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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
 AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
 ACTION: Proposed rule.
 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
                            ( print page 35233) 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
                            ( print page 35234) (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
                            ( print page 35235) 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
                            ( print page 35236) 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 
                        ( print 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 § 419.22 of the regulations. Under § 419.20(b) of the regulations, we specify the types of hospitals and entities that are excluded from payment under the OPPS. These excluded entities include: Maryland hospitals, but only for services that are paid under a cost containment waiver in accordance with section 1814(b)(3) of the Act; 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.
                        ( print 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— The methodology used to recalibrate the proposed APC relative payment weights.
                    The proposed changes to packaged services.
                    The proposed update to the conversion factor used to determine payment rates under the OPPS. In this section, we set forth proposed changes in the amounts and factors for calculating the full annual update increase to the conversion factor.
                    The proposed retention of our current policy to use the IPPS wage indices to adjust, for geographic wage differences, the portion of the OPPS payment rate and the copayment standardized amount attributable to labor-related cost.
                    The proposed update of statewide average default CCRs.
                    The proposed application of hold harmless transitional outpatient payments (TOPs) for certain small rural hospitals.
                    The proposed payment adjustment for rural SCHs.
                    The proposed calculation of the hospital outpatient outlier payment.
                    The calculation of the proposed national unadjusted Medicare OPPS payment.
                    The proposed beneficiary copayments for OPPS services. 2. Proposed OPPS Ambulatory Payment Classification (APC) Group Policies In section III. of this proposed rule, we discuss— The proposed additions of new HCPCS codes to APCs.
                    Our proposals to establish a number of new APCs.
                    Our analyses of Medicare claims data and certain recommendations of the APC Panel.
                    The application of the 2 times rule and proposed exceptions to it.
                    Proposed changes to specific APCs.
                    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.
                        ( print page 35239) 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 
                        ( print 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: 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.
                    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.
                    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.
                    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 
                        ( print 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. 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  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 
                        ( print page 35253)
                        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 
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                        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 ±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. 
 
  
 
  
 
  
 
  
 
  
 
  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 change0392—Administration, Processing and Storage for Blood and Blood Components; Processing and Storage
We are proposing to crosswalk charges under revenue code 0392 to cost center 4700 (Blood Storing, Processing, & 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 Supplies—Extension of 027X; Surgical Dressings
We are proposing to crosswalk the charges reported under revenue code 0623 to cost 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 Day Program; Half Day
We are proposing to crosswalk charges 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 Day0942—Other Therapeutic Services (also see 095x, an extension of 094x); Educ/Training
We are proposing to crosswalk the charges under revenue code 0942 to cost center 6000 (Clinic) as the primary cost 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 Services (also see 095x, an extension of 094x); Pulmonary Rehabilitation
We are proposing to crosswalk the charges under revenue code 0948 to cost center 4900 (Respiratory Therapy) as primary 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 
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                        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 
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                        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 
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                        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
Description0250
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.( print 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 
                        ( print 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 
                        ( print 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 APC
Proposed CY 2010 status 
                                 indicator
Proposed CY 2010 APC title0039
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 
                        ( print 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: 93303 (Transthoracic echocardiography for congenital cardiac anomalies; complete);
                    93304 (Transthoracic echocardiography for congenital cardiac anomalies; follow-up or limited study);
                    93307 (Echocardiography, transthoracic, real-time with image documentation (2D) with or without M-mode recording; complete);
                    93308 (Echocardiography, transthoracic, real-time with image documentation (2D) with or without M-mode recording; follow-up or limited study);
                    93312 ( Echocardiography, transesophageal, real time with image documentation (2D) (with or without M-mode recording); including probe placement, image acquisition, interpretation and report);
                    93315 (Transesophageal echocardiography for congenital cardiac anomalies; including probe placement, image acquisition, interpretation and report);
                    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
                    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( print 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 
                        ( print 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. 
 
