCS code and April 2009 ASP
  information.

    As shown in Tables 27 and 28, the ratio of adjusted cost in the 
claims data for separately payable drugs and biologicals to ASP 
increased compared to the value derived from our standard methodology 
and declined for packaged drugs and biologicals compared to the value 
calculated according to our standard drug payment methodology as shown 
in Table 26. Specifically, under our standard methodology without 
adjustment of the pharmacy overhead cost currently attributed to 
packaged drugs and biologicals, packaged drugs and biologicals would be 
paid at ASP+247 percent. Using the CMS overhead weights, this value 
declined to ASP+144 percent and using the pharmacy stakeholders' 
overhead weights, it declined to ASP+151 percent.
    Under our standard drug payment methodology, without adjustment of 
the pharmacy overhead cost currently attributed to separately payable 
drugs and biologicals, separately payable drugs and biologicals would 
be paid at ASP-2 percent. Assuming a base average acquisition cost for 
all drugs and biologicals of ASP and using the CMS overhead weights to 
redistribute the residual $345 million in pharmacy overhead cost 
associated with packaged drugs and biologicals in the claims data, this 
value increased to ASP+4 percent, and using the pharmacy stakeholders' 
overhead weights to redistribute the residual $345 million in pharmacy 
overhead cost, this value also increased to ASP+4 percent.
    Based on these analyses, we estimate that we would redistribute 
$165 million in pharmacy overhead cost from packaged to separately 
payable drugs and biologicals by setting the average acquisition cost 
for all drugs and biologicals to ASP and using the CMS overhead 
weights, and we would redistribute $153 million in pharmacy overhead 
cost from packaged to separately payable drugs and biologicals by 
setting the average acquisition cost for all drugs and biologicals to 
ASP and using the pharmacy stakeholders' overhead weights. These 
observed outcomes are consistent with our CY 2010 proposal to 
redistribute between one-third and one-half of the $395 million of 
pharmacy overhead cost currently associated with packaged drugs and 
biologicals to separately payable drugs and biologicals. These values 
are also consistent with the $150 million we are proposing to 
redistribute from the cost of packaged drugs and biologicals to 
separately payable drugs and biologicals for CY 2010, which would 
represent a reduction in the cost of packaged drugs and biologicals of 
27 percent.
    After we performed these analyses, the pharmacy stakeholders 
provided us with updated assignments of CY 2009 drug HCPCS codes to 
their recommended levels of pharmacy complexity. We then assigned the 
remaining HCPCS codes for drugs and biologicals that the pharmacy 
stakeholders had not assigned based on our understanding of the 
characteristics of their categories. We recalibrated our model to 
incorporate the updated information. We observed no substantive changes 
in our findings, with the revised overhead category assignments 
redistributing $159 million from packaged to separately payable drugs 
and biologicals and resulting in an ASP+X percentage of ASP+4 percent 
for separately payable drugs and biologicals and ASP+148 percent for 
packaged drugs and biologicals.
    This analysis based on our synthesis of existing data and 
information from a variety of sources supports the appropriateness of a 
redistribution of the magnitude we are proposing for CY 2010. We 
believe that our analyses of the claims data using the CMS relative 
overhead weights derived from the 2005 MedPAC pharmacy overhead study 
and using the pharmacy overhead category payments, levels of 
complexity, and assignments of drugs provided by the pharmacy 
stakeholders (where available), confirm that payment for separately 
payable drugs and biologicals at ASP+4 percent represents a reasonable 
aggregate adjustment for the pharmacy overhead cost of these separately 
payable drugs and biologicals, compared to the payment that would 
result from the standard drug payment methodology. Payment for 
separately payable drugs at ASP+4 percent would ensure that hospitals 
are paid appropriately for the average hospital acquisition cost and 
the pharmacy overhead cost that our analyses show would be 
appropriately redistributed from the estimated cost of drugs that we 
are proposing to package for CY 2010.
    Our proposal for CY 2010 relies upon the premise of providing a 
pharmacy overhead adjustment to payment for separately payable drugs by 
redistributing pharmacy overhead cost from packaged drugs to separately 
payable drugs. Therefore, regardless of whether similar analyses for 
the CY 2010 OPPS/ASC final rule based on updated claims and cost report 
data result in a different payment level for separately payable drugs 
than ASP+4 percent, we believe that any redistributed amount of 
pharmacy overhead cost should be removed from the estimated cost of 
packaged drugs and biologicals. We are proposing to redistribute 
pharmacy overhead cost within the estimated total amount of acquisition 
and overhead cost for all drugs and biologicals that has been

[[Page 35332]]

reported to us by hospitals by making a pharmacy overhead adjustment to 
payment for separately payable drugs and biologicals that is based upon 
a partial redistribution of the pharmacy overhead cost of packaged 
drugs and biologicals. As described previously in this section, we are 
proposing that any redistribution of pharmacy overhead cost that may 
arise from CY 2010 final rule claims data would occur only from some 
drugs and biologicals to other drugs and biologicals, thereby 
maintaining the estimated total cost of drugs and biologicals (no 
redistribution of cost would occur from other services to drugs and 
biologicals or vice versa). While there is some evidence that 
relatively more pharmacy overhead cost should be associated with 
separately payable drugs and biologicals and less pharmacy overhead 
cost should be associated with packaged drugs and biologicals in order 
to improve payment accuracy, the recent RTI report on the OPPS' 
hospital-specific CCR methodology (``Refining Cost to Charge Ratios for 
Calculating APC and DRG Relative Payment Weights,'' July 2008 final 
report), the June 2005 MedPAC study of hospital outpatient pharmacy 
overhead costs, and our claims analyses discussed in this proposed rule 
present no evidence that the total cost of drugs and biologicals 
(including acquisition and overhead costs) is understated in claims in 
relation to the costs of other services paid under the OPPS. Therefore, 
to improve the distribution of pharmacy overhead cost within the total 
estimated cost for all drugs and biologicals, without adversely 
affecting the relativity of payment weights for all services paid under 
the OPPS, we believe that it is most appropriate to redistribute 
pharmacy overhead cost only within the total estimated cost of packaged 
and separately payable drugs and biologicals. By redistributing 
pharmacy overhead cost only within the total estimated cost of packaged 
and separately payable drugs and biologicals, we would maintain a 
constant total cost of drugs and biologicals under the OPPS as reported 
to us by hospitals, without redistributing cost from other OPPS 
services to the cost of drugs and biologicals under the budget neutral 
OPPS.
    While we agree conceptually with the APC Panel that a 
redistribution of pharmacy overhead cost in our claims data from 
packaged to separately payable drugs and biologicals is appropriate, we 
are not proposing to accept the APC Panel's recommendations that CMS 
pay for the acquisition cost of all separately payable drugs at no less 
than ASP+6 percent because, as we discussed previously in this section, 
our analyses of claims data indicate that appropriate payment for the 
acquisition and pharmacy overhead costs of separately payable drugs 
would be ASP+4 percent. We also are not accepting the APC Panel's 
recommendation that CMS package the cost of packaged drugs at ASP+6 
percent, use the difference between this cost and CMS' cost derived 
from charges to provide more appropriate payment for pharmacy services 
costs, and pay for pharmacy services using this amount by applying a 
tiered approach to payments based on criteria related to the pharmacy 
resources required for groups of drugs. We believe that the 
recommendation to package the cost of packaged drugs at ASP+6 percent 
would underpay for the pharmacy overhead cost of packaged drugs, which 
we expect would be higher in relation to ASP than the pharmacy overhead 
cost of separately payable drugs. Further, as discussed earlier in this 
section, because the OPPS is a prospective payment system that relies 
on payment for groups of services to encourage hospital efficiencies, 
we do not believe payment for pharmacy overhead costs that is separate 
from the OPPS payment for the acquisition costs of drugs would be 
appropriate.
    The APC Panel further recommended that, if CMS did not adopt a 
methodology consistent with their recommendations summarized above, CMS 
should exclude data from hospitals that participate in the 340B program 
from its ratesetting calculations for drugs and that CMS should pay 
340B hospitals in the same manner as it pays non-340B hospitals. We are 
not accepting the APC Panel's recommendation that CMS propose to 
exclude data from hospitals that participate in the 340B program from 
its ratesetting calculations for drugs. For CY 2010, we note that we 
are proposing a drug payment methodology that partially resembles the 
methodology recommended by the APC Panel because the proposal 
incorporates a redistribution of pharmacy overhead cost from packaged 
to separately payable drugs and biologicals. However, excluding data 
from hospitals that participate in the 340B program from our ASP+X 
calculation, but paying those hospitals at that derived payment amount, 
would effectively redistribute payment to drugs and biologicals from 
payment for other services under the OPPS, and we do not believe this 
redistribution would be appropriate. We are accepting the APC Panel 
recommendation that CMS propose to pay 340B hospitals in the same 
manner as non-340B hospitals are paid. Commenters on the CY 2009 OPPS/
ASC final rule with comment period were generally opposed to 
differential payment for hospitals based on their 340B participation 
status, and we do not believe it would be appropriate to exclude claims 
from this subset of hospitals in the context of our CY 2010 proposal to 
pay all hospitals at the same rate for separately payable drugs and 
biologicals. Moreover, as discussed above, while we are not proposing 
to adopt the APC Panel's specific recommended methodology to 
redistribute pharmacy overhead cost that would otherwise by paid 
through payment for packaged drugs, our proposed CY 2010 pharmacy 
adjustment methodology that would result in the payment of separately 
payable drugs and biologicals at ASP+4 percent incorporates a more 
limited redistribution of pharmacy overhead cost that would, 
nevertheless, preserve the aggregate drug cost in the claims, a result 
consistent with the APC Panel's recommendations. Therefore, we believe 
that it is appropriate to propose to pay 340B hospitals at the same 
rates that we are proposing to pay non-340B hospitals, and we are 
proposing to include the claims and cost report data for 340B hospitals 
in the data we have used for our analyses in order to calculate the 
proposed payment rates for drugs and biologicals and other services for 
the CY 2010 OPPS.
    In conclusion, we are proposing for CY 2010 to redistribute between 
one-third and one-half of the difference between the aggregate claims 
cost for packaged drugs and biologicals and ASP dollars for those 
products, which results in payment for the acquisition and pharmacy 
overhead costs of separately payable drugs and biologicals that do not 
have pass-through payment status of ASP+4 percent. This payment amount 
reflects an APC drug payment adjustment for pharmacy overhead cost. To 
accomplish this payment adjustment, we also are proposing to reduce the 
cost of packaged drugs and biologicals that is incorporated into the 
payment for procedural APCs by the amount of pharmacy overhead cost 
that is redistributed from packaged drugs and biologicals to the 
payment for separately payable drugs and biologicals. This proposal is 
based on the proposed redistribution of $150 million (through a 27 
percent reduction in packaged drug and biological cost), between one-
third and one-half of the

[[Page 35333]]

pharmacy overhead cost (the cost above ASP) of packaged drugs and 
biologicals in hospital outpatient claims, to the cost of separately 
payable drugs and biologicals, preserving the aggregate cost of all 
drugs and biologicals observed in the most recent claims and cost 
report data available for this proposed rule. We are further proposing 
that the claims data for 340B hospitals be included in the calculation 
of payment for drugs and biologicals under the CY 2010 OPPS, and that 
340B hospitals would be paid the same amounts for separately payable 
drugs and biologicals as hospitals that do not participate in the 340B 
program. Finally, we are proposing that, in accordance with our 
standard drug payment methodology, the estimated payments for 
separately payable drugs and biologicals would be taken into account in 
the calculation of the weight scaler that would apply to the relative 
weights for all procedural services (but would not to separately 
payable drug and biologicals) paid under the OPPS, as required by 
section 1833(t)(14)(H) of the Act.
4. Proposed Payment for Blood Clotting Factors
    For CY 2009, we are providing payment for blood clotting factors 
under the OPPS at ASP+4 percent, plus an additional payment for the 
furnishing fee that is also a part of the payment for blood clotting 
factors furnished in physicians' offices under Medicare Part B. The CY 
2009 updated furnishing fee is $0.164 per unit.
    For CY 2010, we are proposing to pay for blood clotting factors at 
ASP+4 percent, consistent with our proposed payment policy for other 
nonpass-through separately payable drugs and biologicals, and to 
continue our policy for payment of the furnishing fee using an updated 
amount. Because the furnishing fee update is based on the percentage 
increase in the Consumer Price Index (CPI) for medical care for the 12-
month period ending with June of the previous year and the Bureau of 
Labor Statistics releases the applicable CPI data after the MPFS and 
OPPS/ASC proposed rules are published, we are not able to include the 
actual updated furnishing fee in this proposed rule. Therefore, in 
accordance with our policy as finalized in the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66765), we will announce the actual 
figure for the percent change in the applicable CPI and the updated 
furnishing fee calculated based on that figure through applicable 
program instructions and posting on the CMS Web site at: http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice/.
5. Proposed Payment for Therapeutic Radiopharmaceuticals
a. Background
    Section 303(h) of Public Law 108-173 exempted radiopharmaceuticals 
from ASP pricing in the physician's office setting. Beginning in the CY 
2005 OPPS final rule with comment period, we have exempted 
radiopharmaceutical manufacturers from reporting ASP data for payment 
purposes under the OPPS. (For more information, we refer readers to the 
CY 2005 OPPS final rule with comment period (69 FR 65811) and the CY 
2006 OPPS final rule with comment period (70 FR 68655).) Consequently, 
we did not have ASP data for radiopharmaceuticals for consideration for 
previous years' OPPS ratesetting. In accordance with section 
1833(t)(14)(B)(i)(I) of the Act, we have classified 
radiopharmaceuticals under the OPPS as SCODs. As such, we have paid for 
radiopharmaceuticals at average acquisition cost as determined by the 
Secretary and subject to any adjustment for overhead costs. 
Radiopharmaceuticals also are subject to the policies affecting all 
similarly classified OPPS drugs and biologicals, such as pass-through 
payment for diagnostic and therapeutic radiopharmaceuticals and 
individual packaging determinations for therapeutic 
radiopharmaceuticals, discussed earlier in this proposed rule.
    For CYs 2006 and 2007, we used mean unit cost data from hospital 
claims to determine each radiopharmaceutical's packaging status and 
implemented a temporary policy to pay for separately payable 
radiopharmaceuticals based on the hospital's charge for each 
radiopharmaceutical adjusted to cost using the hospital's overall CCR. 
In addition, in the CY 2006 OPPS final rule with comment period (70 FR 
68654), we instructed hospitals to include charges for 
radiopharmaceutical handling in their charges for the 
radiopharmaceutical products so these costs would be reflected in the 
CY 2008 ratesetting process. The methodology of providing separate 
radiopharmaceutical payment based on charges adjusted to cost through 
application of an individual hospital's overall CCR for CYs 2006 and 
2007 was finalized as an interim proxy for average acquisition cost 
because of the unique circumstances associated with providing 
radiopharmaceutical products to Medicare beneficiaries. The single OPPS 
payment represented Medicare payment for both the acquisition cost of 
the radiopharmaceutical and its associated handling costs.
    During the CY 2006 and CY 2007 rulemaking processes, we encouraged 
hospitals and radiopharmaceutical stakeholders to assist us in 
developing a viable long-term prospective payment methodology for these 
products under the OPPS. As reiterated in the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66766), we were pleased to note that we 
had many discussions with interested parties regarding the availability 
and limitations of radiopharmaceutical cost data.
    In considering payment options for therapeutic radiopharmaceuticals 
for CY 2008, we examined several alternatives that we discussed in the 
CY 2008 OPPS/ASC proposed rule (72 FR 42738 through 42739) and CY 2008 
OPPS/ASC final rule with comment period (72 FR 66769 through 66770). 
After considering the options and the public comments received, we 
finalized a CY 2008 methodology to provide prospective payment for 
therapeutic radiopharmaceuticals (defined as those Level II HCPCS codes 
that include the term ``therapeutic'' along with a radiopharmaceutical 
in their long code descriptors) using mean costs derived from the CY 
2006 claims data, where the costs were determined using our standard 
methodology of applying hospital-specific departmental CCRs to 
radiopharmaceutical charges, defaulting to hospital-specific overall 
CCRs only if appropriate departmental CCRs were unavailable (72 FR 
66772). In addition, we finalized a policy to package payment for all 
diagnostic radiopharmaceuticals (defined as those Level II HCPCS codes 
that include the term ``diagnostic'' along with a radiopharmaceutical 
in their long code descriptors) for CY 2008. As discussed in the CY 
2008 OPPS/ASC proposed rule (72 FR 42739), we believed that adopting 
prospective payment for therapeutic radiopharmaceuticals based on 
historical hospital claims data was appropriate because it served as 
our most accurate available proxy for the average hospital acquisition 
cost of separately payable therapeutic radiopharmaceuticals. In 
addition, we noted that we have found that our general prospective 
payment methodology based on historical hospital claims data results in 
more consistent, predictable, and equitable payment amounts across 
hospitals and likely provides incentives to hospitals for efficiently 
and economically providing these outpatient services.
    Prior to implementation of the final CY 2008 methodology of 
providing a prospective payment for therapeutic radiopharmaceuticals, 
section 106(b) of Public Law 110-173 was enacted on

[[Page 35334]]

December 29, 2007, that specified payment for therapeutic 
radiopharmaceuticals based on individual hospital charges adjusted to 
cost. Therefore, hospitals continued to receive payment for therapeutic 
radiopharmaceuticals by applying the hospital-specific overall CCR to 
each hospital's charge for a therapeutic radiopharmaceutical from 
January 1, 2008, through June 30, 2008. As we stated in the CY2009 
OPPS/ASC proposed rule (73 FR 41493), thereafter, the OPPS would 
provide payment for separately payable therapeutic radiopharmaceuticals 
on a prospective basis, with payment rates based upon mean costs from 
hospital claims data as set forth in the CY 2008 OPPS/ASC final rule 
with comment period, unless otherwise required by law.
    Following issuance of the CY 2009 OPPS/ASC proposed rule, section 
142 of Public Law 110-275 amended section 1833(t)(16)(C) of the Act, as 
amended by section 106(a) of Public Law 110-173, to further extend the 
payment period for therapeutic radiopharmaceuticals based on hospital's 
charges adjusted to cost through December 31, 2009. Therefore, we are 
continuing to pay hospitals for therapeutic radiopharmaceuticals at 
charges adjusted to cost through the end of CY 2009.
b. Proposed Payment Policy
    Since the start of the temporary cost-based payment methodology for 
radiopharmaceuticals in CY 2006, we have met with several interested 
parties on a number of occasions regarding payment under the OPPS for 
radiopharmaceuticals and have received numerous different suggestions 
from these stakeholders regarding payment methodologies that we could 
employ for future use under the OPPS.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66771), we solicited comments requesting interested parties to provide 
information related to if and how the existing ASP methodology could be 
used to establish payment for specific therapeutic radiopharmaceuticals 
under the OPPS. Similar to the recommendations we received during the 
CY 2008 OPPS/ASC proposed rule comment period (72 FR 66770), we 
received several suggestions regarding the establishment of an OPPS-
specific methodology for radiopharmaceutical payment that would be 
similar to the ASP methodology, without following the established ASP 
procedures referenced at section 1847A of the Act and implemented 
through rulemaking. Some commenters recommended using external data 
submitted by a variety of sources other than manufacturers. Along this 
line, commenters suggested gathering information from nuclear 
pharmacies using methodologies with a variety of names such as Nuclear 
Pharmacy Calculated Invoiced Price (Averaged) (CIP) and Calculated 
Pharmacy Sales Price (CPSP). Other commenters recommended that CMS base 
payment for certain radiopharmaceuticals on manufacturer-reported ASP.
    As noted in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66771), a ratesetting approach based on external data would be 
administratively burdensome for us because we would be required to 
collect, process, and review external information to ensure that it was 
valid, reliable, and representative of a diverse group of hospitals so 
that it could be used to establish rates for all hospitals. However, we 
specifically requested additional comments regarding the use of the 
existing ASP reporting structure for therapeutic radiopharmaceuticals 
as this established methodology was already used for payment of other 
drugs provided in the hospital outpatient setting (72 FR 66771). While 
we received several recommendations from commenters on the CY 2008 
OPPS/ASC final rule with comment period regarding payment of 
therapeutic radiopharmaceuticals based on estimated costs provided by 
manufacturers or other parties, we believe that the use of external 
data for payment of therapeutic radiopharmaceuticals should only be 
adopted if those external data are subject to the same well-established 
regulatory framework as the ASP data currently used for payment of 
separately payable drugs and biologicals under the OPPS. We have 
previously indicated that nondevice external data used for setting 
payment rates should be publicly available and representative of a 
diverse group of hospitals both by location and type, and should also 
identify the relevant data sources. We do not believe that external 
therapeutic radiopharmaceutical cost data voluntarily provided outside 
of the established ASP methodology, either by manufacturers or nuclear 
pharmacies, would generally satisfy these criteria that are minimum 
standards for setting OPPS payment rates.
    We received public comments on the CY 2008 OPPS/ASC final rule with 
comment period from certain radiopharmaceutical manufacturers who 
indicated that the standard ASP methodology could be used for payment 
of certain therapeutic radiopharmaceutical products. Specifically, 
these manufacturers expressed interest in providing ASP for their 
therapeutic radiopharmaceutical products as a basis for payment under 
the OPPS.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41495), we proposed to 
allow manufacturers to submit ASP information for any separately 
payable therapeutic radiopharmaceutical for payment purposes under the 
OPPS. If ASP information was not submitted or appropriately certified 
by the manufacturer for a given calendar year quarter, then for that 
quarter we proposed to provide prospective payment based on the 
therapeutic radiopharmaceuticals mean cost from hospital claims data. 
However, as stated above, section 142 of Public Law 110-275 amended 
section 1833(t)(16)(C) of the Act, as amended by section 106(a) of 
Public Law 110-173, to further extend the payment period for 
therapeutic radiopharmaceuticals based on hospital's charges adjusted 
to cost through December 31, 2009, so we did not finalize this 
proposal. We note that, in response to our proposed therapeutic 
radiopharmaceutical payment methodology for CY 2009, we received a 
number of public comments that were supportive of the proposal for 
future years.
    At the February 2009 meeting of the APC Panel, the APC Panel 
recommended that CMS use the ASP methodology to pay for therapeutic 
radiopharmaceuticals and, where ASP data are not available, to pay 
based on mean costs from claims data for CY 2010. We are accepting this 
recommendation, and for CY 2010, we are proposing to allow 
manufacturers to submit ASP information for any separately payable 
therapeutic radiopharmaceutical in order for therapeutic 
radiopharmaceuticals to be paid based on ASP beginning in CY 2010 under 
the OPPS. Similar to our CY 2009 proposal, we are not proposing to 
compel manufacturers to submit ASP information. Also, as discussed in 
the CY 2009 OPPS/ASC proposed rule (73 FR 41495), the ASP data 
submitted would need to be provided for a patient-specific dose, or 
patient-ready form, of the therapeutic radiopharmaceutical in order to 
properly calculate the ASP amount for a given HCPCS code. In addition, 
in those instances where there is more than one manufacturer of a 
particular therapeutic radiopharmaceutical, we note that all 
manufacturers would need to submit ASP information in order for payment 
to be made on an ASP basis. We are specifically requesting public 
comment on the development of a crosswalk, similar to the NDC/HCPCS 
crosswalk for

[[Page 35335]]

separately payable drugs and biologicals posted on the CMS Web site at: 
http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice/ 01a_
2008aspfiles.asp, for use for therapeutic radiopharmaceuticals.
    We continue to believe that the use of ASP information for OPPS 
payment would provide an opportunity to improve payment accuracy for 
these products by applying an established methodology that has already 
been successfully implemented under the OPPS for other separately 
payable drugs and biologicals. As is the case with other drugs and 
biologicals subject to ASP reporting, in order for a therapeutic 
radiopharmaceutical to receive payment based on ASP beginning January 
1, 2010, we would need to receive ASP information from the manufacturer 
no later than November 1, 2009, that would reflect therapeutic 
radiopharmaceutical sales in the third quarter of CY 2009 (July 1, 
2009, through September 30, 2009). These data would not be available 
for publication in the CY 2010 OPPS/ASC final rule with comment period 
but would be included in the January 2010 OPPS quarterly release that 
would update the payment rates for separately payable drugs, 
biologicals, and therapeutic radiopharmaceuticals based on the most 
recent ASP data, consistent with our customary practice over the past 4 
years when we have used the ASP methodology for payment of separately 
payable drugs and biologicals under the OPPS. In addition, we would 
need to receive information from radiopharmaceutical manufacturers that 
would allow us to calculate a unit dose cost estimate based on the 
applicable HCPCS code for the therapeutic radiopharmaceutical.
    We realize that not all therapeutic radiopharmaceutical 
manufacturers may be willing or able to submit ASP information for a 
variety of reasons. We are proposing to provide payment at the ASP rate 
if ASP information is available for a given calendar year quarter or, 
if ASP information is not available, we are proposing to provide 
payment based on the most recent hospital mean unit cost data that we 
have available. We believe that both methodologies represent an 
appropriate and adequate proxy for average hospital acquisition cost 
and associated handling costs for these products. Therefore, if ASP 
information for the appropriate period of sales related to payment in 
any CY 2010 quarter is not available, we would rely on the CY 2008 mean 
unit cost data derived from hospital claims to set the payment rates 
for therapeutic radiopharmaceuticals. We note that this is not the 
usual OPPS process that relies on alternative data sources, such as WAC 
or AWP, when ASP information is temporarily unavailable, prior to 
defaulting to the mean unit cost from hospital claims data. We are 
proposing this methodology specifically for therapeutic 
radiopharmaceuticals whereby we would immediately default to the mean 
unit cost from hospital claims if sufficient ASP data were not 
available because we are not proposing to require therapeutic 
radiopharmaceutical manufacturers to report ASP data at this time. We 
do not believe that WAC or AWP is an appropriate proxy to provide OPPS 
payment for average therapeutic radiopharmaceutical acquisition cost 
and associated handling costs when manufacturers are not required to 
submit ASP data and, therefore, payment based on WAC or AWP could 
continue for the full calendar year.
    Recognizing that we may need to utilize mean unit cost data to pay 
for therapeutic radiopharmaceuticals in CY 2010 if ASP data are not 
submitted, we evaluated the mean unit cost information in the CY 2010 
claims data for all therapeutic radiopharmaceuticals for this proposed 
rule. We noticed that we had numerous claims with service units greater 
than one for HCPCS code A9543 (Yttrium Y-90 ibritumomab tiuxetan, 
therapeutic, per treatment dose, up to 40 millicuries) and A9545 
(Iodine I-131 tositumomab, therapeutic, per treatment dose), when the 
long descriptors for these therapeutic radiopharmaceuticals clearly 
indicate ``per treatment dose'' and, therefore, we would expect the 
service units on every claim to be one. In contrast, the other six 
therapeutic radiopharmaceuticals that would be separately payable in CY 
2010 all include ``per millicurie'' in their HCPCS code descriptors, so 
reporting multiple service units for those items could be appropriate. 
We do not believe that hospitals billing more than one unit of HCPCS 
codes A9543 orA9545 on a claim are correctly reporting these products 
and, therefore, we believe these claims are incorrectly coded. Although 
we do not normally examine hospital reporting patterns for individual 
services, pricing an individual item, such as a therapeutic 
radiopharmaceutical with low volume, may argue for more aggressive 
trimming to remove inaccurate claims. Therefore, we removed all claims 
with units greater than one for these two therapeutic 
radiopharmaceuticals before estimating their mean unit costs. Because 
we do not have ASP data for therapeutic radiopharmaceuticals that were 
used for payment in April 2009, the proposed payment rates included in 
Addenda A and B to this proposed rule are based on mean costs from 
historical hospital claims data available for this proposed rule, 
subject to the additional trimming of incorrectly coded claims for 
HCPCS codes A9543 and A9545 as described above.
    Similar to the ASP process already in place for drugs and 
biologicals, we are proposing to update ASP data for therapeutic 
radiopharmaceuticals through our quarterly process as updates become 
available. In addition, we are proposing to assess the availability of 
ASP data for therapeutic radiopharmaceuticals quarterly, and if ASP 
data become available midyear, we would transition at the next 
available quarter to ASP-based payment. For example, if ASP data are 
not available for the quarter beginning January 2010 (that is, ASP 
information reflective of third quarter CY 2009 sales are not submitted 
in October 2009), then the next opportunity to begin payment based on 
ASP data for a therapeutic radiopharmaceutical would be April 2010 if 
ASP data reflective of fourth quarter CY 2009 sales were submitted in 
January 2010.

        Table 29--Proposed CY 2010 Separately Payable Therapeutic
                          Radiopharmaceuticals
------------------------------------------------------------------------
                       CY 2009 short       Proposed CY     Proposed CY
CY 2009 HCPCS Code       descriptor         2010 APC         2010 SI
------------------------------------------------------------------------
A9517.............  I131 iodide cap, rx            1064               K
A9530.............  I131 iodide sol, rx            1150               K
A9543.............  Y90 ibritumomab, rx            1643               K
A9545.............  I131 tositumomab,              1645               K
                     rx.
A9563.............  P32 Na phosphate...            1675               K
A9564.............  P32 chromic                    1676               K
                     phosphate.

[[Page 35336]]

 
A9600.............  Sr89 strontium.....            0701               K
A9605.............  Sm 153 lexidronm...            0702               K
------------------------------------------------------------------------

6. Proposed Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes, But Without OPPS Hospital Claims 
Data
    Public Law 108-173 does not address the OPPS payment in CY 2005 and 
after for drugs, biologicals, and radiopharmaceuticals that have 
assigned HCPCS codes, but that do not have a reference AWP or approval 
for payment as pass-through drugs or biologicals. Because there is no 
statutory provision that dictated payment for such drugs, biologicals 
and radiopharmaceuticals in CY 2005, and because we had no hospital 
claims data to use in establishing a payment rate for them, we 
investigated several payment options for CY 2005 and discussed them in 
detail in the CY 2005 OPPS final rule with comment period (69 FR 65797 
through 65799).
    For CYs 2005 to 2007, we implemented a policy to provide separate 
payment for new drugs, biologicals, and radiopharmaceuticals with HCPCS 
codes (specifically those new drug, biological, and radiopharmaceutical 
HCPCS codes in each of those calendar years that did not crosswalk to 
predecessor HCPCS codes) but which did not have pass-through status, at 
a rate that was equivalent to the payment they received in the 
physician's office setting, established in accordance with the ASP 
methodology for drugs and biologicals, and based on charges adjusted to 
cost for radiopharmaceuticals. For CYs 2008 and 2009, we finalized a 
policy to provide payment for new drugs (excluding contrast agents) and 
biologicals (excluding implantable biologicals for CY 2009) with HCPCS 
codes, but which did not have pass-through status and were without OPPS 
hospital claims data, at ASP+5 percent and ASP+4 percent, respectively, 
consistent with the final OPPS payment methodology for other separately 
payable drugs and biologicals. New therapeutic radiopharmaceuticals 
were paid at charges adjusted cost based on the statutory requirement 
for CY 2008 and CY 2009 and payment for new diagnostic 
radiopharmaceuticals was packaged in both years. For CY 2010, we are 
proposing to continue the CY 2009 payment methodology for new drugs 
(excluding contrast agents) and nonimplantable biologicals and extend 
the methodology to payment for new therapeutic radiopharmaceuticals, 
when their period of payment at charges adjusted to cost no longer 
would apply. Therefore, for CY 2010, we are proposing to provide 
payment for new drugs (excluding contrast agents), nonimplantable 
biologicals, and therapeutic radiopharmaceuticals with HCPCS codes 
(those new CY 2010 drug (excluding contrast agents), nonimplantable 
biological, and therapeutic radiopharmaceutical HCPCS codes that do not 
crosswalk to CY 2009 HCPCS codes), but which do not have pass-through 
status and are without OPPS hospital claims data, at ASP+4 percent, 
consistent with the proposed CY 2010 payment methodology for other 
separately payable nonpass-through drugs, nonimplantable biologicals, 
and therapeutic radiopharmaceuticals. We believe this proposed policy 
would ensure that new nonpass-through drugs, nonimplantable 
biologicals, and therapeutic radiopharmaceuticals would be treated like 
other drugs, nonimplantable biologicals, and therapeutic 
radiopharmaceuticals under the OPPS, unless they are granted pass-
through status. Only if they are pass-through drugs, nonimplantable 
biologicals, or therapeutic radiopharmaceuticals would they receive a 
different payment for CY 2010, generally equivalent to the payment 
these drugs and biologicals would receive in the physician's office 
setting, consistent with the requirements of the statute. We are 
proposing to continue packaging payment for all new nonpass-through 
diagnostic radiopharmaceuticals, contrast agents, and implantable 
biologicals with HCPCS codes (those new CY 2010 diagnostic 
radiopharmaceutical, contrast agent, and implantable biological HCPCS 
codes that do not crosswalk to predecessor HCPCS codes), consistent 
with the proposed packaging of all existing nonpass-through diagnostic 
radiopharmaceuticals, contrast agents and implantable biologicals, as 
discussed in more detail in section V.B.2.d. of this proposed rule.
    In accordance with the OPPS ASP methodology, in the absence of ASP 
data, we are proposing, for CY 2010, to continue the policy we 
implemented beginning in CY 2005 of using the WAC for the product to 
establish the initial payment rate for new nonpass-through drugs and 
biologicals with HCPCS codes, but which are without OPPS claims data. 
However, we note that if the WAC is also unavailable, we would make 
payment at 95 percent of the product's most recent AWP. We also are 
proposing to assign status indicator ``K'' to HCPCS codes for new drugs 
and nonimplantable biologicals without OPPS claims data and for which 
we have not granted pass-through status. We further note that, with 
respect to new items for which we do not have ASP data, once their ASP 
data become available in later quarter submissions, their payment rates 
under the OPPS would be adjusted so that the rates would be based on 
the ASP methodology and set to the finalized ASP-based amount (proposed 
for CY 2010 at ASP+4 percent) for items that have not been granted 
pass-through status.
    For CY 2010, we also are proposing to base payment for new 
therapeutic radiopharmaceuticals with HCPCS codes as of January 1, 
2010, but which do not have pass-through status, on the WACs for these 
products if ASP data for these therapeutic radiopharmaceuticals are not 
available. If the WACs are also unavailable, we are proposing to make 
payment for new therapeutic radiopharmaceuticals at 95 percent of their 
most recent AWPs because we would not have mean costs from hospital 
claims data upon which to base payment. Analogous to new drugs and 
biologicals, we are proposing to assign status indicator ``K'' to HCPCS 
codes for new therapeutic radiopharmaceuticals for which we have not 
granted pass-through status.
    Consistent with other ASP-based payments, for CY 2010, we are 
proposing to make any changes to the payment amounts for new drugs and 
biologicals in the CY 2010 OPPS/ASC final rule with comment period and 
also on a quarterly basis on the CMS Web site during CY 2010 if later 
quarter ASP submissions (or more recent WACs or

[[Page 35337]]

AWPs) indicate that changes to the payment rates for these drugs and 
biologicals are necessary. The payment rates for new therapeutic 
radiopharmaceuticals would also be changed accordingly, based on later 
quarter ASP submissions. We note that the new CY 2010 HCPCS codes for 
drugs, biologicals, and therapeutic radiopharmaceuticals are not 
available at the time of development of this proposed rule. However, 
they will be included in the CY 2010 OPPS/ASC final rule with comment 
period where they will be assigned comment indicator ``NI'' to reflect 
that their interim final OPPS treatment is open to public comment on 
the CY 2010 OPPS/ASC final rule with comment period.
    There are several nonpass-through drugs and biologicals that were 
payable in CY 2008 and/or CY 2009 for which we do not have any CY 2008 
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 for which we do have pricing information for the ASP 
methodology. We note that there are currently no therapeutic 
radiopharmaceuticals in this category. In order to determine the 
packaging status of these items for CY2010, we calculated an estimate 
of the per day cost of each of these items by multiplying the payment 
rate for each product based on ASP+4 percent, similar to other nonpass-
through drugs and biologicals paid separately under the OPPS, by an 
estimated average number of units of each product that would typically 
be furnished to a patient during one administration in the hospital 
outpatient setting. We are proposing to package items for which we 
estimated the per administration cost to be less than or equal to $65, 
which is the general packaging threshold that we are proposing for 
drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals 
in CY 2010. We are proposing to pay separately for items with an 
estimated per day cost greater than $65 (with the exception of 
diagnostic radiopharmaceuticals, contrast agents and implantable 
biologicals, which we are proposing to continue to package regardless 
of cost, as discussed in more detail in section V.B.2.d. of this 
proposed rule) in CY 2010. We are proposing that the CY 2010 payment 
for separately payable items without CY 2008 claims data would be ASP+4 
percent, similar to payment for other separately payable nonpass-
through drugs and biologicals under the OPPS. In accordance with the 
ASP methodology used in the physician's office setting, in the absence 
of ASP data, we are proposing to use the WAC for the product to 
establish the initial payment rate. However, we note that if the WAC is 
also unavailable, we would make payment at 95 percent of the most 
recent AWP available.
    Table 30 lists all of the nonpass-through drugs and biologicals 
without available CY 2008 claims data to which these policies would 
apply in CY 2010.

                           Table 30--Drugs and Biologicals Without CY 2008 Claims Data
----------------------------------------------------------------------------------------------------------------
                                                           Estimated
                                                        average number                              Proposed CY
      CY 2009 HCPCS code       CY 2009 long descriptor   of units per      Proposed CY 2010 SI       2010 APC
                                                        administration
----------------------------------------------------------------------------------------------------------------
90681........................  Rotavirus vaccine,                    1  K                                   1239
                                human, attenuated, 2
                                dose schedule, live,
                                for oral use.
90696........................  Diphtheria, tetanus                   1  N
                                toxoids, acellular
                                pertussis vaccine and
                                poliovirus vaccine,
                                inactivated (DTaP-
                                IPV), when
                                administered to
                                children 4 through 6
                                years of age, for
                                intramuscular use.
J0364........................  Injection, apomorphine               12  N
                                hydrochloride, 1 mg.
J2724........................  Injection, protein c               2240  K                                   1139
                                concentrate,
                                intravenous, human, 10
                                iu.
J3355........................  Injection,                            2  K                                   1741
                                urofollitropin, 75 IU.
J9215........................  Injection, interferon,                5  K                                   0865
                                alfa-n3, (human
                                leukocyte derived),
                                250,000 iu.
----------------------------------------------------------------------------------------------------------------

    Finally, there are eight drugs and biologicals, shown in Table 31 
below, that were payable in CY 2008, but for which we lack CY 2008 
claims data and any other pricing information for the ASP methodology. 
In CY 2009, for similar items without CY 2007 claims data and without 
pricing information for the ASP methodology, we stated that we were 
unable to determine their per day cost and we packaged these items for 
the year, assigning these items status indicator ``N.''
    For CY 2010, we are proposing to change the status indicator for 
the eight drugs and biologicals shown in Table 31 below to status 
indicator ``E'' (Not paid by Medicare when submitted on outpatient 
claims (any outpatient bill type)) as these drugs and biologicals are 
not currently sold or have been identified as obsolete. In addition, we 
are proposing to provide separate payment for these drugs and 
biologicals if pricing information reflecting recent sales becomes 
available mid-year in CY 2010 for the ASP methodology. If pricing 
information becomes available, we would assign the products status 
indicator ``K'' and pay for them separately for the remainder of CY 
2010.


 Table 31--Drugs and Biologicals Without Information on per day Cost and
           Without Pricing Information for the ASP Methodology
------------------------------------------------------------------------
   CY 2009 HCPCS code     CY 2009 short descriptor   Proposed CY 2010 SI
------------------------------------------------------------------------
90296...................  Diphtheria antitoxin....  E
90581...................  Anthrax vaccine, sc.....  E
90727...................  Plague vaccine, im......  E
J0128...................  Abarelix injection......  E
J0350...................  Injection anistreplase    E
                           30 u.
J0395...................  Arbutamine hcl injection  E
J1452...................  Intraocular Fomivirsen    E
                           na.
J2460...................  Oxytetracycline           E
                           injection.
------------------------------------------------------------------------


[[Page 35338]]

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

A. Background

    Section 1833(t)(6)(E) of the Act limits the total projected amount 
of transitional pass-through payments for drugs, biologicals, 
radiopharmaceuticals, and categories of devices for a given year to an 
''applicable percentage'' of total program payments estimated to be 
made under section 1833(t) of the Act for all covered services 
furnished for that year under the hospital OPPS. For a year before CY 
2004, the applicable percentage was 2.5 percent; for CY 2004 and 
subsequent years, we specify the applicable percentage up to 2.0 
percent.
    If we estimate before the beginning of the calendar year that the 
total amount of pass-through payments in that year would exceed the 
applicable percentage, section 1833(t)(6)(E)(iii) of the Act requires a 
uniform reduction in the amount of each of the transitional pass-
through payments made in that year to ensure that the limit is not 
exceeded. We make an estimate of pass-through spending to determine not 
only whether payments exceed the applicable percentage, but also to 
determine the appropriate reduction to the conversion factor for the 
projected level of pass-through spending in the following year in order 
to ensure that total estimated pass-through spending for the 
prospective payment year is budget neutral as required by section 
1883(t)(6)(E) of the Act.
    For devices, developing an estimate of pass-through spending in CY 
2010 entails estimating spending for two groups of items. The first 
group of items consists of device categories that were recently made 
eligible for pass-through payment and that would continue to be 
eligible for pass-through payment in CY 2010. The CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66778) describes the methodology 
we have used in previous years to develop the pass-through spending 
estimate for known device categories continuing into the applicable 
update year. The second group contains items that we know are newly 
eligible, or project would be newly eligible, for device pass-through 
payment in the remaining quarters of CY 2009 or beginning in CY 2010. 
As discussed in section V.A.4. of this proposed rule, because we are 
proposing that, beginning in CY 2010, the pass-through evaluation 
process and pass-through payment for implantable biologicals newly 
approved for pass-through payment beginning on or after January 1, 
2010, that are always surgically inserted or implanted (through a 
surgical incision or a natural orifice) would be the device pass-
through process and payment methodology only, the estimate of pass-
through spending for these implantable biologicals newly eligible for 
pass-through payment beginning in CY 2010 would be included in the 
pass-through spending estimate for this second group of device 
categories. The sum of the CY 2010 pass-through estimates for these two 
groups of device categories would equal the total CY 2010 pass-through 
spending estimate for device categories with pass-through status.
    For devices eligible for pass-through payment, section 
1833(t)(6)(D)(ii) of the Act establishes the pass-through amount as the 
amount by which the hospital's charges for the device, adjusted to 
cost, exceeds the portion of the otherwise applicable Medicare OPD fee 
schedule that the Secretary determines is associated with the device. 
As discussed in section IV.A.2. of this proposed rule, we deduct from 
the pass-through payment for an identified device category eligible for 
pass-through payment an amount that reflects the portion of the APC 
payment amount that we determine is associated with the cost of the 
device, defined as the device APC offset amount, when we believe that 
predecessor device costs for the device category newly approved for 
pass-through payment (hereinafter referred to as the new device 
category) are already packaged into the existing APC structure. For 
each device category that becomes newly eligible for device pass-
through payment, including an implantable biological under our CY 2010 
proposal, we estimate pass-through spending to be the difference 
between payment for the device category and the device APC offset 
amount, if applicable, for the procedures that would use the device. If 
we determine that predecessor device costs for the new device category 
are not already included in the existing APC structure, the pass-
through spending estimate for the device category would be the full 
payment at charges adjusted to cost.
    For drugs and biologicals eligible for pass-through payment, 
section 1833(t)(6)(D)(i) of the Act establishes the pass-through 
payment amount as the amount by which the amount authorized under 
section 1842(o) of the Act (or, if the drug or biological is covered 
under a competitive acquisition contract under section 1847B of the 
Act, an amount determined by the Secretary equal to the average price 
for the drug or biological for all competitive acquisition areas and 
year established under such section as calculated and adjusted by the 
Secretary) exceeds the portion of the otherwise applicable fee schedule 
amount that the Secretary determines is associated with the drug or 
biological. Because we are proposing to pay for most nonpass-through 
separately payable drugs and nonimplantable biologicals under the CY 
2010 OPPS at ASP+4 percent, which represents the otherwise applicable 
fee schedule amount associated with most pass-through drugs and 
biologicals, and because we would pay for pass-through drugs and 
nonimplantable biologicals at ASP+6 percent or the Part B drug CAP 
rate, if applicable, our estimate of drug and nonimplantable biological 
pass-through payment for CY 2010 is not zero. Furthermore, payment for 
certain drugs, specifically diagnostic radiopharmaceuticals, contrast 
agents, and implantable biologicals without pass-through status, would 
always be packaged into payment for the associated procedures because 
these products would never be separately paid. However, all pass-
through diagnostic radiopharmaceuticals and contrast agents and those 
implantable biologicals with pass-through status approved prior to CY 
2010 would be paid based at ASP+6 percent or the Part B drug CAP rate, 
if applicable, like other pass-through drugs and biologicals. 
Therefore, our estimate of pass-through payment for all diagnostic 
radiopharmaceuticals and contrast agents and those implantable 
biologicals with pass-through status approved prior to CY 2010 is also 
not zero.
    In section V.A.6. of this proposed rule, we discuss our proposal to 
determine if the cost of certain ``policy-packaged'' drugs, including 
diagnostic radiopharmaceuticals and contrast agents, are already 
packaged into the existing APC structure. If we determine that a 
``policy-packaged'' drug approved for pass-through payment resembles 
predecessor diagnostic radiopharmaceuticals and contrast agents already 
included in the costs of the APCs that would be associated with the 
drug receiving pass-through payment, we are proposing to offset the 
amount of pass-through payment for diagnostic radiopharmaceuticals and 
contrast agents. For these drugs, the APC offset amount would be the 
portion of the APC payment for the specific procedure being performed 
with the diagnostic radiopharmaceutical or contrast agent receiving 
pass-through payment that is attributable to diagnostic 
radiopharmaceuticals and contrast agents, which we refer to as the

[[Page 35339]]

``policy-packaged'' drug APC offset amount. If we determine that an 
offset is appropriate for a specific diagnostic radiopharmaceutical or 
contrast agent receiving pass-through payment, we would reduce our 
estimate of pass-through payment for these drugs by this amount. We 
have not established a policy to offset pass-through payment for 
implantable biologicals when approved for pass-through payment as a 
drug or biological, that is, for CY 2009 and earlier, so we would 
consider full payment at ASP+6 percent for these implantable 
biologicals receiving biological pass-through payment in our estimate 
of CY 2010 pass-through spending for drugs and biologicals.
    We note that the Part B drug CAP program has been suspended 
beginning January 1, 2009. We refer readers to the Medicare Learning 
Network (MLN) Matters Special Edition article SE0833 for more 
information on this suspension. As of the publication of this proposed 
rule, the Part B drug CAP program has not been reinstituted. Therefore, 
for this proposed rule, we will continue to not have an effective Part 
B drug CAP rate for pass-through drugs and biologicals. Similar to 
estimates for devices, the first group of drugs and biologicals 
requiring a pass-through payment estimate consists of those products 
that were recently made eligible for pass-through payment and that 
would continue to be eligible for pass-through payment in CY 2010. The 
second group contains drugs and nonimplantable biologicals that we know 
are newly eligible, or project would be newly eligible, beginning in CY 
2010. The sum of the CY 2010 pass-through estimates for these two 
groups of drugs and biologicals would equal the total CY 2010 pass-
through spending estimate for drugs and biologicals with pass-through 
status.

B. Proposed Estimate of Pass-Through Spending

    We are proposing to set the applicable percentage limit at 2.0 
percent of the total OPPS projected payments for CY 2010, consistent 
with our OPPS policy from CY 2004 through 2009. As we discuss in 
section IV.A. of this proposed rule, there are currently no device 
categories receiving pass-through payment in CY 2009 that would 
continue for payment during CY 2010. Therefore, there are no device 
categories in the first group, that is, device categories recently made 
eligible for pass-through payment and continuing into CY 2010, and the 
estimate for this group is $0.
    As stated earlier, we are proposing in section V.A.4. of this 
proposed rule to specify that, beginning in CY 2010, the pass-through 
evaluation process and pass-through payment for implantable biologicals 
that are always surgically inserted or implanted (through a surgical 
incision or a natural orifice) would be the device pass-through process 
and payment methodology only. Therefore, we are proposing to continue 
considering existing implantable biologicals approved for pass-through 
payment under the drugs and biologicals pass-through provision prior to 
CY 2010 as drugs and biologicals for pass-through payment estimate 
purposes. These implantable biologicals that have been approved for 
pass-through status prior to CY 2010 would continue to be considered 
drugs and biologicals until they expire from pass-through status. 
Therefore, the pass-through spending estimate for this first group of 
pass-through devices would not include currently eligible implantable 
biologicals that have been granted pass-through status prior to CY 
2010.
    In section V.A.4. of this proposed rule, we are proposing that 
payment for implantable biologicals newly eligible for pass-through 
payment beginning in CY 2010 would be based on hospital charges 
adjusted to cost, rather than the ASP methodology that is applicable to 
pass-through drugs and biologicals. Therefore, we are proposing that, 
beginning in CY 2010, the estimate of pass-through spending for 
implantable biologicals first paid as pass-through devices in CY 2010 
be based on the payment methodology for pass-through devices, and be 
included in the device pass-through spending estimate.
    In estimating CY 2010 pass-through spending for device categories 
in the second group, that is, device categories that we knew at the 
time of the development of this proposed rule would be newly eligible 
for pass-through payment in CY 2010 (of which there are none), 
additional device categories (including categories that would describe 
implantable biologicals) that we estimate could be approved for pass-
through status subsequent to the development of this proposed rule and 
before January 1, 2010, and contingent projections for new categories 
(including categories that would describe implantable biologicals in 
the second through fourth quarters of CY 2010), we are proposing to use 
the general methodology described in the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66778), while also taking into account 
recent OPPS experience in approving new pass-through device categories. 
There are no new device categories (including categories that would 
describe implantable biologicals) for CY 2010 of which we are aware at 
the time of development of this proposed rule. The estimate of CY 2010 
pass-through spending for this second group is $10.0 million.
    Employing our established methodology that the estimate of pass-
through device spending in CY 2010 incorporates CY 2010 estimates of 
pass-through spending for known device categories continuing in CY 
2010, those known or projected to be first effective January 1, 2010, 
and those device categories projected to be approved during subsequent 
quarters of CY 2009 or CY 2010, our proposed estimate of total pass-
through spending for device categories is $10.0 million for CY 2010.
    To estimate CY 2010 pass-through spending for drugs and biologicals 
in the first group, specifically those drugs (including 
radiopharmaceuticals and contrast agents) and biologicals (including 
implantable biologicals) recently made eligible for pass-through 
payment and continuing into CY 2010, we are proposing to utilize the 
most recent Medicare physician's office data regarding their 
utilization, information provided in the respective pass-through 
applications, historical hospital claims data, pharmaceutical industry 
information, and clinical information regarding those drugs or 
biologicals, in order to project the CY 2010 OPPS utilization of the 
products. For the known drugs and biologicals (excluding diagnostic 
radiopharmaceuticals, contrast agents, and implantable biologicals) 
that would continue on pass-through status in CY 2010, we then estimate 
the total pass-through payment amount as the difference between ASP+6 
percent or the Part B drug CAP rate, as applicable, and ASP+4 percent, 
aggregated across the projected CY 2010 OPPS utilization of these 
products. Because payment for a diagnostic radiopharmaceutical or 
contrast agent would be packaged if the product were not paid 
separately due to its pass-through status, we include in the pass-
through estimate the difference between payment for the drug or 
biological at ASP+6 percent (or WAC+6 percent, or 95 percent of AWP, if 
ASP information is not available) and the ``policy-packaged'' drug APC 
offset amount, if we have determined that the diagnostic 
radiopharmaceutical or contrast agent approved for pass-through payment 
resembles predecessor diagnostic radiopharmaceuticals and contrast 
agents already included in the costs of the APCs that would be 
associated with the drug receiving pass-through payment. Because 
payment for an

[[Page 35340]]

implantable biological continuing on pass-through status in CY 2010 
would be packaged if the product were not paid separately due to its 
pass-through status and because we have not established a pass-through 
payment offset policy for implantable biologicals when approved for 
pass-through payment as biologicals, that is, for CY 2009 and earlier, 
we include in the pass-through spending estimate the full payment for 
these implantable biological at ASP+6 percent (or WAC+6 percent or 95 
percent of AWP, if ASP is not available). Based on the results of these 
analyses, we are proposing the estimated pass-through spending 
attributable to the first group (that is, the known drugs and 
biologicals, including implantable biologicals continuing with pass-
through eligibility in CY 2010) described above to be approximately 
$8.9 million for CY 2010. This $8.9 million estimate of CY 2010 pass-
through spending for the first group of pass-through drugs and 
biologicals reflects the current pass-through drugs and biologicals 
that are continuing on pass-through status into CY 2010; these products 
are displayed in Table 22 in section V.A.3. of this proposed rule.
    To estimate CY 2010 pass-through spending for drugs and 
nonimplantable biologicals in the second group (that is, drugs and 
nonimplantable biologicals that we know at the time of development of 
this proposed rule would be newly eligible for pass-through payment in 
CY 2010 (of which there are none), additional drugs and nonimplantable 
biologicals that we estimate could be approved for pass-through status 
subsequent to the development of this proposed rule and before January 
1, 2010, and projections for new drugs and nonimplantable biologicals 
that could be initially eligible for pass-through payment in the second 
through fourth quarters of CY 2010, we are proposing to use utilization 
estimates from pass-through applicants, pharmaceutical industry data, 
clinical information, recent trends in the per unit ASPs of hospital 
outpatient drugs, and projected annual changes in service volume and 
intensity as our basis for making the CY 2010 pass-through payment 
estimate. We also are considering the most recent OPPS experience in 
approving new pass-through drugs and nonimplantable biologicals. As 
noted earlier, consistent with our proposal discussed in section V.A.4. 
of this proposed rule, we are proposing to include new implantable 
biologicals that we would expect to be approved for pass-through status 
as devices beginning in CY 2010 in the second group of items considered 
for device pass-through estimate purposes. Therefore, we are not 
including implantable biologicals in the second group of items in the 
drug and biological pass-through spending estimate. We also are 
proposing in section V.A.5. of this proposed rule to revise our pass-
through payment policy regarding ``new'' drugs and biologicals that 
were not receiving hospital outpatient payment as of December 31, 1996 
and that also meet the other criteria for receiving pass-through 
payment. Specifically, we are proposing to change the start date of the 
pass-through payment eligibility period for a ``new'' drug or 
biological from the first date on which pass-through payment is made to 
the date on which payment is first made for a drug or biological as an 
outpatient hospital service under Part B, using the date of first sale 
of the drug or biological in the United States after FDA approval as a 
proxy, to better reflect the statutory provisions for pass-through 
payment under section 1833(t)(6) of the Act. As we developed our CY 
2010 estimate of pass-through spending, we considered the most recent 
OPPS experience in approving new pass-through drugs and nonimplantable 
biologicals. We note that a number of the drugs and biologicals 
currently receiving pass-through payment in CY 2009 would not be 
eligible for pass-through payment under the proposed revised definition 
of the pass-through payment eligibility period. Therefore, we have 
reduced our estimate of CY 2010 pass-through spending for new drugs and 
nonimplantable biologicals that could be initially eligible for pass-
through payment beginning in CY 2010 to take into consideration the 
potential effect of our proposed CY 2010 pass-through payment 
eligibility period policy on the future number of drugs and biologicals 
newly approved for pass-through payment in comparison with our 
historical OPPS experience over the past several years.
    Based on the results of these analyses, we are proposing the 
estimated pass-through spending attributable to this second group of 
drugs and biologicals to be approximately $19.1 million for CY 2010. We 
note that, as discussed in section V.A. of this proposed rule, 
radiopharmaceuticals are considered drugs for pass-through purposes. 
Therefore, we have included radiopharmaceuticals as drugs in our 
proposed CY 2010 pass-through spending estimate.
    In accordance with the comprehensive methodology described above in 
this section, we estimate that total pass-through spending for the 
device categories and the drugs and biologicals that are continuing for 
pass-through payment into CY 2010 and those device categories, drugs, 
and nonimplantable biologicals that first become eligible for pass-
through status during CY 2010, would be approximately $38 million, 
which represents 0.12 percent of total OPPS projected payments for CY 
2010. Because we estimate that pass-through spending in CY 2010 would 
not amount to 2.0 percent of total projected OPPS CY 2010 program 
spending, we are proposing to return 1.88 percent of the pass-through 
pool to adjust the conversion factor, as we discuss in section II.B. of 
this proposed rule.

VII. Proposed OPPS Payment for Brachytherapy Sources

A. Background

    Section 1833(t)(2)(H) of the Act, as added by section 621(b)(2)(C) 
of Public Law 108-173 (MMA), mandated the creation of additional groups 
of covered OPD services that classify devices of brachytherapy 
consisting of a seed or seeds (or radioactive source) (``brachytherapy 
sources'') separately from other services or groups of services. The 
additional groups must reflect the number, isotope, and radioactive 
intensity of the brachytherapy sources furnished and include separate 
groups for palladium-103 and iodine-125 sources.
    Section 1833(t)(16)(C) of the Act, as added by section 621(b)(1) of 
Public Law 108-173, established payment for brachytherapy sources 
furnished from January 1, 2004, through December 31, 2006, based on a 
hospital's charges for each brachytherapy source furnished adjusted to 
cost. Under section 1833(t)(16)(C) of the Act, charges for the 
brachytherapy sources may not be used in determining any outlier 
payments under the OPPS for that period of payment. Consistent with our 
practice under the OPPS to exclude items paid at cost from budget 
neutrality consideration, these items were excluded from budget 
neutrality for that time period as well.
    In our CY 2007 annual OPPS rulemaking, we proposed and finalized a 
policy of prospective payment based on median costs for the 11 
brachytherapy sources for which we had claims data. We based the 
prospective payment rates on median costs for each source from our CY 
2005 claims data (71 FR 68102 through 71 FR 68115).
    Subsequent to publication of the CY 2007 OPPS/ASC final rule with 
comment period, section 107 of Public

[[Page 35341]]

Law 109-432 (MIEA-TRHCA) amended section 1833 of the Act. Specifically, 
section 107(a) of Public Law 109-432 amended section 1833(t)(16)(C) of 
the Act by extending the payment period for brachytherapy sources based 
on a hospital's charges adjusted to cost for 1 additional year, through 
December 31, 2007. Therefore, we continued to pay for brachytherapy 
sources based on charges adjusted to cost for CY 2007.
    Section 107(b)(1) of Public Law 109-432 amended section 
1833(t)(2)(H) of the Act by adding a requirement for the establishment 
of separate payment groups for ``stranded and non-stranded'' 
brachytherapy sources furnished on or after July 1, 2007, in addition 
to the existing requirements for separate payment groups based on the 
number, isotope, and radioactive intensity of brachytherapy sources 
under section 1833(t)(2)(H) of the Act. Section 107(b)(2) of Public Law 
109-432 authorized the Secretary to implement this requirement by 
``program instruction or otherwise.'' We note that public commenters 
who responded to the CY 2007 OPPS/ASC proposed rule asserted that 
stranded sources, which they described as embedded into the stranded 
suture material and separated within the strand by material of an 
absorbable nature at specified intervals, had greater production costs 
than non-stranded sources (71 FR 68113 through 68114).
    As a result of the statutory requirement to create separate groups 
for stranded and non-stranded sources as of July 1, 2007, we 
established several coding changes through a transmittal, effective 
July 1, 2007 (Transmittal 1259, dated June 1, 2007). Based on public 
comments received on the CY 2007 OPPS/ASC proposed rule and industry 
input, we were aware of three sources available in stranded and non-
stranded forms at that time: Iodine-125; palladium-103; and cesium-131 
(72 FR 42746). We created six new HCPCS codes to differentiate the 
stranded and non-stranded versions of iodine, palladium, and cesium 
sources.
    In Transmittal 1259, we indicated that if we receive information 
that any of the other sources now designated as non-stranded are also 
FDA-approved and marketed as a stranded source, we would create a code 
for the stranded source. We also established two ``Not Otherwise 
Specified'' (NOS) codes for billing stranded and non-stranded sources 
that are not yet known to us and for which we do not have source-
specific codes. We established HCPCS code C2698 (Brachytherapy source, 
stranded, not otherwise specified, per source) for stranded NOS sources 
and HCPCS code C2699 (Brachytherapy source, non-stranded, not otherwise 
specified, per source) for non-stranded NOS sources.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66784), we again finalized prospective payment for brachytherapy 
sources, beginning in CY 2008, with payment rates determined using the 
CY 2006 claims-based costs per source for each brachytherapy source. 
Consistent with our policy regarding APC payments made on a prospective 
basis, we finalized the policy in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66686) to subject the cost of brachytherapy 
sources to the outlier provision of section 1833(t)(5) of the Act, and 
to also subject brachytherapy source payment weights to scaling for 
purposes of budget neutrality. Therefore, brachytherapy sources could 
receive outlier payments if the costs of furnishing brachytherapy 
sources met the criteria for outlier payment. In addition, as noted in 
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66683), 
implementation of prospective payment for brachytherapy sources would 
provide opportunities for hospitals to receive additional payments 
under certain circumstances through the 7.1 percent rural SCH 
adjustment.
    For CY 2008, we also proposed and finalized a policy regarding 
payment for new brachytherapy sources for which we have no claims data 
(72 FR 42749 and 72 FR 66786, respectively). We indicated we would 
assign future new HCPCS codes for new brachytherapy sources to their 
own APCs, with prospective payment rates set based on our consideration 
of external data and other relevant information regarding the expected 
costs of the sources to hospitals. Finally, we proposed and finalized 
our policy to discontinue using status indicator ``H'' (Pass-Through 
Device Categories. Separate cost based pass-through payment; not 
subject to co-payment) because we would not be paying charges adjusted 
to costs after December 31, 2007, and instead adopted a policy of using 
status indicator ``K'' (which includes, among others, ``Brachytherapy 
Sources. Paid under OPPS; separate APC payment'') for CY 2008 (72 FR 
42749 and 72 FR 66785, respectively).
    After we finalized these proposals for CY 2008, section 106(a) of 
Public Law 110-173 (MMSEA) extended the charges-adjusted-to-cost 
payment methodology for brachytherapy sources for an additional 6 
months, through June 30, 2008. Because our final CY 2008 policies paid 
for brachytherapy sources at prospective rates based on median costs, 
we were unable to implement these policies during this extension.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41502), we again 
proposed prospective payment rates for brachytherapy sources for CY 
2009. We proposed to pay for brachytherapy sources at prospective rates 
based on their source-specific median costs as calculated from CY 2007 
claims data available for CY 2009 ratesetting. Subsequent to issuance 
of the CY 2009 OPPS/ASC proposed rule, Public Law 110-275 (MIPPA) was 
enacted on July 15, 2008. Section 142 of Public Law 110-275 amended 
section 1833(t)(16)(C) of the Act, as amended by section 106(a) of 
Public Law 110-173 (MMSEA), to further extend the payment period for 
brachytherapy sources based on a hospital's charges adjusted to cost 
from July 1, 2008, through December 31, 2009. Therefore, we continued 
to pay for brachytherapy sources at charges adjusted to cost in CY 2008 
from July 1 through December 31, and we maintained the assignment of 
status indicator ``H'' to brachytherapy sources for claims processing 
purposes in CY 2008. For CY 2009, we have continued to pay for all 
separately payable brachytherapy sources based on a hospital's charges 
adjusted to cost. Because brachytherapy sources are paid at charges 
adjusted to cost, we did not subject them to outlier payments under 
section 1833(t)(5) of the Act, or subject brachytherapy source payment 
weights to scaling for purposes of budget neutrality. Moreover, during 
the CY 2009 period of payment at charges adjusted to cost, 
brachytherapy sources are not eligible for the 7.1 percent rural SCH 
adjustment (as discussed in detail in section II.E. of this proposed 
rule).
    Furthermore, for CY 2009, we did not adopt the policy we 
established in the CY 2008 OPPS/ASC final rule with comment period of 
paying stranded and non-stranded NOS codes for brachytherapy sources, 
C2698 and C2699, based on a rate equal to the lowest stranded or non-
stranded prospective payment for such sources. Also, for CY 2009, we 
did not adopt the policy we established in the CY 2008 OPPS/ASC final 
rule with comment period regarding payment for new brachytherapy 
sources for which we have no claims data. NOS HCPCS codes C2698 and 
C2699 and newly established specific source codes are paid at charges 
adjusted to cost through December 31, 2009, consistent with section 142 
of Public Law 110-275.
    For CY 2009, we finalized our proposal to create new status 
indicator ``U'' (Brachytherapy Sources. Paid

[[Page 35342]]

under OPPS; separate APC payment) for brachytherapy source payment, 
instead of using status indicator ``K'' as proposed and finalized for 
CY 2008 for prospective payment, or status indicator ``H,'' used during 
the period of charges adjusted to cost payment. As noted in the CY 2009 
OPPS/ASC final rule with comment period (73 FR 68670), assigning a 
status indicator, such as status indicator ``K,'' to several types of 
items and services with potentially differing payment policies added 
unnecessary complexity to our operations. Status indicator ``U'' is 
used only for brachytherapy sources, regardless of their specific 
payment methodology for any period of time.
    At the February 2009 meeting, the APC Panel recommended paying for 
brachytherapy sources in CY 2010 using a prospective payment 
methodology based on median costs from claims data. The APC Panel 
reviewed CY 2007 and CY 2008 brachytherapy source median costs from 
claims data and noted the stability of the data from year to year.

B. Proposed OPPS Payment Policy

    Under section 142 of Public Law 110-275, payment for brachytherapy 
sources is mandated at charges adjusted to cost only through CY 2009. 
For CY 2010, we are proposing to adopt the general OPPS prospective 
payment methodology for brachytherapy sources, consistent with section 
1833(t)(2)(C) of the Act.
    As we have previously stated (72 FR 66780 and 73 FR 41502), we 
believe that adopting the general OPPS prospective payment methodology 
for brachytherapy sources is appropriate for a number of reasons. The 
general OPPS payment methodology uses median costs based on claims data 
to set the relative payment weights for hospital outpatient services. 
This payment methodology results in more consistent, predictable, and 
equitable payment amounts per source across hospitals by eliminating 
some of the extremely high and low payment amounts resulting from 
payment based on hospitals' charges adjusted to cost. We believe the 
OPPS prospective payment methodology would also provide hospitals with 
incentives for efficiency in the provision of brachytherapy services to 
Medicare beneficiaries. Moreover, this approach is consistent with our 
payment methodology for the vast majority of items and services paid 
under the OPPS.
    We are proposing to use CY 2008 claims data for setting the CY 2010 
payment rates for brachytherapy sources, as we are proposing for most 
other items and services that will be paid under the CY 2010 OPPS. For 
CY 2008, we have a full year of claims data for each of the separately 
payable sources, including iodine, palladium, and cesium sources that 
have stranded and non-stranded configurations. As indicated earlier, 
the APC Panel, at the February 2009 meeting, recommended using the 
median cost data for CY 2010 rates. Our proposal is consistent with the 
APC Panel's recommendation.
    We are proposing to adopt the other payment policies for 
brachytherapy sources we finalized in previous final rules. We are 
proposing to pay for the stranded and non-stranded NOS codes, HCPCS 
codes C2698 and C2699, at a rate equal to the lowest stranded or non-
stranded prospective payment rate for such sources, respectively, on a 
per source basis (as opposed, for example, to a per mci), which is 
based on the policy we established in the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66785). This proposed payment methodology 
for NOS sources would provide payment to a hospital for new sources, 
while encouraging interested parties to quickly bring new sources to 
our attention so that specific coding and payment could be established.
    We also are proposing to implement the policy we established in the 
CY 2008 OPPS/ASC final rule with comment period (which was superseded 
by section 142 of Pub. L. 110-275) regarding payment for new 
brachytherapy sources for which we have no claims data, based on the 
same reasons we discussed in that final rule with comment period (72 FR 
66786). That policy is intended to enable us to assign future new HCPCS 
codes for new brachytherapy sources to their own APCs, with prospective 
payment rates set based on our consideration of external data and other 
relevant information regarding the expected costs of the sources to 
hospitals.
    Consistent with our policy regarding APC payments made on a 
prospective basis, we are proposing to subject brachytherapy sources to 
outlier payments under section 1833(t)(5) of the Act, and also to 
subject brachytherapy source payment weights to scaling for purposes of 
budget neutrality. Therefore, brachytherapy sources could receive 
outlier payments if the costs of furnishing brachytherapy sources meet 
the criteria for outlier payment. In addition, as noted in the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66683), implementation 
of prospective payments for brachytherapy sources would provide 
opportunities for hospitals to receive additional payments in CY 2010 
under certain circumstances through the 7.1 percent rural adjustment as 
described in section II.E. of this proposed rule. Therefore, we are 
proposing to pay for brachytherapy sources at prospective payment rates 
based on their source-specific median costs for CY 2010. The separately 
payable brachytherapy source HCPCS codes, long descriptors, APCs, 
status indicators, and approximate median costs that we are proposing 
for CY 2010 are presented in Table 32.

                     Table 32--Proposed Separately Payable Brachytherapy Sources for CY 2010
----------------------------------------------------------------------------------------------------------------
                                                                                                      CY 2010
      CY 2009 HCPCS code       CY 2009 long descriptor    Proposed CY      Proposed CY 2010 SI      approximate
                                                           2010 APC                                 median cost
----------------------------------------------------------------------------------------------------------------
A9527........................  Iodine I-125, sodium               2632  U                                    $38
                                iodide solution,
                                therapeutic, per
                                millicurie.
C1716........................  Brachytherapy source,              1716  U                                     42
                                non-stranded, Gold-
                                198, per source.
C1717........................  Brachytherapy source,              1717  U                                    220
                                non-stranded, High
                                Dose Rate Iridium-192,
                                per source.
C1719........................  Brachytherapy source,              1719  U                                     35
                                non-stranded, Non-High
                                Dose Rate Iridium-192,
                                per source.
C2616........................  Brachytherapy source,              2616  U                                 15,599
                                non-stranded, Yttrium-
                                90, per source.
C2634........................  Brachytherapy source,              2634  U                                     60
                                non-stranded, High
                                Activity, Iodine-125,
                                greater than 1.01 mCi
                                (NIST), per source.
C2635........................  Brachytherapy source,              2635  U                                     28
                                non-stranded, High
                                Activity, Palladium-
                                103, greater than 2.2
                                mCi (NIST), persource.
C2636........................  Brachytherapy linear               2636  U                                     19
                                source, non-stranded,
                                Palladium-103, per 1
                                MM.
C2638........................  Brachytherapy source,              2638  U                                     43
                                stranded, Iodine-125,
                                per source.
C2639........................  Brachytherapy source,              2639  U                                     36
                                non-stranded, Iodine-
                                125, per source.

[[Page 35343]]

 
C2640........................  Brachytherapy source,              2640  U                                     58
                                stranded, Palladium-
                                103, per source.
C2641........................  Brachytherapy source,              2641  U                                     58
                                non-stranded,
                                Palladium-103, per
                                source.
C2642........................  Brachytherapy source,              2642  U                                    100
                                stranded, Cesium-131,
                                per source.
C2643........................  Brachytherapy source,              2643  U                                     66
                                non-stranded, Cesium-
                                131, per source.
C2698........................  Brachytherapy source,              2698  U                                    *43
                                stranded, not
                                otherwise specified,
                                per source.
C2699........................  Brachytherapy source,              2699  U                                    *28
                                non-stranded, not
                                otherwise specified,
                                per source.
----------------------------------------------------------------------------------------------------------------
* Median cost is that of the lowest cost stranded or non-stranded source upon which CY 2010 payment for the NOS
  HCPCS code would be based.

    We continue to invite hospitals and other parties to submit 
recommendations to us for new HCPCS codes to describe new brachytherapy 
sources consisting of a radioactive isotope, including a detailed 
rationale to support recommended new sources. Such recommendations 
should be directed to the Division of Outpatient Care, Mail Stop C4-05-
17, Centers for Medicare and Medicaid Services, 7500 Security 
Boulevard, Baltimore, MD 21244. We will continue to add new 
brachytherapy source codes and descriptors to our systems for payment 
on a quarterly basis.

VIII. Proposed OPPS Payment for Drug Administration Services

A. Background

    In CY 2005, in response to the recommendations made by public 
commenters and the hospital industry, OPPS transitioned from Level II 
HCPCS Q-codes to the use of CPT codes for drug administration services. 
These CPT codes allowed specific reporting of services regarding the 
number of hours for an infusion and provided consistency in coding 
between Medicare and other payers. (For a discussion regarding coding 
and payment for drug administration services prior to CY 2005, we refer 
readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66787).)
    While hospitals began adopting CPT codes for outpatient drug 
administration services in CY 2005, physicians paid under the MPFS were 
using HCPCS G-codes in CY 2005 to report office-based drug 
administration services. These G-codes were developed in anticipation 
of substantial revisions to the drug administration CPT codes by the 
CPT Editorial Panel that were expected for CY 2006.
    In CY 2006, as anticipated, the CPT Editorial Panel revised its 
coding structure for drug administration services and incorporated new 
concepts such as initial, sequential, and concurrent services, into a 
structure that previously distinguished services based on type of 
administration (chemotherapy/nonchemotherapy), method of administration 
(injection/infusion/push), and for infusion services, first hour and 
additional hours. For CY 2006, we implemented the CY 2006 drug 
administration CPT codes that did not reflect the concepts of initial, 
sequential, and concurrent services under the OPPS, and we created 
HCPCS C-codes that generally paralleled the CY 2005 CPT codes for 
reporting these other services.
    For CY 2007, as a result of public comments on the proposed rule 
and feedback from the hospital community and the APC Panel, we 
implemented the full set of CPT codes for drug administration services, 
including codes incorporating the concepts of initial, sequential, and 
concurrent services. In addition, the CY 2007 update process offered us 
the first opportunity to consider data gathered from the use of CY 2005 
CPT codes for purposes of ratesetting. For CY 2007, we used CY 2005 
claims data to implement a six-level APC structure for drug 
administration services. In CY 2008, we continued to use the full set 
of CPT codes for drug administration services and continued our 
assignment of drug administration services to this six-level APC 
structure.
    For CY 2009, we continued to allow hospitals to use the full set of 
CPT codes for drug administration services but moved from a six-level 
APC structure to a five-level APC structure. We note that, while there 
were changes in the CPT numerical coding for nonchemotherapy drug 
administration services in CY 2009, the existing CPT codes were only 
renumbered and there were no significant changes to the code 
descriptors themselves. As we discussed in the CY 2009 OPPS/ASC final 
rule with comment period (73 FR 68672), the CY 2009 ratesetting process 
afforded us the first opportunity to examine hospital claims data for 
the full set of CPT codes that reflected the concepts of initial, 
sequential, and concurrent services. For CY 2009, we performed our 
standard annual OPPS review of the clinical and resource 
characteristics of the drug administration CPT codes assigned to the 
six-level CY 2008 APC structure based on the CY 2007 claims data 
available for the CY 2009 OPPS/ASC proposed rule. As a result of our 
hospital cost analysis and detailed clinical review, we adopted a five-
level APC structure for CY 2009 drug administration services to more 
appropriately reflect their resource utilization in APCs that also 
group clinically similar services. As we noted in the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68671), these APCs generally 
demonstrated the clinically expected and actually observed comparative 
relationships between the median costs of different types of drug 
administration services, including initial and additional services; 
chemotherapy and other diagnostic, prophylactic, or therapeutic 
services; injections and infusions; and simple and complex methods of 
drug administration. In the CY 2009 OPPS/ASC final rule with comment 
period (73 FR 68673), we indicated our belief that the five-level APC 
structure was the most appropriate structure based on updated hospital 
claims data for the full range of CPT drug administration codes for the 
CY 2009 OPPS/ASC final rule with comment period because the structure 
resulted in payment groups with greater clinical and resource 
homogeneity.

B. Proposed Coding and Payment for Drug Administration Services

    For CY 2010, we are proposing to continue to use the full set of 
CPT codes for drug administration services. In addition, as a part of 
our standard annual review, we analyzed the assignments of drug 
administration CPT codes into the five-level APC structure and, based 
on the results of this review, are proposing to continue a five-level 
APC structure for CY 2010. Further, we are proposing some minor 
reconfigurations of the APCs as

[[Page 35344]]

described below to account for changes in HCPCS code-specific median 
costs resulting from updated CY 2008 claims data and the most recent 
cost report data, and the CY 2010 drug payment proposal that is 
discussed in section V.B.3.b. of this proposed rule.
    In the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68117), we explained that we expected CPT codes for additional hours of 
infusion to be reported with CPT codes for the initial hour of drug 
infusion. This would result in a substantial number of claims for drug 
administration services that were unusable for ratesetting purposes 
because multiple services would be present on the same bill and result 
in essentially no correctly coded claims upon which to set the median 
costs for the CPT codes describing additional hours of infusion. (We 
refer readers to section II.A.1.b. of this proposed rule for a further 
discussion of multiple bills and our ratesetting methodology.) In order 
to use these claims for ratesetting purposes for both the initial drug 
administration codes and the additional hour drug administration codes, 
we adopted the policy of adding the additional hour drug administration 
codes to the bypass list in order to create ``pseudo'' single claims 
that would be useable for OPPS ratesetting purposes. After the creation 
of these ``pseudo'' single claims, we applied the standard OPPS 
methodology to calculate HCPCS code-specific median costs for these 
initial and additional hour drug administration codes.
    As we explained further in the CY 2007 OPPS/ASC final rule with 
comment period, bypassing these additional hour drug administration CPT 
codes and developing additional ``per unit'' claims provided a 
methodology for calculating median costs for these previously packaged 
drug administration services which attributed all of their line-item 
cost data to their assigned APCs. However, we noted that this 
methodology allocates all packaged costs on claims for drug 
administration services to the associated initial hour of infusion 
code. Because these additional hours of infusion codes were always 
reported with other drug administration services, we expected that the 
packaging related to additional hours of infusion would be 
appropriately assigned to the initial drug administration service also 
included on the same claim. While we stated our belief that there are 
some packaged costs that are clinically related to the second and 
subsequent hours of infusion, especially for infusions of packaged 
drugs spanning several hours, we were not able to accurately assign 
representative portions of packaged costs to multiple different 
services due to the limitations of our claims data.
    We indicated that while this methodology did not assign any 
packaged costs to the additional hours of drug administration codes, we 
believed this methodology took into account all of the packaging on 
claims for drug administration services and provided a reasonable 
framework for developing median costs for drug administration services 
that were often provided in combination with one another.
    Since this approach was first adopted for CY 2007, we have updated 
and expanded the bypass methodology to reflect changing drug 
administration HCPCS codes that are recognized under the OPPS. We 
placed all of the add-on CPT codes for drug administration services, 
including the sequential infusion and intravenous push codes, on the 
bypass list in CY 2009 (73 FR 68513) in order to continue this 
framework for transforming these otherwise unusable multiple bills into 
``pseudo'' single claims that can be used for OPPS ratesetting 
purposes.
    Table 33 below displays the proposed configurations of the five 
drug administration APCs for CY 2010. In proposing to reassign several 
HCPCS codes for CY 2010, we have taken into consideration the resource 
characteristics of the services, as reflected in their HCPCS code-
specific median costs and their clinical characteristics. We believe 
the proposed APC configurations group drug administration services that 
share sufficiently similar clinical and resource characteristics, 
taking into consideration updated CY 2008 claims data and the most 
recent cost report data and common clinical scenarios that have been 
described to us.
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IX. Proposed OPPS Payment for Hospital Outpatient Visits

A. Background

    Currently, hospitals report visit HCPCS codes to describe three 
types of OPPS services: Clinic visits, emergency department visits, and 
critical care services. For OPPS purposes, we recognize clinic visit 
codes as those codes defined in the CPT codebook to report evaluation 
and management (E/M) services provided in the physician's office or in 
an outpatient or other ambulatory facility. We recognize emergency 
department visit codes as those codes used to report E/M services 
provided in the emergency department. Emergency department visit codes 
consist of five CPT codes that apply to Type A emergency departments, 
and five Level II HCPCS codes that apply to Type B emergency 
departments. For OPPS purposes, we recognize critical care codes as 
those CPT codes used by hospitals to report critical care services that 
involve the ``direct delivery by a physician(s) of medical care for a 
critically ill or critically injured patient,'' as defined by the CPT 
codebook. In Transmittal 1139, Change Request 5438, dated December 22, 
2006, we stated that, under the OPPS, the time that can be reported as 
critical care is the time spent by a physician and/or hospital staff 
engaged in active face-to-face critical care of a critically ill or 
critically injured patient. Under the OPPS, we also recognize HCPCS 
code G0390 (Trauma response team associated with hospital critical care 
service) for the reporting of a trauma response in association with 
critical care services.
    We are proposing to continue recognizing these CPT and HCPCS codes 
describing clinic visits, Type A and B emergency department visits, 
critical care services, and trauma team activation provided in 
association with critical care services for CY 2010. These codes are 
listed below in Table 34.

   Table 34--Proposed HCPCS Codes Used To Report Clinic and Emergency
              Department Visits and Critical Care Services
------------------------------------------------------------------------
       CY 2009 HCPCS code                   CY 2009 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).

[[Page 35350]]

 
99203..........................  Office or other outpatient visit for
                                  the evaluation and management of a new
                                  patient (Level 3).
99204..........................  Office or other outpatient visit for
                                  the evaluation and management of a new
                                  patient (Level 4).
99205..........................  Office or other outpatient visit for
                                  the evaluation and management of a new
                                  patient (Level 5).
99211..........................  Office or other outpatient visit for
                                  the evaluation and management of an
                                  established patient (Level 1).
99212..........................  Office or other outpatient visit for
                                  the evaluation and management of an
                                  established patient (Level 2).
99213..........................  Office or other outpatient visit for
                                  the evaluation and management of an
                                  established patient (Level 3).
99214..........................  Office or other outpatient visit for
                                  the evaluation and management of an
                                  established patient (Level 4).
99215..........................  Office or other outpatient visit for
                                  the evaluation and management of an
                                  established patient (Level 5).
------------------------------------------------------------------------
                 Emergency Department Visit HCPCS Codes
------------------------------------------------------------------------
99281..........................  Emergency department visit for the
                                  evaluation and management of a patient
                                  (Level 1).
99282..........................  Emergency department visit for the
                                  evaluation and management of a patient
                                  (Level 2).
99283..........................  Emergency department visit for the
                                  evaluation and management of a patient
                                  (Level 3).
99284..........................  Emergency department visit for the
                                  evaluation and management of a patient
                                  (Level 4).
99285..........................  Emergency department visit for the
                                  evaluation and management of a patient
                                  (Level 5).
G0380..........................  Type B emergency department visit
                                  (Level 1).
G0381..........................  Type B emergency department visit
                                  (Level 2).
G0382..........................  Type B emergency department visit
                                  (Level 3).
G0383..........................  Type B emergency department visit
                                  (Level 4).
G0384..........................  Type B emergency department visit
                                  (Level 5).
------------------------------------------------------------------------
                   Critical Care Services HCPCS Codes
------------------------------------------------------------------------
99291..........................  Critical care, evaluation and
                                  management of the critically ill or
                                  critically injured patient; first 30-
                                  74 minutes.
99292..........................  Critical care, evaluation and
                                  management of the critically ill or
                                  critically injured patient;
                                  eachadditional 30 minutes.
G0390..........................  Trauma response associated with
                                  hospital critical care service.
------------------------------------------------------------------------

    During the February 2009 APC Panel meeting, the APC Panel 
recommended that CMS present at the next APC Panel meeting an analysis 
of the most common diagnoses and services associated with Type A and 
Type B emergency department visits, including an analysis by hospital-
specific characteristics, as well as an analysis of CY 2008 claims data 
for clinic and emergency department (Types A and B) visits. The APC 
Panel also recommended that the work of the Visits and Observation 
Subcommittee continue. We are adopting these recommendations and plan 
to provide the requested data and analyses to the APC Panel at an 
upcoming meeting.

B. Proposed Policies for Hospital Outpatient Visits

1. Clinic Visits: New and Established Patient Visits
    As reflected in Table 34, hospitals use different CPT codes for 
clinic visits based on whether the patient being treated is a new or an 
established patient. Beginning in CY 2009, we refined the definitions 
of new and established patients to reflect whether or not the patient 
has been registered as an inpatient or outpatient of the hospital 
within the past 3 years. A patient who has been registered as an 
inpatient or outpatient of the hospital within the 3 years prior to a 
visit would be considered to be an established patient for that visit, 
while a patient who has not been registered as an inpatient or 
outpatient of the hospital within the 3 years prior to a visit would be 
considered to be a new patient for that visit. We refer readers to the 
CY 2009 OPPS/ASC final rule with comment period (73 FR 68677 through 
68680) for a full discussion of the refined definitions.
    We continue to believe that defining new or established patient 
status based on whether the patient has been registered as an inpatient 
or outpatient of the hospital within the 3 years prior to a visit will 
reduce hospitals' administrative burden associated with reporting 
appropriate clinic visit CPT codes. For CY 2010, we are proposing to 
continue recognizing the refined definitions of new and established 
patients, and to continue our policy of calculating median costs for 
clinic visits under the OPPS using historical hospital claims data. As 
discussed in detail in section II.A.2.e.(1) of this proposed rule and 
consistent with our CY 2009 policy, when calculating the median costs 
for the clinic visit APCs (0604 through 0608), we would utilize our 
methodology that excludes those claims for visits that are eligible for 
payment through the extended assessment and management composite APC 
8002 (Level I Extended Assessment and Management Composite). We believe 
that this approach would continue to result in the most accurate cost 
estimates for APCs 0604 through 0608 for CY 2010.
2. Emergency Department Visits
    Since CY 2007, we have recognized two different types of emergency 
departments for payment purposes under the OPPS--Type A emergency 
departments and Type B emergency departments. As described in greater 
detail below, by providing payment for two types of emergency 
departments, we recognize for OPPS payment purposes both the CPT 
definition of an emergency department, which requires the facility to 
be available 24 hours, and the requirements for emergency departments 
specified in the provisions of the Emergency Medical Treatment and 
Labor Act (EMTALA) (Pub. L. 99-272), which do not stipulate 24 hour 
availability but do specify other obligations for hospitals that offer 
emergency services. For more detailed information on the EMTALA 
provisions, we refer readers to the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68680).
    In the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68132), we finalized the definition of Type A emergency departments to 
distinguish them from Type B emergency

[[Page 35351]]

departments. A Type A emergency department must be available to provide 
services 24 hours a day, 7 days a week, and meet one or both of the 
following requirements related to the EMTALA definition of a dedicated 
emergency department, specifically: (1) It is licensed by the State in 
which it is located under the applicable State law as an emergency room 
or emergency department; or (2) It is held out to the public (by name, 
posted signs, advertising, or other means) as a place that provides 
care for emergency medical conditions on an urgent basis without 
requiring a previously scheduled appointment. For CY 2007 (71 FR 
68140), we assigned the five CPT E/M emergency department visit codes 
for services provided in Type A emergency departments to five created 
Emergency Visit APCs, specifically APC 0609 (Level 1 Emergency Visits), 
APC 0613 (Level 2 Emergency Visits), APC 0614 (Level 3 Emergency 
Visits), APC 0615 (Level 4 Emergency Visits), and APC 0616 (Level 5 
Emergency Visits). We defined a Type B emergency department as any 
dedicated emergency department that incurred EMTALA obligations, but 
did not meet the CPT definition of an emergency department. For 
example, a hospital department or facility that may be characterized as 
a Type B emergency department would meet the definition of a dedicated 
emergency department, but may not be available 24 hours a day, 7 days a 
week. Hospitals or facilities with such dedicated emergency departments 
incur EMTALA obligations with respect to an individual who presents to 
the department and requests, or has a request made on his or her 
behalf, examination or treatment for a medical condition.
    To determine whether visits to Type B emergency departments have 
different resource costs than visits to either clinics or Type A 
emergency departments, in the CY 2007 OPPS/ASC final rule with comment 
period (71 FR 68132), we finalized a set of five HCPCS G-codes for use 
by hospitals to report visits to all entities that meet the definition 
of a dedicated emergency department under the EMTALA regulations but 
that are not Type A emergency departments. These codes are called 
``Type B emergency department visit codes.'' In the CY 2007 OPPS/ASC 
final rule with comment period (71 FR 68132), we explained that these 
new HCPCS G-codes would serve as a vehicle to capture median cost and 
resource differences among visits provided by Type A emergency 
departments, Type B emergency departments, and clinics. We stated that 
the reporting of specific HCPCS G-codes for emergency department visits 
provided in Type B emergency departments would permit us to 
specifically collect and analyze the hospital resource costs of visits 
to these facilities in order to determine if, in the future, a proposal 
for an alternative payment policy might be warranted. We expected 
hospitals to adjust their charges appropriately to reflect differences 
in Type A and Type B emergency department visit costs.
    As we noted in the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68681), the CY 2007 claims data used for that rulemaking system 
were from the first year of claims data available for analysis that 
included hospital's cost data for these new Type B emergency department 
HCPCS visit codes. Based on our analysis of the CY 2007 claims data, we 
confirmed that the median costs of Type B emergency department visits 
were less than the median costs of Type A emergency department visits 
for all but the level 5 visit. In other words, the median costs from 
the CY 2007 hospital claims represented real differences in the 
hospital resource costs for the same level of visits in a Type A or 
Type B emergency department. Therefore, for CY 2009, we adopted the 
August 2008 APC Panel recommendation to assign levels 1 through 4 Type 
B emergency department visits to their own APCs and to assign the level 
5 Type B emergency department visit to the same APC as the level 5 Type 
A emergency department visit.
    We now have CY 2008 cost data for CY 2010 ratesetting for the Type 
B emergency department HCPCS G-codes, representing a second year of 
claims data for these Type B emergency department visit HCPCS codes. 
Overall, we observe the same frequency and pattern of billing for the 
type B emergency department visit codes as we did in the CY 2007 claims 
data (72 FR 68681). In the CY 2008 claims available for this proposed 
rule, we observe that 334 hospitals billed at least one Type B 
emergency department visit code in CY 2008, with a total frequency of 
visits provided in Type B emergency departments of approximately 
210,000. All except 5 of the 334 hospitals reporting Type B emergency 
department visits in CY 2007 also reported Type A emergency department 
visits. Overall, many more hospitals (approximately 3,225 total 
hospitals) reported Type A emergency department visits than Type B 
emergency department visits. For comparison purposes, the total 
frequency of visits provided in hospital outpatient clinics and Type A 
emergency departments is approximately 14.8 million and 10.4 million, 
respectively. The median costs for the Type B emergency department 
visit HCPCS codes, as compared to the Type A emergency department visit 
HCPCS codes and the clinic visit APC median costs, are shown in Table 
35 below.

  Table 35--Comparison of Proposed Median Costs for Clinic Visit APCs, Type B Emergency Department Visit HCPCS
                            Codes, and Type A Emergency Department Visit HCPCS Codes
----------------------------------------------------------------------------------------------------------------
                                                                      Proposed CY     Proposed CY
                                                      Proposed CY     2010 type B     2010 type A
                                                      2010 clinic      emergency       emergency
                    Visit level                          visit        department         visit
                                                      approximate     approximate     approximate
                                                      APC  median     HCPCS code      HCPCS code
                                                         cost         median cost     median cost
--------------------------------------------------------------------------------------------------
Level 1...........................................             $55             $46             $54
Level 2...........................................              71              65              89
Level 3...........................................              87              95             141
Level 4...........................................             112             132             227
Level 5...........................................             164             251             334
----------------------------------------------------------------------------------------------------------------


[[Page 35352]]

    As demonstrated in Table 35, the median costs of the lowest level 
visits based on the CY 2008 claims data are similar across all 
settings, including clinic and Type A and B emergency departments. 
Visit levels 2 and 3 share similar resource costs in the clinic and 
Type B emergency department settings, while visits provided in Type A 
emergency departments have higher estimated resource costs at these 
levels. The level 4 clinic visit APC is less resource-intensive than 
the level 4 Type B emergency department visit, which is similarly less 
resource-intensive than the level 4 Type A emergency department visit. 
Similarly, the level 5 clinic visit APC is less resource-intensive than 
the level 5 Type B emergency department visit, which is less resource-
intensive than the level 5 Type A emergency department visit.
    This pattern of relative cost differences between Type A and Type B 
emergency department visits is largely consistent with the 
distributions we observed in the CY 2007 data, with the exception that, 
in the CY 2008 claims data, we observe a relatively lower HCPCS code-
specific median cost associated with level 5 Type B emergency 
department visits compared to the HCPCS-code specific median cost of 
level 5 Type A emergency department visits. In contrast, in our CY 2007 
claims data we observed similar resource costs for level 5 Type A and 
Type B emergency department visits. In the CY 2009 OPPS/ASC final rule 
with comment period (73 FR 68683), we hypothesized that for the highest 
level of emergency department visits, the resources required would be 
the same in both emergency department settings. Now that more data on 
Type B emergency department visits are available, and hospitals have 
more experience billing for Type B services, we observe differences in 
the resources for the highest level emergency department visits to Type 
A and Type B emergency departments. We shared this cost and frequency 
data with the Visits and Observation Subcommittee of the APC Panel 
during the February 2009 meeting.
    As noted in the CY 2009 OPPS/ASC final rule with comment period (73 
FR 68683), we performed data analyses regarding the costs of Type A and 
Type B emergency department visits in addition to our standard median 
cost calculations. These analyses included studying the emergency 
department visit costs of hospitals that billed Type B emergency 
department visits only, analyzing the cost data for hospitals that 
billed both Type A and Type B emergency department visits, and 
evaluating whether there were differences in the costs of Type A and 
Type B emergency department visits by Medicare contractor to ascertain 
whether there were differences in how Medicare contractors have 
interpreted our Type A and Type B emergency department visit policies. 
In the CY 2007 data, we observed that hospitals that billed both Type A 
and Type B emergency department visits had lower costs for Type B 
emergency department visits than Type A emergency department visits at 
all levels except for the level 5 Type B emergency department visit. 
Our analyses of differences in Type A and Type B emergency department 
visit median costs by Medicare contractor did not identify concerning 
differences. Overall, we observed a distribution of visit costs as 
expected, including generally lower Type B emergency department visit 
costs in comparison with Type A emergency department visits, and 
increasing costs for Type B emergency department visits from levels 1 
through 5, similar to the cost increases we observed from levels 1 
through 5 for Type A emergency department visits. We did observe a few 
contractors with more unusual cost distributions for Type B emergency 
department visits, including relatively similar or higher costs across 
levels 1 through 5 for Type B emergency department visits. For CY 2009, 
we concluded that we had no reason to believe that the cost differences 
between Type A and Type B emergency department visits evident in our 
aggregate OPPS claims data resulted from varying contractor criteria as 
to what defines Type A and Type B emergency departments. We also 
committed to monitoring these distributions in future years.
    For this CY 2010 proposed rule, we repeated some of our analyses of 
Type B emergency department visits using updated CY 2008 claims data to 
confirm that Type B emergency department visit costs are generally 
lower than Type A emergency department visit costs and to again assess 
whether there are systematic differences in the costs of Type A and 
Type B emergency department visits by Medicare contractor. As noted 
above, we observed that hospitals that billed both Type A and Type B 
emergency department visits had lower costs for Type B emergency 
department visits than Type A emergency department visits, including 
level 5 Type B emergency department visits, which is a change from the 
CY 2007 data. We further evaluated differences in the costs of Type A 
and Type B emergency department visits by Medicare contractor. Based on 
our analysis of CY 2008 claims, we observed similar patterns in HCPCS 
code-specific median cost differences between Type A and Type B 
emergency department visits as observed in the CY 2007 claims. 
Hospitals in the jurisdictions of most Medicare contractors have 
generally lower Type B emergency department visit costs in comparison 
with Type A emergency department visits, as well as increasing costs 
for Type B emergency department visits from levels 1 through 5, similar 
to the cost increases we observed from levels 1 through 5 for Type A 
emergency department visits.
    Like last year, we also observed a few contractors with more 
unusual cost distributions for Type B emergency department visits, 
including those with Type B emergency department visit costs that are 
relatively similar or higher than Type A emergency department visit 
costs across levels 1 through 5. Some of these Medicare contractors are 
the same contractors that we noted had more unusual relative cost 
distributions for Type B emergency department visits relative to Type A 
emergency department visit costs in the CY 2007 claims data. In order 
to confirm that these Medicare contractors are applying our policies 
consistently, we examined the HCPCS code-specific median costs for Type 
A and Type B emergency department visits for the providers in each 
Medicare contractor's area. For almost all of these Medicare 
contractors, we see one or two providers with relatively high Type B 
emergency department visit costs relative to Type B emergency 
department visit costs nationwide or with Type B emergency department 
visit costs that are relatively similar to or higher than Type A 
emergency department visit costs. These one or two providers have 
sufficient visit volumes to influence the calculation of the HCPCS 
code-specific median costs for their respective Medicare contractors.
    In summary, our further analyses of Type B emergency department 
visit costs for this CY 2010 OPPS/ASC proposed rule confirm that the 
median costs of Type B emergency department visits are less than the 
median costs of Type A emergency department visits across all levels. 
Our further analyses also confirm that there are no significant 
differences in how Medicare contractors have interpreted our Type A and 
Type B emergency department visit reporting policies. The median costs 
from CY 2008 hospital claims represent real differences in the hospital 
resource costs for the same level of visit in a

[[Page 35353]]

Type A or Type B emergency department.
    Therefore, we are proposing to pay for Type B emergency department 
visits in CY 2010 consistent with their median costs. Specifically, we 
are proposing to pay levels 1 through 4 Type B emergency department 
visits through four levels of APCs: APC 0626 (Level 1 Type B Emergency 
Visits), APC 0627 (Level 2 Type B Emergency Visits), APC 0628 (Level 3 
Type B Emergency Visits), and APC 0629 (Level 4 Type B Emergency 
Visits). In addition, we are proposing to create new APC 0630 (Level 5 
Type B Emergency Visits) and pay level 5 Type B emergency department 
visits through this new APC. We are proposing to assign HCPCS codes 
G0380, G0381, G0382, G0383, and G0384 (the levels 1, 2, 3, 4, and 5 
Type B emergency department visit Level II HCPCS codes) to APCs 0626, 
0627, 0628, 0629, and 0630, respectively, for CY 2010. These HCPCS 
codes would be the only HCPCS codes assigned to these APCs. 
Furthermore, to distinguish new APC 0630 from the APC for the level 5 
Type A emergency visits, we are proposing to modify the title of the 
current level 5 Type A emergency visit APC to incorporate Type A in the 
title. Therefore, the proposed revised title of APC 0616 would be 
``Level 5 Type A Emergency Visits.''
    This proposal to pay for Type B emergency department visits based 
on their median costs is consistent with the APC Panel's March 2008 
recommendation for payment of Type B emergency department visits. As 
part of their recommended configuration of APCs for Type B emergency 
department visits in CY2009, the APC Panel also said that, given the 
limited CY 2007 claims data available for Type B emergency department 
visits, CMS should reconsider payment adjustments as more claims data 
become available. In general, the APC Panel's recommended CY 2009 
configuration paid appropriately for each level of the Type B emergency 
department visits, based on the resource costs of the Type B emergency 
department visits that are reflected in claims data. We believe our 
proposed CY 2010 configuration also would pay appropriately for each 
level of Type B emergency department visits based on estimated resource 
costs from more recent claims data.
    Table 36 below displays the proposed APC median costs for each 
level of Type B emergency department visit under our proposed CY 2010 
configuration. As more cost data become available and hospitals gain 
additional experience with reporting visits to Type B emergency 
departments, we will continue to regularly reevaluate patterns of Type 
A and Type B emergency department visit reporting to ensure that 
hospitals continue to bill appropriately and differentially for these 
services. In addition, according to our usual practice, we will examine 
trends in cost data over time and consider proposing alternative 
emergency department visit APC configurations in the future if updated 
data indicate that changes to the payment structure should be 
considered.

    Table 36--Proposed CY 2010 Type B Emergency Department Visit APC
                      Assignments and Median Costs
------------------------------------------------------------------------
                                                            Proposed CY
                                            Proposed CY        2010
    Type B emergency department level        2010 APC       approximate
                                            assignment      APC  median
                                                               cost
------------------------------------------------------------------------
Level 1.................................            0626             $46
Level 2.................................            0627              65
Level 3.................................            0628              95
Level 4.................................            0629             132
Level 5.................................            0630             251
------------------------------------------------------------------------

3. Visit Reporting Guidelines
    Since April 7, 2000, we have instructed hospitals to report 
facility resources for clinic and emergency department hospital 
outpatient visits using the CPT E/M codes and to develop internal 
hospital guidelines for reporting the appropriate visit level. Because 
a national set of hospital-specific codes and guidelines do not 
currently exist, we have advised hospitals that each hospital's 
internal guidelines that determine the levels of clinic and emergency 
department visits to be reported should follow the intent of the CPT 
code descriptors, in that the guidelines should be designed to 
reasonably relate the intensity of hospital resources to the different 
levels of effort represented by the codes.
    As noted in detail in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66802 through 66805), we observed a normal and stable 
distribution of clinic and emergency department visit levels in 
hospital claims over the past several years. The data indicated that 
hospitals, on average, were billing all five levels of visit codes with 
varying frequency, in a consistent pattern over time. Overall, both the 
clinic and emergency department visit distributions indicated that 
hospitals were billing consistently over time and in a manner that 
distinguished between visit levels, resulting in relatively normal 
distributions nationally for the OPPS, as well as for specific classes 
of hospitals. The results of these analyses were generally consistent 
with our understanding of the clinical and resource characteristics of 
different levels of hospital outpatient clinic and emergency department 
visits. In the CY 2008 OPPS/ASC proposed rule (72 FR 42764 through 
42765), we specifically invited public comment as to whether a pressing 
need for national guidelines continued at this point in the maturation 
of the OPPS, or if the current system where hospitals create and apply 
their own internal guidelines to report visits was currently more 
practical and appropriately flexible for hospitals. We explained that 
although we have reiterated our goal since CY 2000 of creating national 
guidelines, this complex undertaking for these important and common 
hospital services was proving more challenging than we initially 
thought as we received new and expanded information from the public on 
current hospital reporting practices that led to appropriate payment 
for the hospital resources associated with clinic and emergency 
department visits. We stated our belief that many hospitals had worked 
diligently and carefully to develop and implement their own internal 
guidelines that reflected the scope and types of services they provided 
throughout the hospital outpatient system. Based on public comments, as 
well as our own knowledge of how clinics operate, it seemed unlikely 
that one set of straightforward national guidelines could apply to the 
reporting of visits in all hospitals and specialty clinics. In

[[Page 35354]]

addition, the stable distribution of clinic and emergency department 
visits reported under the OPPS over the past several years indicated 
that hospitals, both nationally in the aggregate and grouped by 
specific hospital classes, were generally billing in an appropriate and 
consistent manner as we would expect in a system that accurately 
distinguished among different levels of service based on the associated 
hospital resources.
    Therefore, we did not propose to implement national visit 
guidelines for clinic or emergency department visits for CY 2008. Since 
publication of the CY 2008 OPPS/ASC final rule with comment period, we 
have again examined the distribution of clinic and Type A emergency 
department visit levels based upon updated CY 2008 claims data 
available for this proposed rule and confirmed that we continue to 
observe a normal and stable distribution of clinic and emergency 
department visit levels in hospital claims. We continue to believe 
that, based on the use of their own internal guidelines, hospitals are 
generally billing in an appropriate and consistent manner that 
distinguishes among different levels of visits based on their required 
hospital resources. As a result of our updated analyses, we are 
encouraging hospitals to continue to report visits during CY 2010 
according to their own internal hospital guidelines. In the absence of 
national guidelines, we will continue to regularly reevaluate patterns 
of hospital outpatient visit reporting at varying levels of 
disaggregation below the national level to ensure that hospitals 
continue to bill appropriately and differentially for these services. 
As originally noted in detail in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66648), we continue to expect that hospitals will 
not purposely change their visit guidelines or otherwise upcode clinic 
and emergency department visits for purposes of composite Extended 
Assessment & Management Composite APC payment.
    In addition, we note our continued expectation that hospitals' 
internal guidelines will comport with the principles listed in the CY 
2008 OPPS/ASC final rule with comment period (72 FR 66805). We 
encourage hospitals with more specific questions related to the 
creation of internal guidelines to contact their local fiscal 
intermediary or MAC.
    We appreciate all of the comments we have received in the past from 
the public on visit guidelines, and we encourage continued submission 
of comments throughout the year that would assist us and other 
stakeholders interested in the development of national guidelines. 
Until national guidelines are established, hospitals should continue 
using their own internal guidelines to determine the appropriate 
reporting of different levels of clinic and emergency department 
visits. While we understand the interest of some hospitals in having us 
move quickly to promulgate national guidelines that would ensure 
standardized reporting of hospital outpatient visit levels, we believe 
that the issues and concerns identified both by us and others that may 
arise are important and require serious consideration prior to the 
implementation of national guidelines. Because of our commitment to 
provide hospitals with 6 to 12 months notice prior to implementation of 
national guidelines, we would not implement national guidelines prior 
to CY 2011. Our goal is to ensure that OPPS national or hospital-
specific visit guidelines continue to facilitate consistent and 
accurate reporting of hospital outpatient visits in a manner that is 
resource-based and supportive of appropriate OPPS payments for the 
efficient and effective provision of visits in hospital outpatient 
settings.

X. Proposed Payment for Partial Hospitalization Services

A. Background

    Partial hospitalization is an intensive outpatient program of 
psychiatric services provided to patients as an alternative to 
inpatient psychiatric care for individuals who have an acute mental 
illness. Section 1833(t)(1)(B)(i) of the Act provides the Secretary 
with the authority to designate the HOPD services to be covered under 
the OPPS. The Medicare regulations at Sec.  419.21 that implement this 
provision specify that payments under the OPPS will be made for partial 
hospitalization services furnished by community mental health centers 
(CMHCs) as well as those services furnished by hospitals to their 
outpatients. Section 1833(t)(2)(C) of the Act requires the Secretary to 
establish relative payment weights for covered HOPD services (and any 
APCs) based on median (or mean, at the election of the Secretary) 
hospital costs using data on claims from 1996 and data from the most 
recent available cost reports. Because a day of care is the unit that 
defines the structure and scheduling of partial hospitalization 
services, we established a per diem payment methodology for the partial 
hospitalization program (PHP) APC, effective for services furnished on 
or after August 1, 2000 (65 FR 18452).
    Historically, the median per diem cost for CMHCs greatly exceeded 
the median per diem cost for hospital-based PHPs and fluctuated 
significantly from year to year, while the median per diem cost for 
hospital-based PHPs remained relatively constant ($200-$225). We 
believe that CMHCs may have increased and decreased their charges in 
response to Medicare payment policies. As discussed in more detail in 
section X.B. of this proposed rule and in the CY 2004 OPPS final rule 
with comment period (68 FR 63470), we also believe that some CMHCs 
manipulated their charges in order to inappropriately receive outlier 
payments.
    In developing the CY 2008 update, we began an effort to strengthen 
the PHP benefit through extensive data analysis and policy and payment 
changes. We began this effort as a result of the significant 
fluctuations and declines in the CMHC PHP median per diem costs (we 
refer readers to the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66670 through 66676) for a detailed discussion). The analysis 
included an examination of revenue-to-cost center mapping, refinements 
to the per diem methodology, and an in-depth analysis of the number of 
units of service furnished per day.
    For CY 2008, we proposed and finalized two refinements to the 
methodology for computing the PHP median. Although these refinements 
did not appreciably impact the median per diem cost, we believe the 
refinements resulted in more accurate per diem medians. First, we 
remapped 10 revenue codes that are common among hospital-based PHP 
claims to the most appropriate cost centers (72 FR 66671 through 
66672). Typically, we map the revenue code to the most specific cost 
center with a provider-specific CCR. However, if the hospital does not 
have a CCR for any of the listed cost centers, we consider the overall 
hospital CCR as the default. For partial hospitalization services, the 
revenue center codes billed by hospital-based PHPs are mapped to 
Primary Cost Center 3550 (Psychiatric/Psychological Services). If that 
cost center is not available, they are mapped to the Secondary Cost 
Center 6000 (Clinic). We use the overall facility CCR for CMHCs because 
PHPs are CMHCs only Medicare cost, and CMHCs do not have the same cost 
structure as hospitals. Therefore, for CMHCs, we use the CCR from the 
outpatient provider-specific file. A closer examination of the revenue-
code-to-cost-center crosswalk revealed that 10 of the revenue center 
codes did not map to a Primary Cost Center 3550 or a Secondary Cost 
Center of 6000. We believe this occurred

[[Page 35355]]

because these codes may also be used for services that are not 
furnished in a PHP or services that are not psychiatric related (for 
example, occupational therapy). As discussed in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66671 through 66672), we updated 
this analysis using more recent PHP claims and CCR data. After 
remapping codes, we computed an alternate cost for each line item of 
the hospital-based PHP claims. Remapping those 10 revenue center codes 
reduced the number of lines that defaulted to the hospitals' overall 
CCR and thus created a more accurate estimate of PHP per diem costs for 
a significant number of claims.
    Secondly, we refined our methodology for calculating PHP per diem 
costs by computing the median using a per day methodology. We developed 
an alternate method to determine median cost by computing a separate 
per diem cost for each day rather than for each claim. When there were 
multiple days of care entered on a claim, a unique cost was computed 
for each day of care. We only assigned costs for line items on days 
when a payment was made. All of these costs were then arrayed from 
lowest to highest, and the middle value of the array was considered the 
median per diem cost. A complete discussion of the refined method of 
computing the PHP median cost can be found in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66672).
    After completing extensive data analysis, we continued to observe a 
clear downward trend in the median per diem cost based on the CY 2006 
data used to develop the CY 2008 OPPS/ASC final rule with comment 
period. The analysis revealed that fewer PHP services were being 
provided in a given day. We believed, and continue to believe, that the 
data reflects the level of cost for the type of services that were 
being provided and continue to be provided.
    Because partial hospitalization is provided in lieu of inpatient 
care, it should be a highly structured and clinically intensive 
program, usually lasting most of the day. In order to improve the level 
of services furnished in a PHP day, in the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66673), we reiterated our expectation that 
hospitals and CMHCs must provide a comprehensive program consistent 
with the statutory intent. We also indicated our intent to explore 
changes to our regulations and claims processing systems in order to 
deny payment for low intensity days.
    For CY 2009, we implemented several regulatory, policy, and payment 
changes, including a two-tiered payment approach for PHP services under 
which we would pay one amount for days with 3 units of service (APC 
0172 (Level I Partial Hospitalization) and a higher amount for days 
with 4 or more units of service (APC 0173 (Level II Partial 
Hospitalization). We implemented this payment approach to reflect the 
lower costs of a less intensive day while still paying programs that 
provide 4 or more units of service an amount that recognizes that they 
have provided a more intensive day of care. In this way, we can pay 
appropriately for the level of care provided while still allowing PHPs 
necessary scheduling flexibility (73 FR 68689). As we reiterated in the 
CY 2009 OPPS/ASC final rule with comment period (73 FR 68688), it was 
never our intention that days with only 3 units of service become the 
number of services provided in a typical day. Our intention was to 
provide payment to cover days that consisted of 3 units of service only 
in certain limited circumstances. For example, we believe 3 units of 
service a day may be appropriate when a patient is transitioning 
towards discharge or when a patient is required to leave the PHP early 
for the day due to an unexpected medical appointment. As we noted in 
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68689), 
although we do not expect Level I days to be frequent, we recognize 
that there are times when a patient may need a less intensive day. We 
refer readers to section X.C.2. of the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68688 through 68695) for a full discussion of 
this requirement.
    For CY 2009, we proposed to calculate the payment rates for PHP 
APCs 0172 and 0173 using both hospital-based and CMHC PHP data (73 FR 
41513). After consideration of the public comments received on our 
proposal, we decided to base payment rates for the two-tiered approach 
on hospital-based PHP data only. As we explained in the CY 2009 OPPS/
ASC final rule with comment period (73 FR 68689), using the CMHC data 
for CY 2009 would have significantly reduced the CY 2009 PHP rates and 
negatively impacted hospital-based PHPs. Because hospital-based PHPs 
are geographically diverse, whereas CMHCs are located in only a few 
States, we were concerned that a significant drop in the rate could 
result in hospital-based PHPs closing and lead to possible beneficiary 
access to care problems. To calculate the CY 2009 PHP payment rate for 
APC 0172, we used the median per diem cost for hospital-based PHP days 
with 3 units of service to derive a PHP payment rate of $157. For APC 
0173, we used the median per diem cost for hospital-based PHP days with 
4 or more units of service to derive a CY 2009 PHP payment rate of 
$200.
    In addition, for CY 2009, we finalized our policy to deny payment 
for any PHP claims for days when fewer than 3 units of therapeutic 
services are provided. As noted in the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68694), we believe that 3 units of service should 
be the minimum number of services allowed in a PHP day because a day 
with 1 or 2 units of service does not meet the statutory intent of a 
PHP program. Three units of service are a minimum threshold that 
permits unforeseen circumstances, such as medical appointments, while 
allowing payment, but maintains the integrity of the PHP benefit.
    Further, for CY 2009, we revised the regulations at Sec.  410.43 to 
codify existing basic PHP patient eligibility criteria and added a 
reference to current physician certification requirements at Sec.  
424.24. We believed these changes would help strengthen the PHP benefit 
by conforming our regulations to our longstanding policy (73 FR 68694 
through 68695). Specifically, we revised Sec.  410.43 to add a 
reference to existing regulations at Sec.  424.24(e) that require that 
PHP services be furnished pursuant to a physician certification and 
plan of care. While the requirements at Sec.  424.24(e) are not new, we 
included the reference in Sec.  410.43 to provide a more complete 
description of our expectations for PHP programs in one regulatory 
section. We also revised Sec.  410.43 to add the following patient 
eligibility criteria and reiterate that PHPs are intended for patients 
who--(1) require a minimum of 20 hours per week of therapeutic services 
as evidenced in their plan of care; (2) are likely to benefit from a 
coordinated program of services and require more than isolated sessions 
of outpatient treatment; (3) do not require 24-hour care; (4) have an 
adequate support system while not actively engaged in the program; (5) 
have a mental health diagnosis; (6) are not judged to be dangerous to 
self or others; and (7) have the cognitive and emotional ability to 
participate in the active treatment process and can tolerate the 
intensity of the PHP. We refer readers to section X.C.2. of the CY 2009 
OPPS/ASC final rule with comment period (73 FR 68694 through 68695) for 
a full discussion of this requirement.

[[Page 35356]]

    Lastly, in the CY 2009 OPPS/ASC final rule with comment period (73 
FR 68695 through 68697), we revised the partial hospitalization benefit 
to include several coding updates. We removed three PHP billable codes 
(CPT codes 90899 (Unlisted psychiatric service or procedure), 90853 
(Group psychotherapy other than of a multiple-family group), and 90857 
(Interactive group psychotherapy)), and created two new timed HCPCS 
codes (GO410 (Group psychotherapy other than of a multiple- family 
group, in a partial hospitalization setting, approximately 45 to 50 
minutes) and G0411(Interactive group psychotherapy in a partial 
hospitalization setting, approximately 45 to 50 minutes)). The 
elimination of CPT code 90899 was a result of our concerns about the 
type of services that may be billed using an unlisted CPT code when a 
more appropriate code may be available that better describes the 
services for which PHP payment may be made. The decision to eliminate 
the two group therapy CPT codes (90853 and 90857) and replace them with 
two new parallel timed HCPCs G-codes (G-0410 and G-0411) was based on 
the need for consistency. As most of the current PHP codes already 
include time estimates, we wanted to maintain consistency with the 
existing HCPCS codes used in the PHP by applying a time descriptor to 
the group therapy codes. In addition to these coding updates, we also 
decided to eliminate CPT code 90849 (multi-family group psychotherapy) 
as a billable PHP code because we believed that CPT code 90849 focuses 
the service on the needs of the family and not specifically on the 
needs of the patient, which is not consistent with the intent of the 
statute that treatment in a PHP be focused on the patient's condition 
(73 FR 68696).

B. Proposed PHP APC Update for CY 2010

    For CY 2010, we used CY 2008 claims data and computed median per 
diem costs in the following three categories: (1) All days; (2) days 
with 3 units of service; and (3) days with 4 or more units of service. 
These updated median per diem costs were computed separately for CMHCs 
and hospital-based PHPs and are shown in the table below:

------------------------------------------------------------------------
                                                 Hospital-
                                      CMHCs      based PHPs    Combined
------------------------------------------------------------------------
All Days.........................         $140         $200         $144
Days with 3 units of service.....          129          149          131
Days with 4 units or more units            173          213          175
 of service......................
------------------------------------------------------------------------
 

    Using CY 2008 data and the refined methodology for computing PHP 
per diem costs that we adopted in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66672), we computed the median per diem cost from 
all claims of $144. The data indicate that CMHCs continue to provide 
far fewer days with 4 or more units of service (33 percent compared to 
70 percent for hospital-based PHPs) and that the CMHC median per diem 
cost for 4 or more units of service ($173) is substantially lower than 
the comparable data from hospital-based PHPs ($213). The median for 
claims containing 4 or more units of service for all PHP claims, 
regardless of site of service, is $175. Medians for claims containing 3 
units of service are $129 for CMHCs, $149 for hospital-based PHPs, and 
$131 for all PHP claims, regardless of site of service.
    For CY 2010, we are proposing to continue to use the two-tiered 
payment approach for PHP services established in CY 2009. As mentioned 
previously, this payment approach reflects the lower costs of a less 
intensive day while still recognizing the higher costs associated with 
more intensive days. This payment approach is consistent with our 
intent that the PHP benefit be a comprehensive program in keeping with 
the statutory intent while still providing flexibility in recognizing 
the need for lower intensive days in certain circumstances.
    In addition, for CY 2010, we are proposing to use only hospital-
based PHP data to develop the two PHP APC per diem payment rates for 
the following reasons. If we used combined CMHC and hospital-based PHP 
data to develop the rates, the two per diem payment rates would be 
reduced by approximately $26 for APC 0172 and $25 for APC 0173. We are 
concerned about further reducing both PHP APC per diem payment rates 
without knowing the impact of the policy and payment changes we made in 
CY 2009. Because there is a 2-year delay between data collection and 
rulemaking, the changes we made in CY 2009 will not be reflected in the 
claims data until next year when we are developing the update for CY 
2011. As noted above, we believe the changes we made last year will 
strengthen the integrity of the benefit while at the same time 
positively impact the PHP data for both CMHC and hospital-based PHP 
providers, thus causing the medians to increase over time as the number 
of services provided in a given day of partial hospitalization 
increases. It is for these reasons that we are proposing to use only 
hospital-based PHP data to develop the two proposed APC payment rates 
for PHP for CY 2010: one for days with 3 units of service and one for 
days with 4 or more units of service. The proposed two APCs medians for 
PHP are as follows:

------------------------------------------------------------------------
                                                             Proposed
          Proposed APC                 Group title          median  Per
                                                            diem  rate
------------------------------------------------------------------------
0172...........................  Level I Partial                    $149
                                  Hospitalization (3
                                  services).
0173...........................  Level II Partial                    213
                                  Hospitalization (4 or
                                  more services).
------------------------------------------------------------------------

    Although we are proposing to use only hospital-based PHP data to 
develop the two proposed PHP APC per diem payment rates for CY 2010, we 
are requesting public comment about the possibility of using both CMHC 
and hospital-based PHP data to develop the PHP payment rates for CY 
2010. We are requesting public comments because we have concerns about 
not using data from both PHP provider types. Both CMHCs and hospital-
based PHPs are paid the

[[Page 35357]]

same two APC per diem payment rates. Therefore, we believe that both 
provider types should have their data utilized in the development of 
the payment rates. However, as noted above, we have concerns about 
further reducing the two payment rates without knowing the impact of 
the policy and payment changes made in CY 2009.
    In summary, for CY 2010, we are proposing to use only hospital-
based PHP data for developing the two proposed PHP APC per diem payment 
rates, although we are requesting public comments on the possibility of 
using both CMHC and hospital-based data for the final rule.

C. Proposed Separate Threshold for Outlier Payments to CMHCs

    In the November 7, 2003 final rule with comment period (68 FR 
63469), we indicated that, given the difference in PHP charges between 
hospitals and CMHCs, we did not believe it was appropriate to make 
outlier payments to CMHCs using the outlier percentage target amount 
and threshold established for hospitals. Prior to that time, there was 
a significant difference in the amount of outlier payments made to 
hospitals and CMHCs for PHP services. In addition, further analysis 
indicated that using the same OPPS outlier threshold for both hospitals 
and CMHCs did not limit outlier payments to high cost cases and 
resulted in excessive outlier payments to CMHCs. Therefore, beginning 
in CY 2004, we established a separate outlier threshold for CMHCs. The 
separate outlier threshold for CMHCs has resulted in more commensurate 
outlier payments.
    In CY 2004, the separate outlier threshold for CMHCs resulted in 
$1.8 million in outlier payments to CMHCs. In CY 2005, the separate 
outlier threshold for CMHCs resulted in $0.5 million in outlier 
payments to CMHCs. In contrast, in CY 2003, more than $30 million was 
paid to CMHCs in outlier payments. We believe this difference in 
outlier payments indicates that the separate outlier threshold for 
CMHCs has been successful in keeping outlier payments to CMHCs in line 
with the percentage of OPPS payments made to CMHCs. The table below 
includes a listing of the outlier target amounts and the portion of the 
target amount allocated to CMHCs for PHP outliers for CYs 2004 through 
2009.

------------------------------------------------------------------------
                                                           Portion of
                                                         target amount
                                       Outlier target     allocated to
                 Year                      amount        CMHCs for PHP
                                         percentage      outliers  (in
                                                            Percent)
------------------------------------------------------------------------
CY 2004..............................             2.0                0.5
CY 2005..............................             2.0                0.6
CY 2006..............................             1.0                0.6
CY 2007..............................             1.0               0.15
CY 2008..............................             1.0               0.02
CY 2009..............................             1.0               0.12
------------------------------------------------------------------------

    As noted in section II.F. of this proposed rule, for CY 2010, we 
are proposing to continue our policy of identifying 1.0 percent of the 
aggregate total payments under the OPPS for outlier payments. We are 
proposing that a portion of that 1.0 percent, an amount equal to 0.02 
percent of outlier payments (or 0.0002 percent of total OPPS payments), 
would be allocated to CMHCs for PHP outliers. As discussed in section 
II.F. of this proposed rule, we are proposing to set a dollar threshold 
in addition to an APC multiplier threshold for OPPS outlier payments. 
However, because the PHP APC is the only APC for which CMHCs may 
receive payment under the OPPS, we would not expect to redirect outlier 
payments by imposing a dollar threshold. Therefore, we are not 
proposing to set a dollar threshold for CMHC outliers. As noted in 
section II.F. of this proposed rule, we are proposing to set the 
outlier threshold for CMHCs for CY 2010 at 3.40 times the APC payment 
amount and the CY 2010 outlier payment percentage applicable to costs 
in excess of the threshold at 50 percent. Specifically, we are 
proposing that if a CMHC's cost for partial hospitalization services, 
paid under either APC 0172 or APC 0173, exceeds 3.40 times the payment 
for APC 0173, the outlier payment would be calculated as 50 percent of 
the amount by which the cost exceeds 3.40 times the APC 0173 payment 
rate.

XI. Proposed Procedures That Will Be Paid Only as Inpatient Procedures

A. Background

    Section 1833(t)(1)(B)(i) of the Act gives the Secretary broad 
authority to determine the services to be covered and paid for under 
the OPPS. Before implementation of the OPPS in August 2000, Medicare 
paid reasonable costs for services provided in the HOPD. The claims 
submitted were subject to medical review by the fiscal intermediaries 
to determine the appropriateness of providing certain services in the 
outpatient setting. We did not specify in regulations those services 
that were appropriate to provide only in the inpatient setting and 
that, therefore, should be payable only when provided in that setting.
    In the April 7, 2000 final rule with comment period (65 FR 18455), 
we identified procedures that are typically provided only in an 
inpatient setting and, therefore, would not be paid by Medicare under 
the OPPS. These procedures comprise what is referred to as the 
``inpatient list.'' The inpatient list specifies those services for 
which the hospital will be paid only when provided in the inpatient 
setting because of the nature of the procedure, the underlying physical 
condition of the patient, or the need for at least 24 hours of 
postoperative recovery time or monitoring before the patient can be 
safely discharged. As we discussed in that rule and in the November 30, 
2001 final rule with comment period (66 FR 59856), we may use any of a 
number of criteria we have specified when reviewing procedures to 
determine whether or not they should be removed from the inpatient list 
and assigned to an APC group for payment under the OPPS when provided 
in the hospital outpatient setting. Those criteria include the 
following:
    <bullet> Most outpatient departments are equipped to provide the 
services to the Medicare population.
    <bullet> The simplest procedure described by the code may be 
performed in most outpatient departments.
    <bullet> The procedure is related to codes that we have already 
removed from the inpatient list.

[[Page 35358]]

    In the November 1, 2002 final rule with comment period (67 FR 
66741), we added the following criteria for use in reviewing procedures 
to determine whether they should be removed from the inpatient list and 
assigned to an APC group for payment under the OPPS:
    <bullet> A determination is made that the procedure is being 
performed in numerous hospitals on an outpatient basis; or
    <bullet> A determination is made that the procedure can be 
appropriately and safely performed in an ASC, and is on the list of 
approved ASC procedures or has been proposed by us for addition to the 
ASC list.
    The list of codes that we are proposing to be paid by Medicare in 
CY 2010 only as inpatient procedures is included as Addendum E to this 
proposed rule.