  
 
  
 
  
 
  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.
                        ( print page 35276) Table 7—Proposed CY 2010 Echocardiography APCs
Proposed CY 2010 APC
Proposed CY 2010 APC title
Proposed CY 2010 approximate APC median cost0128
Echocardiogram With Contrast
$6600269
Level II Echocardiogram Without Contrast
4560270
Level III Echocardiogram Without Contrast
5960697
Level I Echocardiogram Without Contrast
263
 (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 
                        ( print 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 
                        ( print 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
Prospective payment year
Number of claims
APC median costCY 2007
260
$3,549CY 2008
183
4,945CY 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 
                        ( print 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 
                        ( print 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: 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.
                    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.
                        ( print 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 
                        ( print 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
Codes used in combinations: at least one in Group A and one in Group B
CY 2009 HCPCS code
Proposed 
                                 single code  
                                 CY 2010  
                                 APC
Proposed CY 2010 SI 
                                 (composite)Group AComprehensive electrophysiologic evaluation with right atrial pacing and recording, right ventricular pacing and recording, His bundle recording, including insertion and repositioning of multiple electrode catheters, without induction or attempted induction of arrhythmia
93619
0085
Q3Comprehensive electrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or attempted induction of arrhythmia; with right atrial pacing and recording, right ventricular pacing and recording, His bundle recording
93620
0085
Q3Group BIntracardiac catheter ablation of atrioventricular node function, atrioventricular conduction for creation of complete heart block, with or without temporary pacemaker placement
93650
0085
Q3Intracardiac catheter ablation of arrhythmogenic focus; for treatment of supraventricular tachycardia by ablation of fast or slow atrioventricular pathways, accessory atrioventricular connections or other atrial foci, singly or in combination
93651
0086
Q3Intracardiac catheter ablation of arrhythmogenic focus; for treatment of ventricular tachycardia
93652
0086
Q3
 (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 
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                        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 
                        ( print 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 composite)
Proposed CY 2010 approximate 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 without contrast composite)*
Proposed CY 2010 approximate APC median cost = $4290067T
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 contrast composite)
Proposed CY 2010 approximate APC median cost = $63470487
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.( print 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 without contrast composite) *
Proposed CY 2010 approximate APC median cost = $73270336
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 with contrast composite)
Proposed CY 2010 approximate APC median cost = $1,01370549
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.( print 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/
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                        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 
                        ( print 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 
                        ( print 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 
                        ( print 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 
                        *APCPanel@cms.hhs.gov*
                         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 