B. Proposed Changes to the Inpatient List

    For the CY 2010 OPPS, we are proposing to use the same methodology 
as described in the November 15, 2004 final rule with comment period 
(69 FR 65835) to identify a subset of procedures currently on the 
inpatient list that are being performed a significant amount of the 
time on an outpatient basis. Using this methodology, we identified 
three procedures that met the criteria for potential removal from the 
inpatient list. We then clinically reviewed these three potential 
procedures for possible removal from the inpatient list and found them 
to be appropriate candidates for removal from the inpatient list. 
During the February 2009 meeting of the APC Panel, we solicited the APC 
Panel's input on the appropriateness of proposing to remove the 
following three procedures from the CY 2010 OPPS inpatient list: CPT 
codes 21256 (Reconstruction of orbit with osteotomies (extracranial) 
and with bone grafts (includes obtaining autografts) (e.g., micro-
ophthalmia)); 27179 (Open treatment of slipped femoral epiphysis; 
osteoplasty of femoral neck (Heyman type procedure)); and 51060 
(Transvesical ureterolithotomy).
    In addition to presenting to the APC Panel the three procedures 
above, we also presented utilization data for the first 9 months of CY 
2008 for two other specific procedures, in response to a request by the 
APC Panel from the March 2008 meeting: CPT code 20660 (Application of 
cranial tongs, caliper or stereotactic frame, including removal 
(separate procedure)), a procedure that we removed from the inpatient 
list for CY 2009; and CPT code 64818 (Sympathectomy, lumbar), a 
procedure that we maintained on the inpatient list for CY 2009.
    Following the discussion at the February 2009 meeting, the APC 
Panel recommended that CMS propose to remove from the CY 2010 OPPS 
inpatient list CPT codes 21256, 27179, and 51060. The APC Panel also 
recommended that CPT code 64818 remain on the inpatient list for CY 
2010. The APC Panel made no recommendation regarding CPT code 20660.
    For CY 2010, we are proposing to accept the APC Panel's 
recommendations to remove the procedures described by CPT codes 21256, 
27179, and 51060 from the inpatient list because we agree with the APC 
Panel that the procedures may be appropriately provided as hospital 
outpatient procedures for some Medicare beneficiaries. We also are 
proposing to retain CPT code 64818 on the inpatient list because we 
agree with the APC Panel that this procedure should be provided to 
Medicare beneficiaries only in the hospital inpatient setting. The 
three procedures we are proposing to remove from the inpatient list for 
CY 2010 and their CPT codes, long descriptors, and proposed APC 
assignments are displayed in Table 37 below.

Table 37--Procedures Proposed for Removal From the Inpatient List and Their Proposed APC Assignments for CY 2010
----------------------------------------------------------------------------------------------------------------
                                                                                  Proposed CY      Proposed CY
                HCPCS code                            Long descriptor               2010 APC       2010 status
                                                                                   assignment       indicator
----------------------------------------------------------------------------------------------------------------
21256.....................................  Reconstruction of orbit with                  0256                T
                                             osteotomies (extracranial) and
                                             with bone grafts (includes
                                             obtaining autografts) (eg, micro-
                                             ophthalmia).
27179.....................................  Open treatment of slipped femoral             0052                T
                                             epiphysis; osteoplasty of femoral
                                             neck (Heyman type procedure).
51060.....................................  Transvesical ureterolithotomy.....            0163                T
----------------------------------------------------------------------------------------------------------------

XII. OPPS Nonrecurring Technical and Policy Changes and Clarifications

A. Kidney Disease Education Services

1. Background
    Section 152(b) of Public Law 110-275 (MIPPA) amended section 
1861(s)(2) of the Act by adding a new subsection (EE) to provide for 
coverage of kidney disease education (KDE) services as a Medicare Part 
B benefit for Medicare beneficiaries diagnosed with stage IV chronic 
kidney disease (CKD) who, according to accepted clinical guidelines 
identified by the Secretary, will require dialysis or a kidney 
transplant, effective for services furnished on or after January 1, 
2010. Section 152(b) also added a new subsection (ggg) to section 1861 
of the Act to define ``kidney disease education services'' and to 
specify who may furnish these services as a ``qualified person.'' 
Section 1861(ggg)(2)(A) (i) of the Act, as added by section 152(b) of 
Public Law 110-275, defines a qualified person as a physician (as 
defined in section 1861(r)(1) of the Act); or a physician assistant, 
nurse practitioner, or clinical nurse specialist (as defined in section 
1861(aa)(5) of the Act) who furnishes services for which payment may be 
made under the fee schedule established under section 1848 of the Act. 
Section 1861(ggg)(2)(A)(ii) of the Act also defines a qualified person 
as a ``provider of services located in a rural area (as defined in 
section 1886(d)(2)(D) [of the Act]).'' The definition of a ``qualified 
person'' for this benefit includes certain rural providers of services, 
such as hospitals, critical access hospitals (CAHs), skilled nursing 
facilities (SNFs), home health agencies (HHAs), comprehensive 
outpatient rehabilitation facilities (CORFs), and hospices. Section 
1861(ggg)(2)(B) of the Act provides that a qualified person does not 
include a provider of services (other than a provider of services 
described in section 1861(ggg)(2)(A)(ii)) or a renal dialysis facility.
    We are proposing to implement the provisions of section 
1861(s)(2)(EE) and 1861(ggg) of the Act, as added by section 152(b) of 
Public Law 110-275, mainly through the June 2009 CY 2010

[[Page 35359]]

MPFS proposed rule (CMS-1413-P; Medicare Program; Payment Policies 
under the Physician Fee Schedule and Other Revisions to Part B for CY 
2010), hereinafter referred to as the CY 2010 MPFS proposed rule. 
Specifically, in section II.G.10. of the CY 2010 MPFS proposed rule, we 
are proposing to define the Medicare coverage criteria that would be 
applicable to KDE services and who may provide these services (that is, 
a ``qualified person''), consistent with the provisions of sections 
1861(s)(2)(EE) and1861(ggg) of the Act. In that proposed rule, we also 
are proposing to define a provider of services in a rural area as 
defined in section 1886(d)(2)(D) of the Act as a hospital, CAH, SNF, 
CORF, HHA, or hospice that is physically located in a rural area as 
defined in Sec.  412.64(b)(ii)(C) of the regulations or a hospital or 
CAH that is reclassified from urban to rural status pursuant to section 
1886(d)(8)(E) of the Act, as defined in Sec.  412.103 of the 
regulations. According to the proposal included in the CY 2010 MPFS 
proposed rule, a hospital, CAH, SNF, CORF, HHA, or hospice would not be 
considered to be a qualified person if the facility providing KDE 
services is located outside of a rural area unless the service is 
furnished in a hospital or CAH that has reclassified as rural under 
Sec.  412.103.
    In addition, in the CY 2010 MPFS proposed rule, consistent with the 
provisions of section 1861(ggg) of the Act, we are proposing a payment 
amount for KDE services furnished by a ``qualified person.'' 
Specifically, we are proposing to establish two new Level II HCPCS G-
codes to describe KDE services and to specify the associated relative 
value units under the MPFS for payment for these codes.
    Individuals who wish to comment on the proposed coverage criteria 
for KDE services under section 1861(ggg) of the Act, including the 
definition of a ``qualified person,'' the proposed HCPCS codes, and the 
proposed relative value units for KDE services should submit their 
comments to CMS in response to the CY 2010 MPFS proposed rule that we 
describe above. Below we discuss our proposed payment for KDE services 
furnished by providers of services located in a rural area. Public 
comments relating to payment for KDE services furnished by providers of 
services located in a rural area should be submitted in response to 
this OPPS/ASC proposed rule.
2. Proposed Payment for Services Furnished by Providers of Services 
Located in a Rural Area
    We are proposing to pay under the MPFS for KDE services under 
section 1861(ggg) of the Act when the services are furnished by a 
qualified person that is a hospital, CAH, SNF, CORF, HHA, or hospice 
that is located in a rural area as defined in section 1886(d)(2)(D) of 
the Act or a hospital or CAH that is reclassified from urban to rural 
status pursuant to section 1886(d)(8)(E) of the Act, as defined in 
Sec.  412.103 of the regulations. Section 152(b) of Public Law 100-275 
amended section 1848(j)(3) of the Act to add section 1861(s)(2)(EE) 
(kidney disease education services) to the list of subsections of 
section 1861(s)(2) of the Act, which are included in the definition of 
physician services in section 1848(j)(3) of the Act. However, the 
statute does not specify the payment methodology for KDE services 
furnished by providers of these services located in rural areas.
    Given that the statute provides the Secretary with the flexibility 
to pay all qualified persons under the MPFS and there is precedent for 
paying both diabetes self-management training and medical nutrition 
therapy services (which we believe KDE is similar to in terms of 
resource use, specifically staffing and infrastructure) under the MPFS, 
we are proposing to pay all qualified persons for KDE services under 
the MPFS. This single payment methodology would apply to all qualified 
persons, including providers of services in a rural area as we are 
proposing to define such providers in the CY 2010 MPFS proposed rule.
    The language in section 1861(ggg) of the Act that defines KDE 
services is similar to the language in section 1861(qq) of the Act that 
defines ``diabetes self-management training services,'' which is a 
medical or other health service under section 1861(s)(2)(S) of the Act. 
In addition, the language in section 1861(ggg) of the Act is similar to 
the language in section 1861(vv) of the Act that defines medical 
nutrition therapy services, which is also a medical or other health 
service under section 1861(s)(2)(V) of the Act. Finally, both diabetes 
self-management training and medical nutrition therapy are included in 
the definition of ``physicians' services'' for purposes of the MPFS at 
section 1848(j)(3) of the Act, and our standard policy is to pay for 
both services under the MPFS when they are furnished in an HOPD. Given 
that the statute permits us to pay all qualified persons under the MPFS 
and the precedent for paying both diabetes self-management training and 
medical nutrition therapy under the MPFS when these services are 
provided in the hospital outpatient setting, we believe that payment 
under the MPFS is the most appropriate methodology for payment to 
qualified persons who are providers of services located in a rural area 
or who are CAHs or hospitals that have been reclassified as rural 
pursuant to Sec.  412.103 of the regulations for the KDE services they 
furnish.
    The proposed CY 2010 MPFS payments for HCPCS codes GXX26 
(Educational services related to the care of chronic kidney disease; 
individual, per session; face-to-face) and GXX27 (Educational services 
related to the care of chronic kidney disease; group, per session; 
face-to-face) are discussed in the CY 2010 MPFS proposed rule. When the 
qualified person is a rural provider, we would pay the provider the 
applicable amount under the MPFS and a single payment would be made for 
each KDE session, limited to no more than six sessions as discussed in 
the CY 2010 MPFS proposed rule. We would not provide separate payment 
for both a physician's professional services and the associated 
facility services if a single session of KDE services was furnished in 
a rural hospital. Therefore, because of operational constraints, we are 
proposing that payment would be made to only one qualified person for 
KDE services on the same day for the same beneficiary. We also note 
that the MPFS' geographic practice cost index would apply to the 
calculation of the payment in a particular fee schedule locality 
because this locality adjustment methodology is applicable to payment 
for all services paid under the MPFS. We are proposing to assign status 
indicator ``A'' to HCPCS codes GXX26 and GXX27 in Addendum B to this CY 
2010 OPPS/ASC proposed rule to signify that these services, when 
covered, would be paid under a payment system other than the OPPS, 
specifically the MPFS in the case of both HCPCS codes.
    Public comments on this proposal to pay under the MPFS for covered 
KDE services furnished by qualified persons who are hospitals, CAHs, 
SNFs, CORFs, HHAs, or hospices that are located in a rural area or are 
treated as being rural under Sec.  412.103 should be submitted in 
accordance with the instructions for commenting on this OPPS/ASC 
proposed rule. Public comments on all other aspects of the proposed 
implementation of sections 1861(s)(2)(EE) and 1861(ggg) of the Act, 
including, but not limited to, the proposed criteria for coverage of 
the services, the proposed definition of

[[Page 35360]]

``session,'' the proposed HCPCS codes, and the proposed content of the 
program, should be submitted in response to the CY 2010 MPFS proposed 
rule.

B. Pulmonary Rehabilitation, Cardiac Rehabilitation, and Intensive 
Cardiac Rehabilitation Services

1. Legislative Changes
    Section 144(a) of Public Law 110-275 (MIPPA) made a number of 
changes to the Act to provide Medicare Part B coverage and payment for 
pulmonary and cardiac rehabilitation services furnished to 
beneficiaries with chronic obstructive pulmonary disease and certain 
other conditions, respectively, effective January 1, 2010. 
Specifically, section 144(a)(1) of the Act amended section 1861(s)(2) 
of the Act by adding new subparagraphs (CC) and (DD) to specify 
Medicare Part B coverage of items and services furnished under (1) a 
cardiac rehabilitation (CR) program (as defined in an added new section 
1861(eee)(1) of the Act) or under a pulmonary rehabilitation (PR) 
program (as defined under an added new section 1861(fff)(1) of the Act; 
and (2) an intensive cardiac rehabilitation (ICR) program (as defined 
in an added new section 1861(eee)(4) of the Act). The amendments made 
by section 144(a) of Public Law 110-275 provide for coverage of CR, PR, 
and ICR services provided in a physician's office, in a hospital on an 
outpatient basis, or in other settings as the Secretary determines 
appropriate. Section 144(a)(2) of Public Law 110-275 amended section 
1848(j)(3) to provide for payment for services furnished in an ICR 
program under the MPFS and also added a new section 1848(b)(5) to 
provide specific language governing payment for ICR services. Under 
that specific section, the Secretary shall substitute the Medicare OPD 
fee schedule amount established under the prospective payment system 
for hospital outpatient department services under section 1833(t)(3)(D) 
of the Act for cardiac rehabilitation (under HCPCS codes 93797 
(Physician services for outpatient cardiac rehabilitation; without 
continuous ECG monitoring (per session)) and 93798 (Physician services 
for outpatient cardiac rehabilitation; with continuous ECG monitoring 
(per session)) for CY 2007, or any succeeding HCPCS codes established 
for cardiac rehabilitation). Section 144(a)(2) also defined under the 
new section 1848(b)(5) a ``session'' for each of the component cardiac 
rehabilitation items and services defined in subparagraphs (A) through 
(E) of section 1861(eee)(3) of the Act, when furnished for one hour, as 
a separate session of intensive cardiac rehabilitation, and specified 
that payment may be made for up to 6 sessions per day of the series of 
72 one-hour sessions of ICR services. Section 144(a)(1)(B) also 
requires that a physician must be immediately available and accessible 
for medical consultations and medical emergencies at all times items 
and services are being furnished under CR, ICR, and PR programs, except 
that in the case of such items and services furnished under such a 
program in a hospital, such availability shall be presumed.
    As we discuss in detail in section II.G.8. of the June 2009 CY 2010 
MPFS proposed rule, we are using the MPFS and the OPPS rulemaking 
processes, and may use the national coverage determination (NCD) 
process as well, to implement the amendments made by section 144(a) of 
Public Law 110-275. In the CY 2010 MPFS proposed rule, we specify our 
policy proposals for implementing Medicare Part B coverage and payment 
for services furnished in a CR, ICR, and PR program under the MPFS. 
Therefore, public comments on the proposed coverage and payment under 
the MPFS for a CR, ICR, or PR program beginning in CY 2010 should be 
submitted in response to the CY 2010 MPFS proposed rule. In this 
section of this CY 2010 OPPS/ASC proposed rule, we are proposing the CY 
2010 OPPS payment for services in a CR, ICR, or PR program furnished to 
hospital outpatients. Therefore, public comments on the proposed OPPS 
payments for CY 2010 should be submitted in response to this CY 2010 
OPPS/ASC proposed rule.
2. Proposed Payments for Services Furnished to Hospital Outpatients in 
a Pulmonary Rehabilitation Program
    For CY 2010, we are proposing to create one new Level II HCPCS code 
for hospitals to report and bill for the services furnished under a PR 
program as specified in section 1861(fff) of the Act. Specifically, we 
would use HCPCS code GXX30 (Pulmonary rehabilitation, including aerobic 
exercise (includes monitoring), per session, per day). This proposed 
new HCPCS G-code would be used by hospitals to report PR services 
furnished to patients performing physician-prescribed exercises that 
are targeted to improving the patient's physical functioning and may 
also include the provision of other aspects of PR, such as education 
and training. Consistent with our proposal in the CY 2010 MPFS proposed 
rule, we are proposing that hospitals would use proposed HCPCS code 
GXX30 to report sessions lasting a minimum of 60 minutes each, 
generally for two to three sessions of PR per week, under the OPPS. We 
also are proposing to allow no more than one session per day because 
individuals who are furnished services in a PR program have significant 
respiratory compromise and would not typically be capable of performing 
more than one session of exercise per day.
    PR described by proposed HCPCS code GXX30 would be a new 
comprehensive service. We do not believe there is an existing clinical 
APC to which this service could be appropriately assigned under the 
OPPS based on the information currently available to us. We do not 
believe that any services currently paid under the OPPS are 
sufficiently similar to PR, based on both clinical and resource 
characteristics, to justify the initial assignment of proposed HCPCS 
code GXX30 to the same clinical APC as an existing service. 
Historically, individual services that comprise comprehensive PR have 
been reported separately with existing HCPCS codes that are paid under 
the OPPS through the individual APC that is most appropriate for each 
service described by the specific HCPCS code reported.
    For payment under the MPFS, we are proposing relative value units 
for new HCPCS code GXX30 for CY 2010 based on the estimated resources 
and work intensity associated with existing cardiac rehabilitation and 
respiratory therapy services. The nonfacility practice expense amount 
is the component of the MPFS payment that is most comparable to what 
Medicare pays under the OPPS. Both the MPFS nonfacility practice 
expense payment and the OPPS payment include payment for the service 
costs other than the physician professional services that are billed 
and paid under the MPFS in all service settings. The CY 2010 proposed 
nonfacility practice expense payment amount under the MPFS is between 
$10 and $20.
    Given the lack of OPPS hospital cost data to guide the initial 
assignment of the proposed new HCPCS code that would describe services 
furnished under the new PR benefit, for the CY 2010 OPPS, we are 
proposing to assign HCPCS code GXX30 to New Technology APC 1492 (New 
Technology--Level IB ($10-$20)), the New Technology APC that provides 
payment for new services with estimated facility costs between $10 and 
$20 and for which no existing clinical APC is appropriate. The New 
Technology APC payment of $15, at the midpoint of the cost band, would 
be approximately the same as the proposed

[[Page 35361]]

CY 2010 MPFS nonfacility practice expense amount for PR described by 
HCPCS code GXX30. As discussed above, this is the portion of the 
proposed MPFS payment that is most comparable to what Medicare would 
pay under the OPPS. We believe this proposed temporary assignment to a 
New Technology APC would allow us to pay appropriately for the service 
under the OPPS, at a rate that is similar to the corresponding 
physician's office payment amount, while we gather hospital claims data 
and experience with the new service on which to base a clinically 
relevant APC assignment in the future.
3. Proposed Payment for Services Furnished to Hospital Outpatients 
Under a Cardiac Rehabilitation or an Intensive Cardiac Rehabilitation 
Program
    Currently, CR services furnished by hospitals are reported using 
CPT codes 93797 and 93798. In the CY 2010 MPFS proposed rule, we are 
proposing that each day CR items and services are furnished to a 
patient, aerobic exercises along with other exercises must be included 
(that is, a patient must exercise aerobically every day he or she 
attends a CR session). In addition, we are proposing that each session 
must be a minimum of 60 minutes and patients must participate in a 
minimum of two CR sessions a week, with a maximum of two CR sessions a 
day.
    With respect to ICR services, section 1861(eee)(4)(C) of the Act, 
states that ``an intensive cardiac rehabilitation program may be 
provided in a series of 72 one-hour sessions (as defined in 
section1848(b)(5)), up to 6 sessions per day, over a period of up to 18 
weeks.'' For the CY 2010 OPPS, we are proposing to create two new Level 
II HCPCS codes to report the services of an ICR program that are 
furnished to hospital outpatients, consistent with the provisions of 
section 1861(eee)(4)(C) of the Act: Proposed HCPCS code GXX28 
(Intensive cardiac rehabilitation; with or without continuous ECG 
monitoring with exercise, per session) and proposed HCPCS code GXX29 
(Intensive cardiac rehabilitation; with or without continuous ECG 
monitoring; without exercise, per session). These proposed new HCPCS G-
codes would be used to report ICR services furnished by hospitals that 
have an ICR program that has received a designation as a qualified ICR 
program. Consistent with the proposal in the CY 2010 MPFS proposed 
rule, we are proposing that each session of ICR must be a minimum of 60 
minutes and that each day ICR items and services are provided to a 
patient, aerobic exercises along with other exercises must be included 
(that is, a patient must exercise aerobically every day he or she 
attends a ICR session).
    For the CY 2010 OPPS, we are proposing to assign proposed HCPCS 
codes GXX28 and GXX29 to APC0095 (Cardiac Rehabilitation) with a status 
indicator of ``S.'' The proposed median cost of APC 0095 for CY 2010 is 
approximately $39. This proposed median cost reflects historical 
hospital cost data for one session of general CR services reported with 
CPT code 93797 or 93798. Both CR and ICR programs consist of exercise, 
cardiac risk factor modification, psychosocial assessment, outcomes 
assessment and other services, as described in the CY 2010 MPFS 
proposed rule. Although more sessions per day for a beneficiary may be 
provided in an ICR program than a CR program, we believe the hospital 
costs for a single session would be similar, and OPPS payment for CR 
and ICR would be provided on a per-session basis. Therefore, because CR 
and ICR services are similar from both clinical and resource 
perspectives, we believe that it would be appropriate to assign the two 
proposed new Level II HCPCS codes for ICR to APC 0095 while we collect 
cost information from hospitals specific to ICR. We would make a single 
payment of APC 0095 for each session of ICR reported on hospital 
outpatient claims.
4. Physician Supervision for Pulmonary Rehabilitation, Cardiac 
Rehabilitation, and Intensive Cardiac Rehabilitation Services
    Section 144 of Public Law 110-275 includes requirements for 
immediate and ongoing physician availability and accessibility for both 
medical consultations and medical emergencies at all times items and 
services are being furnished under CR, ICR, and PR programs. In section 
II.G.8. of the June 2009 CY 2010 MPFS proposed rule, we have proposed 
that these requirements would be met through existing definitions for 
direct physician supervision in physicians' offices and hospital 
outpatient departments at Sec.  410.26(a)(2) (defined through cross 
reference to Sec.  410.32(b)(3)(ii)) and Sec.  410.27, respectively. 
Direct supervision, as defined in the regulations, is consistent with 
the requirements of Public Law 110-275 because the physician must be 
present and immediately available where the services are being 
furnished. The physician must also be able to furnish assistance and 
direction throughout the performance of the services, which would 
include medical consultations and medical emergencies.
    For CR, ICR, and PR services provided to hospital outpatients, 
direct physician supervision is the standard set forth in the April 7, 
2000 OPPS final rule with comment period (68 FR 18524 through 18526) 
for supervision of hospital outpatient therapeutic services covered and 
paid by Medicare in hospitals and provider-based departments of 
hospitals. We noted in the discussions of cardiac and pulmonary 
rehabilitation in the CY 2010 MPFS proposed rule that if we were to 
propose future changes to the physician office or hospital outpatient 
policies for direct physician supervision, we would provide our 
assessment of the implications of those proposals for the supervision 
of cardiac and pulmonary rehabilitation services at that time.
    As discussed in more detail in section XII.D of this proposed rule, 
we are proposing to refine the definition of the direct supervision of 
hospital outpatient therapeutic services for those services provided in 
the hospital and in an on-campus PBD of the hospital. For services, 
including CR, ICR, and PR services, provided in the hospital and in an 
on-campus PBD of the hospital, direct supervision would mean that the 
physician must be present on the same campus, in the hospital or the 
on-campus PBD of the hospital, as defined in Sec.  413.65, and 
immediately available to furnish assistance and direction throughout 
the performance of the procedure. We are also proposing to define ``in 
the hospital'' in proposed new paragraph Sec.  410.27(g) to mean areas 
in the main building(s) of the hospital that are under the ownership, 
financial, and administrative control of the hospital; are operated as 
part of the hospital; and for which the hospital bills the services 
furnished under the hospital's CMS Certification Number (CCN). We are 
proposing no significant change to the definition or requirements for 
direct supervision of hospital outpatient therapeutic services provided 
in off-campus PBDs of a hospital. Thus, with respect to CR, ICR, and PR 
services furnished in off-campus PBDs of the hospital, direct 
supervision would continue to mean that the physician must be in the 
off-campus PBD and immediately available to furnish assistance and 
direction throughout the performance of the procedure. We believe that 
direct supervision, as defined in the proposed regulations for hospital 
outpatient therapeutic services, continues to be consistent with the 
requirements of Public Law 110-275 for CR, ICR, and PR services because 
the physician must be present and

[[Page 35362]]

immediately available where the services are being furnished. The 
physician must also be able to furnish assistance and direction 
throughout the performance of the services, which would include medical 
consultations and medical emergencies. For a complete discussion of the 
current and proposed requirements for the direct supervision of 
hospital outpatient therapeutic services, we refer readers to section 
XII.D. of this proposed rule.
    Section 144 of Public Law 110-275 also states that in the case of 
items and services furnished under such a CR, ICR, or PR program in a 
hospital, physician availability shall be presumed. As we have stated 
in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68702 
through 68704), the longstanding presumption of direct physician 
supervision for hospital outpatient services means that direct 
physician supervision is the standard for supervision of hospital 
outpatient therapeutic services covered and paid by Medicare in 
hospitals and PBDs of hospitals, and we expect that hospitals are 
providing services in accordance with this standard.
    We note that in section XII.D. of this proposed rule, we are also 
proposing that nonphysician practitioners, defined for the purpose of 
proposed revised Sec.  410.27 of the regulations as clinical 
psychologists, physician assistants, nurse practitioners, clinical 
nurse specialists, and certified nurse-midwives, may directly supervise 
all hospital outpatient therapeutic services that they may perform 
themselves within their State scope of practice and hospital-granted 
privileges, provided that they meet all additional requirements, 
including any collaboration or supervision requirements as specified in 
Sec. Sec.  410.71, 410.74, 410.75, 410.76, and 410.77. However, in the 
CY 2010 MPFS proposed rule and in the corresponding proposed regulation 
text, we proposed a different requirement for the direct supervision of 
CR, ICR, and PR services. We proposed that services provided in CR, 
ICR, and PR programs must be supervised by a doctor of medicine or 
osteopathy, as defined in section 1861(r)(i) of the Act. In addition, 
we proposed specific requirements for the expertise and licensure of 
physicians supervising CR and ICR services. It would not be in 
accordance with the proposed regulations for a nonphysician 
practitioner to supervise services furnished in a CR, ICR, or PR 
program. The physician supervision and expertise requirements proposed 
in the coverage policy and regulations for CR, ICR, and PR services 
must be met for those services to be covered and, therefore, paid by 
Medicare in hospital outpatient settings.

C. Stem Cell Transplant

    Stem cell transplantation is a treatment in which stem cells that 
are harvested from either a patient's or a donor's bone marrow or 
peripheral blood are later infused into that patient to treat an 
illness. Autologous stem cell transplantation is a technique for 
providing additional stem cells using the patient's own previously 
harvested stem cells. Allogeneic stem cell transplantation is a 
procedure in which stem cells from a healthy donor are acquired and 
prepared to provide a patient with new stem cells.
    We recently revised section 90.3.3 of Chapter 3 of the Medicare 
Claims Processing Manual (Pub. 100-04) and created new section 231.10 
of Chapter 4 of the Medicare Claims Processing Manual in order to 
clarify billing under Medicare for autologous and allogeneic stem cell 
transplant services. As stated in the cited new and revised manual 
sections, autologous stem cell transplants performed on Medicare 
beneficiaries may be provided on an inpatient or an outpatient basis. 
Hospitals are instructed to bill and show all charges for autologous 
stem cell harvesting, processing, and transplant procedures based on 
the status of the patient (that is, inpatient or outpatient) when the 
individual services are furnished. The CPT codes describing these 
services may be billed and are separately payable under the OPPS when 
the services are provided in the hospital outpatient setting.
    In contrast, allogeneic stem cell transplants performed on Medicare 
beneficiaries are provided on an inpatient basis, and all services 
related to acquiring the stem cells from a donor (whether performed 
inpatient or outpatient) are billed and are payable under Medicare Part 
A through the IPPS MS-DRG payment for the stem cell transplant. In 
addition to payment for the stem cell transplant procedure itself, the 
MS-DRG payment for the stem cell transplant includes payment for stem 
cell acquisition services, which include, but are not limited to, 
National Marrow Donor Program fees for stem cells from an unrelated 
donor (if applicable); tissue typing of donor and recipient; donor 
evaluation; physician pre-admission/pre-procedure donor evaluation 
services; costs associated with the harvesting procedure; post-
operative/post-procedure evaluation of donor; and preparation and 
processing of stem cells. While certain acquisition services, such as 
donor harvesting procedures, may be performed in the hospital 
outpatient setting, hospitals are instructed to include the charges for 
these services in the recipient's inpatient transplant bill as 
acquisition services and not to bill them under the OPPS.
    In order to be consistent with the revised section 90.3.3 and the 
new section 231.10 of the Medicare Claims Processing Manual cited 
earlier, which reflect what we believe to be the current clinical 
practice of performing allogeneic stem cell transplants on Medicare 
beneficiaries on an inpatient basis only, we are proposing to revise 
the status indicator assignments of certain stem cell transplant-
related CPT codes under the OPPS. Specifically, we are proposing to 
change the status indicator for CPT code 38205 (Blood-derived 
hematopoietic progenitor cell harvesting for transplantation, per 
collection; allogenic) from ``S'' to ``E'' for the CY 2010 OPPS to 
reflect that, while an allogeneic stem cell harvesting procedure 
performed on the donor may take place in the HOPD, payment for the 
service is made through the IPPS MS-DRG payment for the associated 
transplant procedure performed on the recipient. We also are proposing 
to change the status indicators for CPT code 38240 (Bone marrow or 
blood-derived peripheral stem cell transplantation; allogenic) and CPT 
code 38242 (Bone marrow or blood-derived peripheral stem cell 
transplantation; allogeneic donor lymphocyte infusions) from ``S'' to 
``C'' for the CY 2010 OPPS to reflect that these allogeneic transplant 
procedures are payable by Medicare as inpatient procedures only.
    We refer readers to section 90.3.3 of Chapter 3 and section 231.10 
of Chapter 4 of the Medicare Claims Processing Manual for more detailed 
information on billing and payment for autologous and allogeneic stem 
cell transplants and related services.

D. Physician Supervision

1. Background
    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 provided a restatement and clarification of the 
requirements for physician supervision of hospital outpatient 
diagnostic and therapeutic services that were set forth in the April 
2000 OPPS final rule with comment period (65 FR 18524 through 18526). 
As we stated in those rules, section 1861(s)(2)(C) of the Act 
authorizes payment for diagnostic services that are furnished to a 
hospital

[[Page 35363]]

outpatient for the purpose of diagnostic study. We have further defined 
the requirements for diagnostic services furnished to hospital 
outpatients, including requirements for physician supervision of 
diagnostic services, in Sec. Sec.  410.28 and 410.32 of our 
regulations. Section 410.28(e) states that Medicare Part B will make 
payment for diagnostic services furnished at provider-based departments 
(PBDs) of hospitals ``only when the diagnostic services are furnished 
under the appropriate level of physician supervision specified by CMS 
in accordance with the definitions in Sec. Sec.  410.32(b)(3)(i), 
(b)(3)(ii), and (b)(3)(iii).'' In addition, in the April 2000 OPPS 
final rule with comment period (65 FR 18526), we stated that our model 
for the requirement was the requirement for physician supervision of 
diagnostic tests payable under the MPFS that was set forth in the CY 
1998 MPFS final rule (62 FR 59048). In 2000, we also explained with 
respect to the supervision requirements for individual diagnostic tests 
that we intended to instruct hospitals and fiscal intermediaries to use 
the MPFS as a guide pending issuance of updated requirements. For 
diagnostic services not listed in the MPFS, we stated that fiscal 
intermediaries, in consultation with their medical directors, would 
define appropriate supervision levels in order to determine whether 
claims for these services are reasonable and necessary. Since 2000, we 
have continued to follow the supervision requirements for individual 
diagnostic tests as listed in the MPFS Relative Value File. The file is 
updated quarterly and is available on the CMS Web site at: http://www.cms.hhs.gov/PhysicianFeeSched/.
    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 also reiterated that direct physician supervision is 
the standard for physician supervision as set forth in the April 2000 
OPPS final rule with comment period for supervision of hospital 
outpatient therapeutic services covered and paid by Medicare in 
hospitals and PBDs of hospitals. We noted that section 1861(s)(2)(B) of 
the Act authorizes payment for hospital services ``incident to 
physicians' services rendered to outpatients.'' We have further defined 
the supervision requirements for hospital outpatient therapeutic 
services and supplies ``incident to'' a physician's service in Sec.  
410.27 of our regulations. More specifically, Sec.  410.27(f) states: 
``Services furnished at a department of a provider, as defined in Sec.  
413.65(a)(2) of this subchapter, that has provider-based status in 
relation to a hospital under Sec.  413.65 of this subchapter, must be 
under the direct supervision of a physician. `Direct supervision' means 
the physician must be present and on the premises of the location and 
immediately available to furnish assistance and direction throughout 
the performance of the procedure. It does not mean that the physician 
must be present in the room when the procedure is performed.'' This 
language makes no distinction between on-campus and off-campus PBDs.
    In the preamble of the April 2000 OPPS final rule with comment 
period (65 FR 18525), we further discussed the requirement for 
physician supervision and the finalization of the proposed regulation 
text. In that discussion, we stated that the language of Sec.  
410.27(f) ``applies to services furnished at an entity that is located 
off the campus of a hospital that we designate as having provider-based 
status as a department of a hospital in accordance with Sec.  413.65.'' 
We also stated that, for services furnished in a department of a 
hospital that is located on the campus of a hospital, ``we assume the 
direct supervision requirement to be met as we explain in section 
3112.4(a) of the Intermediary Manual.'' We further stated that ``we 
assume the physician supervision requirement is met on hospital 
premises because staff physicians would always be nearby within the 
hospital.''
    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 restated the existing physician supervision policy 
for hospital outpatient therapeutic services because we were concerned 
that some stakeholders may have misunderstood our use of the term 
``assume'' in the April 2000 OPPS final rule with comment period, 
believing that our statement meant that we do not require any 
supervision in the hospital or in an on-campus PBD for hospital 
outpatient therapeutic services, or that we only require general 
supervision for those services. This is not the case. It has been our 
expectation that hospital outpatient therapeutic services are provided 
under the direct supervision of physicians in the hospital and in all 
PBDs of the hospital, specifically, both on-campus and off-campus 
departments of the hospital. The expectation that a physician would 
always be nearby predates the OPPS and is related to the statutory 
authority for payment of hospital outpatient services--that Medicare 
makes payment for hospital outpatient services ``incident to'' the 
services of physicians in the treatment of patients as described in 
section 1861(s)(2)(B) of the Act. Section 410.27(a)(1)(ii) of the 
regulations states that Medicare Part B pays for hospital services and 
supplies furnished incident to a physician service to outpatients if 
they are provided ``as an integral though incidental part of a 
physician's services.'' In addition, we have stated in section 20 of 
chapter 6 of the Medicare Benefit Policy Manual (Pub. 100-2) that 
hospitals provide two distinct types of services to outpatients: 
services that are diagnostic in nature, and other services that aid the 
physician in the treatment of the patient. We further defined these 
therapeutic services and supplies in section 20.5.1 of the Medicare 
Benefit Policy Manual, stating ``therapeutic services and supplies 
which hospitals provide on an outpatient basis are those services and 
supplies (including the use of hospital facilities) which are incident 
to the services of physicians in the treatment of patients.'' We also 
provide in section 20.5.1 that services and supplies must be furnished 
on a physician's order and delivered under physician supervision. 
However, the manual indicates further that each occasion of a service 
by a nonphysician does not need to also be the occasion of the actual 
rendition of a personal professional service by the physician 
responsible for the care of the patient. Nevertheless, as stipulated in 
that same section of the manual ``during any course of treatment 
rendered by auxiliary personnel, the physician must personally see the 
patient periodically and sufficiently often enough to assess the course 
of treatment and the patient's progress and, where necessary, to change 
the treatment regimen.''
    The expectation that a physician would always be nearby within the 
hospital also dates back to a time when hospital inpatient services 
provided in a single hospital building represented the majority of 
hospital payments by Medicare. Since that time, advances in medical 
technology, changes in the patterns of health care delivery, and 
changes in the organizational structure of hospitals have led to the 
development of extensive hospital campuses, sometimes spanning several 
city blocks, as well as off-campus and satellite provider-based 
campuses at different locations. In the April 2000 OPPS final rule with 
comment period (65 FR 18525), we described the focus of the direct 
physician supervision requirement for off-campus PBDs. In the CY 2009 
OPPS/ASC final rule with

[[Page 35364]]

comment period (73 FR 68703), we stated that we do expect direct 
physician supervision of all hospital outpatient therapeutic services, 
regardless of their on-campus or off-campus location, but that we would 
continue to emphasize the physician supervision requirement for off-
campus PBDs. However, we also noted that if there were problems with 
outpatient care in a hospital or in an on-campus PBD where direct 
supervision was not in place (that is, the expectation of direct 
physician supervision was not met), we would consider that to be a 
quality concern. We noted that we want to ensure that payment is made 
for high quality hospital outpatient services provided to beneficiaries 
in a safe and effective manner and consistent with Medicare 
requirements.
    Finally, we noted that the definition of direct supervision in 
Sec.  410.27(f) for PBDs requires that the physician must be present 
and on the premises of the location and immediately available to 
furnish assistance and direction throughout the performance of the 
procedure. In the April 2000 OPPS final rule with comment period (65 FR 
18525), we further distinguished ``on the premises of the location'' by 
stating ``* * * a physician must be present on the premises of the 
entity accorded status as a department of the hospital and therefore, 
immediately available to furnish assistance and direction for as long 
as patients are being treated at the site.'' We also stated that this 
characterization does not mean that the physician must be physically in 
the room where a procedure or service is furnished. We noted in the CY 
2009 OPPS/ASC final rule with comment period (73 FR 68703) that 
although we have not further defined the term ``immediately available'' 
for this specific context, the lack of timely physician response to a 
problem in the HOPD would represent a quality concern from our 
perspective that hospitals should consider in structuring their 
provision of services in ways that meet the direct physician 
supervision requirement for HOPD services.
    In response to a comment requesting clarification, we also 
discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68703 through 68704) that a nonphysician practitioner may not provide 
the physician supervision in a PBD, even if a nurse practitioner's or a 
physician assistant's professional service was being billed as a nurse 
practitioner or a physician assistant service and not a physician 
service. We noted that section 1861(r) of the Act defines a physician 
as follows: ``[t]he term `physician', when used in connection with the 
performance of any function or action, means (1) a doctor of medicine 
or osteopathy legally authorized to practice medicine and surgery by 
the State in which he performs such function or action * * *; (2) a 
doctor of dental surgery or of dental medicine * * *; (3) a doctor of 
podiatric medicine * * *; (4) a doctor of optometry * * *; or (5) a 
chiropractor. In addition, we pointed out that the conditions of 
participation for hospitals under Sec.  482.12(c)(1)(i) through 
(c)(1)(vi) of our regulations require that every Medicare hospital 
patient is under the care of a doctor of medicine or osteopathy, a 
doctor of dental surgery or dental medicine, a doctor of podiatric 
medicine, a doctor of optometry, a chiropractor, or a clinical 
psychologist; each practicing within the extent of the Act, the Federal 
regulations, and State law. Further, Sec.  482.12(c)(4) of our 
regulations requires that a doctor of medicine or osteopathy must be 
responsible for the care of each Medicare patient with respect to any 
medical or psychiatric condition that is present on admission or 
develops during hospitalization and is not specifically within the 
scope of practice of one of the other practitioners listed in Sec.  
482.12(c)(1)(ii) through (c)(1)(vi).
    Moreover, section 1861(s)(2)(B) of the Act authorizes payment for 
hospital services ``incident to physicians' services rendered to 
outpatients.'' We have further defined the requirements for hospital 
outpatient therapeutic services and supplies ``incident to'' a 
physician's service in Sec.  410.27 of our regulations. Section 
410.27(a)(1)(ii) describes payment for hospital outpatient services 
when they are ``an integral though incidental part of a physician's 
services.'' Also, Sec.  410.27(f) requires that hospital outpatient 
services provided in PBDs must be under the direct supervision of a 
physician. We stated that the language of the statute and regulations 
does not include nonphysician practitioners other than clinical 
psychologists. Therefore, it would not be in accordance with the law 
and regulations for a nonphysician practitioner other than a clinical 
psychologist to be providing the physician supervision in a PBD, even 
if a nurse practitioner's or a physician assistant's professional 
service was being billed as a nurse practitioner or a physician 
assistant service and not a physician service.
2. Issues Regarding the Physician Supervision of Hospital Outpatient 
Services Raised by Hospitals and Other Stakeholders
    Although we received a few public comments on the discussion of 
physician supervision in the CY 2009 OPPS/ASC proposed rule, since 
publication of the CY 2009 OPPS/ASC final rule with comment period on 
November 18, 2008, we have received many questions and concerns about 
the current policies from hospitals and other stakeholders. Some 
stakeholders expressed appreciation for the CMS clarification, stating 
that the supervision policies were clear and represented needed 
safeguards for beneficiaries. On the other hand, we have received 
numerous questions about the application of the policies to hospital 
outpatient therapeutic services furnished in areas of the hospital that 
some stakeholders believe have not clearly been discussed, such as the 
application of direct supervision to hospital outpatient therapeutic 
services furnished within the main buildings of the hospital that may 
not be PBDs of the hospital. Some hospitals expressed difficulty in 
determining whether certain areas of their hospitals were considered 
provider-based. Other stakeholders cited the direct supervision policy 
as first articulated in 2000 as problematic because they believe that 
CMS failed to consider hospitals' current organizational structures. 
Some hospitals and other stakeholders inquired about a physician's 
qualifications for providing supervision or questioned whether 
physician supervision must be provided by a physician in a particular 
medical specialty. A number of stakeholders challenged the current 
policy that nonphysician practitioners cannot provide direct 
supervision for those hospital outpatient therapeutic services they may 
personally perform or that they may order to be provided by other 
hospital staff incident to the nonphysician practitioner's services. In 
addition, numerous stakeholders, especially rural hospitals, raised 
budgetary and patient access concerns related to ensuring adequate 
physician staffing, especially because nonphysician practitioners may 
not directly supervise the delivery of hospital outpatient therapeutic 
services. Furthermore, rural hospitals and CAHs raised concerns 
regarding the inconsistency of the direct supervision requirements for 
CAHs with other CAH policies, pointing out that the Medicare conditions 
of participation for CAHs allow nurse practitioners and physician

[[Page 35365]]

assistants to be responsible for the care of Medicare patients in CAHs. 
Some stakeholders specifically questioned whether Sec.  410.27(f) 
applied to CAHs because the term ``CAH'' is not in the heading of Sec.  
410.27, which currently reads ``Outpatient hospital services and 
supplies incident to a physician service: Conditions.'' Other 
stakeholders complained about the significant burden on hospitals to 
provide direct physician supervision because they believe there is no 
clear clinical need for such supervision, particularly a uniform level 
of supervision for all types of hospital outpatient therapeutic 
services. Some stakeholders challenged the applicability of the direct 
supervision requirements to specific types of hospital outpatient 
services, such as partial hospitalization or chemotherapy 
administration services.
    Similar to the issues related to direct supervision of hospital 
outpatient therapeutic services raised by hospitals and other 
stakeholders, we have received questions since publication of the CY 
2009 OPPS/ASC final rule with comment period, citing confusion 
regarding the application of physician supervision policies for 
hospital outpatient diagnostic services, especially with respect to 
services provided within the main buildings of the hospital that are 
not PBDs. In addition, some stakeholders have pointed out that there is 
no site-of-service requirement for hospital outpatient diagnostic 
services, and that, therefore, hospitals may send patients to 
independent diagnostic testing facilities (IDTFs) or other entities to 
receive diagnostic services under arrangement. They added that although 
these facilities are not PBDs, the hospital would bill for these 
services as hospital outpatient services in accordance with the 
hospital bundling rules. Some of these stakeholders have asked what 
type of physician supervision is required for diagnostic services 
provided under arrangement.
    A number of stakeholders urged CMS to withdraw or delay the 
physician supervision policies discussed in the CY 2009 OPPS/ASC final 
rule with comment period, arguing that this rule included policy 
changes rather than clarification and, therefore, sufficient 
opportunity for public notice and comment was not provided. Some 
further argued that CMS should suspend enforcement of these policies 
while CMS gathers additional public input and considered alternatives. 
These stakeholders suggested a variety of additional approaches to 
soliciting full feedback from the hospital and physician communities on 
the supervision policies and their impact, including holding an open 
door forum or town hall meeting and reopening the discussion during the 
CY 2010 OPPS rulemaking process.
    As stated previously in this section, we provided a restatement and 
clarification of existing policy in the CY 2009 OPPS/ASC proposed rule 
(73 FR 41518 through 41519), citing numerous existing statutory, 
regulatory, manual, and prior rule preamble statements in section 
XII.A. of that rule specifically titled, ``Physician Supervision of 
HOPD Services.'' The CY 2009 OPPS/ASC proposed rule provided for a 60-
day comment period. We continue to believe that the CY 2009 restatement 
and clarification made no change to longstanding hospital outpatient 
physician supervision policies as incorporated in prior statements of 
policy, including the codified Federal regulations. In addition, we 
provided for public notice and comment regarding these physician 
supervision polices through the CY2009 OPPS/ASC proposed rule in which, 
as noted above, we discussed physician supervision in a distinct 
section of the proposed rule. However, we received only a few public 
comments on that section. We note that the physician supervision 
policies for hospital outpatient diagnostic and therapeutic services as 
described in the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68702 through 68704) continue to be in effect for CY 2009. We have not 
instructed contractors to delay initiation of enforcement actions or to 
discontinue pursuing pending enforcement actions regarding the 
physician supervision of hospital outpatient services.
    However, while we are not proposing to withdraw the longstanding 
physician supervision policies for hospital outpatient services, we 
have extensively considered the many questions and concerns on this 
topic raised to us by stakeholders in the course of developing this CY 
2010 OPPS/ASC proposed rule in order to assess whether proposed changes 
to the existing policies should be considered. We appreciate the many 
detailed comments and suggestions interested stakeholders have raised 
in the first few months since publication of the CY 2009 OPPS/ASC final 
rule with comment period. We have considered a wide variety of 
potential modifications to our physician supervision policies in 
response to this information about current health care delivery 
practices and challenges. The dialogue with interested stakeholders has 
provided us with sufficient information to develop proposals for 
certain changes to the supervision policies for hospital outpatient 
services for CY 2010 in order to take into full consideration current 
clinical practice and patterns of care, the need to ensure patient 
access, the associated hospital and physician responsibilities, 
consistency among requirements for different sites of services, and 
other important factors. We believe that these proposals address many 
of the concerns and questions regarding our existing policies that have 
been raised to us by stakeholders over the past several months. We look 
forward to robust public comments on this proposed rule regarding our 
CY 2010 proposals for physician supervision in order to inform our 
decisions regarding final policies for CY 2010.
    In considering the questions and concerns that have been raised 
over the past several months, we have identified three areas within our 
existing hospital outpatient physician supervision policies for which 
we believe proposals of policy changes are appropriate for CY 2010, two 
related to the supervision of therapeutic services and one related to 
the supervision of diagnostic services. Our specific CY 2010 proposals, 
including the proposed changes to our regulations to conform to these 
proposals, are discussed below.
3. Proposed Policies for Direct Supervision of Hospital and CAH 
Outpatient Therapeutic Services
    First, for CY 2010 we are proposing that nonphysician 
practitioners, specifically physician assistants, nurse practitioners, 
clinical nurse specialists, and certified nurse-midwives, may directly 
supervise all hospital outpatient therapeutic services that they may 
perform themselves in accordance with their State law and scope of 
practice and hospital-granted privileges, provided that they continue 
to meet all additional requirements, including any collaboration or 
supervision requirements as specified in the regulations at Sec. Sec.  
410.74 through 410.77. Clinical psychologists may already provide 
direct supervision, as we mentioned in the CY 2009 OPPS/ASC final rule 
with comment period (73 FR 68703 through 68704) because they, along 
with physicians (as defined in section 1861(r)(1) of the Act), may be 
responsible for the care of a hospital patient, as discussed in the 
Medicare conditions of participation for hospitals in Sec.  482.12(c) 
of our regulations. We believe that allowing certain nonphysician 
practitioners (nurse practitioners, physician assistants, clinical 
nurse specialists, and certified nurse-midwives) to provide direct 
supervision of certain hospital

[[Page 35366]]

outpatient therapeutic services is appropriate because, even though 
these practitioners are not physicians, they are recognized in statute 
and regulation as providing services that are analogous to physicians' 
services. Medicare Part B covers the professional services of clinical 
psychologists, nurse practitioners, physician assistants, clinical 
nurse specialists, and certified nurse-midwives when the services would 
be covered as physicians' services if furnished by a physician (a 
doctor of medicine or osteopathy, as set forth in section 1861(r)(1) of 
the Act). The coverage of their services is described in Sec. Sec.  
410.71(a), 410.74(a), 410.75(a) and (c), 410.76(a) and (c), and 
410.77(a), respectively, of our regulations. Medicare also makes 
payment for services provided incident to the services of these 
nonphysician practitioners as specified in Sec. Sec.  
410.71(a)(2)(iii), 410.74(b), 410.75(d), 410.76(d), and 410.77(c), 
respectively.
    We also note that section 1861(r) of the Act does not include 
clinical psychologists, nurse practitioners, physician assistants, 
clinical nurse specialists, or certified nurse-midwives in the 
definition of a physician. However, as previously mentioned, the 
conditions of participation for hospitals at Sec.  482.12(c)(1)(vi) of 
our regulations do include clinical psychologists as practitioners who 
may be responsible for the care of Medicare patients. The conditions of 
participation at Sec. Sec.  482.12(c)(1)(i) through (c)(1)(vi) require 
that every Medicare hospital patient be under the care of a doctor of 
medicine or osteopathy, a doctor of dental surgery or dental medicine, 
a doctor of podiatric medicine, a doctor of optometry, a chiropractor, 
or a clinical psychologist; each practicing in accordance with the Act, 
Federal regulations, and State law. Further, Sec.  482.12(c)(4) of our 
regulations requires that a doctor of medicine or osteopathy must be 
responsible for the care of each Medicare patient with respect to any 
medical or psychiatric condition that is present on admission or 
develops during hospitalization and is not specifically within the 
scope of practice of one of the other practitioners listed in Sec.  
482.12(c)(1)(ii) through (c)(1)(vi). Also, as permitted by State law, 
certain nonphysician practitioners may admit individuals to a hospital 
or CAH and order and provide therapeutic services to them. Since 1998, 
we have allowed payment for the professional services of these 
nonphysician practitioners in addition to payment for physicians' 
services when the nonphysician practitioner's professional services are 
furnished in an HOPD. We also have made outpatient facility payments to 
the hospital for those facility services provided incident to the 
professional services of these nonphysician practitioners (63 FR 
58873). In addition, the conditions of participation for CAHs at Sec.  
485.631 require that a doctor of medicine or osteopathy, a nurse 
practitioner, a physician assistant, or a clinical nurse specialist is 
available to furnish patient care services at all times the CAH 
operates. A doctor of medicine or osteopathy must be present for 
sufficient periods of time to provide medical direction, medical care 
services, consultation and supervision as described in the conditions 
of participation and must be available through radio or telephone 
contact for assistance with medical emergencies or patient referral.
    Taking into consideration the totality of these existing conditions 
and requirements, we are proposing to revise Sec.  410.27 of the 
regulations to make clear that Medicare Part B payment may be made for 
hospital outpatient services and supplies furnished incident to the 
services of a physician, clinical psychologist, nurse practitioner, 
physician assistant, clinical nurse specialist, or certified nurse-
midwife service; and to add that, effective January 1, 2010, clinical 
psychologists, nurse practitioners, physician assistants, clinical 
nurse specialists, or certified nurse-midwives may provide direct 
supervision for hospital outpatient therapeutic services that they may 
perform themselves under State law and within their scope of practice 
and hospital-granted privileges in the context of the existing 
requirements in Sec. Sec.  410.71, 410.74, 410.75, 410.76, and 410.77. 
However, we note that, as discussed in section XII.B.4 of this proposed 
rule, the direct supervision of CR, ICR, and PR services must be 
furnished by a doctor of medicine or osteopathy, as specified in the 
proposed coverage policy and regulations for CR, ICR, and PR services. 
We also note that Medicare does not make a payment to a physician under 
the MPFS when the physician solely provides the direct physician 
supervision of hospital outpatient therapeutic services but furnishes 
no direct professional services to a patient. This also would apply to 
the supervision of hospital outpatient therapeutic services provided by 
nonphysician practitioners.
    We also note that we are not proposing to modify requirements 
relating to physician supervision or collaboration for these 
nonphysician practitioners. In regard to the supervision of physician 
assistants, Sec.  410.74(a)(iv) requires that physician assistants 
perform services under the general supervision of a physician. We have 
further defined this general supervision in section 190(c) of chapter 
15 of the Medicare Benefit Policy Manual. Section 190(c) states that 
``the PA's physician supervisor (or a physician designated by the 
supervising physician or employer as provided under State law or 
regulations) is primarily responsible for the overall direction and 
management of the PA's professional activities and for assuring that 
the services provided are medically appropriate for the patient. The 
physician supervisor (or physician designee) need not be physically 
present with the PA when a service is being furnished to a patient and 
may be contacted by telephone, if necessary, unless State law or 
regulations require otherwise.''
    The requirements for collaboration of nurse practitioners are 
defined in Sec.  410.75(c)(3) of the regulations and section 200(D) of 
chapter 15 of the Medicare Benefit Policy Manual. The requirements for 
clinical nurse specialists are located in Sec.  410.76(c)(3) of the 
regulations and section 210(D) of Chapter 15 of the Medicare Benefit 
Policy Manual. These sections define collaboration as a process in 
which the nurse practitioner or the clinical nurse specialist works 
with one or more physicians (doctors or medicine or osteopathy) to 
deliver health care services within the scope of the practitioner's 
expertise, with medical direction and appropriate supervision as 
required by the law of the State in which the services are being 
furnished. In the absence of more stringent State law requirements 
governing collaboration, collaboration is to be evidenced by the nurse 
practitioner or the clinical nurse specialist documenting his or her 
scope of practice and indicating the relationships that he or she has 
with physicians to deal with issues outside their scope of practice. 
The collaborating physician does not need to be present with the nurse 
practitioner or clinical nurse specialist when the services are 
furnished or to make an independent evaluation of each patient who is 
seen by the nurse practitioner or clinical nurse specialist.
    Second, for CY 2010 we are proposing to refine the definition of 
direct supervision of hospital outpatient therapeutic services for 
those services furnished in a hospital and in on-campus PBDs of a 
hospital. For services furnished on a hospital's main campus, we are 
proposing that direct supervision means that the supervisory physician 
or

[[Page 35367]]

nonphysician practitioner must be present on the same campus, in the 
hospital or the on-campus PBD of the hospital as defined in Sec.  
413.65, and immediately available to furnish assistance and direction 
throughout the performance of the procedure. We are proposing to add a 
new paragraph (a)(1)(iv)(A) to Sec.  410.27(a)(1)(iv)(A) to reflect 
this requirement. We also are proposing to define ``in the hospital'' 
in new paragraph Sec.  410.27(g) as meaning areas in the main 
building(s) of a hospital that are under the ownership, financial, and 
administrative control of the hospital; that are operated as part of 
the hospital; and for which the hospital bills the services furnished 
under the hospital's CCN. Therefore, to be present in the hospital or 
the on-campus PBD of the hospital and immediately available requires 
that the physician or nonphysician practitioner must be physically 
present in areas on the campus of the hospital that are part of the 
hospital, including on-campus PBDs, that are operated by the hospital, 
and where services furnished in those areas are billed under the 
hospital's CCN. The supervisory physician or nonphysician practitioner 
of the hospital's outpatient therapeutic services may not be located in 
any other entity, such as a physician's office, IDTF, co-located 
hospital, or hospital-operated provider or supplier such as a skilled 
nursing facility (SNF), end stage renal disease (ESRD) facility, or 
home health agency (HHA), or any other nonhospital space that may be 
co-located on the hospital's campus, as ``hospital campus'' is defined 
in Sec.  413.65(a)(2) of the regulations.
    While we have not previously specified in policy guidance a 
definition for the term ``immediately available'' with respect to 
services provided in areas of the hospital on its main campus that are 
not PBDs, we believe that the existing definitions of direct 
supervision in Sec. Sec.  410.27(f) and 410.32(b)(3)(ii) that apply to 
PBDs and physician office settings indicate that the physician must be 
physically present in order to provide direct supervision of services. 
With regard to services provided in PBDs of hospitals or physicians' 
offices, these regulations specify that the physician must be present 
in the PBD or in the office suite, respectively. Thus, we have 
previously established that direct supervision requires immediate 
physical presence. While we also have not specifically defined the word 
``immediate'' for direct supervision in terms of time or distance, the 
general definition of the word means ``without interval of time.'' 
Therefore, the supervisory physician or nonphysician practitioner could 
not be immediately available while, for example, performing another 
procedure or service that he or she could not interrupt. In addition, 
we understand that advances in medical technology, changes in the 
patterns of health care delivery, and changes in the organizational 
structure of hospitals have led to the development of extensive 
hospital campuses, sometimes spanning several city blocks. However, in 
the context of direct physician or nonphysician practitioner 
supervision, we believe that it would be neither appropriate nor 
``immediate'' for the supervisory physician or nonphysician 
practitioner to be so physically far away on the main campus from the 
location where hospital outpatient services are being furnished that he 
or she could not intervene right away. As we stated in the CY 2009 
OPPS/ASC final rule with comment period (73 FR 68703), if there were 
problems with outpatient care in a hospital or in an on-campus PBD 
where the requirement for direct supervision was not met, we would 
consider that to be a quality concern. Appropriate supervision is a key 
aspect of the delivery of safe and high quality hospital outpatient 
services that are paid under Medicare.
    In addition, the definition of direct supervision in existing Sec.  
410.27(f) has included and would continue to specify under our CY 2010 
proposal that the physician or nonphysician practitioner must be 
available to furnish assistance and direction throughout the 
performance of the procedure. This means that the physician or 
nonphysician practitioner must be prepared to step in and perform the 
service, not just to respond to an emergency. This includes the ability 
to take over performance of a procedure and, as appropriate to both the 
supervisory physician or nonphysician practitioner and the patient, to 
change a procedure or the course of treatment being provided to a 
particular patient. We originally stated in the April 2000 OPPS final 
rule (65 FR 18525) that the physician does not ``necessarily need to be 
of the same specialty as the procedure or service that is being 
performed.'' We also have stated in manual guidance that hospital 
medical staff that supervises the services ``need not be in the same 
department as the ordering physician'' (section 20.5.1 of chapter 6 of 
the Medicare Benefits Policy Manual). However, in order to furnish 
appropriate assistance and direction for any given service or 
procedure, we believe the supervisory physician or nonphysician 
practitioner must have, within his or her State scope of practice and 
hospital-granted privileges, the ability to perform the service or 
procedure.
    We are proposing no significant changes to the definition or 
requirements for direct supervision in off-campus PBDs of the hospital 
other than to allow nonphysician practitioners to provide direct 
supervision in these PBDs for the services that these practitioners may 
perform. With respect to off-campus PBDs of hospitals, direct 
supervision will continue to mean that the physician or nonphysician 
practitioner must be in the off-campus PBD and immediately available to 
furnish assistance and direction throughout the performance of the 
procedure. We are proposing to revise existing Sec.  410.27(f) by 
redesignating it as Sec.  410.27(a)(1)(iv)(B) and making a technical 
change to clarify the current language by removing ``present and on the 
premises of the location'' and replacing it with ``present in the off-
campus provider-based department.'' While the meaning of this provision 
is the same, we believe this proposed modification to the language 
defining direct supervision is more consistent with the language of the 
other proposed changes to Sec.  410.27. As we clarified in the CY 2009 
OPPS/ASC final rule with comment period (73 FR 68704), the supervisory 
physician for hospital outpatient therapeutic services must be in each 
PBD of a particular off-campus remote location, but that does not mean 
that the physician must be in the room when the procedure is performed. 
In the April 2000 OPPS final rule (65 FR 18525), we responded to public 
commenters who asserted that requiring a physician to be onsite at a 
PBD throughout the performance of all ``incident to'' (therapeutic) 
services would be burdensome and costly for hospitals where there are a 
limited number of physicians available to provide coverage, 
particularly in rural settings. We disagreed then that the supervision 
requirement was unnecessary and burdensome because hospitals, prior to 
2000, were already required to ``meet a direct supervision of `incident 
to' services requirement that is unrelated to the provider-based rules. 
That is, we require that hospital services and supplies furnished to 
outpatients that are incident to physician services be furnished on a 
physician's order by hospital personnel and under a physician's 
supervision'' (section 3112.4 of the Medicare Intermediary Manual). In 
addition, when we discussed the ``assumption'' or expectation that the 
physician supervision requirement is

[[Page 35368]]

met on the hospital's main campus in the April 2000 OPPS final rule (65 
FR 18525), we specifically did not extend that assumption to off-campus 
departments of the hospital. We continue to believe that it would be 
inappropriate to allow one physician or nonphysician practitioner to 
supervise all services being provided in all PBDs at a particular off-
campus remote location. Since first allowing off-campus sites to be 
considered PBDs of hospitals, we have placed particular emphasis on 
ensuring the quality and safety of the services provided in these 
locations, which can be many miles from the main hospital campus, 
through both additional provider-based requirements in Sec.  413.65(e) 
and our emphasis on direct physician supervision under Sec.  410.27(f). 
In addition, because the physician or nonphysician practitioner must be 
immediately available and have, within his or her State scope of 
practice and hospital-granted privileges, the ability to perform the 
services being supervised, we believe it would be highly unlikely that 
one physician or nonphysician practitioner would be both immediately 
available at all times that therapeutic services are being provided and 
would have the knowledge and ability to adequately supervise all 
services being performed at once in multiple off-campus PBDs.
    To reflect these proposed changes for the provision of direct 
supervision of therapeutic services provided to hospital outpatients in 
our regulations, we are proposing to revise the language of the 
existing Sec.  410.27(f) and redesignate it as a new paragraph 
(a)(1)(iv) of Sec.  410.27 to specify that direct physician or 
nonphysician practitioner supervision of hospital outpatient 
therapeutic services is required for Medicare Part B payment. We are 
proposing to add a new paragraph (a)(1)(iv)(A) to Sec.  410.27 to state 
that, for services provided on the hospital's main campus, direct 
supervision means that the physician or nonphysician practitioner must 
be present on the same campus, in the hospital or on-campus PBD of the 
hospital, as defined in Sec.  413.65, and immediately available to 
furnish assistance and direction throughout the performance of the 
procedure. It does not mean that the physician or nonphysician 
practitioner must be in the room when the procedure is performed. We 
also are proposing to add new paragraph (a)(1)(iv)(B) to Sec.  410.27 
to reflect that, for off-campus PBDs of hospitals, the physician or 
nonphysician practitioner must be present in the off-campus PBD, as 
defined in Sec.  413.65, and immediately available to furnish 
assistance and direction throughout the performance of the procedure. 
It does not mean that the physician or nonphysician practitioner must 
be in the room when the procedure is performed. As we stated 
previously, the proposed language of paragraph (a)(1)(iv)(B) is similar 
to existing Sec.  410.27(f) that we are proposing to revise and 
redesignate. Furthermore, we are proposing to make a technical change 
to clarify the language in this paragraph to remove ``present and on 
the premises of the location'' and replace it with ``present in the 
off-campus provider-based department.'' Also, as discussed above in 
section XII.B.4 of this proposed rule and as proposed in the CY 2010 
MPFS proposed rule, the direct supervision of CR, ICR, and PR services 
must be furnished by a doctor of medicine or osteopathy, as specified 
in proposed Sec. Sec.  410.47 and 410.49, respectively. We are 
proposing to include this exception in proposed paragraphs 
(a)(1)(iv)(A) and (a)(1)(iv)(B) in Sec.  410.27. In addition, we are 
proposing to add a new paragraph (f) to Sec.  410.27 to define a 
nonphysician practitioner for purposes of Sec.  410.27 as a clinical 
psychologist, a physician assistant, a nurse practitioner, a clinical 
nurse specialist, or a certified nurse-midwife. Proposed new Sec.  
410.27(a)(1)(iv) would provide that these nonphysician practitioners 
may directly supervise services that they could furnish themselves in 
accordance with State law and within their scope of practice and 
hospital-granted privileges, as long as all requirements for coverage, 
including the physician supervision or collaboration for these 
nonphysician practitioners, are met in accordance with Sec. Sec.  
410.71, 410.74, 410.75, 410.76, and 410.77, respectively. We also are 
proposing to define ``in the hospital'' in new paragraph Sec.  
410.27(g) to mean areas in the main building(s) of the hospital that 
are under the ownership, financial, and administrative control of the 
hospital; that are operated as part of the hospital; and for which the 
hospital bills the services furnished under the hospital's CCN. 
Finally, we are proposing to make a technical correction to the title 
of Sec.  410.27 to read, ``Outpatient hospital or CAH services and 
supplies incident to a physician service: Conditions'' to clarify in 
the title that the requirements for payment of hospital outpatient 
therapeutic services incident to a physician or nonphysician 
practitioner service in that section apply to both hospitals and CAHs. 
Similarly, we are proposing to include the phrase ``hospital or CAH'' 
throughout the text of Sec.  410.27 wherever the text currently refers 
just to ``hospital.'' The omission of the term ``CAH'' from Sec.  
410.27 was a drafting oversight. However, we have applied the 
requirements of Sec.  410.27, including ``incident to'' requirements 
such as the site-of-service requirement and physician supervision as 
well as other hospital policies, such as the bundling rules, to CAHs, 
just as we have in 42 CFR Part 409 (Subparts A through D and F through 
H) and Sec.  410.28 and Sec.  413.65 of the regulations where CAHs are 
explicitly mentioned.
4. Proposed Policies for Direct Supervision of Hospital and CAH 
Outpatient Diagnostic Services
    As we discussed in detail in section XII.D.1. of this proposed 
rule, with respect to the physician supervision requirements for 
individual diagnostic tests, we have continued since the April 2000 
OPPS final rule discussion (65 FR 18526) to instruct hospitals that, 
for diagnostic services furnished in PBDs of hospitals, hospitals 
should follow the supervision requirements for individual diagnostic 
tests as listed in the MPFS Relative Value File. For diagnostic 
services not listed in the MPFS file, Medicare contractors, in 
consultation with their medical directors, define appropriate 
supervision levels in order to determine whether claims for these 
services are reasonable and necessary. To further specify the 
supervision policy across service settings and to provide consistency 
for all hospital outpatient diagnostic services, for CY 2010 we are 
proposing to require that all hospital outpatient diagnostic services 
that are provided directly or under arrangement, whether provided in 
the main buildings of the hospital, in a PBD, or at a nonhospital 
location, follow the physician supervision requirements for individual 
tests as listed in the MPFS Relative Value File. We also are proposing 
that the definitions of general, direct, and personal supervision as 
defined in Sec. Sec.  410.32(b)(3) (i) through (b)(3)(iii) would also 
apply. In the case of direct supervision of diagnostic services 
furnished directly by the hospital or under arrangement in the main 
hospital buildings or on-campus in a PBD, we are proposing that the 
definition of direct supervision would be the same as the definition we 
are proposing for therapeutic services provided on-campus as discussed 
in section XII.D.3. of this proposed rule, meaning that the physician 
would be present on the same campus, in the hospital or the on-campus 
PBD of the hospital, as defined in Sec.  413.65, and immediately 
available to furnish

[[Page 35369]]

assistance and direction throughout the performance of the procedure. 
In addition, the definition of ``in the hospital'' as defined in 
proposed Sec.  410.27(g), discussed above, would apply. This means that 
the supervisory physician may not be located in any entity such as a 
physician's office, co-located hospital, IDTF, or hospital-operated 
provider or supplier such as a SNF, ESRD facility, or HHA, or any other 
nonhospital space that may be co-located on the hospital's campus, as 
campus is defined in Sec.  413.65(a)(2).
    Similarly, in the case of direct physician supervision of 
diagnostic services furnished directly or under arrangement in an off-
campus PBD, we are proposing that the definition of direct supervision 
would be the same as the current definition for therapeutic services 
provided in an off-campus PBD as discussed in section XII.D.3. of this 
proposed rule, meaning the physician must be present in the off-campus 
PBD, as defined in Sec.  413.65 and immediately available to furnish 
assistance and direction throughout the performance of the procedure. 
As we discussed in the April 2000 OPPS final rule (65 FR 18524 through 
18525) and the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68702 through 68704), we have long made the analogy of the PBD to the 
physician's office suite, as described in the definition of direct 
supervision in Sec.  410.32(b)(3)(ii).
    In addition to providing diagnostic services directly or under 
arrangement in the hospital, including provider-based departments of 
the hospital, a hospital may also send its outpatients to another 
entity, such as an IDTF, to furnish these services under arrangement 
for the hospital. For example, in the April 2000 OPPS final rule (65 FR 
185440 through 185441), in a discussion of the hospital bundling rules, 
we discussed that an entity, like an IDTF, may be located in the main 
buildings of a hospital or on the hospital campus but operated 
independently of the hospital. In addition, these suppliers, providers, 
or other entities may be located elsewhere, not on hospital's main 
campus or other hospital property. These entities, like IDTFs and 
physicians' offices, may provide services to their own patients (not 
hospital outpatients) and to hospital outpatients under arrangements 
with the hospital. They follow the physician supervision requirements 
of the MPFS and Sec.  410.32 when providing services to Medicare 
beneficiaries who are not hospital outpatients. For consistency, we are 
proposing for CY 2010 that all diagnostic services provided to hospital 
outpatients under arrangement in nonhospital entities, whether those 
entities are located on the main campus of the hospital or elsewhere, 
would also follow the requirements as described in Sec.  
410.32(b)(3)(i) through (iii). When hospitals contract with other 
entities to provide services under arrangement, the hospital must 
exercise professional responsibility over the arrangement for services, 
in accordance with the guidance provided in the section 10.3 of chapter 
5 of the Medicare General Information, Eligibility and Entitlement 
Manual (Pub 100-1). This means that for the hospital to receive 
payment, it is responsible for ensuring that all applicable 
requirements in Sec. Sec.  410.28 and 410.32 are met. In the case of 
hospital outpatient diagnostic services provided under arrangement at 
nonhospital locations, such as IDTFs, we believe that the term ``office 
suite'' used in Sec.  410.32(b)(3)(ii) is directly applicable because 
these facilities usually also provide diagnostic services to their own 
patients and, therefore, would be able to apply the direct supervision 
requirement in Sec.  410.32(b)(3)(ii) without further definition.
    Physician assistants, nurse practitioners, clinical nurse 
specialists, and certified nurse-midwives who operate within the scope 
practice under State law may order and perform diagnostic tests, as 
discussed in Sec.  410.32(a)(3) and corresponding manual guidance in 
section 80 of chapter 15 of the Medicare Benefit Policy Manual. 
However, this manual guidance and the regulation at Sec.  410.32(b)(1) 
also state that diagnostic x-ray and other diagnostic tests must be 
furnished under the appropriate level of supervision by a physician as 
defined in section 1861(r) of the Act. Thus, physician assistants, 
nurse practitioners, clinical nurse specialists, and certified nurse-
midwives may not function as supervisory physicians for the purposes of 
diagnostic tests. In keeping with these existing requirements, we are 
not proposing to allow physician assistants, nurse practitioners, 
clinical nurse specialists, and certified nurse-midwives to provide the 
supervision of diagnostic tests provided to hospital outpatients. 
Clinical psychologists may supervise only diagnostic psychological and 
neuropsychological testing services as described in an exception to the 
basic rule at Sec.  410.32(b)(2)(iii) for diagnostic psychological and 
neuropsychological testing services, when these services are personally 
furnished by a clinical psychologist or an independently practicing 
psychologist or when they are furnished under the general supervision 
of a physician or clinical psychologist.
    To reflect these proposed changes for the provision of direct 
supervision of diagnostic services provided to hospital outpatients in 
the regulations, we are proposing to revise existing Sec.  410.28(e). 
First, we are proposing to specify that the provisions of proposed 
revised paragraph (e) apply to diagnostic services furnished by the 
hospital, directly or under arrangement, consistent with our proposal 
to apply the existing diagnostic services supervision requirement for 
PBDs to diagnostic services provided directly by the hospital or under 
arrangement. We would continue to specify that the definitions of 
general and personal physician supervision included in Sec.  
410.32(b)(3)(i) and (b)(3)(iii) apply to these levels of supervision of 
hospital outpatient diagnostic services. Furthermore, we are proposing 
to add new paragraph (e)(1) to Sec.  410.28 to indicate that, for 
services furnished directly or under arrangement, in the hospital or in 
an on-campus department of a provider, as defined in Sec.  413.65, 
direct supervision means that the physician must be present on the same 
campus, in the hospital or PBD of the hospital as defined in Sec.  
413.65, and immediately available to furnish assistance and direction 
throughout the performance of the procedure. We also would continue to 
provide that direct supervision does not mean that the physician must 
be in the room when the procedure is performed. As discussed above, we 
would apply the definition of ``in the hospital'' as proposed in Sec.  
410.27(g) of the regulations. In addition, we are proposing to add new 
paragraph (e)(2) to Sec.  410.28 to reflect that, for the direct 
physician supervision of diagnostic services furnished directly or 
under arrangement in off-campus PBDs of hospitals, the physician must 
present in the off-campus PBD, as defined in Sec.  413.65, and 
immediately available to furnish assistance and direction throughout 
the performance of the procedure. We would continue to provide that 
direct supervision does not mean that the physician must be in the room 
when the procedure is performed. Finally, we are proposing to add new 
paragraph (e)(3) to specify that for the direct supervision of hospital 
outpatient services provided under arrangement in physicians' offices 
and other nonhospital locations, the definition of direct supervision 
in Sec.  410.32(b)(3)(ii) applies.

[[Page 35370]]

5. Summary of CY 2010 Physician Supervision Proposals
    In summary, for CY 2010, we are proposing that nonphysician 
practitioners, defined for the purpose of Sec.  410.27 of the 
regulations as clinical psychologists, physician assistants, nurse 
practitioners, clinical nurse specialists, and certified nurse-
midwives, may directly supervise all hospital outpatient therapeutic 
services that they may perform themselves within their State scope of 
practice and hospital-granted privileges, provided that they meet all 
additional requirements, including any collaboration or supervision 
requirements as specified in Sec. Sec.  410.71, 410.74, 410.75, 410.76, 
and 410.77. However, nonphysician practitioners may not provide the 
direct supervision of CR, ICR, and PR services, since we have also 
proposed in the CY 2010 MPFS proposed rule that the direct supervision 
of CR, ICR, and PR services must be furnished by a doctor of medicine 
or osteopathy, as specified in proposed Sec. Sec.  410.47 and 410.49, 
respectively. We also are proposing to refine the definition of the 
direct supervision of hospital outpatient therapeutic services for 
those services provided in the hospital and in an on-campus PBD of the 
hospital. For services provided in the hospital and in an on-campus PBD 
of the hospital, direct supervision would mean that the physician or 
nonphysician practitioner must be present on the same campus, in the 
hospital or the on-campus PBD of the hospital or CAH, as defined in 
Sec.  413.65, and immediately available to furnish assistance and 
direction throughout the performance of the procedure. We also are 
proposing to define ``in the hospital'' in new paragraph Sec.  
410.27(g) to mean areas in the main building(s) of a hospital or CAH 
that are under the ownership, financial, and administrative control of 
the hospital or CAH; that are operated as part of the hospital or CAH; 
and for which the hospital or CAH bills the services furnished under 
the hospital's or CAH's CCN. We are proposing no significant change to 
the definition or requirements for direct supervision of hospital 
outpatient therapeutic services provided in off-campus PBDs of a 
hospital or CAH other than to allow nonphysician practitioners to 
provide direct supervision for the services that they may perform in 
those locations.
    For CY 2010, we are proposing to require that all hospital 
outpatient diagnostic services provided directly or under arrangement, 
whether provided in the hospital, in a PBD, or at a nonhospital 
location, follow the physician supervision requirements for individual 
tests as listed in the MPFS Relative Value File. The existing 
definitions of general and personal supervision as defined in Sec.  
410.32(b)(3)(i) and (iii) would also apply. For services furnished 
directly or under arrangement in the hospital or on-campus PBD, direct 
supervision would mean that the physician must be present on the same 
campus, in the hospital or on-campus PBD of the hospital, and 
immediately available to furnish assistance and direction throughout 
the performance of the procedure. For this purpose, the definition of 
``in the hospital'', as proposed in Sec.  410.27(g), would apply. For 
diagnostic services furnished directly or under arrangement off-campus 
in a PBD of the hospital, direct supervision would mean that the 
physician must be present in the off-campus PBD and immediately 
available to furnish assistance and direction throughout the 
performance of the procedures. For all hospital outpatient diagnostic 
services provided under arrangement in nonhospital locations, such as 
IDTFs and physicians' offices, the existing definition of direct 
supervision Sec.  410.32(b)(3)(ii) would apply. We are proposing to 
revise Sec. Sec.  410.27 and 410.28 of the regulations to reflect these 
changes as discussed under sections XII.D.3. and 4. of this proposed 
rule.

E. Direct Referral for Observation Services

    Since CY 2003, hospitals have reported a Level II HCPCS code for 
Medicare billing purposes for a ``direct admission'' to a hospital for 
outpatient observation services. In section 290 of Chapter 4 of the 
Medicare Claims Processing Manual (Publication 100-4), we define a 
``direct admission'' as the direct referral of a patient by a community 
physician to a hospital for observation services without an associated 
emergency room visit, hospital outpatient clinic visit, critical care 
service, or hospital outpatient surgical procedure (that is, a status 
indicator ``T'' procedure) on the day of the initiation of observation 
services. Since CY 2006, we have instructed hospitals to report a 
``direct admission'' referred for observation services using HCPCS code 
G0379 (Direct admission of patient for hospital observation care) (70 
FR 68688 through 68691).
    Observation care is a hospital outpatient service that is reported 
using HCPCS code G0378 (Hospital observation services, per hour). 
Hospitals report outpatient observation services, which are commonly 
provided in association with a hospital clinic visit, emergency 
department visit, or other major service, on hospital outpatient 
claims, just like other outpatient services. Physicians order 
observation care, defined as clinically appropriate services, including 
ongoing short-term treatment, assessment, and reassessment furnished in 
order for the physician to determine whether the beneficiary will 
require further treatment as an inpatient or whether the beneficiary 
may be safely discharged from the hospital.
    We have become aware that, because the word ``admission'' is 
generally used in reference to inpatient hospital care, our historical 
use of the phrase ``direct admission'' in the code descriptor for HCPCS 
code G0379 and the use of the phrase ``observation status'' in the 
Medicare Claims Processing Manual (Chapter 4, section 290) and the 
Medicare Benefit Policy Manual (Chapter 6, section 20) may be 
contributing to confusion for hospitals and beneficiaries related to a 
beneficiary's status as an inpatient or an outpatient when he or she is 
receiving observation services. For Medicare payment purposes, there is 
no patient status termed ``observation status.'' Hospitals may only 
bill for items and services furnished to inpatients, outpatients, or 
nonpatients. We believe that using terminology such as ``observation 
status'' or ``admission to observation'' may be confusing for 
physicians, hospitals, and beneficiaries. Therefore, for CY 2010, we 
are proposing to modify the code descriptor for HCPCS code G0379 to 
remove the reference to the word ``admission'' and to replace it with 
``referral.'' The proposed long code descriptor for HCPCS code G0379 
would be ``Direct referral for hospital observation care.'' We are 
proposing this change to more accurately reflect that the physician in 
the community has referred the beneficiary to the hospital for 
observation services as a hospital outpatient. In addition to the 
proposed CY 2010 change to the code descriptor for HCPCS code G0379 in 
this proposed rule, we plan to modify the Medicare Claims Processing 
Manual and the Medicare Benefit Policy Manual to remove references 
related to ``admission'' for observation services or ``observation 
status.'' We are not proposing to change the status indicator or 
payment methodology for HCPCS code G0379 for CY 2010. Instead, we are 
proposing to continue the payment policy that was finalized for the CY 
2009 OPPS (73 FR 68554). HCPCS code G0379 is assigned status indicator 
``Q3,''

[[Page 35371]]

indicating that it is eligible for payment through APC 8002 (Level I 
Extended Assessment & Management Composite) when certain criteria are 
met or through APC 0604 (Level I Hospital Clinic Visits) when other 
criteria are met; otherwise, its payment is packaged into payment for 
other separately payable services in the same encounter. The criteria 
for payment of HCPCS code G0379 under either composite APC 8002, as 
part of the extended assessment and management composite service, or 
APC 0604, as a separately payable individual service are: (1) both 
HCPCS codes G0378 and G0379 are reported with the same date of service; 
and (2) no service with a status indicator of ``T'' or ``V'' or 
Critical Care (APC 0617) is provided on the same date of service as 
HCPCS code G0379. If either of the above criteria is not met, HCPCS 
code G0379 is assigned status indicator ``N'' and its payment is 
packaged into the payment for other separately payable services 
provided in the same encounter.

XIII. Proposed OPPS Payment Status and Comment Indicators

A. Proposed OPPS Payment Status Indicator Definitions

    The OPPS payment status indicators (SIs) that we assign to HCPCS 
codes and APCs play an important role in determining payment for 
services under the OPPS. They indicate whether a service represented by 
a HCPCS code is payable under the OPPS or another payment system and 
also whether particular OPPS policies apply to the code. Our CY 2010 
proposed status indicator assignments for APCs and HCPCS codes are 
shown in Addendum A and Addendum B, respectively, to this proposed 
rule. For CY2010, we are only proposing to change the definitions of 
status indicators ``H'' and ``K.'' We are not proposing any changes to 
the other status indicators that were listed in Addendum D1 of the CY 
2009 OPPS/ASC final rule with comment period. These status indicators 
are listed in the tables under sections XIII.A.1., 2., 3., and 4. of 
this proposed rule.
1. Proposed Payment Status Indicators To Designate Services That Are 
Paid Under the OPPS
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TP20JY09.326


[[Page 35373]]


[GRAPHIC] [TIFF OMITTED] TP20JY09.327

BILLING CODE 4120-01-C
    Section 142 of Public Law 110-275 (MIPPA) required CMS to pay for 
therapeutic radiopharmaceuticals for the period of July 1, 2008, 
through December 31, 2009, at hospitals' charges adjusted to the costs. 
The status indicator ``H'' was assigned to therapeutic 
radiopharmaceuticals to indicate that an item was paid at charges 
adjusted to cost during CY 2009. For CY 2010, we are proposing to pay 
prospectively and separately for therapeutic radiopharmaceuticals with 
average per day costs greater than the proposed CY 2010 drug packaging 
threshold of $65 under the OPPS. Therefore, we are proposing to change 
the status indicator for HCPCS codes used to report separately payable 
therapeutic radiopharmaceuticals from ``H'' to ``K,'' which indicates 
that an item is separately paid under the OPPS at the APC payment rate 
established for the item. We refer readers to section V.B.4. of this 
proposed rule for the discussion of the proposed CY 2010 change to our 
payment policy for therapeutic radiopharmaceuticals.
    As discussed in detail in section V.A.4. of this proposed rule, we 
are proposing to consider implantable biologicals that are not on pass-
through status as a biological before January 1, 2010, as devices 
beginning in CY 2010. Therefore, as devices, pass-through implantable 
biologicals would be assigned a status indicator of ``H,'' while 
nonpass-through implantable biologicals would be assigned a status 
indicator of ``N'' beginning in CY 2010. Those implantable biologicals 
that have been granted pass-through status under the drug and 
biological criteria prior to January 1, 2010, would continue to be 
assigned a status indicator of ``G'' until they are proposed for 
expiration from pass-through status during our annual rulemaking cycle. 
We are proposing to assign status indicator ``K'' to nonimplantable 
biologicals and to adjust the definition of status indicator ``K'' 
accordingly.
2. Proposed Payment Status Indicators To Designate Services That Are 
Paid Under a Payment System Other Than the OPPS

------------------------------------------------------------------------
          Indicator             Item/code/service    OPPS payment status
------------------------------------------------------------------------
A...........................  Services furnished    Not paid under OPPS.
                               to a hospital         Paid by fiscal
                               outpatient that are   intermediaries/MACs
                               paid under a fee      under a fee
                               schedule or payment   schedule or payment
                               system other than     system other than
                               OPPS, for example:    OPPS.

[[Page 35374]]

 
                              <bullet> Ambulance
                               Services.
                              <bullet> Clinical     Not subject to
                               Diagnostic            deductible or
                               Laboratory Services.  coinsurance.
                              <bullet> Non-
                               Implantable
                               Prosthetic and
                               Orthotic Devices.
                              <bullet> EPO for
                               ESRD Patients.
                              <bullet> Physical,
                               Occupational, and
                               Speech Therapy.
                              <bullet> Routine
                               Dialysis Services
                               for ESRD Patients
                               Provided in a
                               Certified Dialysis
                               Unit of a Hospital.
                              <bullet> Diagnostic
                               Mammography.
                              <bullet> Screening    Not subject to
                               Mammography.          deductible.
C...........................  Inpatient Procedures  Not paid under OPPS.
                                                     Admit patient. Bill
                                                     as inpatient.
F...........................  Corneal Tissue        Not paid under OPPS.
                               Acquisition;          Paid at reasonable
                               Certain CRNA          cost.
                               Services; and
                               Hepatitis B
                               Vaccines.
L...........................  Influenza Vaccine;    Not paid under OPPS.
                               Pneumococcal          Paid at reasonable
                               Pneumonia Vaccine.    cost; not subject
                                                     to deductible or
                                                     coinsurance.
M...........................  Items and Services    Not paid under OPPS.
                               Not Billable to the
                               Fiscal Intermediary/
                               MAC.
Y...........................  Non-Implantable       Not paid under OPPS.
                               Durable Medical       All institutional
                               Equipment.            providers other
                                                     than home health
                                                     agencies bill to
                                                     DMERC.
------------------------------------------------------------------------

3. Proposed Payment Status Indicators To Designate Services That Are 
Not Recognized under the OPPS But That May Be Recognized by Other 
Institutional Providers

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

4. Proposed Payment Status Indicators To Designate Services That Are 
Not Payable by Medicare on Outpatient Claims

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

    Addendum B, with a complete listing of HCPCS codes that includes 
their proposed payment status indicators and proposed APC assignments 
for CY 2010, is available electronically on the CMS Web site under 
supporting documentation for this proposed rule at: http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/list.asp#TopOfPage.

B. Proposed Comment Indicator Definitions

    For the CY 2010 OPPS, we are proposing to use the two comment 
indicators that are in effect for the CY 2009 OPPS.
    <bullet> ``CH''--Active HCPCS codes in current and next calendar 
year; status indicator and/or APC assignment have changed or active 
HCPCS code that will be discontinued at the end of the current calendar 
year.
    <bullet> ``NI''--New code, interim APC assignment; comments will be 
accepted

[[Page 35375]]

on the interim APC assignment for the new code.
    We are proposing to use the ``CH'' comment indicator in the CY 2010 
OPPS/ASC final rule with comment period to indicate HCPCS codes for 
which the status indicator or APC assignment, or both, would change in 
CY 2010 compared to their assignment as of December 31, 2009.
    We are using the ``CH'' indicator in this proposed rule to call 
attention to proposed changes in the payment status indicator and/or 
APC assignment for HCPCS codes for CY 2010 compared to their assignment 
as of June 30, 2009. We believe that using the ``CH'' indicator in this 
proposed rule would help facilitate the public's review of the changes 
that we are proposing for CY 2010. The use of the comment indicator 
``CH'' in association with a composite APC indicates that the 
configuration of the composite APC is proposed for change in this 
proposed rule.
    For the CY 2010 OPPS, we are proposing to continue our policy of 
using comment indicator ``NI'' in the CY 2010 OPPS/ASC final rule with 
comment period. Only HCPCS codes with comment indicator ``NI'' in the 
CY 2010 OPPS/ASC final rule with comment period would be subject to 
comment. We are proposing that HCPCS codes that do not appear with 
comment indicator ``NI'' in the CY 2010 OPPS/ASC final rule with 
comment period would not be open to public comment, unless we 
specifically request additional comments elsewhere in the CY 2010 OPPS/
ASC final rule with comment period. The CY 2010 treatment of HCPCS 
codes that appear in the CY 2010 OPPS/ASC final rule with comment 
period to which comment indicator ``NI'' is not appended will have been 
open to public comment during the comment period for this proposed 
rule.

XIV. OPPS Policy and Payment Recommendations

A. MedPAC Recommendations

    MedPAC was established under section 1805 of the Act to advise the 
U.S. Congress on issues affecting the Medicare program. As required 
under the statute, MedPAC submits reports to Congress not later than 
March and June of each year that present its Medicare payment policy 
recommendations. The following section describes recent recommendations 
relevant to the OPPS that have been made by MedPAC.
    The March 2009 MedPAC ``Report to Congress: Medicare Payment 
Policy'' included the following recommendation relating specifically to 
the Medicare hospital OPPS:
    Recommendation 2A-1: The Congress should increase payment rates for 
the acute inpatient and outpatient prospective payment systems in 2010 
by the projected rate of increase in the hospital market basket index, 
concurrent with implementation of a quality incentive payment program.
    CMS Response: We are proposing to increase payment rates for the CY 
2010 OPPS by the projected rate of increase in the hospital market 
basket through adjustment of the full CY 2010 conversion factor. 
Simultaneously, we are proposing for CY 2010 to continue to reduce the 
annual update factor by 2.0 percentage points for hospitals that are 
defined under section 1886(d)(1)(B) of the Act and that do not meet the 
hospital outpatient quality data reporting required by section 
1833(t)(17) of the Act. Specifically, we are proposing to calculate two 
conversion factors, a full conversion factor based on the full hospital 
market basket increase and a reduced conversion factor that reflects 
the 2.0 percentage point reduction to the market basket. We discuss our 
proposed update of the conversion factor and our proposed adoption and 
implementation of the reduced conversion factor that would apply to 
hospitals that fail their quality reporting requirements for the full 
CY 2010 OPPS update in section XVI of this proposed rule.
    The full March 2009 MedPAC report can be downloaded from MedPAC's 
Web site at: http://www.medpac.gov/documents/Mar09_EntireReport.pdf.

B. APC Panel Recommendations

    Recommendations made by the APC Panel at its February 2009 meeting 
are discussed in the sections of this proposed rule that correspond to 
topics addressed by the APC Panel. The report and recommendations from 
the APC Panel's February 18-19, 2009 meeting are available on the CMS 
Web site at: http://www.cms.hhs.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp .

C. OIG Recommendations

    The mission of the Office of the Inspector General (OIG), as 
mandated by Public Law 95-452, as amended, is to protect the integrity 
of the U.S. Department of Health and Human Services (HHS) programs, as 
well as the health and welfare of beneficiaries served by those 
programs. This statutory mission is carried out through a nationwide 
network of audits, investigations, and inspections. In June 2007, the 
OIG released a report, entitled ``Impact of Not Retroactively Adjusting 
Outpatient Outlier Payments,'' that described the OIG's research into 
sources of errors in CMHC outlier payments. The OIG report included the 
following two recommendations relating specifically to the hospital 
OPPS under which payment is made for outpatient services provided by 
CMHCs.
    Recommendation 1: The OIG recommended that CMS require adjustments 
of outpatient outlier payments at final cost report settlement, 
retroactive to the beginning of the cost report period.
    Recommendation 2: The OIG recommended that CMS require retroactive 
adjustments of outpatient outlier payments when an error caused by the 
fiscal intermediary or provider is identified after a cost report is 
settled.
    We addressed both of these recommendations in the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68594). We noted in that final 
rule that the OIG's findings were based largely on information from the 
OPPS' early implementation period, between CY 2000 and CY 2003, and 
that we believed we had taken several steps since that time in order to 
improve the accuracy and frequency of the Medicare contractors' CCR 
calculations, including updating our instructions for calculating CCRs, 
increasing the frequency of CCR calculation, and conducting an annual 
review of CMHC CCRs.
    However, taking into account these OIG recommendations, we proposed 
and finalized a policy to provide for reconciliation of outlier 
payments under the OPPS at final cost report settlement as recommended 
by the OIG, beginning in CY 2009. We discuss our rationale for this 
policy in detail in section II.F.4. of the CY 2009 OPPS/ASC final rule 
with comment period (73 FR 68594 through 68599).
    There are no more recent OIG recommendations that pertain to the 
OPPS than the June 2007 recommendations.

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

A. Background

1. Legislative Authority for the ASC Payment System
    Section 1832(a)(2)(F)(i) of the Act provides that benefits under 
Medicare Part B include payment for facility services furnished in 
connection with surgical procedures specified by the Secretary that are 
performed in an ASC. To participate in the Medicare program as an ASC, 
a facility must meet the standards specified in section

[[Page 35376]]

1832(a)(2)(F)(i) of the Act, which are set forth in 42 CFR Part 416, 
Subpart B and Subpart C of our regulations. The regulations at 42 CFR 
Part 416, Subpart B describe the general conditions and requirements 
for ASCs, and the regulations at Subpart C explain the specific 
conditions for coverage for ASCs.
    Section 141(b) of the Social Security Act Amendments of 1994, 
Public Law 103-432, required establishment of a process for reviewing 
the appropriateness of the payment amount provided under section 
1833(i)(2)(A)(iii) of the Act for intraocular lenses (IOLs) that belong 
to a class of new technology intraocular lenses (NTIOLs). That process 
was the subject of a final rule entitled ``Adjustment in Payment 
Amounts for New Technology Intraocular Lenses Furnished by Ambulatory 
Surgical Centers,'' published on June 16, 1999, in the Federal Register 
(64 FR 32198).
    Section 626(b) of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA), Public Law 108-173, added subparagraph 
(D) to section 1833(i)(2) of the Act, which required the Secretary to 
implement a revised ASC payment system to be effective not later than 
January 1, 2008. Section 626(c) of the MMA amended section 1833(a)(1) 
of the Act by adding new subparagraph (G), which requires that, 
beginning with implementation of the revised ASC payment system, 
payment for surgical procedures furnished in ASCs shall be 80 percent 
of the lesser of the actual charge for the services or the amount 
determined by the Secretary under the revised payment system.
    Section 5103 of the Deficit Reduction Act of 2005 (DRA), Public Law 
109-171, amended section 1833(i)(2) of the Act by adding a new 
subparagraph (E) to place a limitation on payment amounts for surgical 
procedures furnished in ASCs on or after January 1, 2007, but before 
the effective date of the revised ASC payment system (that is, January 
1, 2008). Section 1833(i)(2)(E) of the Act provides that if the 
standard overhead amount under section 1833(i)(2)(A) of the Act for an 
ASC facility service for such surgical procedures, without application 
of any geographic adjustment, exceeds the Medicare payment amount under 
the hospital OPPS for the service for that year, without application of 
any geographic adjustment, the Secretary shall substitute the OPPS 
payment amount for the ASC standard overhead amount.
    Section 109(b) of the Medicare Improvements and Extension Act of 
2006 of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA), Public 
Law 109-432, amended section 1833(i) of the Act, in part, by 
redesignating clause (iv) as clause (v) and adding a new clause (iv) to 
paragraph (2)(D) and adding paragraph (7)(A), which provide the 
Secretary the authority to require ASCs to submit data on quality 
measures and to reduce the annual update by 2 percentage points for an 
ASC that fails to submit data as required by the Secretary on selected 
quality measures. Section 109(b) of the MIEA-TRHCA also amended section 
1833(i) of the Act by adding new paragraph (7)(B), which requires that, 
to the extent the Secretary establishes such an ASC quality reporting 
program, certain quality of care reporting requirements mandated for 
hospitals paid under the OPPS, under section 109(a) of the MIEA-TRHCA, 
be applied in a similar manner to ASCs unless otherwise specified by 
the Secretary.
    For a detailed discussion of the legislative history related to 
ASCs, we refer readers to the June 12, 1998 proposed rule (63 FR 32291 
through 32292).
2. Prior Rulemaking
    On August 2, 2007, we published in the Federal Register (72 FR 
42470) the final rule for the revised ASC payment system, effective 
January 1, 2008 (the ``August 2, 2007 final rule''). We revised our 
criteria for identifying surgical procedures that are eligible for 
Medicare payment when furnished in ASCs and adopted the method we would 
use to set payment rates for ASC covered surgical procedures and 
covered ancillary services furnished in association with those covered 
surgical procedures beginning in CY 2008. In that final rule, we also 
established a policy for updating on an annual calendar year basis the 
ASC conversion factor, the relative payment weights, the ASC payment 
rates, and the list of procedures for which Medicare would not make an 
ASC payment. We also established a policy for treating new and revised 
HCPCS and CPT codes under the ASC payment system. This policy is 
consistent with the OPPS to the extent possible (72 FR 42533).
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66827), we updated and finalized the CY 2008 ASC rates and lists of 
covered surgical procedures and covered ancillary services. We also 
made regulatory changes to 42 CFR Parts 411, 414, and 416 related to 
our final policies to provide payments to physicians who perform 
noncovered ASC procedures in ASCs based on the facility practice 
expense (PE) relative value units (RVUs), to exclude covered ancillary 
radiology services and covered ancillary drugs and biologicals from the 
categories of designated health services (DHS) that are subject to the 
physician self-referral prohibition, and to reduce ASC payments for 
surgical procedures when the ASC receives full or partial credit toward 
the cost of the implantable device. In the CY 2009 OPPS/ASC final rule 
with comment period (73 FR 68722), we updated and finalized the CY 2009 
ASC rates and lists of covered surgical procedures and covered 
ancillary services.
3. Policies Governing Changes to the Lists of Codes and Payment Rates 
for ASC Covered Surgical Procedures and Covered Ancillary Services
    The August 2, 2007 final rule established our policies for 
determining which procedures are ASC covered surgical procedures and 
covered ancillary services. Under Sec. Sec.  416.2 and 416.166 of the 
regulations, subject to certain exclusions, covered surgical procedures 
are surgical procedures that are separately paid under the OPPS, that 
would not be expected to pose a significant risk to beneficiary safety 
when performed in an ASC, and that would not be expected to require 
active medical monitoring and care at midnight following the procedure 
(``overnight stay''). We adopted this standard for defining which 
surgical procedures are covered surgical procedures under the ASC 
payment system as an indicator of the complexity of the procedure and 
its appropriateness for Medicare payment in ASCs. We use this standard 
only for purposes of evaluating procedures to determine whether or not 
they are appropriate for Medicare beneficiaries in ASCs. We define 
surgical procedures as those described by Category I CPT codes in the 
surgical range from 10000 through 69999, as well as those Category III 
CPT codes and Level II HCPCS codes that crosswalk or are clinically 
similar to ASC covered surgical procedures (72 FR 42478). We note that 
we added over 800 surgical procedures to the list of covered surgical 
procedures for ASC payment in CY 2008, the first year of the revised 
ASC payment system, based on the criteria for payment that we adopted 
in the August 2, 2007 final rule as described above in this section. 
Patient safety and health outcomes continue to be important to us as 
more health care moves to the ambulatory care setting. Therefore, as we 
gain additional experience with the ASC payment system, we are 
interested in any information the public may have regarding the 
comparative patient

[[Page 35377]]

outcomes of surgical care provided in ambulatory settings, including 
HOPDs, ASCs, and physicians' offices, particularly with regard to the 
Medicare population.
    In the August 2, 2007 final rule, we also established our policy to 
make separate ASC payments for the following ancillary items and 
services when they are provided integral to ASC covered surgical 
procedures: brachytherapy sources; certain implantable items that have 
pass-through status under the OPPS; certain items and services that we 
designate as contractor-priced, including, but not limited to, 
procurement of corneal tissue; certain drugs and biologicals for which 
separate payment is allowed under the OPPS; and certain radiology 
services for which separate payment is allowed under the OPPS. These 
covered ancillary services are specified in Sec.  416.164(b) and, as 
stated previously, are eligible for separate ASC payment (72 FR 42495). 
Payment for ancillary items and services that are not paid separately 
under the ASC payment system is packaged into the ASC payment for the 
covered surgical procedure.
    The full CY 2009 lists of ASC covered surgical procedures and 
covered ancillary services are included in Addenda AA and BB, 
respectively, to the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68840 through 68933 and 69270 through 69308).
    We update the lists of, and payment rates for, covered surgical 
procedures and covered ancillary services, in conjunction with the 
annual proposed and final rulemaking process to update the OPPS and ASC 
payment systems (Sec.  416.173; 72 FR 42535). In addition, because we 
base ASC payment policies for covered surgical procedures, drugs, 
biologicals, and certain other covered ancillary services on the OPPS 
payment policies, we also provide quarterly updates for ASC services 
throughout the year (January, April, July, and October), just as we do 
for the OPPS. The updates are to implement newly created Level II HCPCS 
codes and Category III CPT codes for ASC payment and to update the 
payment rates for separately paid drugs and biologicals based on the 
most recently submitted ASP data. New Category I CPT codes, except 
vaccine codes, are released only once a year and, therefore, are 
implemented through the January quarterly update. New Category I CPT 
vaccine codes are released twice a year and thus are implemented 
through the January and July quarterly updates.
    In our annual updates to the ASC list of, and payment rates for, 
covered surgical procedures and covered ancillary services, we 
undertake a review of excluded surgical procedures (including all 
procedures newly proposed for removal from the OPPS inpatient list), 
new procedures, and procedures for which there is revised coding, to 
identify any that we believe meet the criteria for designation as ASC 
covered surgical procedures or covered ancillary services. Updating the 
lists of covered surgical procedures and covered ancillary services, as 
well as their payment rates, in association with the annual OPPS 
rulemaking cycle is particularly important because the OPPS relative 
payment weights and, in some cases, payment rates, are used as the 
basis for the payment of covered surgical procedures and covered 
ancillary services under the revised ASC payment system. This joint 
update process ensures that the ASC updates occur in a regular, 
predictable, and timely manner.

B. Proposed Treatment of New Codes

1. Proposed Treatment of New Category I and III CPT Codes and Level II 
HCPCS Codes
    We finalized a policy in the August 2, 2007 final rule to evaluate 
each year all new Category I and Category III CPT codes and Level II 
HCPCS codes that describe surgical procedures, and to make preliminary 
determinations in the annual OPPS/ASC final rule with comment period 
regarding whether or not they meet the criteria for payment in the ASC 
setting and, if so, whether they are office-based procedures (72 FR 
42533). In addition, we identify new codes as ASC covered ancillary 
services based upon the final payment policies of the revised ASC 
payment system. New HCPCS codes that are released in the summer through 
the fall of each year, to be effective January 1, are included in the 
final rule with comment period updating the ASC payment system for the 
following calendar year. These new codes are flagged with comment 
indicator ``NI'' in Addenda AA and BB to the OPPS/ASC final rule with 
comment period to indicate that we are assigning a payment indicator to 
the codes on an interim basis. The interim payment indicators assigned 
to the new codes under the revised ASC payment system are subject to 
public comment in that final rule with comment period. These interim 
determinations must be made in the OPPS/ASC final rule with comment 
period because, in general, the new HCPCS codes and their descriptors 
for the upcoming calendar year are not available at the time of 
development of the OPPS/ASC proposed rule. We will respond to those 
comments in the OPPS/ASC final rule with comment period for the 
following calendar year. We are proposing to continue this 
identification and recognition process for CY 2010.
    In addition, we are proposing to continue our policy of 
implementing through the ASC quarterly update process new mid-year CPT 
codes, generally Category III CPT codes, that the AMA releases in 
January to become effective the following July, and released in July to 
become effective the following January. We are proposing to include in 
Addenda AA or BB, as appropriate, to the CY 2010 OPPS/ASC final rule 
with comment period the new Category III CPT codes released in January 
2009 for implementation on July 1, 2009 (through the ASC quarterly 
update process) that we identify as ASC covered services. Similarly, we 
are proposing to include in Addenda AA and BB to that final rule with 
comment period any new Category III CPT codes that the AMA releases in 
July 2009 to be effective on January 1, 2010, that we identify as ASC 
covered services. However, only those new Category III CPT codes 
implemented effective January 1, 2010, will be designated by comment 
indicator ``NI'' in the Addenda to the CY 2010 OPPS/ASC final rule with 
comment period to indicate that we have assigned them an interim 
payment status that is subject to public comment. The two Category III 
CPT codes implemented in July 2009 for ASC payment, which appear in 
Table 38 below, are subject to comment through this proposed rule, and 
we are proposing to finalize their payment indicators in the CY 2010 
OPPS/ASC final rule with comment period.
    We are proposing to assign payment indicator ``G2'' (Non office-
based surgical procedure added in CY2008 or later; payment based on 
OPPS relative payment weight) to both of these two new codes. Because 
new Category III CPT codes that become effective for July are not 
available to CMS in time for incorporation into the Addenda to the 
OPPS/ASC proposed rule, our policy is to include the codes, their 
proposed payment indicators, and proposed payment rates in the preamble 
to the proposed rule but not in the Addenda to the proposed rule. These 
codes and their final payment indicators and rates will be included in 
the Addenda to the OPPS/ASC final rule with comment period.
    The new mid-year codes for the covered surgical procedures 
implemented in July 2009 are displayed in Table 38 below, along with 
their

[[Page 35378]]

proposed payment indicators and proposed payment rates. These codes and 
their final payment indicators and rates will be included in Addendum 
AA to the CY 2010 OPPS/ASC final rule with comment period.

        Table 38--New Category III CPT Codes Implemented in July 2009 as ASC Covered Surgical Procedures
----------------------------------------------------------------------------------------------------------------
                                                                                   Proposed CY
                                                                                     2010 ASC       Proposed CY
             CY 2009 HCPCS code                    CY 2009 long descriptor           payment         2010 ASC
                                                                                    indicator      payment rate
----------------------------------------------------------------------------------------------------------------
0200T......................................  Percutaneous sacral augmentation                G2          $879.13
                                              (sacroplasty), unilateral
                                              injection(s), including the use
                                              of a balloon or mechanical device
                                              (if utilized), one or more
                                              needles.
0201T......................................  Percutaneous sacral augmentation                G2         1,206.09
                                              (sacroplasty), bilateral
                                              injections, including the use of
                                              a balloon or mechanical device
                                              (if utilized), two or more
                                              needles.
----------------------------------------------------------------------------------------------------------------

2. Proposed Treatment of New Level II HCPCS Codes Implemented in April 
and July 2009
    New Level II HCPCS codes may describe covered surgical procedures 
or covered ancillary services. All new Level II HCPCS codes implemented 
in April and July 2009 for ASCs describe covered ancillary services. 
During the second quarter of CY 2009, we added to the list of covered 
ancillary services two new Level II HCPCS codes because they are drugs 
or biologicals for which separate payment was newly allowed under the 
OPPS in the same calendar quarter. The two Level II HCPCS codes added 
effective April 1, 2009, are HCPCS code C9247 (Iobenguane, I-123, 
diagnostic, per study dose, up to 10 millicuries) and HCPCS code C9249 
(Injection, certolizumab pegol, 1 mg). Although HCPCS code C9247 was 
created for use beginning on January 1, 2009, it was initially not paid 
separately under the hospital OPPS and, therefore, its payment was 
packaged under the ASC payment system until April 1, 2009.
    For the third quarter of CY 2009, we are adding a total of 11 new 
Level II drug and biological HCPCS codes to the list of ASC covered 
ancillary services because they are newly eligible for separate payment 
under the OPPS. These HCPCS codes are: C9250 (Human plasma fibrin 
sealant, vapor-heated, solvent-detergent (Artiss), 2 ml); C9251 
(Injection, C1 esterase inhibitor (human) 10 units); C9252 (Injection, 
plerixafor, 1 mg); C9253 (Injection, temozolomide, 1 mg); C9360 (Dermal 
substitute, native, non-denatured collagen, neonatal bovine origin 
(SurgiMend Collagen Matrix), per 0.5 square centimeters); C9361 
(Collagen matrix nerve wrap (NeuroMend Collagen Nerve Wrap), per 0.5 
centimeter length); C9362 (Porous purified collagen matrix bone void 
filler (Integra Mozaik Osteoconductive Scaffold Strip), per 0.5 cc); 
C9363 (Skin substitute, Integra Meshed Bilayer Wound Matrix, per square 
centimeter); C9364 (Porcine implant, Permacol, per square centimeter); 
Q2023 (Injection, factor viii (antihemophilic factor, recombinant) 
(Xyntha), per i.u.); and Q4116 (Skin substitute, Alloderm, per square 
centimeter).
    We assigned payment indicator ``K2'' (Drugs and biologicals paid 
separately when provided integral to a surgical procedure on ASC list; 
payment based on OPPS rate) to all of these new Level II HCPCS codes 
and added the codes to the list of covered ancillary services through 
either the April update (Transmittal 1698, Change Request 6424, dated 
March 13, 2009) or the July update (Transmittal 1740, Change Request 
6496, dated May 22, 2009) to the CY 2009 ASC payment system. While we 
also initially assigned payment indicator ``K2'' to new HCPCS code 
Q4115 (Skin substitute, Alloskin, per square centimeter) for July 2009, 
we are correcting that assignment retroactive to July 2009 to signify 
that this HCPCS code is not a covered ancillary service because it is 
not recognized for payment under the OPPS during that same time period. 
In this CY 2010 OPPS/ASC proposed rule, we are soliciting public 
comment on the proposed CY 2010 ASC payment indicators and payment 
rates for the drugs and biologicals, as listed in Tables 39 and 40 
below. Those HCPCS codes became payable in ASCs, beginning in April or 
July 2009, respectively, and are paid at the ASC rates posted for the 
appropriate calendar quarter on the CMS Web site at: http://www.cms.hhs.gov/ASCPayment/.
    The codes listed in Table 39 are included in Addendum BB to this 
proposed rule. However, because HCPCS codes that become effective for 
July are not available to CMS in time for incorporation into the 
Addenda to the OPPS/ASC proposed rule, our policy is to include these 
HCPCS codes and their CY 2010 proposed payment indicators and payment 
rates in the preamble to the proposed rule but not in the Addenda to 
the proposed rule. These codes and their final payment indicators and 
rates will be included in the appropriate Addendum to the CY 2010 OPPS/
ASC final rule with comment period. Thus, the codes implemented by the 
July 2009 ASC quarterly update and their proposed CY 2010 payment rates 
(based on July 2009 ASP data) that are displayed in Table 40 are not 
included in Addendum BB to this proposed rule. We are proposing to 
include the services reported using the new HCPCS codes displayed in 
Tables 39 and 40 as covered ancillary services for payment to ASCs for 
CY 2010. The final list of covered ancillary services and the 
associated payment weights and payment indicators will be included in 
the CY 2010 OPPS/ASC final rule with comment period, consistent with 
our annual update policy.

    Table 39--New Level II HCPCS Codes for Covered Ancillary Services
                        Implemented in April 2009
------------------------------------------------------------------------
                                                           Proposed CY
                                      CY 2009 long           2010 ASC
       CY 2009 HCPCS code              descriptor            payment
                                                            indicator
------------------------------------------------------------------------
C9247..........................  Iobenguane, I-123,                  K2
                                  diagnostic, per study
                                  dose, up to 10
                                  millicuries.
C9249..........................  Injection,                          K2
                                  certolizumab pegol, 1
                                  mg.
------------------------------------------------------------------------


[[Page 35379]]


           Table 40--New Level II HCPCS Codes for Covered Ancillary Services Implemented in July 2009
----------------------------------------------------------------------------------------------------------------
                                                                                   Proposed CY
                                                                                     2010 ASC       Proposed CY
             CY 2009 HCPCS code                    CY 2009 long descriptor           payment         2010 ASC
                                                                                    indicator     payment rate *
----------------------------------------------------------------------------------------------------------------
C9250......................................  Human plasma fibrin sealant, vapor-             K2          $155.00
                                              heated, solvent-detergent
                                              (Artiss), 2 ml.
C9251......................................  Injection, C1 esterase inhibitor                K2            41.34
                                              (human), 10 units.
C9252......................................  Injection, plerixafor, 1 mg.......              K2           276.04
C9253......................................  Injection, temozolomide, 1 mg.....              K2             5.00
C9360......................................  Dermal substitute, native, non-                 K2            14.31
                                              denatured collagen, neonatal
                                              bovine origin (SurgiMend Collagen
                                              Matrix), per 0.5 square
                                              centimeters.
C9361......................................  Collagen matrix nerve wrap                      K2           124.55
                                              (NeuroMend Collagen Nerve Wrap),
                                              per 0.5 centimeter length.
C9362......................................  Porous purified collagen matrix                 K2            56.71
                                              bone void filler (Integra Mozaik
                                              Osteoconductive Scaffold Strip),
                                              per 0.5 cc.
C9363......................................  Skin substitute, Integra Meshed                 K2            11.13
                                              Bilayer Wound Matrix, per square
                                              centimeter.
C9364......................................  Porcine implant, Permacol, per                  K2            18.57
                                              square centimeter.
Q2023......................................  Injection, factor viii                          K2             1.15
                                              (antihemophilic factor,
                                              recombinant) (Xyntha), per i.u..
Q4116......................................  Skin substitute, Alloderm, per                  K2            32.42
                                              square centimeter.
----------------------------------------------------------------------------------------------------------------
Based on July 2009 ASP information.

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

1. Covered Surgical Procedures
a. Proposed Additions to the List of ASC Covered Surgical Procedures
    We are proposing to update the ASC list of covered surgical 
procedures by adding 28 procedures to the list. Twenty-six of these 
procedures were among those excluded from the ASC list for CY 2009 
because we believed they did not meet the definition of a covered 
surgical procedure based on our expectation that they would pose a 
significant safety risk to Medicare beneficiaries or would require an 
overnight stay if performed in ASCs. The other two procedures, 
specifically those described by CPT code 0200T (Percutaneous sacral 
augmentation (sacroplasty), unilateral injection(s), including the use 
of a balloon or mechanical device (if utilized), one or more needles) 
and CPT code 0201T (Percutaneous sacral augmentation (sacroplasty), 
bilateral injections, including the use of a balloon or mechanical 
device (if utilized), two or more needles), are new Category III CPT 
codes that became effective July 1, 2009, and were implemented in the 
July 2009 ASC update (Table 38 above). As a result of our clinical 
evaluation of the procedures described by the new Category III codes, 
we determined that these two new procedures may be appropriately 
provided to Medicare beneficiaries in ASCs.
    In response to comments on the CY 2009 proposed rule, we stated in 
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68724) that, 
as we developed the CY 2010 proposed rule, we would perform a 
comprehensive review of the APCs in order to identify potentially 
inconsistent ASC treatment of procedures assigned to a single APC under 
the OPPS. Thus, we examined surgical procedures that are excluded from 
the current ASC list of covered surgical procedures and the APCs to 
which they are assigned under the OPPS. We identified for review 223 
excluded surgical procedures that were assigned to the same APCs in CY 
2009 as one or more ASC covered surgical procedures. Based upon our 
clinical review of those procedures, we determined that 26 surgical 
procedures may be appropriate for performance in ASCs and are proposing 
to add them to the CY 2010 ASC list of covered surgical procedures and 
to assign payment indicator ``G2'' (Non office-based surgical procedure 
added in CY 2008 or later; payment based on OPPS relative payment 
weight) to each of them. We found that the remaining 197 excluded 
procedures would pose significant safety risks to beneficiaries or 
would be expected to require an overnight stay if provided in ASCs. 
Therefore, we are not proposing to add those 197 procedures to the CY 
2010 ASC list of covered surgical procedures.
    The 28 procedures that we are proposing to add to the ASC list of 
covered surgical procedures, including their HCPCS code short 
descriptors and proposed CY 2010 payment indicators, are displayed in 
Table 41 below.

   Table 41--Proposed New ASC Covered Surgical Procedures for CY 2010
------------------------------------------------------------------------
                                                       Proposed CY 2010
       CY 2009 HCPCS code           CY 2009 short        ASC payment
                                     descriptor           indicator
------------------------------------------------------------------------
26037..........................  Decompress fingers/ G2
                                  hand.
27475..........................  Surgery to stop     G2
                                  leg growth.
27479..........................  Surgery to stop     G2
                                  leg growth.
27720..........................  Repair of tibia...  G2
35460..........................  Repair venous       G2
                                  blockage.
35475..........................  Repair arterial     G2
                                  blockage.
41512..........................  Tongue suspension.  G2
42225..........................  Reconstruct cleft   G2
                                  palate.
42227..........................  Lengthening of      G2
                                  palate.

[[Page 35380]]

 
43130..........................  Removal of          G2
                                  esophagus pouch.
43752..........................  Nasal/orogastric w/ G2
                                  stent.
45541..........................  Correct rectal      G2
                                  prolapse.
49435..........................  Insert subq exten   G2
                                  to ip cath.
49436..........................  Embedded ip cath    G2
                                  exit-site.
49442..........................  Place cecostomy     G2
                                  tube perc.
50080..........................  Removal of kidney   G2
                                  stone.
50081..........................  Removal of kidney   G2
                                  stone.
50727..........................  Revise ureter.....  G2
51535..........................  Repair of ureter    G2
                                  lesion.
57295..........................  Revise vag graft    G2
                                  via vagina.
60210..........................  Partial thyroid     G2
                                  excision.
60212..........................  Partial thyroid     G2
                                  excision.
60220..........................  Partial removal of  G2
                                  thyroid.
60225..........................  Partial removal of  G2
                                  thyroid.
61770..........................  Incise skull for    G2
                                  treatment.
0193T..........................  Rf bladder neck     G2
                                  microremodel.
0200T *........................  Perq sacral augmt   G2
                                  unilat inj.
0201T *........................  Perq sacral augmt   G2
                                  bilat inj.
------------------------------------------------------------------------
* Indicates codes are new, effective July 2009.

    Among the procedures we identified as meeting the criteria for 
designation as a covered surgical procedure was CPT code 35475 
(Transluminal balloon angioplasty, percutaneous; brachiocephalic trunk 
or branches, each vessel). The volume and utilization data for this 
procedure indicate that it is most frequently performed in outpatient 
settings. After review, our CMS medical advisors found that it would be 
appropriate to propose designation of CPT code 35475 as an ASC covered 
surgical procedure for CY 2010. Related to our proposal to add CPT code 
35475 to the list of covered surgical procedures is our concurrent 
proposal to delete two Level II HCPCS codes we created effective for CY 
2007, HCPCS codes G0392 (Transluminal balloon angioplasty, 
percutaneous; for maintenance of hemodialysis access, arteriovenous 
fistula or graft; arterial) and G0393 (Transluminal balloon 
angioplasty, percutaneous; for maintenance of hemodialysis access, 
arteriovenous fistula or graft; venous) to enable ASCs to receive 
Medicare payment for providing the angioplasty services required to 
maintain the arteriovenous fistulae that are important to individuals 
who undergo routine dialysis. We are proposing to delete HCPCS codes 
G0392 and G0393 concurrently with the designation of CPT code 35475 as 
a covered surgical procedure because there no longer would be a need 
for the two Level II HCPCS G-codes. ASCs would be able to use CPT 35475 
and CPT code 35476 (Transluminal balloon angioplasty, percutaneous; 
venous), which was included on the list of ASC covered surgical 
procedures beginning in CY 2008, to report the same procedures 
currently reported by HCPCS codes G0392 and G0393.
    Thus, we are proposing to add the 28 surgical procedures listed in 
Table 41 above to the list of covered ASC surgical procedures and to 
delete the HCPCS codes displayed in Table 42 below.

                          Table 42--HCPCS Codes Proposed for Deletion Effective CY 2010
----------------------------------------------------------------------------------------------------------------
                                                                                           CY 2009 ASC payment
               CY 2009 HCPCS code                       CY 2009 short descriptor                indicator
----------------------------------------------------------------------------------------------------------------
G0392..........................................  AV fistula or graft arterial..........                       A2
G0393..........................................  AV fistula or graft venous............                       A2
----------------------------------------------------------------------------------------------------------------

b. Proposed Covered Surgical Procedures Designated as Office-Based
(1) Background
    In the August 2, 2007 ASC final rule, we finalized our policy to 
designate as ``office-based'' those procedures that are added to the 
ASC list of covered surgical procedures in CY 2008 or later years that 
we determine are performed predominantly (more than 50 percent of the 
time) in physicians offices based on consideration of the most recent 
available volume and utilization data for each individual procedure 
code and/or, if appropriate, the clinical characteristics, utilization, 
and volume of related codes. In that rule, we also finalized our policy 
to exempt all procedures on the CY 2007 ASC list from application of 
the office-based classification (72 FR 42512). The procedures that were 
added to the ASC list of covered surgical procedures beginning in CY 
2008 that we determined were office-based were identified in Addendum 
AA to that rule by payment indicator ``P2'' (Office-based surgical 
procedure added to ASC list in CY 2008 or later with MPFS nonfacility 
PE RVUs; payment based on OPPS relative payment weight); ``P3'' 
(Office-based surgical procedure added to ASC list in CY 2008 or later 
with MPFS nonfacility PE RVUs; payment based on MPFS nonfacility PE 
RVUs); or ``R2'' (Office-based surgical procedure added to ASC list in 
CY 2008 or later without MPFS nonfacility PE RVUs; payment based on 
OPPS relative payment weight), depending on whether we estimated it 
would be paid according

[[Page 35381]]

to the standard ASC payment methodology based on its OPPS relative 
payment weight or at the MPFS nonfacility PE RVU 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 or permanently 
office-based after taking into account updated volume and utilization 
data.
(2) Proposed Changes to Covered Surgical Procedures Designated as 
Office-Based for CY 2010
    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 2008 volume and utilization data and the clinical 
characteristics for all surgical procedures that are assigned payment 
indicator ``G2'' in CY 2009, as well as for those procedures assigned 
to one of the temporary office-based payment indicators, specifically 
``P2*,'' ``P3*,'' or ``R2*'' in the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68730 through 68733). As a result of that review, 
we are proposing to newly designate 6 procedures as office-based for CY 
2010. We also are proposing to make permanent the office-based 
designations of 4 surgical procedures that have temporary office-based 
designations in CY 2009.
    Our review of CY 2008 volume and utilization data resulted in our 
identification of 6 surgical procedures with payment indicators ``G2'' 
that now meet the criteria for designation as office-based. The data 
indicate the procedures are performed more than 50 percent of the time 
in physicians' offices. Our medical advisors believe the services are 
of a level of complexity consistent with other procedures that are 
performed routinely in physicians' offices. The 6 procedures we are 
proposing to permanently designate as office-based are: CPT code 15852 
(Dressing change (for other than burns) under anesthesia (other than 
local)); CPT code 19105 (Ablation, cryosurgical, of fibroadenoma, 
including ultrasound guidance, each fibroadenoma); CPT code 20555 
(Placement of needles or catheters into muscle and/or soft tissue for 
subsequent interstitial radioelement application (at the time of or 
subsequent to the procedure)); CPT code 36420 (Venipuncture, cutdown; 
younger than age 1 year); CPT code 50386 (Removal (via snare/capture) 
of internally dwelling ureteral stent via transurethral approach, 
without use of cystoscopy, including radiological supervision and 
interpretation); and CPT code 57022 (Incision and drainage of vaginal 
hematoma; obstetrical/postpartum). These procedures and their HCPCS 
code short descriptors and proposed CY 2010 payment indicators are 
displayed in Table 43 below.

           Table 43--ASC Covered Surgical Procedures Proposed for Office-Based Designation for CY2010
----------------------------------------------------------------------------------------------------------------
                                                                                                   Proposed CY
                                                                                  CY 2009 ASC        2010 ASC
            CY 2009 HCPCS code                   CY 2009 short descriptor           payment          payment
                                                                                   indicator       indicator *
----------------------------------------------------------------------------------------------------------------
15852.....................................  Dressing change not for burn......              G2               R2
19105.....................................  Cryosurg ablate fa, each..........              G2               P3
20555.....................................  Place ndl musc/tis for rt.........              G2               R2
36420.....................................  Vein access cutdown <1 yr.........              G2               R2
50386.....................................  Remove stent via transureth.......              G2               P2
57022.....................................  I & d vaginal hematoma, pp........              G2               R2
----------------------------------------------------------------------------------------------------------------
* Proposed payment indicators are based on a comparison of the proposed rates according to the ASC standard
  ratesetting methodology and the MPFS proposed rates. Under current law, the MPFS payment rates will have a
  negative update for CY 2010. For a discussion of those rates, we refer readers to the June 2009 CY 2010 MPFS
  proposed rule.

    We also reviewed CY 2008 volume and utilization data and other 
information for the 10 procedures with temporary office-based 
designations for CY 2009. Among these 10 procedures, there were no 
claims data for the 3 procedures with CPT codes that were new in CY 
2009. Those 3 new procedure codes are: CPT code 46930 (Destruction of 
internal hemorrhoid(s) by thermal energy (eg, infrared coagulation, 
cautery, radiofrequency)); CPT code 64455 (Injection(s), anesthetic 
agent and/or steroid, plantar common digital nerve(s) (eg, Morton's 
neuroma)); and CPT code 64632 (Destruction by neurolytic agent; plantar 
common digital nerve). Consequently, we are proposing to maintain their 
temporary office-based designations for CY 2010.
    As a result of our review of the remaining 7 procedures that have 
temporary office-based designations for CY 2009, we are proposing to 
make permanent the office-based designations for 4 procedures for CY 
2010. The 4 surgical procedure codes are: CPT code 0084T (Insertion of 
a temporary prostatic urethral stent); CPT code 21073 (Manipulation of 
temporomandibular joint(s) (TMJ), therapeutic, requiring an anesthesia 
service (ie, general or monitored anesthesia care)); CPT code 55876 
(Placement of interstitial device(s) for radiation therapy guidance 
(eg, fiducial markers, dosimeter), prostate (via needle, any approach), 
single or multiple); and HCPCS code C9728 (Placement of interstitial 
device(s) for radiation therapy/surgery guidance (eg, fiducial markers, 
dosimeter), other than prostate (any approach), single or multiple). 
Although we have no Medicare volume and utilization data in physicians' 
offices for HCPCS code C9728 because this code is not recognized for 
payment under the MPFS, we noted in the CY 2009 OPPS/ASC proposed rule 
(73 FR41528) that because HCPCS code C9728 is analogous to CPT code 
55876, we believe they should be paid according to the same ASC payment 
methodology under the ASC payment system. The volume and utilization 
data for CPT code 0084T, 21073, and 55876 are sufficient to support our 
determination that these procedures are most commonly provided in 
physicians' offices. Therefore, we are proposing to make permanent the 
office-based designations for the four procedures (including HCPCS code 
C9728) for CY 2010.
    We are not proposing to make permanent the office-based 
designations for the 3 other procedures for which the CY 2009 office-
based designations are temporary because we do not believe that the 
currently available volume and utilization data provide an adequate

[[Page 35382]]

basis for proposing permanent office-based designations. Rather, 
available data support our determination that maintaining the temporary 
office-based designation is appropriate for CY 2010 for CPT code 0099T 
(Implantation of intrastromal corneal ring segments); CPT code 0124T 
(Conjunctival incision with posterior extrascleral placement of 
pharmacological agent (does not include supply of medication)); and CPT 
code 67229 (Treatment of extensive or progressive retinopathy, 1 or 
more sessions; preterm infant (less than 37 weeks gestation at birth), 
performed from birth up to 1 year of age (eg, retinopathy of 
prematurity), photocoagulation or cryotherapy). Thus, we are proposing 
to maintain the temporary office-based designation for those procedures 
for CY 2010.
    The procedures that we are proposing to permanently designate as 
office-based for CY 2010 are displayed in Table 44 below. The 
procedures that we are proposing to continue to temporarily designate 
as office-based for CY 2010 are displayed in Table 45 below. The 
procedures for which the proposed office-based designation for CY 2010 
is temporary also are indicated by an asterisk in Addendum AA to this 
proposed rule.