                        ( print 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 
                        ( print 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 
                        ( print 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
State
Urban/rural
Proposed CY 2010 default CCR
Previous default CCR (CY 2009 OPPS Final rule)ALASKA
RURAL
0.511
0.562ALASKA
URBAN
0.334
0.345ALABAMA
RURAL
0.218
0.221ALABAMA
URBAN
0.202
0.202ARKANSAS
RURAL
0.256
0.256ARKANSAS
URBAN
0.259
0.268ARIZONA
RURAL
0.260
0.267ARIZONA
URBAN
0.219
0.226CALIFORNIA
RURAL
0.210
0.219CALIFORNIA
URBAN
0.212
0.218COLORADO
RURAL
0.343
0.346COLORADO
URBAN
0.251
0.248CONNECTICUT
RURAL
0.371
0.372CONNECTICUT
URBAN
0.333
0.322DISTRICT OF COLUMBIA
URBAN
0.327
0.329DELAWARE
RURAL
0.320
0.302DELAWARE
URBAN
0.382
0.349FLORIDA
RURAL
0.205
0.204FLORIDA
URBAN
0.189
0.189GEORGIA
RURAL
0.267
0.267GEORGIA
URBAN
0.247
0.251HAWAII
RURAL
0.357
0.367HAWAII
URBAN
0.307
0.344IOWA
RURAL
0.332
0.439IOWA
URBAN
0.292
0.294IDAHO
RURAL
0.477
0.449IDAHO
URBAN
0.425
0.419ILLINOIS
RURAL
0.277
0.280ILLINOIS
URBAN
0.261
0.266INDIANA
RURAL
0.295
0.298INDIANA
URBAN
0.297
0.295KANSAS
RURAL
0.297
0.300KANSAS
URBAN
0.238
0.238KENTUCKY
RURAL
0.233
0.236KENTUCKY
URBAN
0.260
0.255LOUISIANA
RURAL
0.281
0.283LOUISIANA
URBAN
0.265
0.258MARYLAND
RURAL
0.299
0.303MARYLAND
URBAN
0.271
0.276MASSACHUSETTS
URBAN
0.325
0.328MAINE
RURAL
0.451
0.452MAINE
URBAN
0.436
0.428MICHIGAN
RURAL
0.319
0.317MICHIGAN
URBAN
0.319
0.321MINNESOTA
RURAL
0.485
0.488MINNESOTA
URBAN
0.330
0.348MISSOURI
RURAL
0.274
0.269MISSOURI
URBAN
0.276
0.282MISSISSIPPI
RURAL
0.261
0.261MISSISSIPPI
URBAN
0.198
0.209MONTANA
RURAL
0.468
0.455MONTANA
URBAN
0.466
0.439NORTH CAROLINA
RURAL
0.272
0.272NORTH CAROLINA
URBAN
0.288
0.292NORTH DAKOTA
RURAL
0.349
0.369NORTH DAKOTA
URBAN
0.352
0.354NEBRASKA
RURAL
0.346
0.345NEBRASKA
URBAN
0.264
0.283NEW HAMPSHIRE
RURAL
0.350
0.350NEW HAMPSHIRE
URBAN
0.288
0.296NEW JERSEY
URBAN
0.251
0.257NEW MEXICO
RURAL
0.264
0.263NEW MEXICO
URBAN
0.337
0.328NEVADA
RURAL
0.311
0.312NEVADA
URBAN
0.192
0.192NEW YORK
RURAL
0.421
0.412( print page 35294)NEW YORK
URBAN
0.385
0.388OHIO
RURAL
0.348
0.353OHIO
URBAN
0.254
0.258OKLAHOMA
RURAL
0.275
0.278OKLAHOMA
URBAN
0.238
0.238OREGON
RURAL
0.311
0.318OREGON
URBAN
0.353
0.374PENNSYLVANIA
RURAL
0.282
0.284PENNSYLVANIA
URBAN
0.224
0.232PUERTO RICO
URBAN
0.487
0.519RHODE ISLAND
URBAN
0.293
0.294SOUTH CAROLINA
RURAL
0.243
0.242SOUTH CAROLINA
URBAN
0.245
0.240SOUTH DAKOTA
RURAL
0.328
0.336SOUTH DAKOTA
URBAN
0.263
0.267TENNESSEE
RURAL
0.237
0.244TENNESSEE
URBAN
0.220
0.221TEXAS
RURAL
0.256
0.257TEXAS
URBAN
0.230
0.238UTAH
RURAL
0.406
0.413UTAH
URBAN
0.409
0.430VIRGINIA
RURAL
0.253
0.257VIRGINIA
URBAN
0.263
0.266VERMONT
RURAL
0.412
0.406VERMONT
URBAN
0.422
0.422WASHINGTON
RURAL
0.354
0.349WASHINGTON
URBAN
0.336
0.342WISCONSIN
RURAL
0.402
0.399WISCONSIN
URBAN
0.334
0.346WEST VIRGINIA
RURAL
0.292
0.293WEST VIRGINIA
URBAN
0.348
0.349WYOMING
RURAL
0.413
0.418WYOMING
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 § 419.70(d) of our regulations to reflect the requirements of Public Law 109-171.
                        ( print 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 §§ 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 § 419.70(d)(2) to more precisely capture our existing policy and to correct an inaccurate cross-reference. We also made technical corrections to the cross-references in paragraphs (e), (g), and (i) of § 419.70. For CY 2010, we are proposing to make a technical correction to the heading of § 419.70(d)(5) to correctly identify the policy as described in the subsequent regulation text. The paragraph heading 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 § 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 § 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 
                        ( print 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 
                        ( print 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 
                        ( print 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*a*is the labor-related portion of the national unadjusted payment rate (wage adjusted)*. *X*a