  Table 44--CY 2009 Temporarily Designated Office-Based ASC Covered Surgical Procedures Proposed for Permanent
                                      Office-Based Designation for CY 2010
----------------------------------------------------------------------------------------------------------------
                                                                                                   Proposed CY
                                                                                  CY 2009 ASC        2010 ASC
            CY 2009 HCPCS code                   CY 2009 short descriptor           payment          payment
                                                                                   indicator       indicator**
----------------------------------------------------------------------------------------------------------------
0084T.....................................  Temp prostate urethral stent......             R2*               R2
21073.....................................  Mnpj of tmj w/anesth..............             P3*               P3
55876.....................................  Place rt device/marker, pros......             P3*               P3
C9728.....................................  Place device/marker, non pro......             R2*               R2
----------------------------------------------------------------------------------------------------------------
* If designation is temporary.
** Proposed payment indicators are based on a comparison of the proposed rates according to the ASC standard
  ratesetting methodology and the MPFS proposed rates. Under current law, the MPFS payment rates will have a
  negative update for CY 2010. For a discussion of those rates, we refer readers to the June 2009 CY 2010 MPFS
  proposed rule.


    Table 45--CY 2009 Temporarily Designated Office-Based ASC Covered
 Surgical Procedures Proposed for Temporary Office-Based Designation in
                                 CY 2010
------------------------------------------------------------------------
                                                           Proposed CY
                                      CY 2009 short          2010 ASC
       CY 2009 HCPCS code              descriptor            payment
                                                           indicator**
------------------------------------------------------------------------
0099T..........................  Implant corneal ring..             R2*
0124T..........................  Conjunctival drug                  R2*
                                  placement.
46930..........................  Destroy internal                   P3*
                                  hemorrhoids.
64455..........................  N block inj, plantar               P3*
                                  digit.
64632..........................  N block inj, common                P3*
                                  digit.
67229..........................  Tr retinal les preterm             R2*
                                  inf.
------------------------------------------------------------------------
* If designation is temporary.
** Proposed payment indicators are based on a comparison the proposed
  rates according to the ASC standard ratesetting methodology and the
  MPFS proposed rates. Under current law, the MPFS payment rates will
  have a negative update for CY 2010. For a discussion of those rates,
  we refer 010 MPFS proposed rule.

c. ASC-Covered Surgical Procedures Designated as Device-Intensive
(1) Background
    As discussed in the August 2, 2007 ASC final rule (72 FR 42503 
through 42508), we adopted a modified payment methodology for 
calculating the ASC payment rates for covered surgical procedures that 
are assigned to the subset of OPPS device-dependent APCs with a device 
offset percentage greater than 50 percent of the APC cost under the 
OPPS, in order to ensure that payment for the procedure is adequate to 
provide packaged payment for the high-cost implantable devices used in 
those procedures. We assigned payment indicators ``H8'' (Device-
intensive procedure on ASC list in CY 2007; paid at adjusted rate) and 
``J8'' (Device-intensive procedure added to ASC list in CY2008 or 
later; paid at adjusted rate) to identify the procedures that were 
eligible for ASC payment calculated according to the modified 
methodology, depending on whether the procedure was included on the ASC 
list of covered surgical procedures prior to CY 2008 and, therefore, 
subject to transitional payment as discussed in the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68739 through 68742). The 52 
device-intensive procedures for which the modified rate calculation 
methodology applies in CY 2009 were displayed in Table 47 and in 
Addendum AA to the CY 2009 OPPS/ASC final rule with comment period (73 
FR 68736 through 68738 and 68840 through 68933).
(2) Proposed Changes to List of Covered Surgical Procedures Designated 
as Device-Intensive for CY 2010
    We are proposing to update the ASC list of covered surgical 
procedures that are eligible for payment according to the device-
intensive procedure payment methodology for CY 2010, consistent with 
the proposed OPPS device-dependent APC update, reflecting the proposed 
APC assignments of procedures, designation of APCs as device-dependent, 
and APC device offset percentages based on CY 2008 OPPS claims data. 
The OPPS device-dependent APCs are discussed further in section 
II.A.2.d.(1) of this proposed rule. The ASC covered surgical procedures 
that we are proposing to designate as device-intensive and that would 
be subject to the device-intensive

[[Page 35383]]

procedure payment methodology for CY2010 are listed in Table 46 below. 
The HCPCS code, the HCPCS code short descriptor, the proposed CY2010 
ASC payment indicator, the proposed CY 2010 OPPS APC assignment, and 
the proposed CY 2010 OPPS APC device offset percentage are also listed 
in Table 46 below. Each proposed device-intensive procedure is assigned 
payment indicator ``H8'' or ``J8,'' depending on whether it is subject 
to transitional payment, and all of these procedures are included in 
Addendum AA to this proposed rule.

                             Table 46--ASC Covered Surgical Procedures Proposed for Device-Intensive Designation for CY 2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                             Proposed CY
                                                                               Proposed CY   Proposed CY                                    2010 device-
            CY 2009 HCPCS code                  CY 2009 short descriptor        2010 ASC      2010 OPPS            OPPS APC title             dependent
                                                                                 payment         APC                                         APC offset
                                                                                indicator                                                    percentage
--------------------------------------------------------------------------------------------------------------------------------------------------------
24361....................................  Reconstruct elbow joint..........           H8          0425   Level II Arthroplasty or                   57
                                                                                                           Implantation with Prosthesis.
24363....................................  Replace elbow joint..............           H8          0425   Level II Arthroplasty or                   57
                                                                                                           Implantation with Prosthesis.
24366....................................  Reconstruct head of radius.......           H8          0425   Level II Arthroplasty or                   57
                                                                                                           Implantation with Prosthesis.
25441....................................  Reconstruct wrist joint..........           H8          0425   Level II Arthroplasty or                   57
                                                                                                           Implantation with Prosthesis.
25442....................................  Reconstruct wrist joint..........           H8          0425   Level II Arthroplasty or                   57
                                                                                                           Implantation with Prosthesis.
25446....................................  Wrist replacement................           H8          0425   Level II Arthroplasty or                   57
                                                                                                           Implantation with Prosthesis.
27446....................................  Revision of knee joint...........           J8          0425   Level II Arthroplasty or                   57
                                                                                                           Implantation with Prosthesis.
33206....................................  Insertion of heart pacemaker.....           J8          0089   Insertion/Replacement of                   71
                                                                                                           Permanent Pacemaker and
                                                                                                           Electrodes.
33207....................................  Insertion of heart pacemaker.....           J8          0089   Insertion/Replacement of                   71
                                                                                                           Permanent Pacemaker and
                                                                                                           Electrodes.
33208....................................  Insertion of heart pacemaker.....           J8          0655   Insertion/Replacement/Conversion           75
                                                                                                           of a permanent dual chamber
                                                                                                           pacemaker.
33212....................................  Insertion of pulse generator.....           H8          0090   Insertion/Replacement of                   73
                                                                                                           Pacemaker Pulse Generator.
33213....................................  Insertion of pulse generator.....           H8          0654   Insertion/Replacement of a                 74
                                                                                                           permanent dual chamber
                                                                                                           pacemaker.
33214....................................  Upgrade of pacemaker system......           J8          0655   Insertion/Replacement/Conversion           75
                                                                                                           of a permanent dual chamber
                                                                                                           pacemaker.
33224....................................  Insert pacing lead & connect.....           J8          0418   Insertion of Left Ventricular              81
                                                                                                           Pacing Elect..
33225....................................  Lventric pacing lead add-on......           J8          0418   Insertion of Left Ventricular              81
                                                                                                           Pacing Elect..
33240....................................  Insert pulse generator...........           J8          0107   Insertion of Cardioverter-                 88
                                                                                                           Defibrillator.
33249....................................  Eltrd/insert pace-defib..........           J8          0108   Insertion/Replacement/Repair of            88
                                                                                                           Cardioverter-Defibrillator
                                                                                                           Leads.
33282....................................  Implant pat-active ht record.....           J8          0680   Insertion of Patient Activated             73
                                                                                                           Event Recorders.
53440....................................  Male sling procedure.............           H8          0385   Level I Prosthetic Urological              58
                                                                                                           Procedures.
53444....................................  Insert tandem cuff...............           H8          0385   Level I Prosthetic Urological              58
                                                                                                           Procedures.
53445....................................  Insert uro/ves nck sphincter.....           H8          0386   Level II Prosthetic Urological             70
                                                                                                           Procedures.
53447....................................  Remove/replace ur sphincter......           H8          0386   Level II Prosthetic Urological             70
                                                                                                           Procedures.
54400....................................  Insert semi-rigid prosthesis.....           H8          0385   Level I Prosthetic Urological              58
                                                                                                           Procedures.
54401....................................  Insert self-contd prosthesis.....           H8          0386   Level II Prosthetic Urological             70
                                                                                                           Procedures.
54405....................................  Insert multi-comp penis pros.....           H8          0386   Level II Prosthetic Urological             70
                                                                                                           Procedures.
54410....................................  Remove/replace penis prosth......           H8          0386   Level II Prosthetic Urological             70
                                                                                                           Procedures.
54416....................................  Remv/repl penis contain pros.....           H8          0386   Level II Prosthetic Urological             70
                                                                                                           Procedures.
55873....................................  Cryoablate prostate..............           H8          0674   Prostate Cryoablation...........           56
61885....................................  Insrt/redo neurostim 1 array.....           H8          0039   Level I Implantation of                    85
                                                                                                           Neurostimulator Generator.
61886....................................  Implant neurostim arrays.........           H8          0315   Level II Implantation of                   88
                                                                                                           Neurostimulator Generator.
62361....................................  Implant spine infusion pump......           H8          0227   Implantation of Drug Infusion              82
                                                                                                           Device.
62362....................................  Implant spine infusion pump......           H8          0227   Implantation of Drug Infusion              82
                                                                                                           Device.
63650....................................  Implant neuroelectrodes..........           H8          0040   Percutaneous Implantation of               58
                                                                                                           Neurostimulator Electrodes.
63655....................................  Implant neuroelectrodes..........           J8          0061   Laminectomy, Laparoscopy, or               63
                                                                                                           Incision for Implantation of
                                                                                                           Neurostimulator Electr.
63685....................................  Insrt/redo spine n generator.....           H8          0039   Level I Implantation of                    85
                                                                                                           Neurostimulator Generator.
64553....................................  Implant neuroelectrodes..........           H8          0040   Percutaneous Implantation of               58
                                                                                                           Neurostimulator Electrodes.
64555....................................  Implant neuroelectrodes..........           J8          0040   Percutaneous Implantation of               58
                                                                                                           Neurostimulator Electrodes.

[[Page 35384]]

 
64560....................................  Implant neuroelectrodes..........           J8          0040   Percutaneous Implantation of               58
                                                                                                           Neurostimulator Electrodes.
64561....................................  Implant neuroelectrodes..........           H8          0040   Percutaneous Implantation of               58
                                                                                                           Neurostimulator Electrodes.
64565....................................  Implant neuroelectrodes..........           J8          0040   Percutaneous Implantation of               58
                                                                                                           Neurostimulator Electrodes.
64573....................................  Implant neuroelectrodes..........           H8          0225   Implantation of Neurostimulator            73
                                                                                                           Electrodes, Cranial Nerve.
64575....................................  Implant neuroelectrodes..........           H8          0061   Laminectomy, Laparoscopy, or               63
                                                                                                           Incision for Implantation of
                                                                                                           Neurostimulator Electr.
64577....................................  Implant neuroelectrodes..........           H8          0061   Laminectomy, Laparoscopy, or               63
                                                                                                           Incision for Implantation of
                                                                                                           Neurostimulator Electr.
64580....................................  Implant neuroelectrodes..........           H8          0061   Laminectomy, Laparoscopy, or               63
                                                                                                           Incision for Implantation of
                                                                                                           Neurostimulator Electr.
64581....................................  Implant neuroelectrodes..........           H8          0061   Laminectomy, Laparoscopy, or               63
                                                                                                           Incision for Implantation of
                                                                                                           Neurostimulator Electr.
64590....................................  Insrt/redo pn/gastr stimul.......           H8          0039   Level I Implantation of                    85
                                                                                                           Neurostimulator Generator.
65770....................................  Revise cornea with implant.......           H8          0293   Level V Anterior Segment Eye               59
                                                                                                           Procedures.
69714....................................  Implant temple bone w/stimul.....           H8          0425   Level II Arthroplasty or                   57
                                                                                                           Implantation with Prosthesis.
69715....................................  Temple bne implnt w/stimulat.....           H8          0425   Level II Arthroplasty or                   57
                                                                                                           Implantation with Prosthesis.
69717....................................  Temple bone implant revision.....           H8          0425   Level II Arthroplasty or                   57
                                                                                                           Implantation with Prosthesis.
69718....................................  Revise temple bone implant.......           H8          0425   Level II Arthroplasty or                   57
                                                                                                           Implantation with Prosthesis.
69930....................................  Implant cochlear device..........           H8          0259   Level VII ENT Procedures........           85
--------------------------------------------------------------------------------------------------------------------------------------------------------

d. ASC Treatment of Surgical Procedures Proposed for Removal From the 
OPPS Inpatient List for CY 2010
    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 procedures proposed for removal from the OPPS inpatient list 
for possible inclusion on the ASC list of covered surgical procedures. 
We evaluated each of the 3 procedures we are proposing to remove from 
the OPPS inpatient list for CY 2010 according to the criteria for 
exclusion from the list of covered ASC surgical procedures. We believe 
that all of these procedures should continue to be excluded from the 
ASC list of covered surgical procedures for CY 2010 because they would 
be expected to pose a significant risk to beneficiary safety in ASCs or 
would be expected to require an overnight stay.
    A full discussion about the APC Panel's recommendations regarding 
the removal of procedures from the OPPS inpatient list for CY 2010 and 
the procedures we are proposing to remove from the OPPS inpatient list 
for CY 2010 may be found in section XI.B. of this proposed rule. The 
HCPCS codes for these procedures and their long descriptors are listed 
in Table 47 below.

Table 47--Procedures Proposed for Exclusion From the ASC List of Covered
   Procedures for CY 2010 That Are Proposed for Removal From the OPPS
                             Inpatient List
------------------------------------------------------------------------
     CY 2009 HCPCS code                CY 2009 long descriptor
------------------------------------------------------------------------
21256......................  Reconstruction of orbit with osteotomies
                              (extracranial) and with bone grafts
                              (includes obtaining autografts) (eg, micro-
                              ophthalmia).
27179......................  Open treatment of slipped femoral
                              epiphysis; osteoplasty of femoral neck
                              (Heyman type procedure).
51060......................  Transvesical ureterolithotomy.
------------------------------------------------------------------------

2. Covered Ancillary Services
    Consistent with the established ASC payment system policy, we are 
proposing to update the ASC list of covered ancillary services to 
reflect the proposed payment status for the services under the CY 2010 
OPPS. Maintaining consistency with the OPPS may result in proposed 
changes to ASC payment indicators for some covered ancillary items and 
services because of changes that are being proposed under the OPPS for 
CY 2010. For example, a covered ancillary service that was separately 
paid under the revised ASC payment system in CY 2009 may be proposed 
for packaged status under the CY 2010 OPPS and, therefore, also under 
the ASC payment system for CY 2010. Comment indicator ``CH,'' discussed 
in section XV.F. of this proposed rule, is used in Addendum BB to this 
proposed rule to indicate covered ancillary services for which we are 
proposing a change in the ASC payment indicator to reflect a proposed 
change in

[[Page 35385]]

the OPPS treatment of the service for CY 2010.
    Except for the Level II HCPCS codes listed in Table 40 of this 
proposed rule, all ASC covered ancillary services and their proposed 
payment indicators for CY 2010 are included in Addendum BB to this 
proposed rule.

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

1. Proposed Payment for Covered Surgical Procedures
a. Background
    Our ASC payment policies for covered surgical procedures under the 
revised ASC payment system are fully described in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66828 through 66831). Under our 
established policy for the revised ASC payment system, the ASC standard 
ratesetting methodology of multiplying the ASC relative payment weight 
for the procedure by the ASC conversion factor for that same year is 
used to calculate the national unadjusted payment rates for procedures 
with payment indicator ``G2.'' For procedures assigned payment 
indicator ``A2,'' our final policy established blended rates to be used 
during the transitional period and, beginning in CY 2011, ASC rates 
calculated according to the ASC standard ratesetting methodology. The 
rate calculation established for device-intensive procedures (payment 
indicators ``H8''and ``J8'') is structured so that the packaged device 
payment amount is the same as under the OPPS, and only the service 
portion of the rate is subject to the ASC standard ratesetting 
methodology. In the CY 2009 OPPS/ASC final rule with comment period (73 
FR 68722 through 68759), we updated the CY 2008 ASC payment rates for 
ASC covered surgical procedures with payment indicators of ``A2,'' 
``G2,'' ``H8,''and ``J8'' using CY 2007 data, consistent with the CY 
2009 OPPS update. Payment rates for device-intensive procedures also 
were updated to incorporate the CY 2009 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 amount (we refer readers to the June 2009 CY 2010 MPFS proposed 
rule) or the amount calculated using the ASC standard ratesetting 
methodology for the procedure. In the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68722 through 68759), we updated the payment 
amounts for office-based procedures (payment indicators ``P2,'' ``P3,'' 
and ``R2'') using the most recent available MPFS and OPPS data. We 
compared the estimated CY 2009 rate for each of the office-based 
procedures, calculated according to the ASC standard ratesetting 
methodology, to the MPFS nonfacility PE RVU amount to determine which 
was lower and, therefore, would be the CY 2009 payment rate for the 
procedure according to the final policy of the revised ASC payment 
system (see Sec.  416.171(d)).
b. Proposed Update to ASC-Covered Surgical Procedure Payment Rates for 
CY 2010
    We are proposing to update ASC payment rates for CY 2010 using the 
established rate calculation methodologies under Sec.  416.171. Thus, 
we are proposing to calculate CY 2010 payments for procedures subject 
to the transitional payment methodology (payment indicators ``A2'' and 
``H8'') using a blend of 75 percent of the proposed CY 2010 ASC rate 
calculated according to the ASC standard ratesetting methodology and 25 
percent of the CY 2007 ASC payment rate, incorporating the device-
intensive procedure methodology, as appropriate, for procedures 
assigned ASC payment indicator ``H8.'' We are proposing to use the 
amount calculated under the ASC standard ratesetting methodology for 
procedures assigned payment indicator ``G2'' because these procedures 
are not subject to the transitional payment methodology.
    We are proposing payment rates for office-based procedures (payment 
indicators ``P2,'' ``P3,'' and ``R2'') and device-intensive procedures 
not subject to transitional payment (payment indicator ``J8'') 
calculated according to our established policies. Thus, we are 
proposing to update the payment amounts for device-intensive procedures 
based on the CY 2010 OPPS proposal that reflects updated OPPS device 
offset percentages, and to make payment for office-based procedures at 
the lesser of the CY 2010 proposed MPFS nonfacility PE RVU amount or 
the proposed CY 2010 ASC payment amount calculated according to the ASC 
standard ratesetting methodology.
c. Proposed Adjustment to ASC Payments for No Cost/Full Credit and 
Partial Credit Devices
    Our ASC policy with regard to payment for costly devices implanted 
in ASCs at no cost or with full or partial credit as set forth in Sec.  
416.179 is consistent with the OPPS policy. The proposed CY 2010 OPPS 
APCs and devices subject to the adjustment policy are discussed in 
section IV.B.2. of this proposed rule. The established ASC policy 
includes adoption of the OPPS policy for reduced payment to providers 
when a specified device is furnished without cost or with full or 
partial credit for the cost of the device for those ASC covered 
surgical procedures that are assigned to APCs under the OPPS to which 
this policy applies. We refer readers to the CY 2009 OPPS/ASC final 
rule with comment period for a full discussion of the ASC payment 
adjustment policy for no cost/full credit and partial credit devices 
(73 FR 68742 through 68745).
    Consistent with the OPPS, we are proposing to update the list of 
ASC covered device-intensive procedures and devices that would be 
subject to the no cost/full credit and partial credit device adjustment 
policy for CY 2010. Table 48 below displays the ASC covered device-
intensive procedures that we are proposing would be subject to the no 
cost/full credit and partial credit device adjustment policy for CY 
2010. When a procedure that is listed in Table 48 is performed to 
implant a device that is listed in Table 49, where that device is 
furnished at no cost or with full credit from the manufacturer, the ASC 
must append the HCPCS ``FB'' modifier on the line with the procedure to 
implant the device. The contractor would reduce payment to the ASC by 
the device offset amount that we estimate represents the cost of the 
device when the necessary device is furnished without cost to the ASC 
or with full credit. We would provide the same amount of payment 
reduction based on the device offset amount in ASCs that would apply 
under the OPPS under the same circumstances. We continue to believe 
that the reduction of ASC payment in these circumstances is necessary 
to pay appropriately for the covered surgical procedure being furnished 
by the ASC.
    We also are proposing to reduce the payment for implantation 
procedures listed in Table 48 by one-half of the device offset amount 
that would be applied if a device was provided at no cost or with full 
credit, if the credit to the ASC is 50 percent or more of the cost of 
the new device. The ASC must append the HCPCS ``FC'' modifier to the 
HCPCS code for a surgical procedure listed in Table 48 when the 
facility receives a partial credit of 50 percent or more of the cost of 
a device listed in Table 49 below. In order to report that they 
received a partial credit of 50 percent or more of the cost of a new 
device, ASCs have the option of either: (1) submitting the claim for 
the device replacement procedure to their

[[Page 35386]]

Medicare contractor after the procedure's performance but prior to 
manufacturer acknowledgment of credit for the device, and subsequently 
contacting the contractor regarding a claim adjustment once the credit 
determination is made; or (2) holding the claim for the device 
implantation procedure until a determination is made by the 
manufacturer on the partial credit and submitting the claim with the 
``FC'' modifier appended to the implantation procedure HCPCS code if 
the partial credit is 50 percent or more of the cost of the replacement 
device. Beneficiary coinsurance would continue to be based on the 
reduced payment amount.

Table 48--Proposed Procedures to Which the No Cost/Full Credit and Partial Credit Device Adjustment Policy Would
                                                Apply in CY 2010
----------------------------------------------------------------------------------------------------------------
                                                                                                       Proposed
                                       Proposed                                           Proposed     CY 2010
 CY 2009 HCPCS     CY 2009 short     CY 2010 ASC    Proposed                              CY 2010        OPPS
     code            descriptor         payment     CY 2010         OPPS APC title       OPPS full   partial APC
                                      indicator    OPPS  APC                             APC offset     offset
                                                                                         percentage   percentage
----------------------------------------------------------------------------------------------------------------
24361.........  Reconstruct elbow             H8         0425  Level II Arthroplasty             57           28
                 joint.                                         or Implantation with
                                                                Prosthesis.
24363.........  Replace elbow joint           H8         0425  Level II Arthroplasty             57           28
                                                                or Implantation with
                                                                Prosthesis.
24366.........  Reconstruct head of           H8         0425  Level II Arthroplasty             57           28
                 radius.                                        or Implantation with
                                                                Prosthesis.
25441.........  Reconstruct wrist             H8         0425  Level II Arthroplasty             57           28
                 joint.                                         or Implantation with
                                                                Prosthesis.
25442.........  Reconstruct wrist             H8         0425  Level II Arthroplasty             57           28
                 joint.                                         or Implantation with
                                                                Prosthesis.
25446.........  Wrist replacement..           H8         0425  Level II Arthroplasty             57           28
                                                                or Implantation with
                                                                Prosthesis.
27446.........  Revision of knee              J8         0425  Level II Arthroplasty             57           28
                 joint.                                         or Implantation with
                                                                Prosthesis.
33206.........  Insertion of heart            J8         0089  Insertion/Replacement             71           35
                 pacemaker.                                     of Permanent Pacemaker
                                                                and Electrodes.
33207.........  Insertion of heart            J8         0089  Insertion/Replacement             71           35
                 pacemaker.                                     of Permanent Pacemaker
                                                                and Electrodes.
33208.........  Insertion of heart            J8         0655  Insertion/Replacement/            75           37
                 pacemaker.                                     Conversion of a
                                                                permanent dual chamber
                                                                pacemaker.
33212.........  Insertion of pulse            H8         0090  Insertion/Replacement             73           37
                 generator.                                     of Pacemaker Pulse
                                                                Generator.
33213.........  Insertion of pulse            H8         0654  Insertion/Replacement             74           37
                 generator.                                     of a permanent dual
                                                                chamber pacemaker.
33214.........  Upgrade of                    J8         0655  Insertion/Replacement/            75           37
                 pacemaker system.                              Conversion of a
                                                                permanent dual chamber
                                                                pacemaker.
33224.........  Insert pacing lead            J8         0418  Insertion of Left                 81           40
                 & connect.                                     Ventricular Pacing
                                                                Elect.
33225.........  Lventric pacing               J8         0418  Insertion of Left                 81           40
                 lead add-on.                                   Ventricular Pacing
                                                                Elect.
33240.........  Insert pulse                  J8         0107  Insertion of                      88           44
                 generator.                                     Cardioverter-
                                                                Defibrillator.
33249.........  Eltrd/insert pace-            J8         0108  Insertion/Replacement/            88           44
                 defib.                                         Repair of Cardioverter-
                                                                Defibrillator Leads.
33282.........  Implant pat-active            J8         0680  Insertion of Patient              73           36
                 ht record.                                     Activated Event
                                                                Recorders.
53440.........  Male sling                    H8         0385  Level I Prosthetic                58           29
                 procedure.                                     Urological Procedures.
53444.........  Insert tandem cuff.           H8         0385  Level I Prosthetic                58           29
                                                                Urological Procedures.
53445.........  Insert uro/ves nck            H8         0386  Level II Prosthetic               70           35
                 sphincter.                                     Urological Procedures.
53447.........  Remove/replace ur             H8         0386  Level II Prosthetic               70           35
                 sphincter.                                     Urological Procedures.
54400.........  Insert semi-rigid             H8         0385  Level I Prosthetic                58           29
                 prosthesis.                                    Urological Procedures.
54401.........  Insert self-contd             H8         0386  Level II Prosthetic               70           35
                 prosthesis.                                    Urological Procedures.
54405.........  Insert multi-comp             H8         0386  Level II Prosthetic               70           35
                 penis pros.                                    Urological Procedures.
54410.........  Remove/replace                H8         0386  Level II Prosthetic               70           35
                 penis prosth.                                  Urological Procedures.
54416.........  Remv/repl penis               H8         0386  Level II Prosthetic               70           35
                 contain pros.                                  Urological Procedures.
61885.........  Insrt/redo                    H8         0039  Level I Implantation of           85           43
                 neurostim 1 array.                             Neurostimulator
                                                                Generator.
61886.........  Implant neurostim             H8         0315  Level II Implantation             88           44
                 arrays.                                        of Neurostimulator
                                                                Generator.
62361.........  Implant spine                 H8         0227  Implantation of Drug              82           41
                 infusion pump.                                 Infusion Device.
62362.........  Implant spine                 H8         0227  Implantation of Drug              82           41
                 infusion pump.                                 Infusion Device.

[[Page 35387]]

 
63650.........  Implant                       H8         0040  Percutaneous                      58           29
                 neuroelectrodes.                               Implantation of
                                                                Neurostimulator
                                                                Electrodes.
63655.........  Implant                       J8         0061  Laminectomy,                      63           31
                 neuroelectrodes.                               Laparoscopy, or
                                                                Incision for
                                                                Implantation of
                                                                Neurostimulator Electr.
63685.........  Insrt/redo spine n            H8         0039  Level I Implantation of           85           43
                 generator.                                     Neurostimulator
                                                                Generator.
64553.........  Implant                       H8         0040  Percutaneous                      58           29
                 neuroelectrodes.                               Implantation of
                                                                Neurostimulator
                                                                Electrodes.
64555.........  Implant                       J8         0040  Percutaneous                      58           29
                 neuroelectrodes.                               Implantation of
                                                                Neurostimulator
                                                                Electrodes.
64560.........  Implant                       J8         0040  Percutaneous                      58           29
                 neuroelectrodes.                               Implantation of
                                                                Neurostimulator
                                                                Electrodes.
64561.........  Implant                       H8         0040  Percutaneous                      58           29
                 neuroelectrodes.                               Implantation of
                                                                Neurostimulator
                                                                Electrodes.
64565.........  Implant                       J8         0040  Percutaneous                      58           29
                 neuroelectrodes.                               Implantation of
                                                                Neurostimulator
                                                                Electrodes.
64573.........  Implant                       H8         0225  Implantation of                   73           37
                 neuroelectrodes.                               Neurostimulator
                                                                Electrodes, Cranial
                                                                Nerve.
64575.........  Implant                       H8         0061  Laminectomy,                      63           31
                 neuroelectrodes.                               Laparoscopy, or
                                                                Incision for
                                                                Implantation of
                                                                Neurostimulator Electr.
64577.........  Implant                       H8         0061  Laminectomy,                      63           31
                 neuroelectrodes.                               Laparoscopy, or
                                                                Incision for
                                                                Implantation of
                                                                Neurostimulator Electr.
64580.........  Implant                       H8         0061  Laminectomy,                      63           31
                 neuroelectrodes.                               Laparoscopy, or
                                                                Incision for
                                                                Implantation of
                                                                Neurostimulator Electr.
64581.........  Implant                       H8         0061  Laminectomy,                      63           31
                 neuroelectrodes.                               Laparoscopy, or
                                                                Incision for
                                                                Implantation of
                                                                Neurostimulator Electr.
64590.........  Insrt/redo pn/gastr           H8         0039  Level I Implantation of           85           43
                 stimul.                                        Neurostimulator
                                                                Generator.
69714.........  Implant temple bone           H8         0425  Level II Arthroplasty             57           28
                 w/stimul.                                      or Implantation with
                                                                Prosthesis.
69715.........  Temple bne implnt w/          H8         0425  Level II Arthroplasty             57           28
                 stimulat.                                      or Implantation with
                                                                Prosthesis.
69717.........  Temple bone implant           H8         0425  Level II Arthroplasty             57           28
                 revision.                                      or Implantation with
                                                                Prosthesis.
69718.........  Revise temple bone            H8         0425  Level II Arthroplasty             57           28
                 implant.                                       or Implantation with
                                                                Prosthesis.
69930.........  Implant cochlear              H8         0259  Level VII ENT                     85           42
                 device.                                        Procedures.
----------------------------------------------------------------------------------------------------------------


 Table 49--Proposed Devices for Which the ``FB'' or ``FC'' Modifier Must
Be Reported With the Procedure Code in CY 2010 When Furnished at No Cost
                     or With Full or Partial Credit
------------------------------------------------------------------------
  CY 2009 device HCPCS code            CY 2009 short descriptor
------------------------------------------------------------------------
C1721.......................  AICD, dual chamber.
C1722.......................  AICD, single chamber.
C1764.......................  Event recorder, cardiac.
C1767.......................  Generator, neurostim, imp.
C1771.......................  Rep dev, urinary, w/sling.
C1772.......................  Infusion pump, programmable.
C1776.......................  Joint device (implantable).
C1778.......................  Lead, neurostimulator.
C1779.......................  Lead, pmkr, transvenous VDD.
C1785.......................  Pmkr, dual, rate-resp.
C1786.......................  Pmkr, single, rate-resp.
C1813.......................  Prosthesis, penile, inflatab.
C1815.......................  Pros, urinary sph, imp.
C1820.......................  Generator, neuro rechg bat sys.
C1881.......................  Dialysis access system.
C1882.......................  AICD, other than sing/dual.
C1891.......................  Infusion pump, non-prog, perm.
C1897.......................  Lead, neurostim, test kit.
C1898.......................  Lead, pmkr, other than trans.
C1900.......................  Lead coronary venous.
C2619.......................  Pmkr, dual, non rate-resp.
C2620.......................  Pmkr, single, non rate-resp.
C2621.......................  Pmkr, other than sing/dual.
C2622.......................  Prosthesis, penile, non-inf.
C2626.......................  Infusion pump, non-prog, temp.
C2631.......................  Rep dev, urinary, w/o sling.
L8614.......................  Cochlear device/system.
L8685.......................  Implt nrostm pls gen sng rec.
L8686.......................  Implt nrostm pls gen sng non.
L8687.......................  Implt nrostm pls gen dua rec.
L8688.......................  Implt nrostm pls gen dua non.
L8690.......................  Aud osseo dev, int/ext comp.
------------------------------------------------------------------------

2. Proposed Payment for Covered Ancillary Services
a. Background
    Our final payment policies under the revised ASC payment system for

[[Page 35388]]

covered ancillary services vary according to the particular type of 
service and its payment policy under the OPPS. Our overall policy 
provides separate ASC payment for certain ancillary items and services 
integrally related to the provision of ASC covered surgical procedures 
that are paid separately under the OPPS and provides packaged ASC 
payment for other ancillary items and services that are packaged under 
the OPPS. Thus, we established a final policy to align ASC payment 
bundles with those under the OPPS (72 FR 42495).
    Our ASC payment policies provide separate payment for drugs and 
biologicals that are separately paid under the OPPS at the OPPS rates, 
while we pay for separately payable radiology services at the lower of 
the MPFS nonfacility PE RVU (or technical component) amount or the rate 
calculated according to the ASC standard ratesetting methodology (72 FR 
42497). In all cases, ancillary items and services must be provided 
integral to the performance of ASC covered surgical procedures for 
which the ASC bills Medicare, in order for those ancillary services 
also to be paid.
    ASC payment policy for brachytherapy sources generally mirrors the 
payment policy under the OPPS. We finalized our policy in the CY 2008 
OPPS/ASC final rule with comment period (72 FR 42499) to pay for 
brachytherapy sources applied in ASCs at the same prospective rates 
that were adopted under the OPPS or, if OPPS rates were unavailable, at 
contractor-priced rates. Subsequent to publication of that rule, 
section 106 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 
(Pub. L. 110-173) mandated that, for the period January 1, 2008 through 
June 30, 2008, brachytherapy sources be paid under the OPPS at charges 
adjusted to cost. Therefore, consistent with our final overall ASC 
payment policy, we paid ASCs at contractor-priced rates for 
brachytherapy sources provided in ASCs during that period of time. 
Beginning July 1, 2008, brachytherapy sources applied in ASCs were to 
be paid at the same prospectively set rates that were finalized in the 
CY 2008 OPPS/ASC final rule with comment period (72 FR 67165 through 
67188). Immediately prior to the publication of the CY 2009 OPPS/ASC 
proposed rule, section 142 of the Medicare Improvements for Patients 
and Providers Act of 2008 (Pub. L. 110-275) amended section 
1833(t)(16)(C) of the Act (as amended by section 106 of the Medicare, 
Medicaid, and SCHIP Extension Act of 2007) to extend the requirement 
that brachytherapy sources be paid under the OPPS at charges adjusted 
to cost through December 31, 2009. Therefore, consistent with final ASC 
payment policy, ASCs continued to be paid at contractor-priced rates 
for brachytherapy sources provided integral to ASC covered surgical 
procedures during that period of time.
    Other separately paid covered ancillary services in ASCs, 
specifically corneal tissue acquisition and device categories with OPPS 
pass-through status, do not have prospectively established ASC payment 
rates according to the final policies of the revised ASC payment system 
(72 FR 42502 and 42509). Under the revised ASC payment system, corneal 
tissue acquisition is paid based on the invoiced costs for acquiring 
the corneal tissue for transplantation. As discussed in section IV.A.1. 
of this proposed rule, new pass-through device categories may be 
established on a quarterly basis, but currently there are no OPPS 
device pass-through categories that would continue for OPPS pass-
through payment (and, correspondingly, separate ASC payment) in CY 
2010.
b. Proposed Payment for Covered Ancillary Services for CY 2010
    For CY 2010, we are proposing to update the ASC payment rates and 
make changes to ASC payment indicators as necessary to maintain 
consistency between the OPPS and ASC payment system regarding the 
packaged or separately payable status of services and the proposed CY 
2010 OPPS and ASC payment rates. The proposed CY 2010 OPPS payment 
methodologies for separately payable drugs and biologicals and 
brachytherapy sources are discussed in sections V. and VII. of this 
proposed rule, respectively, and we are proposing to set the CY 2010 
ASC payment rates for those services equal to the proposed CY 2010 OPPS 
rates.
    Consistent with established ASC payment policy (72 FR 42497), the 
proposed CY 2010 payment for separately payable covered radiology 
services is based on a comparison of the CY 2010 proposed MPFS 
nonfacility PE RVU amounts (we refer readers to the June 2009 CY 2010 
MPFS proposed rule) and the proposed CY 2010 ASC payment rates 
calculated according to the ASC standard ratesetting methodology and 
then set at the lower of the two amounts. Alternatively, payment for a 
radiology service may be packaged into the payment for the ASC covered 
surgical procedure if the radiology service is packaged under the OPPS. 
The payment indicators in Addendum BB indicate whether the proposed 
payment rates for radiology services are based on the MPFS nonfacility 
PE RVU amount or the ASC standard ratesetting methodology, or whether 
payment for a radiology service is packaged into the payment for the 
covered surgical procedure (payment indicator ``N1''). Radiology 
services that we are proposing to pay based on the ASC standard 
ratesetting methodology are assigned payment indicator ``Z2'' 
(Radiology service paid separately when provided integral to a surgical 
procedure on ASC list; payment based on OPPS relative payment weight) 
and those for which the proposed payment is based on the MPFS 
nonfacility PE RVU amount are assigned payment indicator ``Z3'' 
(Radiology service paid separately when provided integral to a surgical 
procedure on ASC list; payment based on MPFS nonfacility PE RVUs).
    All covered ancillary services and their proposed payment 
indicators are listed in Addendum BB to this proposed rule.

E. New Technology Intraocular Lenses

1. Background
    In the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68176), we finalized our current process for reviewing applications to 
establish new active classes of new technology intraocular lenses 
(NTIOLs) and for recognizing new candidate intraocular lenses (IOLs) 
inserted during or subsequent to cataract extraction as belonging to a 
NTIOL class that is qualified for a payment adjustment. Specifically, 
we established the following process:
    <bullet> We announce annually in the Federal Register a document 
that proposes the update of ASC payment rates for the following 
calendar year, a list of all requests to establish new NTIOL classes 
accepted for review during the calendar year in which the proposal is 
published and the deadline for submission of public comments regarding 
those requests. Pursuant to Section 141(b)(3) of Public Law 103-432 and 
our regulations at Sec.  416.185(b), the deadline for receipt of public 
comments is 30 days following publication of the list of requests.
    <bullet> In the Federal Register document that finalizes the update 
of ASC payment rates for the following calendar year, we--
    [cir] Provide a list of determinations made as a result of our 
review of all new class requests and public comments; and
    [cir] Announce the deadline for submitting requests for review of 
an application for a new NTIOL class for the following calendar year.

[[Page 35389]]

    In determining whether a lens belongs to a new class of NTIOLs and 
whether the ASC payment amount for insertion of that lens in 
conjunction with cataract surgery is appropriate, we expect that the 
insertion of the candidate IOL would result in significantly improved 
clinical outcomes compared to currently available IOLs. In addition, to 
establish a new NTIOL class, the candidate lens must be distinguishable 
from lenses already approved as members of active or expired classes of 
NTIOLs that share a predominant characteristic associated with improved 
clinical outcomes that was identified for each class. Furthermore, in 
the CY 2007 OPPS/ASC final rule with comment period (71 FR 68227), we 
finalized our proposal to base our determinations on consideration of 
the following factors set out at Sec.  416.195:
    <bullet> The IOL must have been approved by the FDA and claims of 
specific clinical benefits and/or lens characteristics with established 
clinical relevance in comparison with currently available IOLs must 
have been approved by the FDA for use in labeling and advertising;
    <bullet> The IOL is not described by an active or expired NTIOL 
class; that is, it does not share the predominant, class-defining 
characteristic associated with improved clinical outcomes with 
designated members of an active or expired NTIOL class; and
    <bullet> Evidence demonstrates that use of the IOL results in 
measurable, clinically meaningful, improved outcomes in comparison with 
use of currently available IOLs. According to the statute, and 
consistent with previous examples provided by CMS, superior outcomes 
that we consider include the following:
    [cir] Reduced risk of intraoperative or postoperative complication 
or trauma;
    [cir] Accelerated postoperative recovery;
    [cir] Reduced induced astigmatism;
    [cir] Improved postoperative visual acuity;
    [cir] More stable postoperative vision; and/or
    [cir] Other comparable clinical advantages, such as--
    [squ] Reduced dependence on other eyewear (for example, spectacles, 
contact lenses, and reading glasses);
    [squ] Decreased rate of subsequent diagnostic or therapeutic 
interventions, such as the need for YAG laser treatment;
    [squ] Decreased incidence of subsequent IOL exchange; and
    [squ] Decreased blurred vision, glare, other quantifiable symptom 
or vision deficiency.
    For a request to be considered complete, we require submission of 
the information that is found in the guidance document entitled 
``Application Process and Information Requirements for Requests for a 
New Class of New Technology Intraocular Lens (NTIOL)'' posted on the 
CMS Web site at: http://www.cms.hhs.gov/ASCPayment/08_NTIOLs.asp#TopOfPage.
    As we stated in the CY 2007 OPPS/ASC final rule with comment period 
(71 FR 68180), there are three possible outcomes from our review of a 
request for establishment of a new NTIOL class. As appropriate, for 
each completed request for consideration of a candidate IOL into a new 
class that is received by the established deadline, one of the 
following determinations is announced annually in the final rule 
updating the ASC payment rates for the next calendar year:
    <bullet> The request for a payment adjustment is approved for the 
candidate IOL for 5 full years as a member of a new NTIOL class 
described by a new HCPCS code;
    <bullet> The request for a payment adjustment is approved for the 
candidate IOL for the balance of time remaining as a member of an 
active NTIOL class; or
    <bullet> The request for a payment adjustment is not approved.
    We also discussed our plan to summarize briefly in the final rule 
with comment period the evidence that we reviewed, the public comments, 
and the basis for our determinations in consideration of applications 
for establishment of a new NTIOL class. We established that when a new 
NTIOL class is created, we identify the predominant characteristic of 
NTIOLs in that class that sets them apart from other IOLs (including 
those previously approved as members of other expired or active NTIOL 
classes) and that is associated with improved clinical outcomes. The 
date of implementation of a payment adjustment in the case of approval 
of an IOL as a member of a new NTIOL class would be set prospectively 
as of 30 days after publication of the ASC payment update final rule, 
consistent with the statutory requirement.
2. NTIOL Application Process for Payment Adjustment
    In CY 2007, we posted an updated guidance document to the CMS Web 
site to provide process and information requirements for applications 
requesting a review of the appropriateness of the payment amount for 
insertion of an IOL to ensure that the ASC payment for covered surgical 
procedures includes payment that is reasonable and related to the cost 
of acquiring a lens that is approved as belonging to a new class of 
NTIOLs. This guidance document can be accessed on the CMS Web site at: 
http://www.cms.hhs.gov/ASCPayment/08_NTIOLs.asp#TopOfPage.
    We note that we have also issued a guidance document entitled 
``Revised Process for Recognizing Intraocular Lenses Furnished by 
Ambulatory Surgery Centers (ASCs) as Belonging to an Active Subset of 
New Technology Intraocular Lenses (NTIOLs).'' This guidance document 
can be accessed on the CMS Web site at: http://www.cms.hhs.gov/ASCPayment/Downloads/Request_for_inclusion_in_current_NTIOL_subset.pdf.
    This second guidance document provides specific details regarding 
requests for recognition of IOLs as belonging to an existing, active 
NTIOL class, the review process, and information required for a request 
to review. Currently, there is one active NTIOL class whose defining 
characteristic is the reduction of spherical aberration. CMS accepts 
requests throughout the year to review the appropriateness of 
recognizing an IOL as a member of an active class of NTIOLs. That is, 
review of candidate lenses for membership in an existing, active NTIOL 
class is ongoing and not limited to the annual review process that 
applies to the establishment of new NTIOL classes. We ordinarily 
complete the review of such a request within 90 days of receipt of all 
information that we consider pertinent to our review, and upon 
completion of our review, we notify the requestor of our determination 
and post on the CMS Web site notification of a lens newly approved for 
a payment adjustment as an NTIOL belonging to an active NTIOL class 
when furnished in an ASC.
3. Classes of NTIOLs Approved and New Requests for Payment Adjustment
a. Background
    Since implementation of the process for adjustment of payment 
amounts for NTIOLs that was established in the June 16, 1999 Federal 
Register, we have approved three classes of NTIOLs, as shown in the 
following table, with the associated qualifying IOLs to date:

[[Page 35390]]



----------------------------------------------------------------------------------------------------------------
                              $50 Approved for
NTIOL class   HCPCS code  services furnished on or    NTIOL characteristic       IOLs eligible for adjustment
                                    after
----------------------------------------------------------------------------------------------------------------
1..........  Q1001......  May 18, 2000, through     Multifocal..............  Allergan AMO Array Multifocal
                           May 18, 2005.                                       lens, model SA40N
2..........  Q1002......  May 18, 2000, through     Reduction in Preexisting  STAAR Surgical Elastic Ultraviolet-
                           May 18, 2005.             Astigmatism.              Absorbing Silicone Posterior
                                                                               Chamber IOL with Toric Optic,
                                                                               models AA4203T, AA4203TF, and
                                                                               AA4203TL
3..........  Q1003......  February 27, 2006,        Reduced Spherical         Advanced Medical Optics (AMO)
                           through February 26,      Aberration.               Tecnis[reg] IOL models Z9000,
                           2011.                                               Z9001, Z9002, ZA9003, and AR40xEM
                                                                               and Tecnis[reg] 1-Piece model
                                                                               ZCB00; Alcon Acrysof[reg] IQ
                                                                               Model SN60WF and Acrysert
                                                                               Delivery System model SN60WS;
                                                                               Bausch & Lomb Sofport AO models
                                                                               LI61AO and LI61AOV and Akreos AO
                                                                               models AO60 and MI60; STAAR
                                                                               Affinity Collamer model CQ2015A
                                                                               and CC4204A and Elastimide model
                                                                               AQ2015A; Hoya model FY-60AD
----------------------------------------------------------------------------------------------------------------

b. Request To Establish New NTIOL Class for CY 2010 and Deadline for 
Public Comment
    As explained in the guidance document on the CMS Web site, the 
deadline for each year's requests for review of the appropriateness of 
the ASC payment amount for insertion of a candidate IOL as a member of 
a new class of NTIOLs is announced in the final rule updating the ASC 
and OPPS payment rates for that calendar year. Therefore, a request for 
review for a new class of NTIOLs for CY 2010 must have been submitted 
to CMS by March 2, 2009, the due date published in the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68752). We did not receive any 
requests for review to establish a new NTIOL class for CY 2010 by the 
March 2, 2009 due date.
4. Proposed Payment Adjustment
    The current payment adjustment for a 5-year period from the 
implementation date of a new NTIOL class is $50. In the CY 2007 OPPS/
ASC final rule with comment period, we revised Sec.  416.200(a) through 
(c) to clarify how the IOL payment adjustment is made and how an NTIOL 
is paid after expiration of the payment adjustment, and made minor 
editorial changes to Sec.  416.200(d). For CY 2008 and CY 2009, we did 
not revise the payment adjustment amount, and we are not proposing to 
revise the payment adjustment amount for CY 2010 in light of our 
limited experience with the revised ASC payment system, implemented 
initially on January 1, 2008.
5. Proposed ASC Payment for Insertion of IOLs
    In accordance with the final policies of the revised ASC payment 
system, for CY 2010, payment for IOL insertion procedures is 
established according to the standard payment methodology of the 
revised payment system, which multiplies the ASC conversion factor by 
the ASC payment weight for the surgical procedure to implant the IOL. 
CY 2010 ASC payment for the cost of a conventional lens will be 
packaged into the payment for the associated covered surgical 
procedures performed by the ASC. The HCPCS codes for IOL insertion 
procedures are included in Table 50 below, and their proposed CY 2010 
payment rates may be found in Addendum AA to this proposed rule.

                  Table 50--Insertion of IOL Procedures
------------------------------------------------------------------------
      CY 2009 HCPCS code                CY 2009 Long descriptor
------------------------------------------------------------------------
66983........................  Intracapsular cataract extraction with
                                insertion of intraocular lens prosthesis
                                (one stage procedure).
66984........................  Extracapsular cataract removal with
                                insertion of intraocular lens prosthesis
                                (one stage procedure), manual or
                                mechanical technique (e.g., irrigation
                                and aspiration or phacoemulsification).
66985........................  Insertion of intraocular lens prosthesis
                                (secondary implant), not associated with
                                concurrent cataract removal.
66986........................  Exchange of intraocular lens.
------------------------------------------------------------------------

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 for the revised ASC payment system, we also 
created final comment indicators for the ASC payment system in the CY 
2008 OPPS/ASC final rule with comment period (72 FR 66855). We created 
Addendum DD1 to define ASC payment indicators that we use in Addenda AA 
and BB to provide payment information regarding covered surgical 
procedures and covered ancillary services, respectively, under the 
revised ASC payment system. The ASC payment indicators in Addendum DD1 
are intended to capture policy-relevant characteristics of HCPCS codes 
that may receive packaged or separate payment in ASCs, including their 
ASC payment status prior to CY 2008; their designation as device-
intensive or office-based and the corresponding ASC payment 
methodology; and their classification as separately payable radiology 
services, brachytherapy sources, OPPS pass-through devices, corneal 
tissue acquisition services, drugs or biologicals, or NTIOLs.
    We also created Addendum DD2 that lists the ASC comment indicators. 
The ASC comment indicators used in Addenda AA and BB to the proposed 
rules and final rules with comment period serve to identify, for the 
revised ASC payment system, the status of a specific HCPCS code and its 
payment indicator with respect to the timeframe when comments will be 
accepted. The comment indicator ``NI'' is used in the OPPS/ASC final 
rule with comment period to indicate new HCPCS codes for which the 
interim payment indicator assigned is subject to comment. The ``CH'' 
comment indicator is used in Addenda AA and BB to this CY 2010

[[Page 35391]]

proposed rule to indicate that a new payment indicator (in comparison 
with the indicator for the CY 2009 ASC April quarterly update) is 
proposed for assignment to an active HCPCS code for the next calendar 
year; an active HCPCS code is proposed for addition to the list of 
procedures or services payable in ASCs; or an active HCPCS code is 
proposed for deletion at the end of the current calendar year. The 
``CH'' comment indicators that are published in the final rule with 
comment period are provided to alert readers that a change has been 
made from one calendar year to the next, but do not indicate that the 
change is subject to comment. The full definitions of the payment 
indicators and comment indicators are provided in Addendum DD2 to this 
proposed rule.
2. Proposed ASC Payment and Comment Indicators
    We are not proposing any changes to the definitions of the ASC 
payment indicators or comment indicators for CY 2010.

G. ASC Policy and Payment Recommendations

    MedPAC was established under section 1805 of the Social Security 
Act to advise the U.S. Congress on issues affecting the Medicare 
program. Sections 1805(b)(1)(B) and (b)(1)(C) of the Act require MedPAC 
to submit reports to Congress not later than March 1 and June 15 of 
each year that present its Medicare payment policy reviews and 
recommendations. The following section describes a recent MedPAC 
recommendation that is relevant to the ASC payment system.
    The March 2009 MedPAC ``Report to the Congress: Medicare Payment 
Policy'' included the following recommendation relating specifically to 
the ASC payment system for CY 2010:
    Recommendation 2B-4: The Congress should increase payments for 
ambulatory surgery center (ASC) services in calendar year 2010 by 0.6 
percent. In addition, the Congress should require ASCs to submit to the 
Secretary cost data and quality data that will allow for an effective 
evaluation of the adequacy of ASC payment rates.
    Response: In the August 2, 2007 final rule (72 FR 42518 through 
42519), we adopted a policy to update the ASC conversion factor for 
consistency with section 1833(i)(2)(C) of the Act, which requires that, 
if the Secretary has not updated the ASC payment amounts in a calendar 
year, the payment amounts shall be increased by the percentage increase 
in the Consumer Price Index for All Urban Consumers (CPI-U) as 
estimated by the Secretary for the 12-month period ending with the 
midpoint of the year involved. The statute set the update at zero for 
CYs 2008 and 2009. We indicated that we plan to implement the annual 
updates through an adjustment to the conversion factor under the ASC 
payment system beginning in CY 2010 when the statutory requirement for 
a zero update no longer applies. We are proposing to update the 
conversion factor for the CY 2010 ASC payment system by the percentage 
increase in the CPI-U, consistent with our policy as codified under 
Sec.  416.171(a)(2).
    We are not proposing to require ASCs to submit cost data to the 
Secretary for CY 2010. We have never required ASCs to routinely submit 
cost data. The previous ASC payment system payment rates were initially 
based on ASC cost data collected almost 30 years ago. The 2006 GAO 
report, ``Medicare: Payment for Ambulatory Surgical Centers Should Be 
Based on the Hospital Outpatient Payment System'' (GAO-07-86), 
concluded that the APC groups in the OPPS reflect the relative costs of 
surgical procedures performed in ASCs in the same way that they reflect 
the relative costs of the same procedures when they are performed in 
HOPDs. Using the OPPS as the basis for an ASC payment system provides 
for an annual revision of the ASC payment rates under the budget 
neutral ASC payment system. However, MedPAC noted the lack of 
information available to assess whether ASC payment rates are 
appropriate and recommended that ASCs be required to submit cost and 
quality data to the Secretary as soon as feasible. At present under the 
methodology of the revised ASC payment system, we do not utilize ASC 
cost information to set and revise the payment rates for ASCs but, 
instead, rely on the relativity of hospital outpatient costs developed 
for the OPPS, consistent with the recommendation of the GAO. 
Furthermore, we are concerned that a new Medicare requirement for ASCs 
to submit cost data to the Secretary could be administratively 
burdensome for ASCs. However, in light of the MedPAC recommendation, we 
are soliciting public comment on the feasibility of ASCs submitting 
cost information to CMS, including whether costs should be collected 
from a sample or the universe of ASCs, the administrative burden 
associated with such an activity, the form that such a submission could 
take considering existing Medicare requirements for other types of 
facilities and the scope of ASC services, the expected accuracy of such 
cost information, and any other issues or concerns of interest to the 
public on this topic.
    Finally, we appreciate MedPAC's recommendation that Congress 
require ASCs to submit quality data. Section 109(b) of the MIEA-TRHCA 
(Pub. L. 109-432) gives the Secretary the authority to implement ASC 
quality measure reporting and to reduce the payment update for ASCs 
that fail to report those required measures. As we stated most recently 
in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68779), 
we believe that promoting high quality care in the ASC setting through 
quality reporting is highly desirable and fully in line with our 
efforts under other payment systems. For the reasons discussed in 
section XVI.H. of this proposed rule, we are not proposing to require 
ASC quality data reporting for CY 2010, but our clear intention is to 
implement ASC quality reporting in the future.

H. Proposed Revision to Terms of Agreements for Hospital-Operated ASCs

1. Background
    The August 5, 1982 ASC final rule (47 FR 34082) established the 
initial Medicare ASC payment system and implementing Federal 
regulations under 42 CFR Part 416. Under Sec.  416.26 of our 
regulations, ASCs operated by hospitals, like other ASCs, must meet the 
applicable conditions for coverage and enter into an agreement with CMS 
in which CMS accepts the ASC as qualified to furnish ambulatory 
surgical services. Sections 416.30(a) through (g) of our regulations 
specify terms of agreement for ASCs. Section 416.30(f) specifies the 
following additional terms of agreement for an ASC operated by a 
hospital--
    <bullet> The agreement is made effective on the first day of the 
next Medicare cost reporting period of the hospital that operates the 
ASC;
    <bullet> The ASC participates and is paid only as an ASC, without 
the option of converting to or being paid as a hospital outpatient 
department, unless CMS determines there is good cause to do otherwise; 
and
    <bullet> Costs incurred by the ASC are treated as a nonreimbursable 
cost center on the hospital's Medicare cost report.
    In addition, Sec.  416.35 provides guidance regarding the 
termination of ASC agreements with CMS. Voluntary terminations are 
those initiated by an ASC and as specified in Sec.  416.35, an ASC may 
terminate its agreement either by sending written notice to CMS or by

[[Page 35392]]

ceasing to furnish services to the community.
    Although some sections of Part 416 of the regulations governing 
ASCs have been revised since they were established in 1982, most 
recently for CY 2008 with the adoption of the revised ASC payment 
system, Sec. Sec.  416.30(a) through 416.30(g) have not been changed or 
updated. At the time Sec. Sec.  416.30 and 416.35 were promulgated, 
Medicare paid for hospital outpatient services on a reasonable cost 
basis. In contrast, Medicare initially paid ASCs for a small number of 
surgical procedures at one of only four prospective rates that were 
developed for the ASC payment system using cost data obtained from 
surveys of ASCs. Since then, Medicare has adopted a prospective payment 
system for HOPDs (the OPPS), the ASC list of covered surgical 
procedures and payment rates have been updated a number of times, and, 
beginning in CY 2008, the revised ASC payment system was introduced.
    Under the revised ASC payment system, Medicare greatly increased 
the number and types of surgical procedures that are eligible for 
payment in ASCs. As a result, many more of the same surgical procedures 
may be paid under the OPPS and ASC payment system, with the specific 
payment determined by whether the service is provided by a hospital or 
an ASC. Further, under the current, revised payment methodology, ASC 
payment rates have a direct relationship to the relative payment 
weights under the OPPS for the same services. Today, hospital 
outpatient and ASC surgical procedures are paid based on the relative 
weights adopted for the OPPS, and the difference between payments under 
the two systems is largely a reflection of the differences in capital 
and operating costs attributable to being an ASC or being an HOPD.
    Another change that has taken place since the establishment of the 
Medicare ASC payment system and the implementing regulations at Sec.  
416.30 has been our effort to simplify the Medicare regulations to 
reduce the burden on providers and suppliers. As discussed in the 
August 1, 2002 IPPS final rule (67 FR 50084 through 50090), as part of 
that effort, we revised the provider-based status regulations at Sec.  
413.65 that outline the requirements for a determination that a 
facility or an organization has provider-based status as a department 
or entity of a hospital (main provider). The provider-based status 
rules generally apply to situations where there is a financial 
incentive for a facility or organization to claim affiliation with a 
main provider. The provider-based status rules establish criteria for a 
facility or organization to demonstrate that it is integrated with the 
main provider for payment purposes. We do not make provider-based 
status determinations for certain facilities, listed under Sec.  
413.65(a)(1)(ii) of the regulations, because the outcome of the 
determination (that is, whether a facility, unit, or department is 
found to be freestanding or provider-based) would not affect the 
methodology used to make Medicare or Medicaid payment, the scope of 
benefits available to a Medicare beneficiary in or at the facility, or 
the deductible or coinsurance liability of a Medicare beneficiary in or 
at the facility. According to Sec.  413.65(a)(1)(ii), we do not make 
provider-based determinations for ASCs or other suppliers that have 
active supplier agreements with Medicare because services provided in 
such entities are paid under other fee schedules, specifically in the 
case of ASCs regardless of whether the ASC is operated by a hospital.
    In the August 1, 2002 IPPS final rule (67 FR 50084 through 50090), 
we revised the provider-based status rules where the main providers 
were no longer required to submit an attestation to CMS to demonstrate 
that their provider-based departments or entities met the provider-
based status rules. However, the provider-based department or entity of 
a main provider must still meet the provider-based status rules in 
Sec.  413.65 in order for the main provider to bill for services 
performed in the provider-based department or entity.
2. Proposed Change to the Terms of Agreements for ASCs Operated by 
Hospitals
    In order to further streamline our regulations to reduce the 
administrative burden on providers and suppliers, we are proposing to 
revise existing Sec.  416.30(f)(2) to remove the language requiring a 
hospital-operated ASC to satisfy CMS that there is good cause for its 
request to become a provider-based department of a hospital prior to 
being recognized as such. Specifically, we would remove the language, 
``without the option of converting to or being paid as a hospital 
outpatient department, unless CMS determines there is good cause to do 
otherwise.'' We believe that this proposed revision to the requirements 
that apply to hospital-operated ASCs is consistent with our earlier 
regulation simplification activities related to the provider-based 
status rules under Sec.  413.65. We believe that we would reduce the 
administrative burden on hospitals and ASCs that terminate their 
supplier agreements with Medicare and bring the requirements into 
closer alignment with the provider-based status rules for other 
facilities or organizations that wish to be integrated with the main 
provider for payment purposes. While an ASC participating in Medicare 
would continue to be paid only as an ASC, an ASC would also continue to 
be able to voluntarily terminate its agreements in accordance with 
Sec.  416.35. Thus, if an ASC chooses to voluntarily terminate its 
agreement as an ASC and a main provider wants to consider the surgical 
facility a provider-based department of that main provider, the 
facility must meet the provider-based status rules under Sec.  413.65.

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

1. Background
    In the August 2, 2007 final rule (72 FR 42493), we established our 
policy to base ASC relative payment weights and payment rates under the 
revised ASC payment system on APC groups and relative payment weights. 
Consistent with that policy and the requirement at section 
1833(i)(2)(D)(ii) of the Act that the revised payment system be 
implemented so that it would be budget neutral, the initial ASC 
conversion factor (CY 2008) was calculated so that estimated total 
Medicare payments under the revised ASC payment system in the first 
year would be budget neutral to estimated total Medicare payments under 
the prior (CY 2007) ASC payment system. That is, application of the ASC 
conversion factor was designed to result in aggregate Medicare 
expenditures under the revised ASC payment system in CY 2008 equal to 
aggregate Medicare expenditures that would have occurred in CY 2008 in 
the absence of the revised system, taking into consideration the cap on 
ASC payments in CY 2007 as required under section 1833(i)(2)(E) of the 
Act (72 FR 42521 through 42522).
    We note that we consider the term ``expenditures'' in the context 
of the budget neutrality requirement under section 1833(i)(2)(D)(ii) of 
the Act to mean expenditures from the Medicare Part B Trust Fund. We do 
not consider expenditures to include beneficiary coinsurance and 
copayments. This distinction was important for the CY 2008 ASC budget 
neutrality model that considered payments across hospital outpatient, 
ASC, and MPFS payment systems. However, because coinsurance is almost 
always 20 percent for ASC services, this interpretation of expenditures 
has minimal impact for subsequent budget neutrality

[[Page 35393]]

adjustments calculated within the revised ASC payment system.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66857 
through 66858), we set out a step-by-step illustration of the final 
budget neutrality adjustment calculation based on the methodology 
finalized in the August 2, 2007 final rule (72 FR 42521 through 42531) 
and as applied to updated data available for the CY 2008 OPPS/ASC final 
rule with comment period. The application of that methodology to the 
data available for the CY 2008 OPPS/ASC final rule with comment period 
resulted in a budget neutrality adjustment of 0.65.
    For CY 2008, we adopted the OPPS relative payment weights as the 
ASC relative payment weights for most services and, consistent with the 
final policy, we calculated the CY 2008 ASC payment rates by 
multiplying the ASC relative payment weights by the final CY 2008 ASC 
conversion factor of $41.401. For covered office-based surgical 
procedures and covered ancillary radiology services, the established 
policy is to set the relative payment weights so that the national 
unadjusted ASC payment rate does not exceed the MPFS unadjusted 
nonfacility PE RVU amount. Further, as discussed in the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66841 through 66847), we also 
adopted alternative ratesetting methodologies for specific types of 
services (for example, device-intensive procedures).
    As discussed in the August 2, 2007 final rule (72 FR 42518) and as 
codified under Sec.  416.172(c) of the regulations, the revised ASC 
payment system accounts for geographic wage variation when calculating 
individual ASC payments by applying the pre-floor and pre-reclassified 
hospital wage index to the labor-related share, which is 50 percent of 
the ASC payment amount. Beginning in CY2008, CMS accounted for 
geographic wage variation in labor cost when calculating individual ASC 
payments by applying the pre-floor and pre-reclassified hospital wage 
index values that CMS calculates for payment, using updated Core Based 
Statistical Areas (CBSAs) issued by the Office of Management and Budget 
in June 2003. The reclassification provision provided at section 
1886(d)(10) of the Act is specific to hospitals. We believe the use of 
the most recent available raw pre-floor and pre-reclassified hospital 
wage index results in the most appropriate adjustment to the labor 
portion of ASC costs. In addition, use of the unadjusted hospital wage 
data avoids further reductions in certain rural statewide wage index 
values that result from reclassification. We continue to believe that 
the unadjusted hospital wage index, which is updated yearly and is used 
by many other Medicare payment systems, appropriately accounts for 
geographic variation in labor costs for ASCs.
2. Proposed Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2010 and Future 
Years
    We update the ASC relative payment weights each year using the 
national OPPS relative payment weights (and MPFS nonfacility PE RVU 
amounts, as applicable) for that same calendar year and uniformly scale 
the ASC relative payment weights for each update year to make them 
budget neutral (72 FR 42531 through 42532). Consistent with our 
established policy, we are proposing to scale the CY2010 relative 
payment weights for ASCs according to the following method. Holding ASC 
utilization and the mix of services constant from CY 2008, for CY 2010, 
we would compare the total payment weight using the CY 2009 ASC 
relative payment weights under the 50/50 blend (of the CY 2007 payment 
rate and the ASC payment rate calculated under the ASC standard 
ratesetting methodology) with the total payment weight using the CY 
2010 ASC relative payment weights under the 25/75 blend (of the CY 2007 
ASC payment rate and the ASC payment rate calculated under the ASC 
standard ratesetting methodology) to take into account the changes in 
the OPPS relative payment weights between CY 2009 and CY 2010. We would 
use the ratio of CY 2009 to CY 2010 total payment weight (the weight 
scaler) to scale the ASC relative payment weights for CY 2010. The 
proposed CY 2010 ASC scaler is 0.9514 and scaling would apply to the 
ASC relative payment weights of the covered surgical procedures and 
covered ancillary radiology services for which the ASC payment rates 
are based on OPPS relative payment weights.
    Scaling would not apply in the case of ASC payment for separately 
payable covered ancillary services that have a predetermined national 
payment amount (that is, their national ASC payment amounts are not 
based on OPPS relative payment weights), such as drugs and biologicals 
that are separately paid or services that are contractor-priced or paid 
at reasonable cost in ASCs. Any service with a predetermined national 
payment amount would be included in the ASC budget neutrality 
comparison, but scaling of the ASC relative payment weights would not 
apply to those services. The ASC payment weights for those services 
without predetermined national payment amounts (that is, those services 
with national payment amounts that would be based on OPPS relative 
payment weights if a payment limitation did not apply) would be scaled 
to eliminate any difference in the total payment weight between the 
current year and the update year.
    The proposed weight scaler that we use only to model our estimate 
of payment rates if there was no transition for CY 2010 is equal to 
0.9329. We apply this scaler to the payment weights subject to scaling, 
in order to estimate the ASC payment rates for CY 2010 without the 
transition, for purposes of the ASC impact analysis discussed in 
section XXI.C. of this proposed rule.
    For any given year's ratesetting, we typically use the most recent 
full calendar year of claims data to model budget neutrality 
adjustments. We currently have available 95 percent of CY 2008 ASC 
claims data. To create an analytic file to support calculation of the 
weight scaler and budget neutrality adjustment for the wage index 
(discussed below), we summarized available CY 2008 ASC claims by 
provider and by HCPCS code. We created a unique supplier identifier 
solely for the purpose of identifying unique providers within the CY 
2008 claims data. We used the provider zip code reported on the claim 
to associate state, county, and CBSA with each ASC. This file, 
available to the public as a supporting data file for this proposed 
rule, is posted on the CMS Web site at: http://www.cms.hhs.gov/ASCPayment/01_Overview.asp#TopOfPage.
b. Updating the ASC Conversion Factor
    Under the OPPS, we typically apply a budget neutrality adjustment 
for provider-level changes, most notably a change in the wage index for 
the upcoming year, to the conversion factor. Consistent with our final 
ASC payment policy, for the CY 2010 ASC payment system, we are 
proposing to calculate and apply the pre-floor and pre-reclassified 
hospital wage index that is used for ASC payment adjustment to the ASC 
conversion factor, just as the OPPS wage index adjustment is calculated 
and applied to the OPPS conversion factor (73 FR 41539). For CY 2010, 
we calculated the proposed adjustment for the ASC payment system by 
using the most recent CY 2008 claims data available and estimating the 
difference in total payment that would be created by introducing the CY 
2010 pre-floor and pre-reclassified hospital wage index. Specifically, 
holding CY 2008 ASC utilization and service-mix and CY

[[Page 35394]]

2009 national payment rates after application of the weight scaler 
constant, we calculated the total adjusted payment using the CY 2009 
pre-floor and pre-reclassified hospital wage index and a total adjusted 
payment using the proposed CY 2010 pre-floor and pre-reclassified 
hospital wage index. We used the 50-percent labor-related share for 
both total adjusted payment calculations. We then compared the total 
adjusted payment calculated with the CY 2009 pre-floor and pre-
reclassified hospital wage index to the total adjusted payment 
calculated with the proposed CY 2010 pre-floor and pre-reclassified 
hospital wage index and applied the resulting ratio of 0.9996 (the 
proposed CY 2010 ASC wage index budget neutrality adjustment) to the CY 
2009 ASC conversion factor to calculate the proposed CY 2010 ASC 
conversion factor.
    Section 1833(i)(2)(C) of the Act requires that, if the Secretary 
has not updated the ASC payment amounts in a calendar year, the payment 
amounts shall be increased by the percentage increase in the Consumer 
Price Index for All Urban Consumer (CPI-U) as estimated by the 
Secretary for the 12-month period ending with the midpoint of the year 
involved. However, section 1833(i)(2)(C)(iv) of the Act required that 
the increase of ASC payment amounts for CYs 2008 and 2009 equal zero 
percent. As discussed in the August 2, 2007 final rule, we adopted a 
final policy to update the ASC conversion factor using the CPI-U in 
order to adjust ASC payment rates for CY 2010 and subsequent years (72 
FR 42518 through 42519 and Sec.  416.171(a)(2)). We are proposing to 
implement the annual updates through an adjustment to the ASC 
conversion factor beginning in CY 2010 when the statutory requirement 
for a zero update no longer applies.
    For the 12-month period ending with the midpoint of CY 2010, the 
Secretary estimates that the CPI-U is 0.6 percent. Therefore, we are 
proposing to apply to the ASC conversion factor a 0.6 percent increase 
for CY 2010.
    Thus, for CY 2010, we are proposing to adjust the CY 2009 ASC 
conversion factor ($41.393) by the wage adjustment for budget 
neutrality of 0.9996 and the update of 0.6 percent, which results in a 
proposed CY 2010 ASC conversion factor of $41.625.
3. Display of Proposed ASC Payment Rates
    Addenda AA and BB to this proposed rule display the proposed 
updated ASC payment rates for CY2010 for covered surgical procedures 
and covered ancillary services, respectively. These addenda contain 
several types of information related to the proposed CY 2010 payment 
rates. Specifically, in Addendum AA, a ``Y'' in the column titled 
``Subject to Multiple Procedure Discounting'' indicates that the 
surgical procedure would be subject to the multiple procedure payment 
reduction policy. As discussed in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66829 through 66830), most covered surgical 
procedures are subject to a 50-percent reduction in the ASC payment for 
the lower-paying procedure when more than one procedure is performed in 
a single operative session. Display of the comment indicator ``CH'' in 
the column titled ``Comment Indicator'' indicates a proposed change in 
payment policy for the item or service, including identifying new or 
discontinued HCPCS codes, designating items or services new for payment 
under the ASC payment system, and identifying items or services with 
proposed changes in the ASC payment indicator for CY 2010.
    The values displayed in the column titled ``CY 2010 Third Year 
Transition Payment Weight'' are the proposed relative payment weights 
for each of the listed services for CY 2010, the third year of the 4-
year transition period. The CY 2010 ASC payment rates for the covered 
surgical procedures subject to transitional payment (payment indicators 
``A2'' and ``H8'' in Addendum AA) are based on a blend of 25 percent of 
the CY 2007 ASC payment rate for the procedure and 75 percent of the 
proposed CY2010 ASC rate calculated under the ASC standard ratesetting 
methodology before scaling for budget neutrality, calculated according 
to the standard methodology. The payment weights for all covered 
surgical procedures and covered ancillary services whose ASC payment 
rates are based on OPPS relative payment weights are scaled for budget 
neutrality. Thus, scaling was not applied to the device portion of the 
device-intensive procedures, services that are paid at the MPFS 
nonfacility PE RVU amount, separately payable covered ancillary 
services that have a predetermined national payment amount, such as 
drugs and biologicals that are separately paid under the OPPS, or 
services that are contractor-priced or paid at reasonable cost in ASCs.
    To derive the proposed CY 2010 payment rate displayed in the ``CY 
2010 Third Year Transition Payment'' column, each ASC payment weight in 
the ``CY 2010 Third Year Transition Payment Weight'' column is 
multiplied by the proposed CY 2010 ASC conversion factor of $41.625. 
The conversion factor includes a budget neutrality adjustment for 
changes in the wage index and the CPI-U percentage increase.
    In Addendum BB, there are no relative payment weights displayed in 
the ``CY 2010 Third Year Transition Payment Weight'' column for items 
and services with predetermined national payment amounts, such as 
separately payable drugs and biologicals. The ``CY 2010 Third Year 
Transition Payment'' column displays the proposed CY 2010 national 
unadjusted ASC payment rates for all items and services. The proposed 
CY 2010 ASC payment rates for separately payable drugs and biologicals 
are based on ASP data used for payment in physicians' offices in April 
2009.

XVI. Reporting Quality Data for Annual Payment Rate Updates

A. Background

1. Overview
    CMS has implemented quality measure reporting programs for multiple 
settings of care. These programs promote higher quality, more efficient 
health care for Medicare beneficiaries. The quality data reporting 
program for hospital outpatient care, known as the Hospital Outpatient 
Quality Data Reporting Program (HOP QDRP), has been generally modeled 
after the program for hospital inpatient services, the Reporting 
Hospital Quality Data for Annual Payment Update (RHQDAPU) program. Both 
of these quality reporting programs for hospital services, as well as 
the program for physicians and other eligible professionals, known as 
the Physician Quality Reporting Initiative (PQRI), have financial 
incentives for reporting of quality data to CMS. CMS has also 
implemented quality reporting programs for home health agencies and 
skilled nursing facilities that are based on conditions of 
participation, and an end-stage renal disease quality reporting program 
that is based on conditions for coverage.
2. Hospital Outpatient Quality Data Reporting Under Section 109(a) of 
Public Law 109-432
    Section 109(a) of the MIEA-TRHCA (Pub. L. 109-432) amended section 
1833(t) of the Act by adding a new subsection (17) that affects the 
payment rate update applicable to OPPS payments for services furnished 
by hospitals in outpatient settings on or after January 1, 2009. 
Section 1833(t)(17)(A) of the Act, which applies to hospitals as 
defined under section 1886(d)(1)(B) of the Act, states that subsection 
(d) hospitals that fail to report data required for the quality

[[Page 35395]]

measures selected by the Secretary in the form and manner required by 
the Secretary under section 1833(t)(17)(B) of the Act will receive a 
2.0 percentage point reduction to their annual payment update factor. 
Section 1833(t)(17)(B) of the Act requires that hospitals submit 
quality data in a form and manner, and at a time, that the Secretary 
specifies. Section 1833(t)(17)(C)(i) of the Act requires the Secretary 
to develop measures appropriate for the measurement of the quality of 
care (including medication errors) furnished by hospitals in outpatient 
settings, that these measures reflect consensus among affected parties 
and, to the extent feasible and practicable, that these measures 
include measures set forth by one or more national consensus building 
entities.
    The National Quality Forum (NQF) is a voluntary consensus standard-
setting organization that is composed of a diverse representation of 
consumer, purchaser, provider, academic, clinical, and other health 
care stakeholder organizations. NQF was established to standardize 
health care quality measurement and reporting through its consensus 
development process. We generally prefer to adopt NQF-endorsed measures 
for CMS quality reporting programs. However, we believe that consensus 
among affected parties also can be reflected by other means, including: 
consensus achieved during the measure development process; consensus 
shown through broad acceptance and use of measures; and consensus 
through public comment. We also note that section 1833(t)(17) does not 
require that each measure we adopt for the HOP QDRP be endorsed by a 
national consensus building entity, or by the NQF specifically.
    Section 1833(t)(17)(C)(ii) of the Act authorizes the Secretary to 
select measures for the HOP QDRP that are the same as (or a subset of) 
the measures for which data are required to be submitted under section 
1886(b)(3)(B)(viii) of the Act (the RHQDAPU program). Section 
1833(t)(17)(D) of the Act gives the Secretary the authority to replace 
measures or indicators as appropriate, such as when all hospitals are 
effectively in compliance or when the measures or indicators have been 
subsequently shown not to represent the best clinical practice. Section 
1833(t)(17)(E) of the Act requires the Secretary to establish 
procedures for making data submitted under the HOP QDRP available to 
the public. Such procedures must include giving hospitals the 
opportunity to review their data before these data are released to the 
public.
    As we stated in the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68758 through 68759), we continue to believe that it is most 
appropriate and desirable to adopt measures that specifically apply to 
the hospital outpatient setting for the HOP QDRP. In other words, we do 
not believe that we should simply, without further analysis, adopt the 
RHQDAPU program measures as the measures for the HOP QDRP. Nonetheless, 
we note that section 1833(t)(17)(C)(ii) of the Act allows the Secretary 
to ``[select] measures that are the same as (or a subset of) the 
measures for which data are required to be submitted'' under the 
RHQDAPU program.
3. Reporting ASC Quality Data for Annual Payment Update
    Section 109(b) of the MIEA-TRHCA amended section 1833(i) of the Act 
by redesignating clause (iv) as clause (v) and adding new clause (iv) 
to paragraph (2)(D) and adding paragraph (7). These amendments may 
affect ASC payments for services furnished in ASC settings on or after 
January 1, 2009. Section 1833(i)(2)(D)(iv) of the Act authorizes the 
Secretary to implement the revised payment system for services 
furnished in ASCs (established under section 1833(i)(2)(D) of the Act), 
``so as to provide for a reduction in any annual update for failure to 
report on quality measures.''
    Section 1833(i)(7)(A) of the Act states that the Secretary may 
provide that any ASC that fails to report data required for the quality 
measures selected by the Secretary in the form and manner required by 
the Secretary under section 1833(i)(7) of the Act will incur a 
reduction in any annual payment update of 2.0 percentage points. 
Section 1833(i)(7)(A) of the Act also specifies that a reduction for 
one year cannot be taken into account in computing the ASC update for a 
subsequent calendar year.
    Section 1833(i)(7)(B) of the Act provides that, ``[e]xcept as the 
Secretary may otherwise provide,'' the hospital outpatient quality data 
provisions of sections 1833(t)(17)(B) through (E) of the Act, 
summarized above, shall apply to ASCs. We did not implement an ASC 
quality reporting program for CY 2008 (72 FR66875) or for CY 2009 (73 
FR 68779).
    We refer readers to section XVI.H. of this proposed rule for a 
discussion of our intention to implement ASC quality data reporting in 
a later rulemaking.
4. HOP QDRP Quality Measures for the CY 2009 Payment Determination
    For the CY 2009 annual payment update, we required HOP QDRP 
reporting using seven quality measures--five Emergency Department (ED) 
AMI measures and two Perioperative Care measures. These measures 
address care provided to a large number of adult patients in hospital 
outpatient settings, across a diverse set of conditions, and were 
selected for the initial set of HOP QDRP measures based on their 
relevance as a set to all hospital outpatient departments.
    Specifically, in order for hospitals to receive the full OPPS 
payment update for services furnished in CY 2009, in the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66860), we required that 
subsection (d) hospitals paid under the OPPS submit data on the 
following seven measures for hospital outpatient services furnished on 
or after April 1, 2008: (1) ED-AMI-1--Aspirin at Arrival; (2) ED-AMI-
2--Median Time to Fibrinolysis; (3) ED-AMI-3--Fibrinolytic Therapy 
Received within 30 Minutes of Arrival; (4) ED-AMI-4--Median Time to 
Electrocardiogram (ECG); (5) ED-AMI-5--Median Time to Transfer for 
Primary PCI; (6) PQRI <greek-i>20: Perioperative Care--Timing of 
Antibiotic Prophylaxis; and (7) PQRI <greek-i>21: Perioperative Care--
Selection of Perioperative Antibiotic.
5. HOP QDRP Quality Measures for the CY 2010 Payment Determination
a. Background
    In the CY 2009 OPPS/ASC final rule with comment period, for the CY 
2010 payment update, we required continued submission of data on the 
existing seven measures discussed above (73 FR 68761), and adopted four 
imaging measures (73 FR 68766). For CY 2010, we changed the measure 
designations for the existing seven measures to an ``OP-X'' format in 
order to maintain a consistent sequential designation system that we 
could expand as we add additional measures.
    The four imaging measures that we adopted beginning with the CY 
2010 payment determination (OP-8: MRI Lumbar Spine for Low Back Pain, 
OP-9: Mammography Follow-up rates, OP-10: Abdomen CT--Use of Contrast 
Material, and OP11: Thorax CT--Use of Contrast Material) are claims-
based measures that CMS will calculate using Medicare Part B claims 
data without imposing upon hospitals the burden of additional chart 
abstraction. For purposes of the CY 2010 payment determination, we will 
calculate these

[[Page 35396]]

measures using CY 2008 Medicare administrative claims data.
    In the CY 2009 OPPS/ASC proposed rule, OP-10 had 2 submeasures 
listed: OP-10a: CT Abdomen--Use of contrast material excluding calculi 
of the kidneys, ureter, and/or urinary tract, and OP-10b: CT Abdomen--
Use of contrast material for diagnosis of calculi in the kidneys, 
ureter, and or urinary tract. In the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68766), we finalized OP-10: Abdomen CT--Use of 
Contrast Material. To clarify, we are calculating OP-10 excluding 
patients with renal disease. This exclusion is described in greater 
detail in the Specifications Manual for Hospital Outpatient Department 
Quality Measures (HOPD Specifications Manual) located at the QualityNet 
Web site.
    The complete set of measures to be used for the CY 2010 payment 
determination is set out below, and is shown with the new measure 
designations as well as their former designations:

------------------------------------------------------------------------
 HOP QDRP Measurement Set To Be Used for CY 2010
              Payment Determination                 CY 2009 designation
------------------------------------------------------------------------
OP-1: Median Time to Fibrinolysis...............  ED-AMI-2
OP-2: Fibrinolytic Therapy Received Within 30     ED-AMI-3
 Minutes.
OP-3: Median Time to Transfer to Another          ED-AMI-5
 Facility for Acute Coronary Intervention.
OP-4: Aspirin at Arrival........................  ED-AMI-1
OP-5: Median Time to ECG........................  ED-AMI-4
OP-6: Timing of Antibiotic Prophylaxis..........  PQRI <greek-i>20
OP-7: Prophylactic Antibiotic Selection for       PQRI <greek-i>21
 Surgical Patients.
OP-8: MRI Lumbar Spine for Low Back Pain........  NA
OP-9: Mammography Follow-up Rates...............  NA
OP-10: Abdomen CT--Use of Contrast Material.....  NA
OP-11: Thorax CT--Use of Contrast Material......  NA
------------------------------------------------------------------------

b. Maintenance of Technical Specifications for Quality Measures
    Technical specifications for each HOP QDRP measure are listed in 
the HOPD Specifications Manual, which is posted on the CMS QualityNet 
Web site at https://www.QualityNet.org. We maintain the technical 
specifications for the measures by updating this HOPD Specification 
Manual and include detailed instructions and calculation algorithms 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), we established a subregulatory process for updates to the 
technical specifications that we use to calculate HOP QDRP measures. 
This process is used when changes to the measure specifications are 
necessary due to changes in scientific evidence or in the measure as 
endorsed by the consensus entity. Changes of this nature may not 
coincide with the timing of our regulatory actions, but nevertheless 
require inclusion in the measure specifications so that the HOP QDRP 
measures are calculated based on the most up-to-date scientific and 
consensus standards. We indicated that notification of changes to the 
measure specifications on the QualityNet Web site, http://www.QualityNet.org, and in the HOPD Specifications Manual that occurred 
as a result of changes in scientific evidence or national consensus 
would occur no less than 3 months before any changes become effective 
for purposes of reporting under the HOP QDRP.
    The HOPD Specification Manual is released every 6 months and 
addenda are released as necessary providing at least 3 months of 
advance notice for non-substantive changes such as changes to ICD-9, 
CPT, NUBC and HCPCS codes, and at least 6 months notice for substantive 
changes to data elements that would require significant systems 
changes.
c. Publication of HOP QDRP Data
    Section 1833(t)(17)(E) of the Act requires that the Secretary 
establish procedures to make data collected under the HOP QDRP program 
available to the public. CMS also requires hospitals to complete and 
submit a registration form (``participation form''), in order to 
participate in the HOP QDRP. In submitting this form, participating 
hospitals agree that they will allow CMS to publicly report the quality 
measures, including those that CMS calculates using Medicare claims, as 
required by the HOP QDRP.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68778), we established that for CY 2010, hospitals sharing the same CMS 
Certification Number (CCN, previously known as the Medicare Provider 
Number (MPN)) must combine data collection and submission across their 
multiple campuses for the clinical measures for public reporting 
purposes. We finalized that we will publish quality data by CCN under 
the HOP QDRP. This approach is consistent with the approach taken under 
the RHQDAPU program. In that final rule with comment period, we also 
stated that we intend to indicate instances where data from two or more 
hospitals are combined to form the publicly reported measures on the 
Web site.
    We discuss our proposal for publication for 2010 of HOP QDRP data 
in section XVI.F. of this proposed rule.

B. Proposals Regarding Quality Measures

1. Considerations in Expanding and Updating Quality Measures Under the 
HOP QDRP
    In general when selecting measures for the HOP QDRP program, we 
take into account several considerations and goals. These include: (a) 
Expanding the types of measures beyond process of care measures to 
include an increased number of outcome measures, efficiency measures, 
and patients' experience-of-care measures; (b) expanding the scope of 
hospital services to which the measures apply; (c) considering the 
burden on hospitals in collecting chart-abstracted data; (d) 
harmonizing the measures used in the HOP QDRP program with other CMS 
quality programs to align incentives and promote coordinated efforts to 
improve quality; (e) seeking to use measures based on alternative 
sources of data that do not require chart abstraction or that utilize 
data already being reported by many hospitals, such as data that 
hospitals report to clinical data registries, or all-payer claims 
databases; and (f) weighing the relevance and utility of the measures 
compared to the burden on hospitals in submitting data under the HOP 
QDRP program. Specifically, we give priority to quality measures that 
assess performance on: (a) Conditions that result in the greatest

[[Page 35397]]

mortality and morbidity in the Medicare population; (b) conditions that 
are high volume and high cost for the Medicare program; and (c) 
conditions for which wide cost and treatment variations have been 
reported, despite established clinical guidelines. We have used and 
continue to use these criteria to guide our decisions regarding what 
measures to add to the HOP QDRP measure set.
    In the CY 2009 OPPS/ASC final rule with comment period, we adopted 
four claims-based quality measures that do not require a hospital to 
submit chart-abstracted clinical data. This supports our stated goal to 
expand the measures for the HOP QDRP while minimizing the burden upon 
hospitals and, in particular, without significantly increasing the 
chart abstraction burden. In addition to claims-based measures, we are 
considering registries \1\ and electronic health records (EHRs) as 
alternative ways to collect data from hospitals. Many hospitals submit 
data to and participate in existing registries. In addition, registries 
often capture outcome information and provide ongoing quality 
improvement feedback to registry participants. Instead of requiring 
hospitals to submit the same data to CMS that they are already 
submitting to registries, we could collect the data directly from the 
registries with the permission of the hospital, thereby enabling us to 
expand the HOP QDRP measure set without increasing the burden of data 
collection for those hospitals participating in the registries. The 
data that we would receive from registries would be used to calculate 
quality measures required under HOP QDRP, and would be publicly 
reported like other HOP QDRP quality measures, encouraging improvements 
in the quality of care. We invite comment on such an approach.
---------------------------------------------------------------------------

    \1\ A registry is a collection of clinical data for purposes of 
assessing clinical performance, quality of care, and opportunities 
for quality improvement.
---------------------------------------------------------------------------

    In the CY 2009 OPPS/ASC final rule with comment period, we also 
stated our intention to explore mechanisms for data submission using 
EHRs (73 FR 68769). Establishing such a system will require 
interoperability between EHRs and CMS data collection systems, 
additional infrastructure development on the part of hospitals and CMS, 
and the adoption of standards for the capturing, formatting, and 
transmission of data elements that make up the measures. However, once 
these activities are accomplished, the adoption of measures that rely 
on data obtained directly from EHRs will enable us to expand the HOP 
QDRP measure set with less cost and burden to hospitals.
2. Retirement of HOP QDRP Quality Measures
    In the FY 2010 IPPS proposed rule, we proposed a process for 
immediate retirement of RHQDAPU program measures based on evidence that 
the continued use of the measure as specified raises patient safety 
concerns (74 FR 24168). As we explained in that proposed rule, in 
situations such as the one prompting immediate retirement of the AMI-6 
measure from the RHQDAPU program in December 2008, we do not believe 
that it would be appropriate to wait for the annual rulemaking cycle to 
retire a measure. We are proposing to adopt this same immediate 
retirement policy for the HOP QDRP. Specifically, we are proposing that 
if we receive evidence that continued collection of a measure that has 
been adopted for the HOP QDRP raises patient safety concerns, we would 
promptly retire the measure and notify hospitals and the public of the 
retirement of the measure and the reasons for its retirement through 
the usual means by which we communicate with hospitals, including but 
not limited to hospital e-mail blasts and the QualityNet Web site. We 
also are proposing to confirm the retirement of the measure in the next 
OPPS rulemaking. In other circumstances where we do not believe that 
continued use of a measure raises specific patient safety concerns, we 
intend to use the regular rulemaking process to retire a measure.
    We invite public comment on this proposal allowing for immediate 
retirement of a HOP QDRP measure following evidence of a patient safety 
concern followed by confirmation in the next rulemaking cycle.
3. Proposed HOP QDRP Quality Measures for the CY 2011 Payment 
Determination
    For the CY 2011 payment determination, we are proposing to continue 
requiring that hospitals submit data on the existing 11 HOP QDRP 
measures. These measures continue to address areas of topical 
importance regarding the quality of care provided in hospital 
outpatient departments, and reflect consensus among affected parties. 
Seven of these 11 measures are chart-abstracted measures in two areas 
of importance which are also measured for the Inpatient setting: AMI 
care and surgical care. The remaining four measures address imaging 
efficiency in hospital outpatient departments.
    For the CY 2011 payment determination, we are proposing not to add 
any new HOP QDRP measures. Although we considered adding a number of 
chart-abstracted measures, we are sensitive to the burden upon hospital 
outpatient departments associated with chart abstraction, and believe 
that adopting such measures at this time would not be consistent with 
our stated goal to minimize the collection burden associated with 
quality measurement. We will continue to assess whether we can collect 
data on additional quality measures through mechanisms other than chart 
abstraction, such as from Medicare administrative claims data and EHRs.
    In summary, we are proposing to use the following measures for the 
CY 2011 payment determination:

------------------------------------------------------------------------
  Proposed HOP QDRP measurement set to be used for the CY 2011 payment
                              determination
-------------------------------------------------------------------------
OP-1: Median Time to Fibrinolysis.
OP-2: Fibrinolytic Therapy Received Within 30 Minutes.
OP-3: Median Time To Transfer to Another Facility for Acute Coronary
 Intervention.
OP-4: Aspirin at Arrival.
OP-5: Median Time to ECG.
OP-6: Timing of Antibiotic Prophylaxis.
OP-7: Prophylactic Antibiotic Selection for Surgical Patients.
OP-8: MRI Lumbar Spine for Low Back Pain.
OP-9: Mammography Follow-Up Rates.
OP-10: Abdomen CT--Use of Contrast Material.
OP-11: Thorax CT--Use of Contrast Material.
------------------------------------------------------------------------

    We invite public comment on our proposal to retain the existing 11 
HOP QDRP measures and to not adopt additional measures for the CY 2011 
payment determination.

C. Possible Quality Measures Under Consideration for CY 2012 and 
Subsequent Years

    In previous years' rulemakings, we have provided lists of quality 
measures that are under consideration for future adoption into the HOP 
QDRP measurement set. Below is a list of measures under consideration 
for the CY 2012 payment determination and subsequent years.

[[Page 35398]]



          Quality Measures Under Consideration for CY 2012 and Subsequent Years' Payment Determinations
----------------------------------------------------------------------------------------------------------------
               Topic                                        Measure                     Potential data sources
----------------------------------------------------------------------------------------------------------------
Cancer............................      1  Adjuvant Chemotherapy is Considered or    Registry.
                                            Administered within 4 Months of Surgery
                                            to Patients Under Age 80 with AJCC III
                                            Colon Cancer.
                                    .....  This measure specifications are similar
                                            to PQRI <greek-i>72 found at the PQRI
                                            manual Web site:
                                           http://www.cms.hhs.gov/apps/ama/license.asp?file=/PQRI/downloads/2009PQRIQualityMeasureSpecificationsManualandReleaseNotes.zip.
                                        2  Adjuvant Hormonal Therapy for Patients    Claims, Registry.
                                            with Breast Cancer.
                                    .....  The measure specifications are similar
                                            to PQRI <greek-i>71 found at the PQRI
                                            manual Web site:
                                           http://www.cms.hhs.gov/apps/ama/license.asp?file=/PQRI/downloads/2009PQRIQualityMeasureSpecificationsManualandReleaseNotes.zip.
                                        3  Needle Biopsy to Establish Diagnosis of   Claims, Registry.
                                            Cancer Precedes Surgical Excision/
                                            Resection.
                                    .....  Measure specifications can be found at
                                            http://www.qualityforum.org/pdf/reports/Cancer_Nonmember_Report.pdf.
ED Throughput.....................      4  Median Time from ED Arrival to ED         Chart, EHR.
                                            Departure for Discharged ED Patients.
                                    .....  Measure specifications can be found at
                                            http://qualitynet.org/ under Hospital--
                                            Outpatient.
Diabetes..........................      5  Low Density Lipoprotein Control in Type   Claims, EHR.
                                            1 or 2 Diabetes Mellitus.
                                    .....  The measure specifications are similar
                                            to PQRI <greek-i>2 found at the PQRI
                                            manual Web site: http://www.cms.hhs.gov/apps/ama/license.asp?file=/PQRI/downloads/2009PQRIQualityMeasureSpecificationsManualandReleaseNotes.zip.
                                        6  Urine protein screening or medical        Claims, EHR.
                                            attention for nephrology during at
                                            least one office visit within last year
                                            for patient with diabetes mellitus.
                                    .....  The measure specifications are similar
                                            to PQRI <greek-i>119 found at the PQRI
                                            manual Web site: http://www.cms.hhs.gov/apps/ama/license.asp?file=/PQRI/downloads/2009PQRIQualityMeasureSpecificationsManualandReleaseNotes.zip.
                                        7  Eligible diabetes patients with           Claims, EHR.
                                            documentation of an eye exam or
                                            referral for an eye exam within the
                                            last 24 months.
                                    .....  The measure specifications are similar
                                            to PQRI <greek-i>117 found at the PQRI
                                            manual Web site: http://www.cms.hhs.gov/apps/ama/license.asp?file=/PQRI/downloads/2009PQRIQualityMeasureSpecificationsManualandReleaseNotes.zip.
                                        8  Patients who received at least one        Claims, EHR.
                                            complete foot exam (visual inspection,
                                            sensory exam with monofilament and
                                            pulse exam within the last 12 months).
                                    .....  The measure specifications are similar
                                            to PQRI <greek-i>126 found at the PQRI
                                            manual Web site: http://www.cms.hhs.gov/apps/ama/license.asp?file=/PQRI/downloads/2009PQRIQualityMeasureSpecificationsManualandReleaseNotes.zip.
Medication Reconciliation.........      9  Medication Reconciliation...............  Claims, EHR.
                                    .....  The measure specifications are similar
                                            to PQRI <greek-i>46 found at the PQRI
                                            manual Web site: http://www.cms.hhs.gov/apps/ama/license.asp?file=/PQRI/downloads/2009PQRIQualityMeasureSpecificationsManualandReleaseNotes.zip.
Immunization......................     10  Pneumococcal Vaccination Status--Overall  Chart. EHR.
                                            Rate.
                                    .....  Measure specifications are available at
                                            http://www.qualityforum.org/pdf/reports/Immunization/4%2029%20Immunizations_Nonmembers.pdf.
                                       11  Influenza Vaccination Status--Overall     Chart. EHR.
                                            Rate.
                                    .....  Measure specifications are available at
                                            http://www.qualityforum.org/pdf/reports/Immunization/4%2029%20Immunizations_Nonmembers.pdf.
Imaging Efficiency................     12  SPECT MPI AND Stress Echocardiography     Claims.
                                            for Preoperative Evaluation for Low-
                                            Risk Non-Cardiac Surgery Risk
                                            Assessment.
                                    .....  The measure specifications can be found
                                            at http://www.imagingmeasures.com/.
                                       13  Use of Stress Echocardiography or SPECT   Claims.
                                            MPI Post-Revascularization Coronary
                                            Artery Bypass Graft.
                                    .....  The measure specifications can be found
                                            at http://www.imagingmeasures.com/.
                                       14  Use of Computed Tomography in Emergency   Claims.
                                            Department for Headache.
                                    .....  The measure specifications can be found
                                            at http://www.imagingmeasures.com/.
                                       15  Simultaneous Use of Brain Computed        Claims.
                                            Tomography and Sinus Computed
                                            Tomography.
                                    .....  The measure specifications can be found
                                            at http://www.imagingmeasures.com/.
Surgery...........................     16  Appropriate surgical site hair removal..  Chart, EHR.
                                    .....  The measure specifications are similar
                                            to Surgical Care Improvement Project
                                            Infection (SCIP)-6 which can be found
                                            at http://qualitynet.org/ under
                                            Hospital--Inpatient.
----------------------------------------------------------------------------------------------------------------


[[Page 35399]]

    We invite public comment on these quality measures and topics that 
we might consider proposing to adopt beginning with the CY 2012 payment 
determination. We also are seeking suggestions and rationales to 
support the adoption of measures and topics for the HOP QDRP which do 
not appear in the table above.

D. Proposed Payment Reduction for Hospitals That Fail To Meet the HOP 
QDRP Requirements for the CY 2010 Payment Update

1. Background
    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 
section 1833(t)(17)(B) of the Act, incur a 2.0 percentage point 
reduction to their OPD fee schedule increase factor, that is, the 
annual payment update factor. Section 1833(t)(17)(A)(ii) of the Act 
specifies that any reduction would apply only to the payment year 
involved and would not be taken into account in computing the 
applicable OPD fee schedule increase factor for a subsequent payment 
year.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68769 
through 68772), we discussed how the payment reduction for failure to 
meet the administrative, data collection, and data submission 
requirements of the HOP QDRP affected the CY 2009 payment update 
applicable to OPPS payments for HOPD services furnished by the 
hospitals defined under section 1886(d)(1)(B) of the Act to which the 
program applies. The application of a reduced OPD fee schedule increase 
factor results in reduced national unadjusted payment rates that apply 
to certain outpatient items and services provided by hospitals that are 
required to report outpatient quality data and that fail to meet the 
HOP QDRP requirements. All other hospitals paid under the OPPS receive 
the full OPPS payment update without the reduction.
    The national unadjusted payment rates for many services paid under 
the OPPS equal the product of the OPPS conversion factor and the scaled 
relative weight for the APC to which the service is assigned. The OPPS 
conversion factor, which is updated annually by the OPD fee schedule 
increase factor, is used to calculate the OPPS payment rate for 
services with the following status indicators (listed in Addendum B to 
this proposed rule): ``P,'' ``Q1,'' ``Q2,'' ``Q3,'' ``R,'' ``S,'' 
``T,'' ``V,'' ``U,'' or ``X.'' In the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68770), we adopted a policy that payment for all 
services assigned these status indicators would be subject to the 
reduction of the national unadjusted payment rates for applicable 
hospitals, with the exception of services assigned to New Technology 
APCs, assigned status indicator ``S'' or ``T,'' and brachytherapy 
sources, assigned status indicator ``U,'' which were paid at charges 
adjusted to cost in CY 2009. We excluded services assigned to New 
Technology APCs from the list of services subject to the reduced 
national unadjusted payment rates because the OPD fee schedule increase 
factor is not used to update the payment rates for these APCs.
    In addition, section 1833(t)(16)(C) of the Act, as amended by 
section 142 of Public Law 110-275, specifically required that 
brachytherapy sources be paid during CY 2009 on the basis of charges 
adjusted to cost, rather than under the standard OPPS methodology. 
Therefore, the reduced conversion factor also was not applicable to CY 
2009 payment for brachytherapy sources because payment would not be 
based on the OPPS conversion factor and, consequently, the payment 
rates for these services were not updated by the OPD fee schedule 
increase factor. However, in accordance with section 1833(t)(16)(C) of 
the Act, as amended by section 142 of Public Law 110-275, payment for 
brachytherapy sources at charges adjusted to cost is set to expire on 
January 1, 2010. For CY 2010, we are proposing to pay prospectively for 
brachytherapy sources, as described in section VII. of this proposed 
rule. Therefore, we are proposing that the CY 2010 payment for 
brachytherapy sources would be based on the conversion factor and the 
quality reporting reduction policy would be applicable to brachytherapy 
sources, which are assigned status indicator ``U.''
    The OPD fee schedule increase factor, or market basket update, is 
an input into the OPPS conversion factor, which is used to calculate 
OPPS payment rates. To implement the requirement to reduce the market 
basket update for hospitals that fail to meet reporting requirements, 
in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68770 
through 68771), we calculated two conversion factors: a full market 
basket conversion factor (that is, the full conversion factor), and a 
reduced market basket conversion factor (that is, the reduced 
conversion factor). We then calculated a reduction ratio by dividing 
the reduced conversion factor by the full conversion factor. We refer 
to this reduction ratio as the ``reporting ratio'' to indicate that it 
applies to payment for hospitals that fail to meet their reporting 
requirements. Applying this reporting ratio to the OPPS payment amounts 
results in reduced national unadjusted payment rates that are 
mathematically equivalent to the reduced national unadjusted payment 
rates that would result if we multiplied the scaled OPPS relative 
weights by the reduced conversion factor. To determine the reduced 
national unadjusted payment rates that applied to hospitals that failed 
to meet their quality reporting requirements for the CY 2009 OPPS, we 
multiplied the final full national unadjusted payment rate in Addendum 
B to the CY 2009 OPPS/ASC final rule with comment period by the CY 2009 
OPPS final reporting ratio of 0.981 (73 FR 68771).
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68771 
through 68772), we established a policy that the Medicare beneficiary's 
minimum unadjusted copayment and national unadjusted copayment for a 
service to which a reduced national unadjusted payment rate applies 
would each equal the product of the reporting ratio and the national 
unadjusted copayment or the minimum unadjusted copayment, as 
applicable, for the service. We applied the reporting ratio to both the 
minimum unadjusted copayment and national unadjusted copayment for 
those hospitals that received the payment reduction for failure to meet 
the HOP QDRP reporting requirements. This application of the reporting 
ratio to the national unadjusted and minimum unadjusted copayments was 
calculated according to Sec.  419.41 of the regulations, prior to any 
adjustment for hospitals' failure to meet the quality reporting 
standards according to Sec.  419.43(h). Beneficiaries and secondary 
payers thereby share in the reduction of payments to these hospitals.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68772), we established the policy that all other applicable adjustments 
to the OPPS national unadjusted payment rates apply in those cases when 
the OPD fee schedule increase factor is reduced for hospitals that fail 
to meet the requirements of the HOP QDRP. For example, the following 
standard adjustments now apply to the reduced national unadjusted 
payment rates: the wage index adjustment; the multiple procedure 
adjustment; the interrupted procedure adjustment; the rural sole 
community hospital adjustment; and the adjustment for devices furnished 
with full or partial credit or without cost. We believe that these 
adjustments continue

[[Page 35400]]

to be equally applicable to payments for hospitals that do not meet the 
HOP QDRP requirements. Similarly, outlier payments will continue to be 
made when the criteria are met. For hospitals that fail to meet the 
quality data reporting requirements, the hospitals' costs are compared 
to the reduced payments for purposes of outlier eligibility and payment 
calculation. This policy conforms to current practice under the IPPS. 
For a complete discussion of the OPPS outlier calculation and 
eligibility criteria, we refer readers to section II.F. of this CY 2010 
OPPS/ASC proposed rule.
2. Proposed Reporting Ratio Application and Associated Adjustment 
Policy for CY 2010
    We are proposing to continue our established policy of applying the 
reduction of the OPD fee schedule increase factor through the use of a 
reporting ratio for those hospitals that fail to meet the HOP QDRP 
requirements for the full CY 2010 annual payment update factor. For the 
CY 2010 OPPS, the proposed reporting ratio is 0.980, calculated by 
dividing the reduced conversion factor of $66.118 by the full 
conversion factor of $67.439. We are proposing to continue to apply 
this reporting ratio to all services calculated using the OPPS 
conversion factor. For the CY 2010 OPPS, we are proposing to apply the 
reporting ratio, when applicable, to all HCPCS codes to which we have 
assigned status indicators ``P,'' ``Q1,'' ``Q2,'' ``Q3,'' ``R,'' ``S,'' 
``T,'' ``V,'' or ``X'' and, effective for services furnished on or 
after January 1, 2010, to also apply it to the HCPCS codes for 
brachytherapy sources, to which we have assigned status indicator 
``U.'' Under our established policy, we would continue to exclude 
services paid under New Technology APCs. We are proposing to continue 
to apply this proposed 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 HOP QDRP 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 HOP QDRP. Similarly, we are proposing to 
continue to calculate OPPS outlier eligibility and outlier payment 
based on the reduced payment rates for those hospitals that fail to 
meet the reporting requirements.

E. Proposed Requirements for HOPD Quality Data Reporting for CY 2011 
and Subsequent Years

    In order to participate in the HOP QDRP, hospitals must meet 
administrative, data collection and submission, and data validation 
requirements (if applicable). Hospitals that do not meet the 
requirements of the HOP QDRP, as well as hospitals not participating in 
the program and hospitals that withdraw from the program, will not 
receive the full OPPS payment rate update. Instead, in accordance with 
section 1833(t)(17)(A) of the Act, those hospitals will receive a 
reduction of 2.0 percentage points in their updates for the applicable 
payment year. For payment determinations affecting the CY 2011 payment 
update, we are proposing to implement the requirements listed below. 
Most of these requirements are the same as the requirements we 
implemented for the CY 2010 payment determination, with some proposed 
modifications.
1. Administrative Requirements
    To participate in the HOP QDRP, several administrative steps must 
be completed. These steps require the hospital to:
    <bullet> Identify a QualityNet administrator who follows the 
registration process located on the QualityNet Web site (http://www.QualityNet.org) and submits the information to the appropriate CMS-
designated contractor. All CMS-designated contractors will be 
identified on the QualityNet Web site. The same person may be the 
QualityNet administrator for both the RHQDAPU program and the HOP QDRP. 
From our experience, we believe that the QualityNet administrator 
typically fulfills a variety of tasks related to the hospital's ability 
to participate in the HOP QDRP, such as: creating, approving, editing 
and/or terminating QualityNet user accounts within the organization; 
monitoring QualityNet usage to maintain proper security and 
confidentiality measures; and serving as a point of contact for 
information regarding QualityNet and the HOP QDRP.
    In the past, we have required not only that the hospital designate 
a QualityNet administrator for purposes of registering the hospital to 
participate in the HOP QDRP, but also that the hospital continually 
maintain a QualityNet administrator for as long as the hospital 
participates in the program. We have become aware that the required 
maintenance of the QualityNet administrator is creating an undue 
technical burden for some hospitals and that, in some cases, is 
preventing the hospital from meeting all HOP QDRP requirements. 
Therefore, we are proposing to no longer require that a hospital 
maintain current designation of a QualityNet administrator. We invite 
public comment on this proposed change. Nevertheless, we strongly urge 
hospitals to maintain current designation of a QualityNet 
administrator, regardless of whether the hospital submits data directly 
to the CMS-designated contractor or uses a vendor for transmission of 
data.
    <bullet> Register with QualityNet regardless of the method used for 
data submission.
    <bullet> Complete and submit an online participation form if one 
(or a paper Notice of Participation form) has not been previously 
completed, if a hospital has previously withdrawn, or if the hospital 
acquires a new CCN. For HOP QDRP decisions affecting the CY 2011 
payment determination, hospitals that share the same CCN must complete 
a single online participation form. In the CY 2009 OPPS/ASC final rule 
with comment period (73 FR 68772), we implemented an online 
registration form and eliminated the paper form. At this time, the 
participation form for the HOP QDRP is separate from the RHQDAPU 
program and completing a form for each program is required. Agreeing to 
participate includes acknowledging that the data submitted to the CMS-
designated contractor will be submitted to CMS and may also be shared 
with one or more other CMS contractors that support the implementation 
of the HOP QDRP and be publicly reported.
    Under our current requirements, the deadline for submitting the 
participation form is 30 days following receipt of a CCN form from CMS 
(73 FR 68772). We are proposing to change this requirement as follows:
    Hospitals with Medicare acceptance dates on or after January 1, 
2010: For the CY 2011 payment update, we are proposing that any 
hospital that has a Medicare acceptance date on or after January 1, 
2010 (including a new hospital and hospitals that have merged) must 
submit a completed participation form no later than 180 days from the 
date identified as its Medicare acceptance date on the CMS Online 
System Certification and Reporting (OSCAR) system. Hospitals typically 
receive a package notifying them of their new CCN after they receive 
their Medicare acceptance date. The Medicare acceptance date is the 
earliest date that a hospital can receive Medicare payment for the 
services that it furnishes. Completing the participation form includes 
supplying

[[Page 35401]]

the name and address of each hospital campus that shares the same CCN.
    The use of the Medicare acceptance date as beginning the timeline 
for HOP QDRP participation will allow CMS to monitor more effectively 
hospital compliance with the requirement to complete a participation 
form because a hospital's Medicare acceptance date is readily available 
to CMS through its data systems. In addition, providing an extended 
time period to register for the program will allow newly functioning 
hospitals sufficient time to get their operations up and running before 
having to collect and submit quality data. We invite public comment on 
these proposed changes.
    Hospitals with Medicare acceptance dates before January 1, 2010 
that want to participate or withdraw: For the CY 2011 payment update, 
we are proposing that any hospital that has a Medicare acceptance date 
on or before December 31, 2009 that wants to withdraw from 
participation in the CY2011 HOP QDRP or that is not currently 
participating in the HOP QDRP and wishes to participate in the CY 2011 
HOP QDRP must submit a participation form by March 31, 2010. We are 
proposing a deadline of March 31, 2010, because we believe it will give 
hospitals sufficient time to decide whether they wish to participate in 
the HOP QDRP, as well as put into place the necessary staff and 
resources to timely report data for first quarter CY 2010 services. 
This requirement applies to all hospitals whether or not the hospital 
has billed for payment under the OPPS. We invite public comment on 
these proposed changes.
2. Data Collection and Submission Requirements
a. General Data Collection and Submission Requirements
    We are proposing that, to be eligible for the full CY 2011 OPPS 
payment update, hospitals must:
    <bullet> Submit data: Hospitals that are participating in the HOP 
QDRP must submit data for each applicable quarter by the deadline 
posted on the QualityNet Web site; there must be no lapse in data 
submission. For the CY 2011 annual payment update, the applicable 
quarters will be as follows: 3rd quarter CY 2009, 4th quarter CY 2009, 
1st quarter CY 2010, and 2nd quarter CY 2010. Hospitals that did not 
participate in the CY 2010 HOP QDRP, but would like to participate in 
the CY 2011 HOP QDRP, and that have a Medicare acceptance date on the 
OSCAR system before January 1, 2010, must begin data submission for 1st 
quarter CY 2010 services using the CY 2011 measure set that will be 
finalized in the CY 2010 OPPS/ASC final rule with comment period. For 
those hospitals with Medicare acceptance dates on or after January 1, 
2010, data submission must begin with the first full quarter following 
the submission of a completed online participation form. For the four 
claims-based measures, we will calculate the measures using the 
hospital's Medicare claims data. For the CY 2011 payment update, we 
will utilize paid Medicare fee-for-service (FFS) claims submitted prior 
to January 1, 2010, to calculate these four measures.
    Sampling and Case Thresholds: It will not be necessary for a 
hospital to submit data for all eligible cases for some measures if 
sufficient eligible case thresholds are met. Instead, for those 
measures where a hospital has a sufficiently large number of cases, it 
can sample cases and submit data for these sampled cases rather than 
submitting data from all eligible cases. This sampling scheme which 
includes the minimum number of cases based upon case volume will be set 
out in the HOPD Specifications Manual at least 4 months in advance of 
the required data collection. Hospitals must meet the sampling 
requirements for required quality measures each reporting quarter.
    In addition, in order to reduce the burden on hospitals that treat 
a low number of patients but otherwise meet the submission requirements 
for a particular quality measure, hospitals that have five or fewer 
claims (both Medicare and non-Medicare) for any measure included in a 
measure topic in a quarter will not be required to submit patient level 
data for the entire measure topic for that quarter. Even if hospitals 
are not required to submit patient level data because they have five or 
fewer claims (both Medicare and non-Medicare) for any measure included 
in a measure topic in a quarter, they may voluntarily do so.
    Hospitals must submit all required data according to the data 
submission schedule that will be available on the QualityNet Web site 
(https://www.QualityNet.org). This Web site meets or exceeds all 
current Health Insurance Portability and Accountability Act 
requirements. Submission deadlines will, in general, be four months 
after the last day of each calendar quarter. Thus, for example, the 
submission deadline for data for services furnished during the first 
quarter of CY 2010 (January-March 2010) will be on or around August 1, 
2010. The actual submission deadlines will be posted on the http://www.QualityNet.org Web site.
    Hospitals must submit data to the OPPS Clinical Warehouse using 
either the CMS Abstraction and Reporting Tool for Outpatient Department 
(CART-OPD) measures or the tool of a third-party vendor that meets the 
measure specification requirements for data transmission to QualityNet.
    Hospitals must submit quality data through My QualityNet, the 
secure portion of the QualityNet Web site, to the OPPS Clinical 
Warehouse. The OPPS Clinical Warehouse, which is maintained by a CMS-
designated contractor, will submit the OPPS Clinical Warehouse data to 
CMS. OPPS Clinical Warehouse data are not currently considered to be 
QIO data; rather, we consider such data to be CMS data. However, it is 
possible that the information in the OPPS Clinical Warehouse may at 
some point become QIO information. If this occurs, these data would 
also become protected under the stringent QIO confidentiality 
regulations in 42 CFR part 480.
    Hospitals must collect HOP QDRP data from outpatient episodes of 
care to which the required measures apply. For the purposes of the HOP 
QDRP, an outpatient ``episode of care'' is defined as care provided to 
a patient who has not been admitted as an inpatient, but who is 
registered on the hospital's medical records as an outpatient and 
receives services (rather than supplies alone) directly from the 
hospital. Every effort will be made to ensure that data elements common 
to both inpatient and outpatient settings are defined consistently for 
purposes of quality reporting (such as ``time of arrival'').
    Hospitals are to submit required quality data using the CCN under 
which the care was furnished.
    To be accepted into the OPPS Clinical Warehouse, data submissions, 
at a minimum, must be timely, complete, and accurate. Data submissions 
are considered to be ``timely'' when data are successfully accepted 
into the OPPS Clinical Warehouse on or before the reporting deadline. A 
``complete'' submission is determined based on whether the data satisfy 
the sampling criteria that are published and maintained in the HOPD 
Specifications Manual, and must correspond to both the aggregate number 
of cases submitted by a hospital and the number of Medicare claims the 
hospital submits for payment. We are aware of ``data lags'' that occur 
due to when hospitals submit claims, then cancel and correct those 
claims; efforts will be made to take such events into account that can 
change the aggregate Medicare case

[[Page 35402]]

counts. To be considered ``accurate,'' submissions must pass 
validation, if applicable.
    CMS strongly recommends that hospitals review OPPS Clinical 
Warehouse feedback reports and the HOP QDRP Provider Participation 
Reports that are accessible through their QualityNet accounts. These 
reports enable hospitals to verify whether the data they or their 
vendor submitted was accepted into the OPPS Clinical Warehouse and the 
date/time that such acceptance occurred. We also note that irrespective 
of whether a hospital submits data to the OPPS Clinical Warehouse 
itself or uses a vendor to complete the submissions, the hospital is 
responsible for ensuring that HOP QDRP requirements are met.
    Finally, although not required, hospitals may submit, on a 
voluntary basis, the aggregate numbers of outpatient episodes of care 
which are eligible for submission under the HOP QDRP and sample size 
counts. These aggregated numbers of outpatient episodes represent the 
number of outpatient episodes of care in the universe of all possible 
cases eligible for data reporting under the HOP QDRP. We do not wish to 
require this submission at this time because we continue to see 
evidence that some hospitals would not be able to meet this 
requirement. However, as it is vital for quality data reporting for 
hospitals to be able to determine their population sizes, we believe it 
is highly beneficial for hospitals to develop systems that can 
determine whether or not they have furnished services or billed for 
five or fewer cases for a particular measure topic on a quarterly 
basis. CMS strongly recommends that all hospitals work to develop 
systems that can accurately determine their population and sample sizes 
for purposes of quality reporting.
    In the future, we plan to use the aggregate population and sample 
size data to assess data submission completeness and adherence to 
sampling requirements for Medicare and non-Medicare patients.
    For the reporting of aggregate numbers of outpatient episodes of 
care and sample size counts, we are proposing that the deadlines for 
this reporting will be the same as they are for the reporting of 
quality measures, and these deadlines will be posted on the data 
submission schedule that will be available on the QualityNet Web site.
    We invite public comment on these proposed changes.
b. Extraordinary Circumstance Extension or Waiver for Reporting Quality 
Data
    In our experience, there have been times when hospitals have been 
unable to submit required quality data due to extraordinary 
circumstances that are not within their control. It is our goal to not 
penalize hospitals for such circumstances and we do not want to unduly 
increase their burden during these times. Therefore, we are proposing a 
process for hospitals to follow so that we may consider granting 
extensions or waivers with respect to the reporting of required quality 
data when there are extraordinary circumstances beyond the control of 
the hospital.
    In the event of extraordinary circumstances not within the control 
of the hospital, for the hospital to receive consideration for an 
extension or waiver of the requirement to submit quality data for one 
or more quarters, a hospital must--
    (1) Submit to CMS a request form that will be made available on the 
QualityNet Web site. The following information should be noted on the 
form:
    <bullet> Hospital CCN;
    <bullet> Hospital Name;
    <bullet> CEO and any other designated personnel contact 
information, including name, e-mail address, telephone number, and 
mailing address (must include a physical address, a post office box 
address is not acceptable);
    <bullet> Identified reason for requesting an extension or waiver;
    <bullet> Hospital's reason for requesting an extension or waiver;
    <bullet> Evidence of the impact of the extraordinary circumstances, 
including but not limited to photographs, newspaper and other media 
articles; and
    <bullet> A date when the hospital will again be able to submit HOP 
QDRP data, and a justification for the proposed date.
    The request form must be signed by the hospital's CEO. A request 
form must be submitted within 30 days of the date that the 
extraordinary circumstance occurred.
    Following receipt of such a request, CMS will--
    (1) Provide a written acknowledgement using the contact information 
provided in the request, to the CEO and any additional designated 
hospital personnel, notifying them that the hospital's request has been 
received; and
    (2) Provide a formal response to the CEO and any additional 
designated hospital personnel using the contact information provided in 
the request notifying them of our decision.
    We invite public comment on these proposed procedures for 
requesting an extraordinary circumstance extension or waiver of the 
requirement to submit quality data for one or more quarters.
3. HOP QDRP Validation Requirements
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68776), we announced a voluntary test validation program, the results 
of which would not affect the CY 2010 payment update for any hospital. 
Due to resource constraints, we were not able to implement this test 
validation plan.
a. Proposed Data Validation Requirements for CY 2011
    Validation, as discussed in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66871), is intended to provide assurance of the 
accuracy of the hospital abstracted data. For the CY 2011 payment 
determination, we are proposing to implement a validation program that 
will require hospitals to supply requested medical documentation to a 
CMS contractor for purposes of being validated. However, the results of 
the validation will not affect the CY 2011 payment update for any 
hospital. We believe that it is important for hospitals to have some 
experience and knowledge of the HOP QDRP validation process before 
payment determinations are made based upon validation results. We are 
proposing to implement a validation program that will both limit burden 
upon hospitals, especially small hospitals, as well as provide feedback 
to all hospitals on validation performance.
    Specifically, we are proposing to select a random sample of 7,300 
cases from all cases successfully submitted to the OPPS Clinical 
Warehouse by all participating hospitals for the relevant time period 
described below and validate those data. Based upon the quality data 
submitted for the CY 2009 payment update and our methodology for 
drawing the sample, we estimate that the sample will include up to 20 
cases per participating hospital; the same number of cases sampled on 
an annual basis for validation under the RHQDAPU program. A sample size 
of 7,300 was chosen because it will enable us to detect a relative 
difference of 10 percent in the measured overall accuracy rate with a 
95 percent (two-tailed) confidence interval and should provide 
sufficient data to conduct post-hoc stratified analyses that provide 
meaningful feedback. These figures are based upon a power analysis 
assuming a population measure mismatch rate of 5 percent with the 
outcomes being either a match or a mismatch between

[[Page 35403]]

what the hospital submitted versus what was determined by validation. 
We intend to supply feedback on the validation results to all 
hospitals.
    We are proposing to request medical documentation from hospitals 
for April 1, 2009 through March 31, 2010 episodes of care, which will 
allow us to gather one full year of submitted data for validation 
purposes.
    Once we have completed the random selection, a designated CMS 
contractor will use certified mail to request that each selected 
hospital send to it supporting medical record documentation that 
corresponds to each selected episode of care. Each hospital must submit 
this documentation to the designated CMS contractor within 45 calendar 
days of the date of the request (as documented on the request letter). 
If the hospital fails to comply within 30 days of the initial medical 
documentation request, the designated CMS contractor will send a second 
certified letter to the hospital reminding it that the requested 
documentation must be received within 45 calendar days following the 
date of the initial request. If the hospital still fails to comply, a 
``zero'' score will be assigned to each data element for each selected 
case and the case will fail for all measures in the same topic (for 
example, OP-6 and OP-7 measures for a surgical care case).
    Once the CMS contractor receives the requested medical 
documentation, it will independently reabstract the same quality 
measure data elements that the hospital previously abstracted and 
submitted and compare the two sets of data to determine whether they 
match. Specifically, it will conduct a measures level validation by 
calculating each measure within a submitted record using the 
independently reabstracted data and then comparing this to the measure 
reported by the hospital; a percent agreement will then be calculated.
    As we stated above, the results of the validation will not affect a 
hospital's CY 2011 annual payment update because we want to give 
hospitals time to gain experience with the medical documentation 
requests and the validation process before these results are used in 
payment determinations. However, hospitals must supply the medical 
documentation for each requested case; failure to provide this 
documentation may result in a 2.0 percentage point reduction in a 
hospital's CY 2011 annual payment update.
b. Proposed Data Validation Approach for CY 2012 and Subsequent Years
    Similar to our proposal for the FY 2012 RHQDAPU program (74 FR 
24178), we are proposing to validate data from 800 randomly selected 
hospitals (approximately 20 percent of all participating HOP QDRP 
hospitals) each year, beginning with the CY 2012 payment determination. 
We note that because the 800 hospitals will be selected randomly, every 
HOP QDRP-participating hospital will be eligible each year for 
validation selection. For each selected hospital, we are proposing to 
randomly validate per year up to 48 patient episodes of care (12 per 
quarter) from the total number of cases that the hospital successfully 
submitted to the OPPS Clinical Warehouse. However, if a selected 
hospital has submitted less than 12 cases in one or more quarters, only 
those cases available will be validated. For each selected episode of 
care, a designated CMS contractor will request that the hospital submit 
the supporting medical record documentation that corresponds to the 
episode. We will not be selecting cases stratified by measure or topic; 
our interest is whether the data submitted by hospitals accurately 
reflect the care delivered and documented in the medical record, not 
what the accuracy is by measure or whether there are differences by 
measure or topic. We are proposing to sample data for April 1, 2010 to 
March 31, 2011 services because this will provide a full year of the 
most recent data possible to use for purposes of completing the 
validation in time to make the CY 2012 payment determinations.
    For the CY 2012 and subsequent years' payment determinations, we 
would use the validation methodology proposed for the CY 2011 payment 
update with validation being done for each selected hospital. 
Specifically, we would conduct a measures level validation by 
calculating each measure within a submitted record using the 
independently reabstracted data and then comparing this to the measure 
reported by the hospital; a percent agreement will then be calculated.
    To receive the full OPPS payment update, we are proposing that 
hospitals must attain at least a 90 percent reliability score, based 
upon our validation process, for the designated time period. We will 
use the lower bound of a two-tailed 95 percent confidence interval to 
estimate the validation score. If the calculated upper limit is above 
the required 90 percent reliability threshold, we will consider a 
hospital's data to be ``validated'' for payment purposes. We believe 
that hospitals will be able to attain higher accuracy rates based on 
the proposed measure level match approach versus a data element level 
approach; therefore, we are proposing to implement a higher threshold 
for accuracy than we currently use (and are proposing to use) for 
validation purposes under the RHQDAPU program. We believe that a 
hospital will be able to achieve a higher accuracy rate under this 
validation process because we are not calculating whether each data 
element matches. Instead, we are determining whether or not the 
reabstracted measure result (for example, was aspirin given at arrival 
as part of an episode of care that was properly included in the 
reported data) matches the measure result that was submitted by the 
hospital. In other words, we are more interested in whether the measure 
as a whole has been accurately reported than we are in whether each 
data element that makes up the measure has been accurately reported. 
Thus, we are focusing on whether the quality measure as a whole that a 
hospital reports matches what is in the medical record as determined by 
our reabstraction. The reason we are proposing to implement a measure 
level match for the HOP QDRP, rather than a data element match, is that 
in our experience with the RHQDAPU program, hospitals sometimes receive 
low validation scores due to data element mismatching and not because 
the care administered did not match what was documented in the medical 
record.
    We believe that validating a larger number of cases per hospital, 
but only for 800 randomly selected hospitals, and validating these 
cases at the measure level (rather than at the data element level) has 
several benefits. We believe that this approach is suitable for the HOP 
QDRP because it will: produce a more reliable estimate of whether a 
hospital's submitted data have been abstracted accurately; provide more 
statistically reliable estimates of the quality of care delivered in 
each selected hospital as well as at a national level; and reduce 
overall hospital burden because most hospitals will not be selected to 
undergo validation each year.
    We solicit public comments on this proposed validation methodology.
c. Additional Data Validation Conditions Under Consideration for CY 
2012 and Subsequent Years
    We are considering building upon what we are proposing as a 
validation approach for CY 2012 and subsequent years. We are 
considering, in addition to

[[Page 35404]]

selecting a random sample of hospitals for validation purposes, 
selecting targeted hospitals based on criteria designed to measure 
whether the data they have reported raises a concern regarding data 
accuracy. Because little data have been collected under the HOP QDRP at 
this point, we are considering this approach for possible use beginning 
with the CY 2012 payment determination. Examples of targeting criteria 
could include:
    <bullet> Abnormal data patterns identified such as consistently 
high HOP QDRP measure denominator exclusion rates resulting in 
unexpectedly low denominator counts.
    <bullet> Whether a hospital had previously failed validation; and/
or
    <bullet> Whether a hospital had not been previously selected for 
validation for 2 or more consecutive years.
    Another example of a possible targeting criterion would involve 
some combination of the some or all of the criteria discussed above.
    We again solicit comments on whether these criteria, or another 
approach, should be applied in future years. We especially solicit 
suggestions for additional criteria that could be used to target 
hospitals for validation.