                         = .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*a *Step 6.*
                         If a provider is a SCH, set forth in the regulations at § 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  § 412.64(b), or is treated as being located in a rural area under § 412.103,  multiply the wage index adjusted payment rate by 1.071 to calculate the total payment. The formula below is a mathematical representation of Step 6 and applies the rural adjustment for rural SCHs. Adjusted Medicare Payment (SCH or EACH) = Adjusted Medicare Payment * 1.071 We have provided examples below of the calculation of both the 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.
                        ( print 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 finalizedApril 1, 2009
Level II HCPCS Codes
April 1, 2009
CY 2010 OPPS/ASC proposed rule
CY 2010 OPPS/ASC final rule with comment period.July 1, 2009
Level II HCPCS Codes
July 1, 2009
CY 2010 OPPS/ASC proposed rule
CY 2010 OPPS/ASC final rule with comment period.Category I (certain vaccine codes) and III CPT Codes
July 1, 2009
CY 2010 OPPS/ASC proposed rule
CY 2010 OPPS/ASC final rule with comment period.October 1, 2009
Level II HCPCS Codes
October 1, 2009
CY 2010 OPPS/ASC final rule with comment period
CY 2011 OPPS/ASC final rule with comment period.January 1, 2010
Level II HCPCS Codes
January 1, 2010
CY 2010 OPPS/ASC final rule with Comment Period
CY 2011 OPPS/ASC final rule with comment period.Category I and III CPT Codes
January 1, 2010
CY 2010 OPPS/ASC final rule with comment period
CY 2011 OPPS/ASC final rule with 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. 
                        ( print 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 
                        ( print 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
CY 2009 HCPCS Code
CY 2009 Long Descriptor
Proposed CY 2010 Status Indicator
Proposed CY 2010 APCC9247
Iobenguane, I-123, diagnostic, per study dose, up to 10 millicuries
G
9247C9249
Injection, certolizumab pegol, 1 mg
G
9249
 Table 15—New Level II HCPCS Codes Implemented in July 2009
CY 2009 HCPCS Code
CY 2009 Long Descriptor
Proposed CY 2010 Status Indicator
Proposed CY 2010 APC
Proposed CY 2010 Payment Rate*C9250
Human plasma fibrin sealant, vapor-heated, solvent-detergent (Artiss), 2ml
G
9250
$155.00C9251
Injection, C1 esterase inhibitor (human), 10 units
G
9251
41.34C9252
Injection, plerixafor, 1 mg
G
9252
276.04C9253
Injection, temozolomide, 1 mg
G
9253
5.00C9360
Dermal substitute, native, non-denatured collagen, neonatal bovine origin (SurgiMend Collagen Matrix), per 0.5 square centimeters
G
9360
14.31C9361
Collagen matrix nerve wrap (NeuroMend Collagen Nerve Wrap), per 0.5 centimeter length
G
9361
124.55C9362
Porous purified collagen matrix bone void filler (Integra Mozaik Osteoconductive Scaffold Strip), per 0.5 cc
G
9362
56.71C9363
Skin substitute, Integra Meshed Bilayer Wound Matrix, per square centimeter
G
9363
11.13C9364
Porcine implant, Permacol, per square centimeter
G
9364
18.57Q2023
Injection, factor viii (antihemophilic factor, recombinant) (Xyntha), per i.u
K
1268
1.15Q4115
Skin substitute, Alloskin, per square centimeter
M
Not Applicable
Not ApplicableQ4116
Skin substitute, Alloderm, per square centimeter
K
1270
32.42*Based on July 2009 ASP information.
 Table 16—Category I Vaccine and Category III CPT Codes Implemented in July 2009
CY 2009 HCPCS code
CY 2009 long descriptor
Proposed CY 2010 status indicator
Proposed CY 2010 APC
Proposed CY 2010 payment rate0199T
Physiologic recording of tremor using accelerometer(s) and gyroscope(s), (including frequency and amplitude) including interpretation and report
S
0215
$40.790200T
Percutaneous sacral augmentation (sacroplasty), unilateral injection(s), including the use of a balloon or mechanical device (if utilized), one or more needles
T
0049
1,489.690201T
Percutaneous sacral augmentation (sacroplasty), bilateral injections, including the use of a balloon or mechanical device (if utilized), two or more needles
T
0050
2,134.510202T
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
C
Not applicable
Not applicable90670
Pneumococcal conjugate vaccine, 13 valent, for intramuscular use
E
Not applicable
Not applicable
 