F. Proposed 2010 Publication of HOP QDRP Data

    In the CY 2009 OPPS/ASC final rule with comment period, we stated 
our intention to make the information collected under the HOP QDRP 
available to the public in 2010 (74 FR 68778). In the CY 2008 OPPS/ASC 
final rule with comment period, we stated that ``[i]nformation from 
non-validated data, including the initial reporting period (April--June 
2008) will not be posted'' (72 FR 66874). However, section 
1833(t)(17)(E) of the Act requires that the Secretary establish 
procedures to make data collected under the HOP QDRP available to the 
public, and does not require that such data be validated before it is 
made public. Moreover, under existing procedures for the RHQDAPU 
program, data submitted by hospitals are publicly reported regardless 
of whether those data are successfully validated for payment 
determination purposes. For these reasons, we are proposing to make 
data collected for quarters beginning with third quarter of CY 2008 
(July - September 2008) under the HOP QDRP publicly available, 
regardless of whether those data have been validated for payment 
determination purposes. We invite public comment on this proposal.
    As we noted in section XVI.A.5.c. of this proposed rule, in the CY 
2009 OPPS/ASC final rule with comment period (73 FR 68778), we 
established that for CY 2010, hospitals sharing the same CCN must 
combine data collection and submission across their multiple campuses 
for the clinical measures for public reporting purposes and that we 
will publish quality data by CCN under the HOP QDRP. This approach is 
consistent with the approach taken under the RHQDAPU program. In that 
final rule with comment period, we also stated that we intend to 
indicate instances where data from two or more hospitals are combined 
to form the publicly reported measures on the Web site.

G. Proposed HOP QDRP Reconsideration and Appeals Procedures

    When the RHQDAPU program was initially implemented, it did not 
include a reconsideration process for hospitals. Subsequently, we 
received many requests for reconsideration of those payment decisions 
and, as a result, established a process by which participating 
hospitals would submit requests for reconsideration. We anticipated 
similar concerns with the HOP QDRP and, therefore, in the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66875) we stated our intent 
to implement for the HOP QDRP a reconsideration process modeled after 
the reconsideration process we implemented for the RHQDAPU program. In 
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68779), we 
adopted a mandatory reconsideration process that will apply to the CY 
2010 payment decisions. We are proposing to continue this process for 
the CY 2011 payment update. Under this proposed process, the hospitals 
must--
    (1) Submit to CMS, via QualityNet, a Reconsideration Request form 
that will be made available on the QualityNet Web site; this form must 
be submitted by February 3, 2011 and must contain the following 
information:
    <bullet> Hospital CCN.
    <bullet> Hospital Name.
    <bullet> CMS-identified reason for failure (as provided in any CMS 
notification of failure to the hospital).
    <bullet> Hospital basis for requesting reconsideration. This must 
identify the hospital's specific reason(s) for believing it met the HOP 
QDRP requirements and should receive a full annual payment update.
    <bullet> CEO and any additional designated hospital personnel 
contact information, including name, e-mail address, telephone number, 
and mailing address (must include physical address, not just a post 
office box).
    <bullet> A copy of all materials that the hospital submitted in 
order to receive the full payment update for CY 2011. Such material 
would include, but may not be limited to, the applicable Notice of 
Participation form or completed online registration form, and quality 
measure data that the hospital submitted via QualityNet.
    The request must be signed by the hospital's CEO.
    (2) Following receipt of a request for reconsideration, CMS will--
    <bullet> Provide an e-mail acknowledgement, using the contact 
information provided in the reconsideration request, to the CEO and any 
additional designated hospital personnel notifying them that the 
hospital's request has been received.
    <bullet> Provide a formal response to the hospital CEO and any 
additional designated hospital personnel, using the contact information 
provided in the reconsideration request, notifying the hospital of the 
outcome of the reconsideration process.
    If a hospital is dissatisfied with the result of a HOP QDRP 
reconsideration decision, the hospital may file an appeal under 42 CFR 
Part 405, Subpart R (PRRB appeal).

H. Reporting of ASC Quality Data

    As discussed above, section 109(b) of the MIEA-TRHCA amended 
section 1833(i) of the Act by redesignating clause (iv) as clause (v) 
and adding new clause (iv) to paragraph (2)(D) and new paragraph (7) to 
the Act. These amendments authorize the Secretary to require ASCs to 
submit data on quality measures and to reduce the annual payment update 
in a year by 2.0 percentage points for ASCs that fail to do so. These 
provisions permit, but do not require, the Secretary to require ASCs to 
submit such data and to reduce any annual increase for noncompliant 
ASCs.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66875) and in the CY 2009 OPPS/ASC final rule with comment period (73 
FR 68780), we indicated that we intended to implement the provisions of 
section 109(b) of the MIEA-TRHCA in a future rulemaking. While 
promoting high quality care in the ASC setting through quality 
reporting is highly desirable and fully in line with our efforts under 
other payment systems, the transition to the revised payment system in 
CY 2008 posed significant challenges to ASCs, and we determined that it 
would be most appropriate to allow time for ASCs to gain some 
experience with the revised payment system before introducing other new 
requirements.

[[Page 35405]]

Further, by implementing quality reporting under the OPPS prior to 
establishing quality reporting for ASCs, CMS would gain experience with 
quality measurement in the ambulatory setting in order to identify the 
most appropriate measures for quality reporting in ASCs prior to the 
introduction of the requirement in ASCs. Finally, we are sensitive to 
the potential burden on ASCs associated with chart abstraction and 
believe that adopting such measures at this time is in contrast with 
our desire to minimize collection burden, particularly when measures 
may be reported via EHRs in the future.
    We continue to believe that promoting high quality care in the ASC 
setting through quality reporting is highly desirable and fully in line 
with our efforts under other payment systems. However, we continue to 
have the concerns outlined above for CY 2010 and, therefore, we intend 
to implement the provisions of section 109(b) of the MIEA-TRHCA in a 
future rulemaking. We invite public comment on this deferral of quality 
data reporting for ASCs and invite suggestions for quality measures 
geared toward the services provided by ASCs. We again seek comment on 
potential reporting mechanisms for ASC quality data, including 
electronic submission of these data.

I. Electronic Health Records

    As stated above, CMS is actively seeking alternatives to manual 
chart abstraction for the collection of quality measures for its 
quality data reporting programs. Among these alternatives are claims-
based measure calculation, collection of data from systematic 
registries widely used by hospitals, and electronic submission of 
quality measures via EHRs. In the CY 2009 OPPS/ASC final rule with 
comment period, commenters suggested that we adopt measures that can be 
collected via EHRs (73 FR 68769). We agree with the commenters about 
the importance of actively working to move to a system of data 
collection based on submission from EHRs. We have been engaged with 
health IT standards setting organizations to promote the adoption of 
the necessary standards regarding data capture to facilitate data 
collection via EHRs, and have been collaborating with such 
organizations on standards for a number of quality measures. We 
encourage hospitals to take steps toward the adoption of EHRs that will 
allow for reporting of clinical quality data from the EHR directly to a 
CMS data repository. We also encourage hospitals that are implementing, 
upgrading or developing EHR systems to ensure that such systems conform 
to standards adopted by HHS. We invite public comment on the future 
direction of EHR-based quality measure submission with respect to the 
HOP QDRP.

XVII. Healthcare-Associated Conditions

A. Background

1. Preventable Medical Errors and Hospital-Acquired Conditions (HACs) 
under the IPPS
    As noted in its landmark 1999 report ``To Err is Human: Building a 
Safer Health System,'' the Institute of Medicine found that medical 
errors are a leading cause of morbidity and mortality in the United 
States. Total national costs of these errors due to lost productivity, 
disability, and health care costs were estimated at $17 billion to $29 
billion.\2\ As one approach to combating healthcare-associated 
conditions, in 2005, Congress authorized CMS to adjust Medicare IPPS 
hospital payments to encourage the prevention of these conditions. 
Section 1886(d)(4)(D) of the Act (as added by section 5001(c) of the 
Deficit Reduction Act (DRA) of 2005, Pub. L. 109-171) required the 
Secretary to select by October 1, 2007, at least two conditions that 
are: (1) High cost, high volume, or both; (2) assigned to a higher 
paying diagnosis-related group (DRG) when present as a secondary 
diagnosis; and (3) could reasonably have been prevented through the 
application of evidence-based guidelines. CMS has titled this 
initiative ``Hospital-Acquired Conditions (HAC) and Present on 
Admission (POA) Indicator Reporting.'' Since October 1, 2008, Medicare 
no longer assigns a hospital inpatient discharge to a higher paying 
Medicare Severity Diagnosis-Related Group (MS-DRG) if a selected HAC is 
not present on admission. That is, if there is a HAC, the case is paid 
as though the secondary diagnosis was not present. However, if any 
nonselected complications or comorbidities appear on the claim, the 
claim will be paid at the higher MS-DRG rate; to cause a lower MS-DRG 
payment, all complications or comorbidities on the claim must be 
selected conditions for the HAC payment provision. Since October 1, 
2007, CMS has required hospitals to submit information on Medicare 
hospital inpatient claims specifying whether diagnoses were POA.
---------------------------------------------------------------------------

    \2\ Institute of Medicine: To Err Is Human: Building a Safer 
Health System, November 1999. Available at: http://www.iom.edu/Object.File/Master/4/117/ToErr-8pager.pdf.
---------------------------------------------------------------------------

2. Expanding the Principles of the IPPS HACs Payment Provision to the 
OPPS
    In the CY 2009 OPPS/ASC proposed rule and final rule with comment 
period (73 FR 41547 and 68781, respectively), we discussed whether the 
principle of Medicare not paying more for preventable HACs during 
inpatient stays paid under the IPPS could be applied more broadly to 
other Medicare payment systems in other settings for conditions that 
occur or result from health care delivered in those settings. We also 
acknowledged that implementation of this concept would be different for 
each setting, as each Medicare payment system is unique. As we have 
used in past rulemaking and general notices, in the following 
discussion in this proposed rule, we refer to conditions that occur in 
the hospital inpatient setting as ``hospital-acquired conditions 
(HACs),'' to conditions that occur in HOPDs as ``hospital outpatient 
healthcare-associated conditions (HOP-HACs),'' and to conditions that 
result from care in settings other than the hospital inpatient and HOPD 
settings as ``healthcare-associated conditions.''
    In both the CY 2009 OPPS/ASC proposed rule and final rule with 
comment period, we specifically presented our rationale for considering 
the HOPD as a possible appropriate setting for Medicare to extend to 
the OPPS the concept of not paying more for preventable healthcare-
associated conditions that occur as a result of care provided during a 
hospital encounter. For example, hospitals provide a broad array of 
services in their HOPDs that may overlap or precede the inpatient 
activities of the hospital, including many surgical procedures and 
diagnostic tests that are commonly performed on both hospital 
inpatients and outpatients. Similarly, individuals who are eventually 
admitted as hospital inpatients often initiate their hospital encounter 
in the HOPD, where they receive care during clinic or emergency 
department visits or observation care that precede their inpatient 
hospital admission. In addition, like the IPPS, the OPPS is also 
subject to the ``pay-for-reporting'' provision that affects the 
hospital outpatient annual payment update by the authority of section 
1833(t)(17) of the Act (as amended by section 109(a) of Public Law 109-
432 (MIEA-TRHCA)). (We refer readers to section XVI. of this proposed 
rule for a discussion of the HOP QDRP provisions for hospitals that 
fail to meet the reporting requirements established for the hospital 
outpatient payment update.)

[[Page 35406]]

    The risks of preventable medical errors leading to the occurrence 
of healthcare-associated conditions are likely to be high in outpatient 
settings, given the large number of encounters and exposures that occur 
in these settings. Approximately 530,000 preventable drug-related 
injuries are estimated to occur each year among Medicare beneficiaries 
in outpatient clinics.\3\ These statistics clearly point to the 
significant magnitude of the problem of healthcare-associated 
conditions in outpatient settings. Recent trends have shown a shift in 
services from the inpatient setting to the HOPD, and we expect the 
occurrence of healthcare-associated conditions stemming from outpatient 
care to grow directly as a result of this shift in sites of service.
---------------------------------------------------------------------------

    \3\ Asplen, P., Wolcott, J., Bootman, J.L., Cronenwett, L.R. 
(editors): Preventing Medication Errors: Quality Chasm Series, The 
National Academy Press, 2007. Available at: http://www.nap.edu/catalog.php?record_id=11623.
---------------------------------------------------------------------------

    For the CY 2009 OPPS, we did not adopt any new Medicare policy in 
our discussion of healthcare-associated conditions as they relate to 
the OPPS. Instead, in the CY 2009 OPPS/ASC proposed rule, we solicited 
public comments on options and considerations, including the statutory 
authority related to expanding the IPPS HAC provision to the OPPS. Our 
discussion addressed the following areas:
    <bullet> Criteria for possible candidate OPPS conditions;
    <bullet> Collaboration process;
    <bullet> Potential OPPS HOP-HACs, including object left in during 
surgery; air embolism; blood incompatibility; and falls and trauma, 
fractures, dislocations, intracranial injuries, crushing injuries, and 
burns; and
    <bullet> OPPS infrastructure and payment for encounters resulting 
in healthcare-associated conditions, including the necessity of POA 
reporting for hospital outpatient services, methods for risk 
stratification, and potential methods for adjusting hospital payment.
3. Discussion in the CY 2009 OPPS/ASC Final Rule With Comment Period
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68784 
through 68787), we responded to the public comments we received on 
healthcare-associated conditions in the context of the OPPS. Several 
commenters fully supported expanding the IPPS HAC policy to other 
settings such as HOPDs and ASCs, but many commenters stated that CMS 
should not implement a related policy in other settings without gaining 
implementation experience with the IPPS HACs. A number of commenters 
addressed concerns regarding some of the potential specific HOP-HACs 
discussed in the CY 2009 OPPS/ASC proposed rule (73 FR 41549), and some 
commenters suggested other conditions that should be considered or 
identified those that should not be considered. Many commenters stated 
that the attribution of HOP-HACs in the HOPD setting is difficult and 
stated that there was a need to develop risk adjustment techniques to 
account for differences in patient severity or other patient 
characteristics. Many commenters asserted that the POA indicators may 
need to be modified for use in the HOPD or ASC setting. Some commenters 
suggested that a ``present on encounter'' indicator or another form of 
incorporation of preexisting conditions into an episode-of-care might 
be more useful than a POA indicator. Several commenters believed that 
without changes to the existing OPPS payment structure, there would be 
no straightforward methodology for adjusting hospital payment. While we 
acknowledged these challenges in the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68787), we noted that we view addressing the 
ongoing problem of preventable healthcare-associated conditions in 
outpatient settings, including the HOPD, as a key value-based 
purchasing strategy to sharpen the focus on such improvements beyond 
hospital inpatient care to those settings where the majority of 
Medicare beneficiaries receive most of their health care services. We 
also noted that we looked forward to continuing to work with 
stakeholders to improve the quality, safety, and value of health care 
provided to Medicare beneficiaries, beginning with a joint IPPS/OPPS 
listening session.

B. Public Comments and Recommendations on Issues Regarding Healthcare-
Associated Conditions From the Joint IPPS/OPPS Listening Session

    Subsequent to the issuance of the CY 2009 OPPS/ASC final rule with 
comment period, we held a joint Hospital-Acquired Conditions and 
Hospital Outpatient Healthcare-Associated Conditions Listening Session 
on December 18, 2008. (The listening session was announced in a notice 
published in the Federal Register on October 30, 2008 (73 FR 64618). 
During the listening session, we provided an overview of the HAC 
program under the IPPS and our previous discussions of extending the 
underlying concepts to the HOPD, including OPPS infrastructure concerns 
such as the lack of a POA indicator and the need to address current 
ICD-9-CM POA reporting guidelines, attribution of conditions in the 
HOPD, and payment adjustment considerations. In addition to the initial 
candidate HOP-HACs that we had previously identified based on their 
adoption under the IPPS, we discussed other potential HOP-HACs, such as 
medication errors, conditions related to complications of hospital 
outpatient surgery or other procedures, and infections related to HOPD 
care. A transcript of the listening session is available on the CMS Web 
site at: http://www.cms.hhs.gov/HospitalAcqCond/07_EducationalResources.asp#TopOfPage.
    Of the many public comments presented orally at the listening 
session or submitted in writing, approximately one-half commented on 
expansion of the IPPS HAC payment provision to other settings. Some 
commenters were in favor of an expansion to the HOPD and other 
settings. Many commenters requested that CMS delay any expansion, 
citing the short duration of experience with HACs and POA indicator 
reporting for inpatient hospitalizations and the need to evaluate the 
current program prior to its expansion to other settings. We appreciate 
these commenters' perspectives and note that now that we have early 
data on the HAC program, in the immediate future we plan to evaluate 
the impact of the HAC payment provision through a joint program 
evaluation with CDC, AHRQ, and the Office of Public Health and Science.
    Many commenters pointed to the need to define the boundaries of an 
episode-of-care for healthcare-associated conditions in the HOPD and 
other settings in order to define when, how, and to whom an expanded 
policy would apply. These commenters also noted that hospital 
outpatients have frequently received care from numerous practitioners 
and providers over an extended period of time and the hospitals' or 
clinics' role would be supportive, rather than prescriptive, with 
respect to that patient care. They requested that CMS develop a 
comprehensive and accurate definition of an episode-of-care in order to 
appropriately attribute responsibility and the additional costs 
associated with HOP-HACs. We have previously acknowledged that short-
term consideration of HOP-HACs would necessarily be limited to 
conditions that occur during and result from care provided in a single 
hospital outpatient encounter because a broader definition

[[Page 35407]]

of an episode-of-care has not yet been developed.
    Many commenters believed that detailed information should be 
gathered and analyzed from the IPPS POA indicator reporting experience 
before an expansion of the HAC payment provision and POA indicator 
reporting to the HOPD. Other commenters pointed out that the initial 
four conditions under consideration for HOPDs based on their adoption 
under the IPPS would likely require emergency admission for treatment 
of the event. Though secondary to an initial encounter in the HOPD, 
they indicated that these conditions would be coded as POA for the IPPS 
according to current reporting guidelines and would not be captured as 
HOP-HACs. Several commenters stated that, in the HOPD, it would be 
particularly important to make an assessment over an entire episode-of-
care; thus, POA might be better defined in terms of ``present on 
encounter'' for this purpose. Other commenters pointed to the need for 
the development of new codes and determinations of when the codes 
should apply in order to capture POA conditions under the OPPS, an 
activity that would potentially significantly increase hospitals' 
administrative burden. Some commenters suggested waiting to expand the 
HAC payment provision to other settings until implementation of the 
ICD-10 classification system, which would provide more precise coding 
to identify preexisting conditions. We have acknowledged a number of 
these challenges already, and we will continue to consider these 
reporting issues as we refine our views regarding potential HOP-HACs.
    Many commenters highlighted that patients receiving hospital 
outpatient care may receive care in multiple departments of the 
hospital, both during a single outpatient encounter and longitudinally 
over many outpatient encounters of relatively short duration. These 
commenters stated that, because of these common patterns of care, the 
timely identification of HOP-HACs and their provider attribution would 
be particularly challenging. In addition, the commenters pointed out 
that patient factors may play a role in the development of potential 
HOP-HACs, such as adverse drug events. Several of these commenters 
suggested targeting the HOP-HAC policy to specific APCs, specific HCPCS 
codes, or specific HOPD settings, such as the emergency department. In 
the CY 2009 OPPS/ASC proposed rule and final rule with comment period 
(73 FR 41549 through 41550 and 68785 through 68787, respectively), we 
discussed the challenge of provider attribution under the OPPS, 
particularly for conditions that may develop over time and involve 
multiple encounters and other care settings. We understand the 
importance of this issue and will continue to be cognizant of it in 
future policy development.
    Several commenters asserted that CMS should consider risk 
adjustment models that incorporate population risk adjustments to avoid 
creating barriers to access for more complex patients or to avoid 
unduly placing providers treating more complex patients at higher risk 
for payment consequences due to HOP-HACs. A number of commenters 
endorsed the use of rate-based measures of conditions on a provider-
specific level so that the level of preventability of specific clinical 
conditions could be determined and compared. Several commenters stated 
that, under the best of circumstances, falls may not be ``reasonably 
preventable,'' particularly in the HOPD. Many commenters also believed 
that adverse drug events would require further definition in order to 
appropriately address medication errors that were not directly under 
the control of the hospital providing the treatment of the medication-
related problem and were, therefore, not ``reasonably preventable.'' 
Similarly, some commenters stated that it would be difficult to 
appropriately attribute metabolic derangements in the HOPD to the 
hospital treating the resulting clinical problem. We appreciate these 
public comments and will use our collaborative process with CDC, AHRQ, 
and the Office of Public Health and Science to help define potential 
HOP-HACs that are clinically meaningful for patient safety, as well as 
attributable to care furnished by providers.
    Numerous commenters urged CMS to generally proceed with care, to 
promote the use of evidence-based guidelines and care coordination, and 
to ensure that any HOP-HAC program is aligned with other CMS quality 
programs. Many commenters believed that the challenges involved might 
be better addressed operationally within a full-scale value-based 
purchasing program. We appreciate these suggestions and will consider 
them as we advance policies that will ensure paying for the highest 
quality, safest, and most effective health care for Medicare 
beneficiaries.

C. CY 2010 Approach to Healthcare-Associated Conditions Under the OPPS

    For CY 2010, we are not proposing to expand the principles behind 
the IPPS HAC payment provision to the OPPS through a HOP-HAC program. 
While we continue to believe that it may be appropriate to expand the 
principles of the IPPS HAC payment provision to the OPPS in the future, 
we acknowledge that, at this time, there are many operational 
challenges to such an expansion that will require further consideration 
and infrastructure development. We appreciate the input and guidance 
provided by the many public commenters to date on how to approach these 
challenges. Most stakeholders have strongly encouraged CMS to evaluate 
the impact of the IPPS HAC payment provision before further considering 
any expansion to other settings. At this time, we are evaluating the 
impact of the HAC and POA indicator reporting initiative on Medicare 
payment. We plan to consider any relevant findings as part of our 
future decisionmaking regarding any expansion of the HAC payment 
provision to other settings. We welcome additional suggestions and 
comment from stakeholders on potential HOP-HACs as additional 
information becomes available and health care delivery continues to 
evolve.

XVIII. Files Available to the Public Via the Internet

A. Information in Addenda Related to the CY 2010 Hospital OPPS

    Addenda A and B to this proposed rule provide various data 
pertaining to the proposed CY 2010 payment for items and services under 
the OPPS. Addendum A, which includes a list of all APCs proposed as 
payable under the OPPS, and Addendum B, which includes a list of all 
active HCPCS codes with their proposed CY 2010 OPPS payment status and 
comment indicators, are available to the public by clicking ``Hospital 
Outpatient Regulations and Notices'' on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/.
    For the convenience of the public, we also are including on the CMS 
Web site a table that displays the HCPCS code data in Addendum B sorted 
by proposed APC assignment, identified as Addendum C.
    Addendum D1 defines the payment status indicators that we are 
proposing to use in Addenda A and B. Addendum D2 defines the comment 
indicators that we are proposing to use in Addendum B. Addendum E lists 
the proposed HCPCS codes that we propose would only be payable to 
hospitals as inpatient procedures and would not be payable under the 
OPPS. Addendum L contains the proposed out-migration wage adjustment 
for CY 2010. Addendum M lists the proposed HCPCS codes that would be 
members of a composite APC

[[Page 35408]]

and identifies the composite APC to which each would be assigned. This 
addendum also identifies the proposed status indicator for the HCPCS 
code and a proposed comment indicator if there is a proposed change in 
the code's status with regard to its membership in the composite APC. 
Each of the proposed HCPCS codes included in Addendum M has a single 
procedure payment APC, listed in Addendum B, to which it would be 
assigned when the criteria for assignment to the composite APC are not 
met. When the criteria for payment of the code through the composite 
APC are met, one unit of the composite APC payment is paid, thereby 
providing packaged payment for all services that are assigned to the 
composite APC according to the specific I/OCE logic that applies to the 
APC. We refer readers to the discussion of composite APCs in section 
II.A.2.e. of this proposed rule for a complete description of the 
composite APCs.
    These addenda and other supporting OPPS data files are available on 
the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/.

B. Information in Addenda Related to the CY 2010 ASC Payment System

    Addenda AA and BB to this proposed rule provide various data 
pertaining to the proposed CY 2010 payment for ASC covered surgical 
procedures and covered ancillary services for which ASCs may receive 
separate payment. Addendum AA lists the proposed ASC covered surgical 
procedures and the proposed CY 2010 ASC payment indicators and payment 
rates for each procedure. Addendum BB displays the proposed ASC covered 
ancillary services and their proposed CY 2010 payment indicators and 
payment rates. All proposed relative payment weights and payment rates 
for CY 2010 are a result of applying the revised ASC payment system 
methodology established in the final rule for the revised ASC payment 
system published in the Federal Register on August 2, 2007 (72 FR 42470 
through 42548) to the proposed CY 2010 OPPS and MPFS ratesetting 
information.
    Addendum DD1 defines the proposed payment indicators that are used 
in Addenda AA and BB. Addendum DD2 defines the proposed comment 
indicators that are used in Addenda AA and BB.
    Addendum EE (available only on the CMS Web site) lists the surgical 
procedures that we are proposing to exclude from Medicare payment if 
furnished in ASCs. The proposed excluded procedures listed in Addendum 
EE are surgical procedures that would be assigned to the OPPS inpatient 
list, would not be covered by Medicare, would be reported using a CPT 
unlisted code, or have been determined to pose a significant safety 
risk or are expected to require an overnight stay when performed in 
ASCs.
    These addenda and other supporting ASC data files are included on 
the CMS Web site at: http://www.cms.hhs.gov/ASCPayment/. The MPFS data 
files are located at: http://www.cms.hhs.gov/PhysicianFeeSched/.
    The links to all of the proposed FY 2010 IPPS wage index-related 
tables (that we are proposing to use for the CY 2010 OPPS) that were 
published in the FY 2010 IPPS/LTCH PPS proposed rule (74 FR 24273 
through 24569) are accessible on the CMS Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN.

XIX. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
    <bullet> The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
    <bullet> The accuracy of our estimate of the information collection 
burden.
    <bullet> The quality, utility, and clarity of the information to be 
collected.
    <bullet> Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    This proposed rule does not specify any information collection 
requirements through regulatory text. However, in this proposed rule we 
make reference to associated information collection requirements that 
are not discussed in the regulation text contained in this document. 
The following is a discussion of those requirements.
    As previously stated in Section XVI of the preamble of this 
document, the quality data reporting program for hospital outpatient 
care, known as the Hospital Outpatient Quality Data Reporting Program 
(HOP QDRP), has been generally modeled after the program for hospital 
inpatient services, the Reporting Hospital Quality Data for Annual 
Payment Update (RHQDAPU) program. Section 109(a) of the MIEA-TRHCA 
(Pub. L. 109-432) amended section 1833(t) of the Act by adding a new 
subsection (17) that affects the payment rate update applicable to OPPS 
payments for services furnished by hospitals in outpatient settings on 
or after January 1, 2009. Section 1833(t)(17)(A) of the Act, which 
applies to hospitals as defined under section 1886(d)(1)(B) of the Act, 
states that subsection (d) 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 section 1833(t)(17)(B) of the 
Act will receive a 2.0 percentage point reduction to their annual 
payment update factor. Section 1833(t)(17)(B) of the Act requires that 
hospitals submit quality data in a form and manner, and at a time, that 
the Secretary specifies. Section 1833(t)(17)(C)(i) of the Act requires 
the Secretary to develop measures appropriate for the measurement of 
the quality of care (including medication errors) furnished by 
hospitals in outpatient settings, that these measures reflect consensus 
among affected parties and, to the extent feasible and practicable, 
that these measures include measures set forth by one or more national 
consensus building entities.

HOP QDRP Quality Measures for the CY 2010 and CY 2011 Payment 
Determinations

    In CY 2009, hospitals were required to submit information for seven 
data abstracted measures. In addition, in the CY 2009 final rule (73 FR 
68766) we adopted four claims-based imaging measures for use in CY 
2010, bringing the total number to 11 measures. For the CY 2010 payment 
update, we are requiring hospitals to submit data related to the 7 data 
abstracted measures; the claims-based measures will be calculated from 
administrative paid claims data and do not require additional data 
submission. Similarly, we are proposing to use the same 11 measures for 
CY 2011 payment determinations.

------------------------------------------------------------------------
   HOP QDRP measurement set to be used for CY 2010 and CY 2011 payment
                              determination
-------------------------------------------------------------------------
OP-1: Median Time to Fibrinolysis.
OP-2: Fibrinolytic Therapy Received Within 30 Minutes.
OP-3: Median Time to Transfer to Another Facility for Acute Coronary
 Intervention.
OP-4: Aspirin at Arrival.
OP-5: Median Time to ECG.
OP-6: Timing of Antibiotic Prophylaxis.
OP-7: Prophylactic Antibiotic Selection for Surgical Patients.
OP-8: MRI Lumbar Spine for Low Back Pain.

[[Page 35409]]

 
OP-9: Mammography Follow-up Rates.
OP-10: Abdomen CT--Use of Contrast Material.
OP-11: Thorax CT--Use of Contrast Material.
------------------------------------------------------------------------

    As part of the data submission process pertaining to the 11 
measures listed above, hospitals must also complete and submit notice 
of participation. By submitting this document, hospitals agree that 
they will allow CMS to publicly report the quality measures as required 
by the HOP QDRP.
    The burden associated with this section is the time and effort 
associated with completing the notice of participation as well as 
collecting and submitting the data on the 7 data abstracted measures. 
We estimate that there will be approximately 3,500 respondents per 
year. For hospitals to collect and submit the information on the 
required measures, we estimate it will take 30 minutes per sampled 
case. We estimate there will be a total of 1,800,000 cases per year, 
approximately 514 cases per respondent. The estimated annual burden 
associated with the aforementioned submission requirements is 900,000 
hours ((1,800,000 cases/year) x (0.5 hours/case)).

HOP QDRP Validation Requirements

    In addition to requirements for submitting of quality data, 
hospitals must also comply with the proposed requirements for data 
validation in CY 2011. As specified in section XVI.E of the preamble, 
for the CY2011 payment determination, we are proposing to implement a 
validation program that will require hospitals to supply requested 
medical documentation to a CMS contractor for purposes of being 
validated. However, the results of the validation will not affect the 
CY 2011 payment update for any hospital. We believe that it is 
important for hospitals to have some experience and knowledge of the 
HOP QDRP validation process before payment determinations are made 
based upon validation results. We are proposing to implement a 
validation program that will both limit burden upon hospitals, 
especially small hospitals, as well as provide feedback to all 
hospitals on validation performance. We are proposing to request 
medical documentation from hospitals for April 1, 2009 through March 
31, 2010 episodes of care, which will allow us to gather one full year 
of submitted data for validation purposes.
    The burden associated with the proposed CY 2011 requirement is the 
time and effort necessary to submit validation data to a CMS 
contractor. We estimate that it will take each hospital approximately 
38 minutes to comply with these data submission requirements. To comply 
with the requirements, we estimate each hospital must submit between 2 
to 3 cases on average for review. We estimate that 3,200 hospitals must 
comply with these requirements to submit a total of 7,300 charts across 
all sampled hospitals. The estimated annual burden associated with the 
data validation process for CY2011 is 2,026 hours.
    Similar to our proposal for the FY 2012 RHQDAPU program (74 FR 
24178), we are proposing to validate data from 800 randomly selected 
hospitals each year, beginning with the CY 2012 payment determination. 
We note that because the 800 hospitals will be selected randomly, every 
HOP QDRP-participating hospital will be eligible each year for 
validation selection. For each selected hospital, we are proposing to 
randomly validate per year up to 48 patient episodes of care (12 per 
quarter) from the total number of cases that the hospital successfully 
submitted to the OPPS Clinical Warehouse. However, if a selected 
hospital has submitted less than 12 cases in one or more quarters, only 
those cases available will be validated.
    The burden associated with the proposed CY 2012 requirement is the 
time and effort necessary to submit validation data to a CMS 
contractor. We estimate that it will take each of the 800 sampled 
hospitals approximately 12 hours to comply with these data submission 
requirements. To comply with the requirements, we estimate each 
hospital must submit 48 cases for the affected year for review. We 
estimate that 800 hospitals must comply with these requirements to 
submit a total of 38,400 charts across all sampled hospitals. The 
estimated annual burden associated with the data validation process for 
CY 2012 and subsequent years is 9,600 hours.

Proposed HOP QDRP Reconsideration and Appeals Procedures

    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68779), we adopted a mandatory reconsideration process that will apply 
to the CY 2010 payment decisions. We are proposing to continue this 
process for the CY 2011 payment update. Under this proposed process, 
the hospitals must meet all of the requirements specified in section 
XVI.G of the preamble. The burden associated with meeting the 
requirements associated with the reconsideration and appeals procedures 
is the time and effort necessary to gather the required information and 
submit it to CMS. While these requirements are subject to the PRA, the 
associated burden is exempt under 5 CFR 1320.4. Information collected 
subsequent to an administrative action is not subject to the PRA.

Additional Topics

    While we are seeking OMB approval for the information collection 
requirements associated with the HOP QDRP and the data validation 
processes, we are also seeking public comment on several issues that 
have the potential to ultimately affect the burden associated with HOP 
QDRP and the data validation processes. Specifically, this proposed 
rule lists the possible quality measures under consideration for CY 
2012 and subsequent years. We are also actively soliciting public 
comments to explore the use of registries to comply with the HOP QDRP 
submission requirements, the use of EHRs as a data submission tool, the 
use of a standardized process for the retirement of HOP QDRP quality 
measures, the use of an extraordinary circumstance extension or waiver 
for reporting quality data, and the implementation of additional data 
validation conditions. We will continue to evaluate all of these issues 
and address them in later stages of rulemaking.
    If you comment on these information collection and recordkeeping 
requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget,
    Attention: CMS Desk Officer, (CMS-1414-P)
    Fax: (202) 395-6974; or
    E-mail: <a href="/cdn-cgi/l/email-protection#115e5843504e6264737c786262787e7f517e7c733f747e613f767e67"><span class="__cf_email__" data-cfemail="155a5c47544a666077787c66667c7a7b557a78773b707a653b727a63">[email protected]</span></a>.

XX. Response to Comments

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

[[Page 35410]]

XXI. Regulatory Impact Analysis

A. Overall Impact

    We have examined the impacts of this proposed rule as required by 
Executive Order 12866 (September 1993, Regulatory Planning and Review), 
the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-
354), section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on 
Federalism, and the Congressional Review Act (5 U.S.C. 804(2)).
1. Executive Order 12866
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules that have economically 
significant effects ($100 million or more in any 1 year) or adversely 
affect in a material way the economy, a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local, or tribal government or communities (58 FR 
51741).
    We estimate that the effects of the OPPS provisions that would be 
implemented by this proposed rule would result in expenditures 
exceeding $100 million in any 1 year. We estimate the total increase 
(from proposed changes in this proposed rule as well as enrollment, 
utilization, and case-mix changes) in expenditures under the OPPS for 
CY 2010 compared to CY 2009 to be approximately $1.4 billion. Because 
this proposed rule for the OPPS is ``economically significant'' as 
measured by the $100 million threshold and also a major rule under the 
Congressional Review Act, we have prepared a regulatory impact analysis 
that, to the best of our ability, presents the costs and benefits of 
this rulemaking. Table 51 of this proposed rule displays the 
redistributional impact of the CY 2010 proposed changes on OPPS payment 
to various groups of hospitals.
    We estimate that the effects of the ASC provisions that would be 
implemented by this proposed rule for the ASC payment system would not 
exceed $100 million in any 1 year and, therefore, are not economically 
significant. We estimate the total increase (from proposed changes in 
this proposed rule as well as enrollment, utilization, and case-mix 
changes) in expenditures under the ASC payment system for CY 2010 
compared to CY 2009 to be approximately $80 million. However, because 
this proposed rule for the ASC payment system substantially affects 
ASCs, we have prepared a regulatory impact analysis of changes to the 
ASC payment system that, to the best of our ability, presents the costs 
and benefits of this rulemaking. Table 53 and Table 54 of this proposed 
rule display the redistributional impact of the CY 2010 proposed 
changes on ASC payment, grouped by specialty area and then by 
procedures with the greatest ASC expenditures, respectively.
2. Regulatory Flexibility Act (RFA)
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. Many hospitals, other providers, ASCs, and 
other suppliers are considered to be small entities, either by being 
nonprofit organizations or by meeting the Small Business Administration 
(SBA) definition of a small business (hospitals having revenues of 
$34.5 million or less in any 1 year; ambulatory surgical centers having 
revenues of $10 million or less in any 1 year). (For details on the 
latest standards for health care providers, we refer readers to the 
SBA's Web site at: http://sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf (refer to the 620000 series).)
    For purposes of the RFA, we have determined that many hospitals and 
most ASCs would be considered small entities according to the SBA size 
standards. Individuals and States are not included in the definition of 
a small entity. Therefore, the Secretary has determined that this 
proposed rule would have a significant impact on a substantial number 
of small entities. Because we acknowledge that many of the affected 
entities are small entities, the analyses presented throughout this 
proposed rule constitute our proposed regulatory flexibility analysis. 
Therefore, we are soliciting public comments on our estimates and 
analyses of the impact of this proposed rule on those small entities.
3. Small Rural Hospitals
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. With 
the exception of hospitals located in certain New England counties, for 
purposes of section 1102(b) of the Act, we now define a small rural 
hospital as a hospital that is located outside of an urban area and has 
fewer than 100 beds. Section 601(g) of the Social Security Amendments 
of 1983 (Pub. L. 98-21) designated hospitals in certain New England 
counties as belonging to the adjacent urban areas. Thus, for OPPS 
purposes, we continue to classify these hospitals as urban hospitals. 
We believe that the changes to the OPPS in this proposed rule would 
affect both a substantial number of rural hospitals as well as other 
classes of hospitals and that the effects on some may be significant. 
Also, the changes to the ASC payment system in this proposed rule would 
affect rural ASCs. Therefore, the Secretary has determined that this 
proposed rule would have a significant impact on the operations of a 
substantial number of small rural hospitals.
4. Unfunded Mandates
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. That threshold 
level is currently approximately $133 million. This proposed rule would 
not mandate any requirements for State, local, or tribal governments, 
nor would it affect private sector costs.
5. Federalism
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct costs on State and local 
governments, preempts State law, or otherwise has Federalism 
implications.
    We have examined the OPPS and ASC provisions included in this 
proposed rule in accordance with Executive Order 13132, Federalism, and 
have determined that they would not have a substantial direct effect on 
State, local or tribal governments, preempt State law, or otherwise 
have a Federalism implication. As reflected in Table 51 below, we 
estimate that OPPS payments to governmental hospitals (including State 
and local governmental hospitals) would increase by 1.8 percent under 
this proposed rule. While we cannot know the number of ASCs with 
government ownership, we anticipate

[[Page 35411]]

that it is small. We believe that the provisions related to payments to 
ASCs in CY 2010 would not affect payments to any ASCs owned by 
government entities.
    The following analysis, in conjunction with the remainder of this 
document, demonstrates that this proposed rule is consistent with the 
regulatory philosophy and principles identified in Executive Order 
12866, the RFA, and section 1102(b) of the Act. The proposed rule would 
affect payments to a substantial number of small rural hospitals and a 
small number of rural ASCs, as well as other classes of hospitals and 
ASCs, and some effects may be significant.

B. Effects of OPPS Changes in This Proposed Rule

    We are proposing to make several changes to the OPPS that are 
required by the statute. We are required under section 
1833(t)(3)(C)(ii) of the Act to update annually the conversion factor 
used to determine the APC payment rates. We also are required under 
section 1833(t)(9)(A) of the Act to revise, not less often than 
annually, the wage index and other adjustments, including pass-through 
payments and outlier payments. In addition, we must review the clinical 
integrity of payment groups and weights at least annually. Accordingly, 
in this proposed rule, we are proposing to update the conversion factor 
and the wage index adjustment for hospital outpatient services 
furnished beginning January 1, 2010, as we discuss in sections II.B. 
and II.C., respectively, of this proposed rule. We also are proposing 
to revise the relative APC payment weights using claims data for 
services furnished from January 1, 2008, through December 31, 2008, and 
updated cost report information. We are proposing to continue the 
current payment adjustment for rural SCHs, including EACHs. Finally, we 
list the 6 drugs and biologicals in Table 21 of this proposed rule that 
we are proposing to remove from pass-through payment status for CY 
2010.
    Under this proposed rule, we estimate that the proposed update 
change to the conversion factor and other adjustments as provided by 
the statute would increase total OPPS payments by 2.1 percent in CY 
2010. The proposed changes to the APC weights, the proposed changes to 
the wage indices, and the proposed continuation of a payment adjustment 
for rural SCHs, including EACHs, would not increase OPPS payments 
because these proposed changes to the OPPS are budget neutral. However, 
these proposed updates do change the distribution of payments within 
the budget neutral system as shown in Table 51 below and described in 
more detail in this section. We also estimate that the total change in 
payments between CY 2010 and CY 2009, considering all payments, 
including changes in estimated total outlier payments and expiration of 
additional money for specified wages indices outside of budget 
neutrality, would increase total OPPS payments by 1.9 percent.
1. Alternatives Considered
    Alternatives to the proposed changes we are making and the reasons 
that we have chosen the options are discussed throughout this proposed 
rule. Some of the major issues discussed in this proposed rule and the 
options considered are discussed below.
a. Alternatives Considered for Pass-Through Payment for Implantable 
Biologicals
    We are proposing to change the way we evaluate transitional pass-
through applications for implantable biologicals and the way we pay for 
implantable biologicals newly eligible for transitional pass-through 
status beginning in CY 2010. As discussed in detail in section V.A.4. 
of this proposed rule, we are proposing that the pass-through 
evaluation process and pass-through payment methodology for implantable 
biologicals that are surgically inserted or implanted (through a 
surgical incision or a natural orifice) and that are newly approved for 
pass-through payment beginning on or after January 1, 2010, be the 
device pass-through process and payment methodology only. As a result, 
implantable biologicals would no longer be eligible to submit 
biological pass-through applications and to receive biological pass-
through payment at ASP+6 percent. Rather, implantable biologicals that 
are eligible for device pass-through payment would be paid at the 
charges-adjusted-to-cost methodology used for all pass-through device 
categories.
    We considered three alternatives for the pass-through evaluation 
process and payment methodology for implantable biologicals that are 
surgically inserted or implanted (through a surgical incision or a 
natural orifice). The first alternative we considered was to make no 
change to the current pass-through evaluation process and payment 
methodology for implantable biologicals that are surgically inserted or 
implanted. We did not select this alternative because this approach 
would continue the separate pass-through evaluation processes and 
payment methodologies for implantable biologicals and implantable 
nonbiological devices that are sometimes used for the same clinical 
indications and that are FDA-approved as devices. Moreover, implantable 
biologicals could potentially have two periods of pass-through payment, 
one as a biological and one as a device. We believe that it is most 
appropriate for a product to be eligible for a single period of OPPS 
pass-through payment, rather than a period of device pass-through 
payment and a period of drug or biological pass-through payment.
    The second alternative we considered was to add a criterion 
requiring the demonstration of substantial clinical improvement to the 
biological pass-through evaluation process in order for a biological to 
be approved for pass-through payment. This alternative would provide 
pass-through payment only for those biologicals that demonstrate 
clinical superiority, consistent with the pass-through evaluation 
process for devices and ensuring that a product could receive only one 
period of pass-through payment. We did not choose this alternative 
because this approach would continue the different pass-through payment 
methods for implantable biological and nonbiological devices. Pass-
through payment for biologicals is made at ASP+6 percent as required 
for drug and biological pass-through payment, while pass-through 
devices are paid at charges adjusted to cost. Therefore, this second 
alternative would result in continued inconsistent pass-through payment 
methodologies for biological and nonbiological devices that may 
substitute for one another.
    The third alternative we considered and the one we are proposing 
for CY 2010 is to provide that, beginning in CY 2010, the pass-through 
evaluation process and pass-through payment methodology for implantable 
biologicals that are surgically inserted or implanted (through a 
surgical incision or a natural orifice) be the device pass-through 
process and payment methodology only. We chose this alternative because 
we believe that the most consistent pass-through payment policy is to 
evaluate all such devices, both biological and nonbiological, under the 
device pass-through process. We believe that implantable biologicals 
are most similar to devices because of their required surgical 
insertion or implantation, and that it would be most appropriate to 
evaluate them as devices because they share significant clinical 
similarity with implantable nonbiological devices.

[[Page 35412]]

b. Alternatives Considered for Payment of the Acquisition and Pharmacy 
Overhead Costs of Drugs and Biologicals That Do Not Have Pass-Through 
Status
    We are proposing that, for CY 2010, the OPPS would make payment for 
separately payable drugs and biologicals at ASP+4 percent, and this 
payment would continue to represent combined payment for both the 
acquisition and pharmacy overhead costs of separately payable drugs and 
biologicals. As discussed in detail in section V.B.3. of this proposed 
rule, we believe that approximately $150 million of the estimated $395 
million in pharmacy overhead cost currently attributed to packaged 
drugs should, instead, be attributed to separately payable drugs and 
biologicals to provide an adjustment for the pharmacy overhead costs of 
these separately payable products. As a result, we also are proposing 
to reduce the cost of packaged drugs and biologicals that is included 
in the payment for procedural APCs to offset the $150 million 
adjustment to payment for separately payable drugs and biologicals. We 
are proposing that any redistribution of pharmacy overhead cost that 
may arise from CY 2010 final rule claims data would occur only from 
some drugs and biologicals to other drugs and biologicals, thereby 
maintaining the estimated total cost of drugs and biologicals under the 
OPPS.
    We considered three alternatives for payment of the acquisition and 
pharmacy overhead costs of drugs and biologicals that do not have pass-
through status for CY 2010. The first alternative we considered was to 
continue our standard policy of comparing the estimated aggregate cost 
of separately payable drugs and biologicals in our claims data to the 
estimated aggregate ASP dollars for separately payable drugs and 
biologicals, using the ASP as a proxy for average acquisition cost, to 
calculate the estimated percent of ASP that would serve as the best 
proxy for the combined acquisition and pharmacy overhead costs of 
separately payable drugs and biologicals (70 FR 68642). Under this 
standard methodology, using April 2009 ASP information and costs 
derived from CY 2008 OPPS claims data, we estimated the combined 
acquisition and overhead costs of separately payable drugs and 
biologicals to be ASP minus 2 percent. As discussed in section V.B.3. 
of this proposed rule, we also determined that the combined acquisition 
and overhead costs of packaged drugs are 247 percent of ASP. We did not 
choose this alternative because we believe that this analysis indicates 
that our standard drug payment methodology has the potential to 
``compress'' the calculated costs of separately payable drugs and 
biologicals to some degree. Further, we recognize that the attribution 
of pharmacy overhead costs to packaged or separately payable drugs and 
biologicals through our standard drug payment methodology of a combined 
payment for acquisition and pharmacy overhead costs depends, in part, 
on the treatment of all drugs and biologicals each year under our 
annual drug packaging threshold. Changes to the packaging threshold may 
result in changes to payment for the overhead cost of drugs and 
biologicals that do not reflect actual changes in hospital pharmacy 
overhead cost for those products.
    The second alternative we considered was to adopt the APC Panel's 
recommendation to accept the pharmacy stakeholders' recommended 
methodology for payment of drugs and biologicals that do not have pass-
through status. This recommended methodology would establish ASP+6 
percent as the cost of packaged drugs and biologicals, including all 
pharmacy overhead costs; establish ASP+6 percent as the acquisition 
cost of separately payable drugs and biologicals with some overhead 
cost included; and reallocate the residual cost of packaged drugs and 
biologicals currently reflected in the claims data across three 
categories of pharmacy overhead cost that would then be paid separately 
for each administration of separately payable drugs and biologicals in 
CY 2010. The pharmacy stakeholders recommended that we pay the pharmacy 
overhead amount specific to the overhead category to which a drug or 
biological is assigned, in addition to the ASP+6 percent payment for 
the separately payable drug or biological, each time a separately 
payable drug or biological is administered. We refer readers to section 
V.B.3. of this proposed rule for a more detailed discussion of the 
pharmacy stakeholders' recommended methodology. We did not choose this 
alternative because we do not believe that ASP+6 percent would pay 
sufficiently for the acquisition and pharmacy overhead costs of 
packaged drugs. We believe the amount of redistribution of pharmacy 
overhead costs from packaged to separately payable drugs and 
biologicals incorporated in the recommendation of the pharmacy 
stakeholders would be too great. In addition, we do not believe that it 
would be appropriate to establish separate payment for pharmacy 
overhead costs, thereby unbundling payment for the acquisition and 
overhead costs of separately payable drugs and biologicals when 
hospitals report a single charge for these products that represents 
both types of costs. For these reasons, we are not accepting the APC 
Panel recommendation to adopt the pharmacy stakeholders' recommended 
methodology.
    The third alternative we considered and the one we are proposing 
for CY 2010 is to make payment for nonpass-through separately payable 
drugs and biologicals at ASP+4 percent, which would continue to 
represent a combined payment for both the acquisition costs of 
separately payable drugs and the pharmacy overhead costs applicable to 
these products. We also are proposing to reduce the cost of packaged 
drugs that is included in the payment for procedural APCs to offset the 
$150 million adjustment to payment for separately payable drugs and 
biologicals, resulting in payment for packaged drugs and biologicals of 
ASP+153 percent under our proposal. We chose this alternative because 
we believe that it provides the most appropriate redistribution of 
pharmacy overhead costs associated with drugs and biologicals based on 
the analyses discussed in section V.B.3. of this proposed rule, and is 
consistent with the principles of a prospective payment system.
c. Alternatives Considered for the Physician Supervision of Hospital 
Outpatient Services
    We are proposing to revise or further define several policies 
related to the physician supervision of services in the HOPD for CY 
2010. We refer readers to section XIIE of this proposed rule for the 
full discussion of these proposals. Specifically, for the CY 2010 OPPS, 
we are proposing to revise our existing policy that requires direct 
supervision to be provided by a physician to allow specified 
nonphysician practitioners to supervise the hospital outpatient 
therapeutic services that they are able to personally perform within 
their State scope of practice and hospital-granted privileges. We also 
are proposing to establish a policy for hospital outpatient therapeutic 
services furnished in the main hospital buildings or in on-campus 
provider-based departments (PBDs) that ``direct supervision'' would 
mean that the supervisory physician must be on the same campus, in the 
hospital or the on-campus PBD of the hospital and immediately available 
to furnish assistance and direction throughout the performance of the 
procedure. ``In the hospital'' would

[[Page 35413]]

mean those areas in the main building(s) of the provider that are under 
the ownership, financial, and administrative control of the hospital; 
that are operated as part of the hospital; and for which the hospital 
bills the services furnished under the hospital's CMS Certification 
Number. In addition, we are proposing to establish in regulations a 
policy that would apply the MPFS physician supervision requirements for 
diagnostic tests to all hospital outpatient diagnostic tests performed 
directly by the hospital or under arrangement.
    We considered three alternatives for the physician supervision of 
hospital outpatient services for CY 2010. The first alternative we 
considered was to make no changes to the existing supervision policies 
for hospital outpatient therapeutic and diagnostic services and to 
provide no new policy guidance in this area. This approach would 
require hospitals to ensure that only physicians supervise services 
that may currently be ordered or performed by nonphysician 
practitioners within their State scope of practice and hospital-granted 
privileges. Hospitals would not receive payment for outpatient services 
for which they were unable to provide supervision by a physician. In 
addition, there could continue to be confusion regarding what ``direct 
supervision'' means for services provided in an area of the hospital 
that may not be a PBD of the hospital. Lastly, there would be potential 
for misunderstanding regarding the appropriate level of physician 
supervision required for hospital outpatient diagnostic services 
without a clearly stated policy, codified in regulations, that would 
apply the same level of physician supervision to all hospital 
outpatient diagnostic services, whether provided directly or under 
arrangement, as applies to those services currently furnished in 
physicians' offices and independent diagnostic testing facilities. We 
did not choose this alternative because we believe that it is important 
to address the issues outlined above, including areas of potential 
confusion or limited current policy guidance, to ensure that hospitals 
are able to comply with the hospital outpatient supervision 
requirements while providing access to care for Medicare beneficiaries.
    The second alternative we considered was to permit specified 
nonphysician practitioners to supervise the hospital outpatient 
therapeutic services that they are able to personally perform within 
their State scope of practice and hospital-granted privileges, but to 
propose no changes that would provide clearer statements of policy 
regarding other concerns raised by hospitals regarding physician 
supervision for hospital outpatient therapeutic and diagnostic 
services. We did not choose this alternative because we believe it is 
important to clearly specify the policies that apply to the supervision 
of both therapeutic and diagnostic services in all hospital outpatient 
settings in order to ensure the safety and effectiveness of hospital 
outpatient services furnished to Medicare beneficiaries.
    The third alternative we considered and the one we are proposing 
for CY 2010 was to revise our existing policy to permit specified 
nonphysician practitioners to supervise the services that they are able 
to personally perform within their State scope of practice and 
hospital-granted privileges; to establish a specific definition of 
``direct supervision'' for hospital outpatient therapeutic services 
furnished in the hospital or in on-campus PBDs that was consistent for 
services furnished by the hospital on campus; and to apply the MPFS 
supervision requirements for diagnostic tests to all hospital 
outpatient diagnostic tests provided directly by the hospital or under 
arrangement. We selected this alternative because we believe that it is 
appropriate that a licensed nonphysician practitioner who may bill and 
be paid by Medicare for the practitioner's professional services should 
be able to supervise the therapeutic services that he or she may 
personally perform within his or her State scope of practice and 
hospital-granted privileges. Furthermore, we believe that it is 
necessary and appropriate to establish consistent and operationally 
feasible policies regarding the supervision requirements for hospital 
outpatient therapeutic and diagnostic services in order to ensure safe 
and effective health care services for Medicare beneficiaries.
2. Limitations of Our Analysis
    The distributional impacts presented here are the projected effects 
of the proposed CY 2010 policy changes on various hospital groups. We 
post on the CMS Web site our hospital-specific estimated payments for 
CY 2010 with the other supporting documentation for this proposed rule. 
To view the hospital-specific estimates, we refer readers to the CMS 
Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/. Select 
``regulations and notices'' from the left side of the page and then 
select ``CMS-1414-P'' from the list of regulations and notices. The 
hospital-specific file layout and the hospital-specific file are listed 
with the other supporting documentation for this proposed rule. We show 
hospital-specific data only for hospitals whose claims were used for 
modeling the impacts shown in Table 51 below. We do not show hospital-
specific impacts for hospitals whose claims we were unable to use. We 
refer readers to section II.A.2. of this proposed rule for a discussion 
of the hospitals whose claims we do not use for ratesetting and impact 
purposes.
    We estimate the effects of the proposed individual policy changes 
by estimating payments per service, while holding all other payment 
policies constant. We use the best data available, but do not attempt 
to predict behavioral responses to our proposed policy changes. In 
addition, we do not make adjustments for future changes in variables 
such as service volume, service-mix, or number of encounters. As we 
have done in previous rules, we are soliciting public comment and 
information about the anticipated effects of our proposed changes on 
hospitals and our methodology for estimating them.
3. Estimated Effects of This Proposed Rule on Hospitals
    Table 51 below shows the estimated impact of this proposed rule on 
hospitals. Historically, the first line of the impact table, which 
estimates the proposed change in payments to all hospitals, has always 
included cancer and children's hospitals, which are held harmless to 
their pre-BBA payment-to-cost ratio. We also are including CMHCs in the 
first line that includes all providers because we included CMHCs in our 
weight scaler estimate.
    We present separate impacts for CMHCs in Table 51 because CMHCs are 
paid under two APCs for services under the OPPS: APC 0172 (Level 1 
Partial Hospitalization (3 services)) and APC 0173 (Level II Partial 
Hospitalization (4 or more services)). We discuss the impact on CMHCs 
in section XXI.B.4. of this proposed rule.
    The estimated increase in the total payments made under the OPPS is 
limited by the increase to the conversion factor set under the 
methodology in the statute. The distributional impacts presented do not 
include assumptions about changes in volume and service-mix. The 
enactment of Public Law 108-173 on December 8, 2003, provided for the 
additional payment outside of the budget neutrality requirement for 
wage indices for specific hospitals reclassified under section 508. 
Public Law 108-173 extended section 508 reclassifications through 
September 30, 2008. Section 124 of Public Law 110-275 further

[[Page 35414]]

extended section 508 reclassifications through September 30, 2009. The 
amounts attributable to these reclassifications are incorporated into 
the CY 2009 estimates.
    Table 51 shows the estimated redistribution of hospital and CMHC 
payments among providers as a result of APC reconfiguration and 
recalibration; wage indices; the combined impact of the APC 
recalibration, wage effects, and the market basket update to the 
conversion factor; and, finally, estimated redistribution considering 
all proposed payments for CY 2010 relative to all payments for CY 2009, 
including the impact of proposed changes in the outlier threshold, 
expiring section 508 wage indices, and changes to the pass-through 
payment estimate. We did not model an explicit budget neutrality 
adjustment for the proposed rural adjustment for SCHs because we are 
not proposing to make any changes to the policy for CY 2010. Because 
proposed updates to the conversion factor, including the update of the 
market basket and the subtraction of additional money dedicated to 
pass-through payment for CY 2010, are applied uniformly across 
services, observed redistributions of payments in the impact table for 
hospitals largely depend on the mix of services furnished by a hospital 
(for example, how the APCs for the hospital's most frequently furnished 
services would change), and the impact of the wage index changes on the 
hospital. However, total payments made under this system and the extent 
to which this proposed rule would redistribute money during 
implementation also would depend on changes in volume, practice 
patterns, and the mix of services billed between CY 2009 and CY 2010 by 
various groups of hospitals, which CMS cannot forecast.
    Overall, the proposed OPPS rates for CY 2010 would have a positive 
effect for providers paid under the OPPS, resulting in a 1.9 percent 
increase in Medicare payments. Removing cancer and children's hospitals 
because their payments are held harmless to the pre-BBA ratio between 
payment and cost, and CMHCs suggests that these proposed changes would 
also result in a 1.9 percent increase in Medicare payments to all other 
hospitals, exclusive of transitional pass-through payments.
    To illustrate the impact of the proposed CY 2010 changes, our 
analysis begins with a baseline simulation model that uses the final CY 
2009 weights, the FY 2009 final post-reclassification IPPS wage 
indices, and the final CY 2009 conversion factor. Column 2 in Table 51 
shows the independent effect of proposed changes resulting from the 
reclassification of services among APC groups and the recalibration of 
APC weights, based on 12 months of CY 2008 OPPS hospital claims data 
and the most recent cost report data. We modeled the effect of proposed 
APC recalibration changes for CY 2010 by varying only the weights (the 
final CY 2009 weights versus the proposed CY 2010 weights calculated 
using the CY 2008 claims used for this proposed rule) and calculating 
the percent difference in payments. Column 2 also reflects the effect 
of proposed changes resulting from the proposed APC reclassification 
and recalibration changes and any changes in multiple procedure 
discount patterns or conditional packaging that occur as a result of 
the proposed changes in the relative magnitude of payment weights.
    Column 3 reflects the independent effects of proposed updated wage 
indices, including the proposed application of budget neutrality for 
the rural floor policy on a statewide basis. While we included changes 
to the rural adjustment in this column prior to CY 2009, we did not 
model a budget neutrality adjustment for the rural adjustment for SCHs 
because we are proposing to make no changes to the policy for CY 2010. 
We modeled the independent effect of updating the wage indices and the 
rural adjustment by varying only the wage indices, using the proposed 
CY 2010 scaled weights and a CY2009 conversion factor that included a 
budget neutrality adjustment for the effect of changing the wage 
indices between CY 2009 and CY 2010.
    Column 4 demonstrates the combined ``budget neutral'' impact of APC 
recalibration (that is, Column 2), the wage index update (that is, 
Column 3), as well as the impact of updating the conversion factor with 
the market basket update. We modeled the independent effect of the 
budget neutrality adjustments and the market basket update by using the 
weights and wage indices for each year, and using a CY 2009 conversion 
factor that included the market basket update and a budget neutrality 
adjustment for differences in wage indices.
    Finally, Column 5 depicts the full impact of the proposed CY 2010 
policies on each hospital group by including the effect of all the 
proposed changes for CY 2010 (including the APC reconfiguration and 
recalibration shown in Column 2) and comparing them to all estimated 
payments in CY 2009 (these CY 2009 estimated payments include the 
payments resulting from the non-budget neutral increases to wage 
indices under section 508 of Pub. L. 108-173 as extended by Pub. L. 
110-275). Column 5 shows the combined budget neutral effects of Columns 
2 through 4, plus the impact of the proposed change to the fixed-dollar 
outlier threshold from $1,800 to $2,225; the impact of the expiration 
of section 508 reclassifications; the change in the HOP QDRP payment 
reduction for the small number of hospitals in our impact model that 
failed to meet the reporting requirements; and the impact of increasing 
the estimate of the percentage of total OPPS payments dedicated to 
transitional pass-through payments. We discuss our CY 2010 proposal to 
change the outlier threshold in section II.F. of this proposed rule. Of 
the 85 hospitals that failed to meet the HOP QDRP reporting 
requirements for the full CY 2009 update (and assumed, for modeling 
purposes, to be the same number for CY 2010), we included 13 in our 
model because they had both CY 2008 claims data and recent cost report 
data. We estimate that these cumulative changes would increase payments 
to all providers by 1.9 percent for CY 2010. We modeled the independent 
effect of all proposed changes in Column 5 using the final weights for 
CY 2009 and the proposed weights for CY 2010. We used the final 
conversion factor for CY 2009 of $66.059 and the proposed CY 2010 
conversion factor of $67.439. Column 5 also contains simulated outlier 
payments for each year. We used the charge inflation factor used in the 
FY 2010 IPPS/RY 2010 LTCH PPS proposed rule of 7.29 percent (1.0729) to 
increase individual costs on the CY 2008 claims, and we used the most 
recent overall CCR in the April 2009 OPSF. Using the CY 2008 claims and 
a 7.29 percent charge inflation factor, we currently estimate that 
outlier payments for CY 2009, using a multiple threshold of 1.75 and a 
fixed-dollar threshold of $1,800, would be approximately 1.08 percent 
of total payments. Outlier payments of 1.08 percent are incorporated in 
the CY 2009 comparison in Column 5. We used the same set of claims and 
a charge inflation factor of 15.11 percent (1.1511) and the CCRs in the 
April 2009 OPSF, with an adjustment of 0.9840 to reflect relative 
changes in cost and charge inflation between CY 2008 and CY 2010, to 
model the CY 2010 outliers at 1.0 percent of total payments using a 
multiple threshold of 1.75 and a proposed fixed-dollar threshold of 
$2,225.
Column 1: Total Number of Hospitals
    The first line in Column 1 in Table 51 shows the total number of 
providers (4,137), including cancer and children's

[[Page 35415]]

hospitals and CMHCs for which we were able to use CY 2008 hospital 
outpatient claims to model CY 2009 and CY 2010 payments, by classes of 
hospitals. We excluded all hospitals for which we could not accurately 
estimate CY 2009 or CY 2010 payment and entities that are not paid 
under the OPPS. The latter entities include CAHs, all-inclusive 
hospitals, and hospitals located in Guam, the U.S. Virgin Islands, 
Northern Mariana Islands, American Samoa, and the State of Maryland. 
This process is discussed in greater detail in section II.A. of this 
proposed rule. At this time, we are unable to calculate a 
disproportionate share (DSH) variable for hospitals not participating 
in the IPPS. Hospitals for which we do not have a DSH variable are 
grouped separately and generally include psychiatric hospitals, 
rehabilitation hospitals, and LTCHs. We show the total number (3,870) 
of OPPS hospitals, excluding the hold-harmless cancer and children's 
hospitals and CMHCs, on the second line of the table. We excluded 
cancer and children's hospitals because section 1833(t)(7)(D) of the 
Act permanently holds harmless cancer hospitals and children's 
hospitals to a proportion of their pre-BBA payment relative to their 
pre-BBA costs and, therefore, we removed them from our impact analyses. 
We show the isolated impact on 211 CMHCs in the last row of the impact 
table and discuss that impact separately below.
Column 2: Proposed APC Changes Due to Reassignment and Recalibration
    This column shows the combined effects of proposed reconfiguration, 
recalibration, and other policies (such as setting payment for 
separately payable drugs and biologicals at ASP+4 percent with an 
accompanying reduction in the amount of cost associated with packaged 
drugs and biologicals, payment for brachytherapy sources based on 
median unit cost, and changes in payment for PHP services). 
Specifically, the reduction in PHP payment for APC 0172 is 
redistributed to hospitals and reflected in the 0.1 percent increase 
for the 3,870 hospitals that remain after excluding hospitals held 
harmless and CMHCs. CMHCs perform a greater proportion of low intensity 
partial hospitalization days relative to high intensity partial 
hospitalization days, and thus the impact of the proposed reduction in 
PHP payment for APC 0172 is greater than the effect of the proposed 
increase in PHP payment for APC 0173. Overall, these proposed changes 
would increase payments to urban hospitals by 0.1 percent. We estimate 
that both large and other urban hospitals would see an increase of 0.1 
percent, all attributable to recalibration.
    Overall, rural hospitals would show no increase as a result of 
proposed changes to the APC structure. With the money redistributed 
from PHP services, and other recalibration changes, rural hospitals of 
all bed sizes would experience no change or would experience a decrease 
of 0.1 percent.
    Among teaching hospitals, the largest observed impact resulting 
from proposed APC recalibration would include an increase of 0.1 
percent for minor teaching hospitals and no change for major teaching 
hospitals.
    Classifying hospitals by type of ownership suggests that 
proprietary hospitals would see an increase of 0.2 percent, 
governmental hospitals would see no increase, and voluntary hospitals 
would see an increase of 0.1 percent.
    We estimate that small rural hospitals with 49 or fewer beds would 
experience a modest decrease of 0.1 percent, while hospitals with 50 or 
more beds would experience no change. We also estimate that urban 
hospitals billing a low volume of OPPS services would experience a 
decrease of 0.2 percent, while urban hospitals billing moderate to high 
volumes of services would experience increases of 0.1 percent to 0.3 
percent. Most rural hospitals would experience no change or an increase 
of 0.1 percent, although rural hospitals billing a moderate volume of 
OPPS services would experience a decrease of 0.1 percent. Finally, 
hospitals for which DSH payments are not available would experience 
decreases of 1.3 to 1.5 percent that are largely attributable to the 
reduction in PHP payment for APC 0172. Most other classes of hospitals 
would not experience any change from CY 2009 to CY 2010 or would 
experience a modest increase.
Column 3: Proposed New Wage Indices and the Effect of the Rural 
Adjustment
    This column estimates the impact of applying the proposed FY 2010 
IPPS wage indices for the CY 2010 OPPS. We are not proposing a change 
to the rural payment adjustment for CY 2010. We estimate that the 
combination of updated wage data and statewide application of rural 
floor budget neutrality would redistribute payment among regions. We 
also updated the list of counties qualifying for the section 505 out-
migration adjustment. Overall, urban hospitals would not experience any 
change from CY 2009 to CY 2010, and rural hospitals would experience a 
decrease of 0.1 percent as a result of the updated wage indices. Both 
rural New England States and rural West South Central States would 
experience decreases of up to 1.2 percent. We estimate that urban and 
rural Mountain States would experience increases of 0.8 and 0.7 
percent, respectively. Puerto Rico would experience a decrease of 0.1 
percent.
Column 4: All Proposed Budget Neutrality Changes and Market Basket 
Update
    The addition of the proposed market basket update of 2.1 percent 
would mitigate any negative impacts on hospital payments for CY 2010 
created by the budget neutrality adjustments made in Columns 2 and 3. 
In general, all hospitals would experience an increase of 2.2 percent, 
attributable to the proposed 2.1 percent market basket increase and the 
0.1 percent redistribution created by the reduction in the PHP payment 
for APC 0172.
    Overall, these proposed changes would increase payments to urban 
hospitals by 2.2 percent. We estimate that large urban hospitals would 
experience an increase of 2.2 percent, and other urban hospitals would 
experience a 2.1 percent increase.
    Overall, rural hospitals would experience a 2.0 percent increase as 
a result of the proposed market basket update and other budget 
neutrality adjustments. Rural hospitals that bill less than 5,000 lines 
would experience a 2.2 percent increase. Rural hospitals that bill more 
than 5,000 lines would experience increases of 1.9 to 2.3 percent.
    Among teaching hospitals, the observed impacts resulting from the 
proposed market basket update and other budget neutrality adjustments 
would include an increase of 2.1 and 2.2 percent, respectively, for 
major and minor teaching hospitals.
    Classifying hospitals by type of ownership suggests that both 
voluntary and proprietary hospitals would increase 2.2 percent and 
governmental hospitals would increase 1.9 percent.
Column 5: All Proposed Changes for CY 2010
    Column 5 compares all proposed changes for CY 2010 to final payment 
for CY 2009, including the expiration of the reclassifications under 
section 508, the change in the outlier threshold, payment reductions 
for hospitals that failed to meet the HOP QDRP reporting requirements, 
and the difference in pass-through estimates that are not included in 
the combined percentages shown in Column 4. This column includes 
payment for a handful of hospitals receiving reduced payment because 
they did not meet their hospital

[[Page 35416]]

outpatient quality measure reporting requirements; however, the 
anticipated change in payment between CY 2009 and CY 2010 for these 
hospitals would be negligible. Overall, we estimate that providers 
would experience an increase of 1.9 percent under this proposed rule in 
CY 2010 relative to total spending in CY 2009. The projected 1.9 
percent increase for all providers in Column 5 of Table 51 reflects the 
proposed 2.1 percent market basket increase, less 0.01 percent for the 
change in the pass-through estimate between CY 2009 and CY 2010, less 
0.08 percent for the difference in estimated outlier payments between 
CY 2009 (1.08 percent) and CY 2010 (1.0 percent), and less 0.14 percent 
due to the expiration of the special, non-budget neutral wage index 
payments made under section 508. When we exclude cancer and children's 
hospitals (which are held harmless to their pre-OPPS costs) and CMHCs, 
the gain would remain 1.9 percent.
    The combined effect of all proposed changes for CY 2010 would 
increase payments to urban hospitals by 2.0 percent. We estimate that 
large urban hospitals would experience a 2.0 percent increase, while 
``other'' urban hospitals would experience an increase of 1.9 percent. 
Urban hospitals that bill less than 5,000 lines would experience an 
increase of 1.9 percent. All urban hospitals that bill more than 5,000 
lines would experience increases between 1.9 percent and 2.3 percent.
    Overall, rural hospitals would experience a 1.7 percent increase as 
a result of the combined effects of all proposed changes for CY 2010. 
Rural hospitals that bill less than 5,000 lines would experience an 
increase of 1.9 percent. All rural hospitals that bill greater than 
5,000 lines would experience increases ranging from 1.6 percent to 2.1 
percent.
    Among teaching hospitals, the impacts resulting from the combined 
effects of all proposed changes would include an increase of 1.7 
percent for major teaching hospitals and an increase of 1.9 percent for 
minor teaching hospitals.
    Classifying hospitals by type of ownership suggests that 
proprietary hospitals would gain 2.1 percent, governmental hospitals 
would experience an increase of 1.8 percent, and voluntary hospitals 
would experience an increase of 1.9 percent.
4. Estimated Effects of This Proposed Rule on CMHCs
    The last row of the impact analysis in Table 51 demonstrates the 
impact on CMHCs. We modeled this impact assuming that CMHCs would 
continue to provide the same number of days of PHP care, with each day 
having either three services or four or more services, as seen in the 
CY 2008 claims data. We excluded days with one or two services. Using 
these assumptions, there would be a 5.9 percent decrease in payments to 
CMHCs due to these proposed APC policy changes (shown in Column 2). The 
relative weight for low intensity partial hospitalization APC 0172 
(Level 1 Partial Hospitalization (3 services)) declines between CY 2009 
and CY 2010 under this proposed rule. CMHCs perform a greater 
proportion of low intensity partial hospitalization days than 
psychiatric hospitals. Table 51 demonstrates that non-IPPS hospitals 
for which a disproportionate patient percentage is not available (DSH 
Not Available), consisting largely of psychiatric hospitals, would 
experience a decline in payments of 1.5 percent. Psychiatric hospitals 
provide a greater proportion of APC 0173 (Level II Partial 
Hospitalization (4 or more services)) for which the relative weight 
increases between CY 2009 and CY2010 under this proposed rule.
    Column 3 shows that the proposed CY 2010 wage index updates would 
account for a 0.9 percent increase in payments to CMHCs. We note that 
all providers paid under the OPPS, including CMHCs, would receive a 
proposed 2.1 percent market basket increase (shown in Column 4). 
Combining this proposed market basket increase, along with proposed 
changes in APC policy for CY 2010 and the proposed CY 2010 wage index 
updates, the combined impact on CMHCs for CY 2010 would be a 2.9 
percent decrease. In contrast, non-IPPS hospitals captured under the 
DSH Not Available category, which consists largely of psychiatric 
hospitals, would experience an increase in payment of 0.6 percent for 
CY 2010 after combining the proposed market basket increase for CY 
2010, proposed changes in APC policy for CY 2010, and proposed CY 2010 
wage index updates.

                             Table 51--Impact of CY 2010 Proposed Changes for Hospital Outpatient Prospective Payment System
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        New wage index   Comb (cols 2,
                                                                        Number of           APC           and rural      3) with market    All changes
                                                                        hospitals      recalibration      adjustment     basket update
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                 (1)              (2)              (3)              (4)              (5)
--------------------------------------------------------------------------------------------------------------------------------------------------------
ALL PROVIDERS *....................................................            4,137              0.0              0.0              2.1              1.9
ALL HOSPITALS (excludes hospitals held harmless and CMHCs).........            3,870              0.1              0.0              2.2              1.9
URBAN HOSPITALS....................................................            2,888              0.1              0.0              2.2              2.0
    LARGE URBAN (GT 1 MILL.).......................................            1,575              0.1              0.1              2.2              2.0
    OTHER URBAN (LE 1 MILL.).......................................            1,313              0.1              0.0              2.1              1.9
RURAL HOSPITALS....................................................              982              0.0             -0.1              2.0              1.7
    SOLE COMMUNITY ***.............................................              389              0.0              0.0              2.1              1.6
    OTHER RURAL....................................................              593              0.0             -0.2              1.9              1.8
BEDS (URBAN):
    0-99 BEDS......................................................              952              0.2              0.1              2.4              2.2
    100-199 BEDS...................................................              882              0.1              0.0              2.2              1.9
    200-299 BEDS...................................................              455              0.1              0.1              2.3              2.1
    300-499 BEDS...................................................              411              0.1             -0.1              2.0              1.8
    500 + BEDS.....................................................              188              0.0              0.1              2.2              1.9
BEDS (RURAL):
    0-49 BEDS......................................................              349             -0.1              0.1              2.1              1.8
    50-100 BEDS....................................................              372              0.0             -0.1              2.0              1.7
    101-149 BEDS...................................................              156              0.0             -0.3              1.9              1.8
    150-199 BEDS...................................................               62              0.0             -0.2              1.9              1.5
    200 + BEDS.....................................................               43              0.0              0.0              2.0              1.5
VOLUME (URBAN):

[[Page 35417]]

 
    LT 5,000 Lines.................................................              571             -0.2              0.1              1.9              1.9
    5,000-10,999 Lines.............................................              176              0.2              0.0              2.3              2.1
    11,000-20,999 Lines............................................              272              0.3              0.1              2.4              2.3
    21,000-42,999 Lines............................................              532              0.2              0.1              2.3              2.2
    GT 42,999 Lines................................................            1,337              0.1              0.0              2.2              1.9
VOLUME (RURAL):
    LT 5,000 Lines.................................................               84              0.1              0.0              2.2              1.9
    5,000-10,999 Lines.............................................               99              0.1              0.2              2.3              2.1
    11,000-20,999 Lines............................................              207             -0.1              0.1              2.1              1.8
    21,000-42,999 Lines............................................              312              0.1             -0.2              2.0              1.8
    GT 42,999 Lines................................................              280              0.0             -0.1              1.9              1.6
REGION (URBAN):
    NEW ENGLAND....................................................              148              0.0              0.4              2.5              2.1
    MIDDLE ATLANTIC................................................              366              0.0              0.3              2.4              1.8
    SOUTH ATLANTIC.................................................              449              0.1             -0.2              2.0              1.9
    EAST NORTH CENT................................................              464              0.1             -0.1              2.1              1.7
    EAST SOUTH CENT................................................              186              0.1             -0.1              2.1              2.0
    WEST NORTH CENT................................................              193              0.2              0.0              2.4              2.2
    WEST SOUTH CENT................................................              457              0.1             -0.1              2.1              2.0
    MOUNTAIN.......................................................              187              0.1              0.8              3.0              2.9
    PACIFIC........................................................              390              0.0             -0.1              2.0              1.9
    PUERTO RICO....................................................               48              0.1             -0.1              2.1              2.3
REGION (RURAL):
    NEW ENGLAND....................................................               24             -0.2             -1.2              0.7              0.6
    MIDDLE ATLANTIC................................................               68              0.0              0.5              2.6              2.2
    SOUTH ATLANTIC.................................................              167              0.0             -0.3              1.8              1.7
    EAST NORTH CENT................................................              128              0.1              0.0              2.2              1.8
    EAST SOUTH CENT................................................              177              0.0              0.0              2.1              2.0
    WEST NORTH CENT................................................              106              0.0              0.2              2.3              1.6
    WEST SOUTH CENT................................................              210             -0.1             -0.8              1.2              1.2
    MOUNTAIN.......................................................               71              0.0              0.7              2.8              2.4
    PACIFIC........................................................               31              0.0              0.1              2.2              1.8
TEACHING STATUS:
    NON-TEACHING...................................................            2,879              0.1             -0.1              2.1              2.0
    MINOR..........................................................              707              0.1              0.0              2.2              1.9
    MAJOR..........................................................              284              0.0              0.1              2.1              1.7
DSH PATIENT PERCENT:
    0..............................................................                7              1.1              0.1              3.2              3.1
    GT 0-0.10......................................................              396              0.2              0.1              2.5              2.2
    0.10-0.16......................................................              407              0.1             -0.2              2.1              1.8
    0.16-0.23......................................................              769              0.1              0.0              2.2              1.8
    0.23-0.35......................................................              980              0.1              0.0              2.1              1.9
    GE 0.35........................................................              755              0.0              0.1              2.1              2.0
    DSH NOT AVAILABLE **...........................................              556             -1.5              0.0              0.6              0.6
URBAN TEACHING/DSH:
    TEACHING & DSH.................................................              889              0.0              0.0              2.2              1.9
    TEACHING/NO DSH................................................                0              0.0              0.0              0.0              0.0
    NO TEACHING/DSH................................................            1,464              0.2              0.0              2.2              2.1
    NO TEACHING/NO DSH.............................................                6              1.2              0.1              3.4              3.3
    DSH NOT AVAILABLE **...........................................              529             -1.3              0.0              0.8              0.7
TYPE OF OWNERSHIP:
    VOLUNTARY......................................................            2,085              0.1              0.0              2.2              1.9
    PROPRIETARY....................................................            1,215              0.2             -0.1              2.2              2.1
    GOVERNMENT.....................................................              570              0.0             -0.1              1.9              1.8
CMHCs..............................................................              211             -5.9              0.9             -2.9             -2.9
Column (1) shows total hospitals.
Column (2) shows the impact of changes resulting from the reclassification of HCPCS codes among APC groups and the recalibration of APC weights based on
  CY 2008 hospital claims data.
Column (3) shows the budget neutral impact of updating the wage index by applying the FY 2010 hospital inpatient wage index. We are not proposing any
  changes to the rural adjustment.
Column (4) shows the impact of all budget neutrality adjustments and the addition of the market basket update.
Column (5) shows the additional adjustments to the conversion factor resulting from a change in the pass-through estimate and adds outlier payments.
  This column also shows the impact of the expiration of the 508 wage reclassification, which ends September 30, 2009.
* These 4,137 providers include children and cancer hospitals, which are held harmless to pre-BBA payments, and CMHCs.
** Complete DSH numbers are not available for providers that are not paid under IPPS, including rehabilitation, psychiatric, and long-term care
  hospitals.


[[Page 35418]]

5. Estimated Effect of This Proposed Rule on Beneficiaries
    For services for which the beneficiary pays a copayment of 20 
percent of the payment rate, the beneficiary share of payment would 
increase for services for which the OPPS payments would rise and would 
decrease for services for which the OPPS payments would fall. For 
example, for a service assigned to Level IV Needle Biopsy/Aspiration 
Except Bone Marrow (APC 037) in the CY 2009 OPPS, the national 
unadjusted copayment is $228.76, and the minimum unadjusted copayment 
is $178.60. For CY2010, the proposed national unadjusted copayment for 
APC 037 would be $228.76, the same rate in effect for CY 2009. The 
proposed minimum unadjusted copayment for APC 037 would be $206.05 or 
20 percent of the proposed CY 2010 national unadjusted payment rate for 
APC 037 of $1,030.24. The proposed minimum unadjusted copayment would 
rise because the payment rate for APC 037 would rise for CY 2010. In 
all cases, the statute limits beneficiary liability for copayment for a 
procedure to the hospital inpatient deductible for the applicable year. 
The CY 2009 hospital inpatient deductible is $1,068. The CY 2010 
hospital inpatient deductible is not yet available.
    In order to better understand the impact of changes in copayment on 
beneficiaries, we modeled the percent change in total copayment 
liability using CY 2008 claims. We estimate, using the claims of the 
4,137 hospitals and CMHCs on which our modeling is based, that total 
beneficiary liability for copayments would decline as an overall 
percentage of total payments, from 23.1 percent in CY 2009 to 22.7 
percent in CY 2010.
6. Conclusion
    The proposed changes in this proposed rule would affect all classes 
of hospitals and CMHCs. Some classes of hospitals would experience 
significant gains and others less significant gains, but all classes of 
hospitals would experience positive updates in OPPS payments in CY 
2010. In general, CMHCs would experience an overall decline of 2.9 
percent in payment due to the recalibration of the proposed payment 
rates. Table 51 demonstrates the estimated distributional impact of the 
OPPS budget neutrality requirements that would result in a 1.9 percent 
increase in payments for CY 2010, after considering all proposed 
changes to APC reconfiguration and recalibration, as well as the 
proposed market basket increase, proposed wage index changes, estimated 
payment for outliers, and proposed changes to the pass-through payment 
estimate. The accompanying discussion, in combination with the rest of 
this proposed rule, constitutes a regulatory impact analysis.
7. Accounting Statement
    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table 52, we have 
prepared an accounting statement showing the CY 2010 estimated hospital 
OPPS incurred benefit impact associated with the proposed CY2010 
hospital outpatient market basket update shown in this proposed rule 
based on the baseline for the 2010 President's Budget. All estimated 
impacts are classified as transfers.

   Table 52--Accounting Statement: CY 2010 Estimated Hospital OPPS Incurred Benefit Impact Associated With the
                            Proposed CY 2010 Hospital Outpatient Market Basket Update
                                                  [In billions]
----------------------------------------------------------------------------------------------------------------
             Category                                                Transfers
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers...  $0.5 billion.
From Whom to Whom................  Federal Government to outpatient hospitals and other providers who received
                                    payment under the hospital OPPS.
    Total........................  $0.5 billion.
----------------------------------------------------------------------------------------------------------------

C. Effects of ASC Payment System Changes in This Proposed Rule

    On August 2, 2007, we published in the Federal Register the final 
rule for the revised ASC payment system, effective January 1, 2008 (72 
FR 42470). In that final rule, we adopted the methodologies to set 
payment rates for covered ASC services to implement the revised payment 
system so that it would be designed to result in budget neutrality as 
required by section 626 of Public Law 108-173; established that the 
OPPS relative payment weights would be the basis for payment and that 
we would update the system annually as part of the OPPS rulemaking 
cycle; and provided that the revised ASC payment rates would be phased-
in over 4 years. During the 4-year transition to full implementation of 
the ASC payment rates, payments for surgical procedures paid in ASCs in 
CY 2007 are made using a blend of the CY 2007 ASC payment rate and the 
ASC payment rate calculated according to the ASC standard ratesetting 
methodology for the applicable transitional year. In CY 2009, we are 
paying ASCs using a 50/50 blend, in which payment is calculated by 
adding 50 percent of the CY 2007 ASC rate for a surgical procedure on 
the CY 2007 ASC list of covered surgical procedures and 50 percent of 
the CY 2009 ASC rate calculated according to the ASC standard 
ratesetting methodology for the same procedure. For CY 2010, we would 
transition the blend to a 25/75 blend of the CY 2007 ASC rate and the 
ASC payment rate calculated according to the ASC standard ratesetting 
methodology. Beginning in CY 2011, we would pay ASCs for all covered 
surgical procedures, including those on the CY 2007 ASC list at the ASC 
payment rates calculated according to the ASC standard ratesetting 
methodology. Payment for procedures that were not included on the ASC 
list of covered surgical procedures in CY 2007 is not subject to the 
transitional payment methodology.
    ASC payment rates are calculated by multiplying the ASC conversion 
factor by the ASC relative payment weight. As discussed fully in 
section XV. of this proposed rule, we set the proposed CY 2010 ASC 
relative payment weights by scaling CY 2010 ASC relative payment 
weights by the proposed ASC scaler of 0.9514. These weights take into 
consideration the 25/75 blend for the third year of transitional 
payment for certain services. If there were no transition, the proposed 
scaler for the CY 2010 relative payment weights would be 0.9329. The 
estimated effects of the updated relative payment weights on payment 
rates during this transitional period are varied and are reflected in 
the estimated payments displayed in Tables 53 and 54 below.
    The proposed CY 2010 ASC conversion factor was calculated by

[[Page 35419]]

adjusting the CY 2009 ASC conversion factor to account for changes in 
the pre-floor and pre-reclassified hospital wage indices between CY 
2009 and CY 2010 and by applying the CY 2010 CPI-U of a 0.6 percent 
increase. The proposed CY 2010 ASC conversion factor is $41.625.
1. Alternatives Considered
    Alternatives to the changes we are proposing to make and the 
reasons that we have chosen the options are discussed throughout this 
proposed rule. Some of the major ASC issues discussed in this proposed 
rule and the options considered are discussed below.
a. Alternatives Considered for Office-Based Procedures
    According to our final policy for the revised ASC payment system, 
we designate as office-based those procedures that are added to the ASC 
list of covered surgical procedures in CY 2008 or later years and that 
we determine are predominantly performed in physicians' offices based 
on consideration of the most recent available volume and utilization 
data for each individual procedure HCPCS code and/or, if appropriate, 
the clinical characteristics, utilization, and volume of related HCPCS 
codes. We establish payment for procedures designated as office-based 
at the lesser of the MPFS nonfacility PE RVU amount or the ASC rate 
developed according to the standard methodology of the revised ASC 
payment system.
    In developing this proposed rule, we reviewed the newly available 
CY 2008 utilization data for all surgical procedures added to the ASC 
list of covered surgical procedures in CY 2008 or later and for those 
procedures for which the office-based designation is temporary in the 
CY 2009 OPPS/ASC final rule with comment period (73 FR 68730 through 
68733). Based on that review, and as discussed in section XV.C.1.b. of 
this proposed rule, we are proposing to newly designate six surgical 
procedures as office-based and to make permanent the office-based 
designations of four surgical procedures that have temporary office-
based designations in CY 2009. We considered two alternatives in 
developing this policy.
    The first alternative we considered was to make no change to the 
procedure payment designations. This would mean that we would continue 
to pay for the six procedures we are proposing to newly designate as 
office-based at an ASC payment rate calculated according to the 
standard ratesetting methodology of the revised ASC payment system and 
for the four procedures with temporary office-based designations 
according to the office-based methodology. We did not select this 
alternative because our analysis of the data and our clinical review 
indicated that all 10 procedures we are proposing to designate 
permanently office-based could be considered to be predominantly 
performed in physicians' offices. Consistent with our final policy 
adopted in the August 2, 2007 final rule (72 FR42509), we were 
concerned that continuing to pay at the standard ASC payment rate for 
the six procedures newly designated as office-based could create 
financial incentives for the procedures to shift from physicians' 
offices to ASCs for reasons unrelated to clinical decisions regarding 
the most appropriate setting for surgical care. Further, consistent 
with our policy, we believe that when adequate data become available to 
make permanent determinations about procedures with temporary office-
based designations, maintaining the temporary designation is no longer 
appropriate.
    The second alternative we considered and the one we are proposing 
for CY 2010 is to designate six additional procedures as office-based 
for CY 2010 and to make permanent the office-based designations of four 
of the procedures with temporary office-based designations in CY 2009. 
We chose this alternative because our claims data and clinical review 
indicate that these procedures could be considered to be predominantly 
performed in physicians' offices. We believe that designating these 
procedures as office-based, which results in the CY 2010 ASC payment 
rate for these procedures potentially being capped at the CY 2010 
physician's office rate (that is, the MPFS nonfacility PE RVU amount), 
if applicable, is an appropriate step to ensure that Medicare payment 
policy does not create financial incentives for such procedures to 
shift unnecessarily from physicians' offices to ASCs, consistent with 
our final policy adopted in the August 2, 2007 final rule.
b. Alternatives Considered for Covered Surgical Procedures
    According to our final policy for the revised ASC payment system, 
we designate as covered all surgical procedures that we determine would 
not be expected to pose a significant risk to beneficiary safety or 
would not be expected to require an overnight stay when performed on 
Medicare beneficiaries in an ASC.
    In developing this proposed rule, we reviewed the clinical 
characteristics and newly available CY2008 utilization data, if 
applicable, for all procedures reported by Category III CPT codes 
implemented July 1, 2009, and surgical procedures that were excluded 
from ASC payment for CY 2009. In response to comments on the CY 2009 
OPPS/ASC proposed rule, we stated in the CY 2009 OPPS/ASC final rule 
with comment period (73 FR 68724) that, as we developed the CY 2010 
OPPS/ASC proposed rule, we would perform a comprehensive review of the 
APCs in order to identify potentially inconsistent ASC treatment of 
procedures assigned to a single APC under the OPPS. Thus, for this 
proposed rule, we examined surgical procedures that were excluded from 
the CY 2009 ASC list of covered surgical procedures and the APCs to 
which they were assigned under the OPPS. Based on this review, we 
identified 26 surgical procedures that meet the criteria for inclusion 
on the ASC list of covered surgical procedures, and we are proposing to 
add those procedures to the list for CY 2010 payment. We considered two 
alternatives in developing this policy.
    The first alternative we considered was to make no change to the 
ASC list of covered surgical procedures for CY 2010. We did not choose 
this alternative because our analysis of data and clinical review 
indicated that the 26 procedures we are proposing to designate as 
covered surgical procedures for CY 2010 would not be expected to pose a 
significant risk to beneficiary safety in ASCs and would not be 
expected to require an overnight stay. Consistent with our final 
policy, we were concerned that by continuing to exclude them from the 
list of ASC covered surgical procedures, we may unnecessarily limit 
beneficiaries' access to the services in the most clinically 
appropriate settings.
    The second alternative we considered and the one we are proposing 
for CY 2010 was to propose to designate 26 additional procedures as ASC 
covered surgical procedures for CY 2010. We chose this alternative 
because our claims data and clinical review indicate that these 
procedures would not be expected to pose a significant risk to 
beneficiary safety and would not be expected to require an overnight 
stay, and thus they meet the criteria for inclusion on the list of ASC 
covered surgical procedures. We believe that adding these procedures to 
the list of covered surgical procedures is an appropriate step to 
ensure that beneficiary access to services is not limited 
unnecessarily.
2. Limitations of Our Analysis
    Presented here are the projected effects of the proposed changes 
for CY 2010 on Medicare payment to ASCs. A

[[Page 35420]]

key limitation of our analysis is our inability to predict changes in 
ASC service-mix between CY 2008 and CY 2010 with precision. We believe 
that the net effect on Medicare expenditures resulting from the 
proposed CY 2010 changes would be small in the aggregate for all ASCs. 
However, such changes may have differential effects across surgical 
specialty groups as ASCs continue to adjust to the payment rates based 
on the policies of the revised ASC payment system. We are unable to 
accurately project such changes at a disaggregated level. Clearly, 
individual ASCs would experience changes in payment that differ from 
the aggregated estimated impacts presented below.
3. Estimated Effects of This Proposed Rule on Payments to ASCs
    Some ASCs are multispecialty facilities that perform the gamut of 
surgical procedures, from excision of lesions to hernia repair to 
cataract extraction; others focus on a single specialty and perform 
only a limited range of surgical procedures, such as eye, digestive 
system, or orthopedic procedures. The combined effect on an individual 
ASC of the proposed update to the CY 2010 payments would depend on a 
number of factors, including, but not limited to, the mix of services 
the ASC provides, the volume of specific services provided by the ASC, 
the percentage of its patients who are Medicare beneficiaries, and the 
extent to which an ASC provides different services in the coming year. 
The following discussion presents tables that display estimates of the 
impact of the proposed CY 2010 update to the revised ASC payment system 
on Medicare payments to ASCs, assuming the same mix of services as 
reflected in our CY 2008 claims data. Table 53 depicts the estimated 
aggregate percent change in payment by surgical specialty or ancillary 
items and services group by comparing estimated CY 2009 payments to 
estimated proposed CY 2010 payments, and Table 54 shows a comparison of 
estimated CY2009 payments to estimated proposed CY 2010 payments for 
procedures that we estimate would receive the most Medicare payment in 
CY 2010.
    Table 53 shows the estimated effects on aggregate proposed Medicare 
payments under the revised ASC payment system by surgical specialty or 
ancillary items and services group. We have aggregated the surgical 
HCPCS codes by specialty group, grouped all HCPCS codes for covered 
ancillary items and services into a single group, and then estimated 
the effect on aggregated payment for surgical specialty and ancillary 
items and services groups, considering separately the proposed CY 2010 
transitional rates and the ASC payment rates calculated according to 
the ASC standard ratesetting methodology that would apply in CY 2010 if 
there were no transition. The groups are sorted for display in 
descending order by estimated Medicare program payment to ASCs. The 
following is an explanation of the information presented in Table 53.
    <bullet> Column 1--Surgical Specialty or Ancillary Items and 
Services Group indicates the surgical specialty into which ASC 
procedures are grouped or the ancillary items and services group which 
includes all HCPCS codes for covered ancillary items and services. To 
group surgical procedures by surgical specialty, we used the CPT code 
range definitions and Level II HCPCS codes and Category III CPT codes, 
as appropriate, to account for all surgical procedures to which the 
Medicare program payments are attributed.
    <bullet> Column 2--Estimated ASC Payments were calculated using CY 
2008 ASC utilization (the most recent full year of ASC utilization) and 
CY 2009 ASC payment rates. The surgical specialty and ancillary items 
and services groups are displayed in descending order based on 
estimated CY 2009 ASC payments.
    <bullet> Column 3--Estimated CY 2010 Percent Change with Transition 
(25/75 Blend) is the aggregate percentage increase or decrease, 
compared to CY 2009, in Medicare program payment to ASCs for each 
surgical specialty or ancillary items and services group that is 
attributable to proposed updates to the ASC payment rates for CY 2010 
under the scaled, 25/75 blend of the CY 2007 ASC payment rates and the 
CY 2010 ASC payment rates calculated according to the ASC standard 
ratesetting methodology.
    <bullet> Column 4--Estimated CY 2010 Percent Change without 
Transition (Fully Implemented) is the aggregate percentage increase or 
decrease in Medicare program payment to ASCs for each surgical 
specialty or ancillary items and services group that would be 
attributable to proposed updates to ASC payment rates for CY 2010 
compared to CY 2009 if there were no transition period to the fully 
implemented payment rates. The percentages appearing in Column 4 are 
presented only as comparisons to the percentage changes under the 
transition policy in Column 3. We are not proposing to eliminate or 
modify the policy for a 4-year transition that was finalized in the 
August 2, 2007 final rule (72 FR 42519).
    As seen in Table 53, the proposed update to ASC rates for CY 2010 
is expected to result in small aggregate decreases in payment amounts 
for eye and ocular adnexa and nervous system procedures and somewhat 
greater decreases for digestive system procedures. As shown in Column 4 
in the table, those payment decreases would be expected to be greater 
in CY 2010 if there were no transitional payment for all three of these 
surgical specialty groups.
    Generally, for the surgical specialty groups that account for less 
ASC utilization and spending, the expected payment effects of the 
proposed CY 2010 update are positive. ASC payments for procedures in 
those surgical specialties would increase in CY 2010 with the 25/75 
transitional payment rates and, in the absence of the transition, would 
increase even more. For instance, in the aggregate, payment for 
integumentary system procedures is expected to increase by 6 percent 
under the CY 2010 proposed rates and by 12 percent if there were no 
transition. Similar effects are observed for genitourinary, 
cardiovascular, musculoskeletal, respiratory, hemic and lymphatic 
systems, and auditory system procedures as well. An estimated increase 
in aggregate payment for the specialty group does not mean that all 
procedures in the group would experience increased payment rates. For 
example, the estimated increased payments at the surgical specialty 
group level may be due to decreased payments for some of the most 
frequently provided procedures in the group and the moderating effect 
of the sometimes substantial payment increases for the less frequently 
performed procedures within the surgical specialty group.
    Also displayed in Table 53 for the first time since implementation 
of the revised payment system is a separate estimate of Medicare ASC 
payments for the group of separately payable covered ancillary items 
and services. We estimate that aggregate payments for these items and 
services would decrease by 2 percent for CY 2010. The payment estimates 
for the covered surgical procedures include the costs of packaged 
ancillary items and services. In prior years' proposed rules, we did 
not have ASC payment data for covered ancillary items and services 
because prior to CY 2008, they were paid under other fee schedules or 
packaged into payment for the covered surgical procedures. Beginning 
with this proposed rule, for which we have CY 2008 data, and for all 
subsequent rulemaking, we will have utilization data for those services 
as well as for all

[[Page 35421]]

of the covered surgical procedures provided in ASCs under the revised 
payment system.

    Table 53--Estimated CY 2010 Impact of the Update to the ASC Payment System on Estimated Aggregate CY 2010
  Medicare Program Payments Under the 25/75 Transition Blend and Without a Transition, By Surgical Specialty or
                                       Ancillary Items and Services Group
----------------------------------------------------------------------------------------------------------------
                                                                                                  Estimated  CY
                                                              Estimated  CY     Estimated  CY     2010  percent
                                                                2009 ASC        2010  percent    change  without
                 Surgical specialty group                     payments  (in     change  with       transition
                                                                millions)     transition  (25/       (fully
                                                                                  75 blend)       implemented)
----------------------------------------------------------------------------------------------------------------
(1)                                                                      (2)               (3)               (4)
----------------------------------------------------------------------------------------------------------------
    Total.................................................             3,051                 1                 1
----------------------------------------------------------------------------------------------------------------
Eye and ocular adnexa.....................................             1,399                -1                -2
Digestive system..........................................               727                -5               -11
Nervous system............................................               361                -2                -5
Musculoskeletal system....................................               282                15                29
Genitourinary system......................................               112                 8                16
Integumentary system......................................               105                 6                12
Respiratory system........................................                26                22                36
Cardiovascular system.....................................                18                14                24
Ancillary items and services..............................                14                -2                -2
Auditory system...........................................                 7                 7                16
Hemic & lymphatic systems.................................                 3                21                38

    Table 54 below shows the estimated impact of the proposed updates 
to the revised ASC payment system on aggregate ASC payments for 
selected surgical procedures during CY 2010 with and without the 
transitional blended rate. The table displays 30 of the procedures 
receiving the greatest estimated CY 2009 aggregate Medicare payments to 
ASCs. The HCPCS codes are sorted in descending order by estimated CY 
2009 program payment.
    <bullet> Column 1--HCPCS code.
    <bullet> Column 2--Short Descriptor of the HCPCS code.
    <bullet> Column 3--Estimated CY 2009 ASC Payments were calculated 
using CY 2008 ASC utilization (the most recent full year of ASC 
utilization) and the CY 2009 ASC payment rates. The estimated CY 2009 
payments are expressed in millions of dollars.
    <bullet> Column 4--CY 2010 Percent Change with Transition (25/75 
Blend) reflects the percent differences between the estimated ASC 
payment for CY 2009 and the estimated payment for CY 2010 based on the 
proposed update, incorporating a 25/75 blend of the CY 2007 ASC payment 
rate and the proposed CY 2010 ASC payment rate calculated according to 
the ASC standard ratesetting methodology.
    <bullet> Column 5--CY 2010 Percent Change without Transition (Fully 
Implemented) reflects the percent differences between the estimated ASC 
payment for CY 2009 and the estimated payment for CY 2010 based on the 
proposed update if there were no transition period to the fully 
implemented payment rates. The percentages appearing in Column 5 are 
presented as a comparison to the percentage changes under the 
transition policy in Column 4. We are not proposing to eliminate or 
modify the policy for the 4-year transition that was finalized in the 
August 2, 2007 final rule (72 FR 42519).
    As displayed in Table 54, 23 of the 30 procedures with the greatest 
estimated aggregate CY 2009 Medicare payment are included in the 3 
surgical specialty groups that are estimated to account for the most 
Medicare payment to ASCs in CY 2009, specifically eye and ocular 
adnexa, digestive system, and nervous system surgical groups. 
Consistent with the estimated payment effects on the surgical specialty 
groups displayed in Table 53, the estimated effects of the proposed CY 
2010 update on ASC payment for individual procedures in year 3 of the 
transition shown in Table 54 are varied. Aggregate ASC payments for 
many of the most frequently furnished ASC procedures would decrease as 
the proposed transitional rates more closely align the individual 
procedure relative ASC payment weights with the relativity of payments 
under the OPPS.
    The ASC procedure for which the most Medicare payment is estimated 
to be made in CY 2009 is the cataract removal procedure reported with 
CPT code 66984 (Extracapsular cataract removal with insertion of 
intraocular lens prosthesis (one stage procedure), manual or mechanical 
technique (e.g., irrigation and aspiration or phacoemulsification)). We 
estimate that the proposed update to the ASC rates would result in a 1 
percent payment decrease for this procedure in CY 2010. The estimated 
payment effects on the three other eye and ocular adnexa procedures 
included in Table 54 would be slightly positive or negative, but for 
CPT code 66821 (Discission of secondary membranous cataract (opacified 
posterior lens capsule and/or anterior hyaloid); laser surgery (e.g., 
YAG laser) (one or more stages)), the expected CY 2010 payment decrease 
would be 9 percent, significantly greater than the decreases expected 
for any of the other eye and ocular adnexa procedures shown.
    The proposed transitional payment rates for all but 1 of the 9 
digestive system procedures included in Table 54 would be expected to 
decrease by 5 to 8 percent in CY 2010. Those estimated decreases are 
consistent with decreases in the previous 2 years under the revised 
payment system and would be expected because, under the previous ASC 
payment system, the payment rates for many high volume endoscopy 
procedures were almost the same as the payments for the procedures 
under the OPPS.
    The estimated effects of the proposed CY 2010 update on the 10 
nervous system procedures for which the most

[[Page 35422]]

Medicare ASC payment is estimated to be made in CY 2009 would be 
variable. Our estimates indicate that the proposed CY 2010 update would 
result in less than 4 percent payment decreases for 4 of the 10 
procedures and in more substantial decreases for 3 others. The greatest 
decreases would be seen for two CPT add-on codes, CPT code 64476 
(Injection, anesthetic agent and/or steroid, paravertebral facet joint 
or facet joint nerve; lumbar or sacral, each additional level) and CPT 
code 64484 (Injection, anesthetic agent and/or steroid, transforaminal 
epidural; lumbar or sacral, each additional level), which would be 
expected to have 25 and 19 percent payment decreases, respectively, in 
CY 2010. In contrast, the three nervous system procedures for which we 
estimate positive effects on CY 2010 payments, CPT code 63650 
(Percutaneous implantation of neurostimulator electrode array, 
epidural), CPT code 64721 (Neuroplasty and/or transposition; median 
nerve at carpal tunnel), and CPT code 64622 (Destruction by neurolytic 
agent, paravertebral facet joint nerve; lumbar or sacral, single 
level), would be expected to have substantial payment increases of 9, 
12, and 20 percent, respectively.
    The estimated payment effects for most of the remaining procedures 
listed in Table 54 would be positive. For example, the proposed CY 2010 
transitional payment rates for musculoskeletal CPT codes 29880 
(Arthroscopy, knee, surgical; with meniscectomy (medial AND lateral, 
including any meniscal shaving)) and 29881 (Arthroscopy, knee, 
surgical; with meniscectomy (medial OR lateral, including any meniscal 
shaving)) would be estimated to increase 15 percent over the CY 2009 
transitional payment amount. Musculoskeletal procedures would be 
expected to account for a greater percentage of CY 2010 Medicare ASC 
spending as payment for procedures in that surgical specialty group 
would be increased under the revised payment system.

 Table 54--Estimated Impact of Proposed Update to CY 2010 ASC Payment System on Aggregate Payments for Selected
                                                   Procedures
----------------------------------------------------------------------------------------------------------------
                                                                                                  Estimated  CY
                                                                                Estimated  CY     2010  percent
                                                            Allowed  charges    2010  percent    change  without
      HCPCS code                 Short descriptor                (in mil)      change  (25/75      transition
                                                                                   blend)            (fully
                                                                                                  implemented)
----------------------------------------------------------------------------------------------------------------
(1)                     (2)...............................               (3)               (4)               (5)
----------------------------------------------------------------------------------------------------------------
66984.................  Cataract surg w/iol, 1 stage......             1,059                -1                -3
43239.................  Upper gi endoscopy, biopsy........               163                -7               -14
45380.................  Colonoscopy and biopsy............               133                -5               -11
45378.................  Diagnostic colonoscopy............               123                -6               -11
45385.................  Lesion removal colonoscopy........                95                -5               -11
66821.................  After cataract laser surgery......                71                -9               -18
62311.................  Inject spine l/s (cd).............                69                -3                -6
66982.................  Cataract surgery, complex.........                62                -1                -3
64483.................  Inj foramen epidural l/s..........                57                -2                -6
15823.................  Revision of upper eyelid..........                35                 3                 6
45384.................  Lesion remove colonoscopy.........                33                -6               -12
G0105.................  Colorectal scrn; hi risk ind......                33                -8               -17
G0121.................  Colon ca scrn not hi rsk ind......                32                -8               -17
64475.................  Inj paravertebral l/s.............                29                -2                -6
29881.................  Knee arthroscopy/surgery..........                25                15                29
63650.................  Implant neuroelectrodes...........                24                 9                14
43235.................  Uppr gi endoscopy, diagnosis......                24                 1                 1
64721.................  Carpal tunnel surgery.............                22                12                23
52000.................  Cystoscopy........................                22                -6               -10
29880.................  Knee arthroscopy/surgery..........                20                15                29
64476.................  Inj paravertebral l/s add-on......                19               -25               -51
63685.................  Insrt/redo spine n generator......                18                -9                -8
29826.................  Shoulder arthroscopy/surgery......                17                26                52
62310.................  Inject spine c/t..................                15                -2                -6
67904.................  Repair eyelid defect..............                15                 4                 7
28285.................  Repair hammertoe..................                14                12                24
29827.................  Arthroscop rotator cuff repr......                14                20                41
64622.................  Destr paravertebrl nerve l/s......                14                20                35
64484.................  Inj foramen epidural add-on.......                13               -19               -39
43248.................  Uppr gi endoscopy/guide wire......                12                -7               -14

    The previous ASC payment system served as an incentive to ASCs to 
focus on providing procedures for which they determined Medicare 
payments would support their continued operation. We note that, 
historically, the ASC payment rates for many of the most frequently 
performed procedures in ASCs were similar to the OPPS payment rates for 
the same procedures. Conversely, procedures with ASC payment rates that 
were substantially lower than the OPPS rates have historically been 
performed least often in ASCs. We believed that the revised ASC payment 
system would encourage greater efficiency in ASCs and would promote 
significant increases in the breadth of surgical procedures performed 
in ASCs because it distributes payments across the entire spectrum of 
covered surgical procedures based on a coherent system of relative 
weights that are related to the clinical

[[Page 35423]]

and facility resource requirements of those procedures.
    The CY 2008 claims data that we used to develop the proposed CY 
2010 updates to the ASC payment system relative weights and rates 
reflect the first year of utilization under the revised payment system. 
Although the changes in the claims data are not large, the data reflect 
increased Medicare ASC spending for procedures that were newly added to 
the ASC list in CY 2008. Our estimates based on CY 2008 data indicate 
that for CY 2010 there would be especially noticeable increases in 
spending for genitourinary and cardiovascular procedures, compared to 
the previous ASC payment system.
4. Estimated Effects of This Proposed Rule on Beneficiaries
    We estimate that the proposed CY 2010 update to the ASC payment 
system would be generally positive for beneficiaries with respect to 
the new procedures that we are proposing to add to the ASC list of 
covered surgical procedures and for those that we are proposing to 
designate as office-based for CY 2010. First, except for screening 
colonoscopy and flexible sigmoidoscopy procedures, the ASC coinsurance 
rate for all procedures is 20 percent. This contrasts with procedures 
performed in HOPDs, where the beneficiary is responsible for copayments 
that range from 20 percent to 40 percent of the procedure payment. 
Second, ASC payment rates under the revised payment system are lower 
than payment rates for the same procedures under the OPPS; therefore, 
the beneficiary coinsurance amount under the ASC payment system almost 
always would be less than the OPPS copayment amount for the same 
services. (The only exceptions would be if the ASC coinsurance amount 
exceeds the inpatient deductible. The statute requires that copayment 
amounts under the OPPS not exceed the inpatient deductible.) For new 
procedures that we are proposing to add to the ASC list of covered 
surgical procedures in CY 2010, as well as for procedures already 
included on the list, and that are furnished in an ASC rather than the 
HOPD setting, the beneficiary coinsurance amount would be less than the 
OPPS copayment amount. Furthermore, the proposed additions to the ASC 
list of covered surgical procedures would provide beneficiaries access 
to more surgical procedures in ASCs. Beneficiary coinsurance for 
services migrating from physicians' offices to ASCs may decrease or 
increase under the revised ASC payment system, depending on the 
particular service and the relative payment amounts for that service in 
the physician's office compared to the ASC. However, for those 
additional procedures that we are proposing to designate as office-
based in CY 2010, the beneficiary coinsurance amount would be no 
greater than the beneficiary coinsurance in the physician's office.
    In addition, as finalized in the August 2, 2007 final rule (72 FR 
42520), in CY 2010, the third year of the 4-year transition to the ASC 
payment rates calculated according to the ASC standard ratesetting 
methodology of the revised ASC payment system, ASC payment rates for a 
number of commonly furnished ASC procedures would continue to be 
reduced, resulting in lower beneficiary coinsurance amounts for these 
ASC services in CY 2010.
5. Conclusion
    The proposed updates to the ASC payment system for CY 2010 would 
affect each of the approximately 5,000 ASCs currently approved for 
participation in the Medicare program. The effect on an individual ASC 
would depend on its mix of patients, the proportion of the ASC's 
patients that are Medicare beneficiaries, the degree to which the 
payments for the procedures offered by the ASC are changed under the 
revised payment system, and the extent to which the ASC provides a 
different set of procedures in the coming year.
    The CY 2010 proposed update to the revised ASC payment system 
includes a payment update of 0.6 percent that we estimate will result 
in a greater amount of Medicare expenditures in CY 2010 than was 
estimated to be made in CY 2009. We estimate that the proposed update 
to the revised ASC payment system, including the proposed addition of 
surgical procedures to the list of covered surgical procedures, would 
have a modest effect on Medicare expenditures compared to the estimated 
level of Medicare expenditures in CY 2009.
6. Accounting Statement
    As required by OMB Circular A-4 (available at http://www.whitehousegov/omb/circulars/a004/a-4.pdf), in Table 55 below, we 
have prepared an accounting statement showing the classification of the 
expenditures associated with the statutorily authorized 0.6 percent 
update to the CY 2010 revised ASC payment system, based on the 
provisions of this proposed rule and the baseline spending estimates 
for ASCs in the 2009 Medicare Trustees Report. This table provides our 
best estimate of Medicare payments to suppliers as a result of the 
proposed update to the CY 2010 ASC payment system, as presented in this 
proposed rule. All expenditures are classified as transfers.

 Table 55--Accounting Statement: Classification of Estimated Expenditures From CY 2009 to CY 2010 as a Result of
                          the Proposed CY 2010 Update to the Revised ASC Payment System
----------------------------------------------------------------------------------------------------------------
           Category                                                 Transfers
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers  $16 Million.
From Whom to Whom.............  Federal Government to Medicare Providers and Suppliers.
Annualized Monetized Transfer.  $16 Million.
From Whom to Whom.............  Premium Payments from Beneficiaries to Federal Government.
    Total.....................  $16 Million.
----------------------------------------------------------------------------------------------------------------

D. Effects of Proposed Requirements for Hospital Reporting of Quality 
Data for Annual Hospital Payment Update

    In section XVI. of the CY 2009 OPPS/ASC final rule with comment 
period (73 FR 68758) we discussed our requirements for subsection (d) 
hospitals to report quality data under the HOP QDRP in order to receive 
the full payment update for CY 2010. In section XVI. of this proposed 
rule, we proposed additional policies affecting the CY 2010, CY 2011, 
and CY 2012 HOP QDRP. We estimate that about 83 hospitals may not 
receive the full payment update in CY 2010. Most of these hospitals are 
either small rural or small urban hospitals. However, at this time, 
information is not available to determine the precise number of 
hospitals that do not meet the

[[Page 35424]]

requirements for the full hospital market basket increase for CY 2010. 
We also estimate that 83 hospitals may not receive the full payment 
update in CY 2011 and in CY 2012.
    In section XVI.E.3.a. of this proposed rule, for the CY 2011 
payment update, as part of the proposed validation process, we are 
proposing to require hospitals to submit paper copies of requested 
medical records to a designated contractor within the required 
timeframe. Failure to submit requested documentation can result in a 2 
percentage point reduction in a hospital's update, but the failure to 
pass the validation itself would not. We estimate that no more than 20 
hospitals would fail the proposed validation documentation submission 
requirement for the CY 2011 payment update.
    For the CY 2011 payment update, our proposed validation sample size 
is estimated to be about 7,300 medical records. We estimate that this 
proposed requirement would cost hospitals approximately 12 cents per 
page for copying and approximately $4.00 per chart for postage. We have 
found, based on experience, that an average sized outpatient medical 
chart is approximately 30 pages. We estimate that the total cost to the 
impacted hospitals would be approximately $55,480, with a maximum 
expected cost of $152 for an individual hospital based upon an expected 
maximum of 20 selected records; the expected minimum would be $0.00 if 
no records were selected from a hospital. We believe that this cost is 
minimal, compared with the 2.0 percentage point HOP QDRP component of 
the annual payment update at risk. CMS does not plan to reimburse 
hospitals for copying and mailing costs. This proposed validation 
requirement is necessary so that CMS has all the information it needs 
to validate the accuracy of hospital submitted data abstracted from 
paper medical records.
    In section XVI.E.3.b. of this proposed rule, we are proposing to 
expand the proposed CY 2011 validation requirement for the CY 2012 
payment update. We believe that our proposal to validate data submitted 
by 800 hospitals for purposes of the CY 2012 HOP QDRP payment 
determination would not change the number of hospitals that fail the 
validation requirement from CY 2011. We have proposed to calculate the 
validation matches for CY 2011 (we note, however, that the validation 
results will not affect the CY 2011 payment update) and CY 2012 by 
assessing whether the overall measure data submitted by the hospital 
matches the independently reabstracted measure data. We believe that 
this methodology will make it less difficult for hospitals to satisfy 
the validation requirement than if we proposed to calculate the percent 
agreement between what the hospital submitted and what the CMS 
designated contractor independently abstracted for each submitted, 
individual data element. In addition, we have proposed to validate data 
for a much smaller number of hospitals each year, 800 hospitals out of 
the approximately 3,400 HOP QDRP participating hospitals. As a result, 
we believe that the effect of our proposed validation process for CY 
2012 will be minimal in terms of the number of hospitals that do not 
meet all program requirements. Of the 83 hospitals that we estimate 
will not receive the full payment update for CY 2012, we estimate that 
approximately 20 hospitals will fail to meet our proposed CY 2012 
validation requirements.

E. Executive Order 12866

    In accordance with the provisions of Executive Order 12866, this 
proposed rule was reviewed by the OMB.

List of Subjects

42 CFR Part 410

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

42 CFR Part 416

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

42 CFR Part 419

    Hospitals, Medicare, Reporting and recordkeeping requirements.

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

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

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

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

    2. Section 410.27 is amended by--
    a. Revising the section heading.
    b. Revising the introductory text of paragraph (a) and paragraph 
(a)(1).
    c. Revising paragraph (e).
    d. Revising paragraph (f).
    e. Adding new paragraph (g).
    The revisions and additions read as follows:


Sec.  410.27  Outpatient hospital or CAH services and supplies incident 
to a physician or nonphysician practitioner service: Conditions.

    (a) Medicare Part B pays for hospital or CAH services and supplies 
furnished incident to a physician or nonphysician practitioner service 
to outpatients, including drugs and biologicals that cannot be self-
administered, if--
    (1) They are furnished--
    (i) By or under arrangements made by the participating hospital or 
CAH, except in the case of a SNF resident as provided in Sec.  
411.15(p) of this chapter;
    (ii) As an integral though incidental part of a physician's or 
nonphysician practitioner's services;
    (iii) In the hospital or CAH or in a department of the hospital or 
CAH, as defined in Sec.  413.65 of this subchapter; and
    (iv) Under the direct supervision of a physician or a nonphysician 
practitioner as specified in paragraph (f) of this section. 
Nonphysician practitioners may directly supervise services that they 
may personally furnish in accordance with State law and all additional 
requirements, including those specified in Sec. Sec.  410.71, 410.74, 
410.75, 410.76, and 410.77, respectively.
    (A) For services furnished in the hospital or CAH or in an on-
campus outpatient department of the hospital or CAH, as defined in 
Sec.  413.65 of this subchapter, ``direct supervision'' means that the 
physician or nonphysician practitioner must be present on the same 
campus, in the hospital or CAH or on-campus provider-based departments 
of the hospital or CAH, and immediately available to furnish assistance 
and direction throughout the performance of the procedure. It does not 
mean that the physician or nonphysician practitioner must be present in 
the room when the procedure is performed. For pulmonary rehabilitation, 
cardiac rehabilitation, and intensive cardiac rehabilitation services, 
direct supervision must be furnished by a doctor of medicine or 
osteopathy, as specified in Sec. Sec.  410.47 and 410.49, respectively.
    (B) For services furnished in an off-campus outpatient department 
of the hospital or CAH, as defined in Sec.  413.65 of this subchapter, 
``direct supervision'' means the physician or nonphysician practitioner 
must be present in the off-campus provider-based department of the 
hospital or CAH and immediately available to furnish assistance and 
direction throughout the performance of the procedure. It does not mean 
that the physician or nonphysician practitioner must be present in the 
room when the procedure is performed. For pulmonary

[[Page 35425]]

rehabilitation, cardiac rehabilitation, and intensive cardiac 
rehabilitation services, direct supervision must be furnished by a 
doctor of medicine or osteopathy, as specified in Sec. Sec.  410.47 and 
410.49, respectively.
* * * * *
    (e) Services furnished by an entity other than the hospital or CAH 
are subject to the limitations specified in Sec.  410.42(a).
    (f) For purposes of this section, ``nonphysician practitioner'' 
means a clinical psychologist, physician assistant, nurse practitioner, 
clinical nurse specialist, or certified nurse-midwife.
    (g) For purposes of this section, ``in the hospital or CAH'' means 
areas in the main building(s) of the hospital or CAH that are under the 
ownership, financial, and administrative control of the hospital or 
CAH; that are operated as part of the hospital or CAH; and for which 
the hospital or CAH bills the services furnished under the hospital's 
or CAH's CMS Certification Number.
    3. Section 410.28 is amended by revising paragraph (e) to read as 
follows:


Sec.  410.28  Hospital or CAH diagnostic services furnished to 
outpatients: Conditions.

* * * * *
    (e) Medicare Part B makes payment under section 1833(t) of the Act 
for diagnostic services furnished by or under arrangements made by the 
participating hospital, only when the diagnostic services are furnished 
under the appropriate level of physician supervision specified by CMS 
in accordance with the definitions in Sec.  410.32(b)(3)(i), 
(b)(3)(ii), and (b)(3)(iii). Under general supervision, the training of 
the nonphysician personnel who actually perform the diagnostic 
procedure and the maintenance of the necessary equipment and supplies 
are the continuing responsibility of the facility. In addition--
    (1) For services furnished directly or under arrangement in the 
hospital or in an on-campus outpatient department of the hospital, as 
defined in Sec.  413.65 of this subchapter, ``direct supervision'' 
means that the physician must be present on the same campus, in the 
hospital or on-campus provider-based departments of the hospital, and 
immediately available to furnish assistance and direction throughout 
the performance of the procedure. It does not mean that the physician 
must be present in the room when the procedure is performed. For this 
purpose, the definition of ``in the hospital'' is as specified in Sec.  
410.27(g).
    (2) For services furnished directly or under arrangement in an off-
campus outpatient department of the hospital, as defined in Sec.  
413.65 of this subchapter, ``direct supervision'' means the physician 
must be present in the off-campus provider-based department of the 
hospital and immediately available to furnish assistance and direction 
throughout the performance of the procedure. It does not mean that the 
physician must be present in the room when the procedure is performed.
    (3) For services furnished under arrangement in nonhospital 
locations, ``direct supervision'' means the definition specified in 
Sec.  410.32(b)(3)(ii).
* * * * *

PART 416--AMBULATORY SURGICAL SERVICES

    4. 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 and 1395hh).

    5. Section 416.30 is amended by revising paragraph (f)(2) to read 
as follows:


Sec.  416.30  Terms of the agreement with CMS.

* * * * *
    (f) * * *
    (2) The ASC participates and is paid only as an ASC.
* * * * *

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

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

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

    7. Section 419.64 is amended by--
    a. Adding new paragraphs (a)(4)(iii) and (a)(4)(iv).
    b. Revising paragraph (c)(2).
    c. Adding new paragraph (c)(3).
    The revisions and additions read as follows:


Sec.  419.64  Transitional pass-through payments: Drugs and 
biologicals.

    (a) * * *
    (4) * * *
    (iii) A biological that is not surgically implanted or inserted 
into the body.
    (iv) A biological that is surgically implanted or inserted into the 
body, for which pass-through payment as a biological is made on or 
before December 31, 2009.
* * * * *
    (c) * * *
    (2) For a drug or biological described in paragraph (a)(4) of this 
section and approved for and receiving pass-through payment beginning 
on or before December 31, 2009--the date that CMS makes its first pass-
through payment for the drug or biological.
    (3) For a drug or nonimplantable biological described in paragraph 
(a)(4) of this section and approved for pass-through payment beginning 
on or after January 1, 2010--the date of the first sale of the drug or 
nonimplantable biological in the United States after FDA approval. 
Pass-through payment for the drug or nonimplantable biological begins 
on the first day of the hospital outpatient prospective payment system 
update following the update period during which the drug or 
nonimplantable biological was approved for pass-through status.
* * * * *
    8. Section 419.66 is amended by revising paragraph (b)(4)(iii) to 
read as follows:


Sec.  419.66  Transitional pass-through payments: Medical devices.

* * * * *
    (b) * * *
    (4) * * *
    (iii) A material that may be used to replace human skin (for 
example, a biological skin replacement material or synthetic skin 
replacement material).
* * * * *
    9. Section 419.70 is amended by revising the heading of paragraph 
(d)(5) to read as follows:


Sec.  419.70  Transitional adjustments to limit decline in payments.

* * * * *
    (d) * * *
    (5) Temporary treatment for small sole community hospitals on or 
after January 1, 2009 and through December 31, 2009. * * *
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: June 22, 2009.
Charlene Frizzera,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: June 29, 2009.
Kathleen Sebelius,
Secretary.
BILLING CODE 4120-01-P

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[FR Doc. E9-15882 Filed 7-1-09; 4:15 pm]
BILLING CODE 4120-01-C


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