 
 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 § 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 
                        ( print 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 § 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: Resource homogeneity
                    Clinical homogeneity
                    Hospital outpatient setting
                    Frequency of service (volume)
                    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 title0080
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.
 
 
 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
CY 2009 HCPCS code
CY 2009 short descriptor
CY 2009 SI
CY 2009 APC
Proposed CY 2010 SI
Proposed CY 2010 APC0182T
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 
                        ( print 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 
                        ( print 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 § 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 (§ 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 
                        ( print 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 APC
Proposed CY 2010 APC title
Proposed CY 2010 device
                                 offset 
                                 percentage for no cost/full credit case
Proposed CY 2010 device
                                 offset 
                                 percentage for 
                                 partial credit case0039
Level I Implantation of Neurostimulator Generator
85
43( print page 35308)0040
Percutaneous Implantation of Neurostimulator Electrodes
58
290061
Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electrodes
63
310089
Insertion/Replacement of Permanent Pacemaker and Electrodes
71
350090
Insertion/Replacement of Pacemaker Pulse Generator
73
370106
Insertion/Replacement of Pacemaker Leads and/or Electrodes
41
200107
Insertion of Cardioverter-Defibrillator
88
440108
Insertion/Replacement/Repair of Cardioverter-Defibrillator Leads
88
440225
Implantation of Neurostimulator Electrodes, Cranial Nerve
73
370227
Implantation of Drug Infusion Device
82
410259
Level VII ENT Procedures
85
420315
Level II Implantation of Neurostimulator Generator
88
440385
Level I Prosthetic Urological Procedures
58
290386
Level II Prosthetic Urological Procedures
70
350418
Insertion of Left Ventricular Pacing Elect
81
400425
Level II Arthroplasty or Implantation with Prosthesis
57
280648
Level IV Breast Surgery
47
230654
Insertion/Replacement of a permanent dual chamber pacemaker
74
370655
Insertion/Replacement/Conversion of a permanent dual chamber pacemaker
75
370680
Insertion of Patient Activated Event Recorders
73
36
 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 descriptorC1721
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” 
                        ( print 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 § 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
CY 2009 HCPCS code
CY 2009 short descriptor
Proposed CY 2010 SI
Proposed CY 2010 APCC9354
Veritas collagen matrix, cm2
N
N/AC9355
Neuromatrix nerve cuff, cm
N
N/AJ1300
Eculizumab injection
K
9236( print page 35310)J3488
Reclast injection
K
0951J9261
Nelarabine injection
K
0825J9330
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 HCPCS code
CY 2009 short descriptor
Proposed CY 2010 SI
Proposed CY 2010 APCC9245
Injection, romiplostim
G
9245C9246
Inj, gadoxetate disodium
G
9246C9247
Inj, iobenguane, I-123, dx
G
9247C9248
Inj, clevidipine butyrate
G
9248C9249
Inj, certolizumab pegol
G
9249C9250
Artiss fibrin sealant
G
9250C9251
Inj, C1 esterase inhibitor
G
9251C9252
Injection, plerixafor
G
9252C9253
Injection, temozolomide
G
9253C9356
TendoGlide Tendon Prot, cm2
G
9356C9358
SurgiMend, fetal
G
9358C9359
Implnt, bon void filler-putty
G
9359( print page 35311)C9360
SurgiMend, neonatal
G
9360C9361
NeuraMend nerve wrap
G
9361C9362
Implnt, bon void filler-strip
G
9362C9363
Integra Meshed Bil Wound Mat
G
9363C9364
Porcine implant, Permacol
G
9364J0641
Levoleucovorin injection
G
1236J1267
Doripenem injection
G
9241J1453
Fosaprepitant injection
G
9242J1459
Inj IVIG privigen 500 mg
G
1214J1571
Hepagam b im injection
G
0946J1573
Hepagam b intravenous, inj
G
1138J1953
Levetiracetam injection
G
9238J2785
Injection, regadenoson
G
9244J8705
Topotecan oral
G
1238J9033
Bendamustine injection
G
9243J9207
Ixabepilone injection
G
9240J9225
Vantas implant
G
1711J9226
Supprelin LA implant
G
1142Q4114
Flowable Wound Matrix, 1 cc
G
1251
 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 
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                        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 § 419.64 and those applicable to pass-through device categories are found in § 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 
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                        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 
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                        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 §§ 419.64 and 419.66 to conform to this new policy. Specifically, we are proposing to amend § 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 § 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 § 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 § 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 § 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 § 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 § 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 § 419.64 and add a new paragraph (c)(3) to § 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 
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                        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 § 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 § 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 
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                        for 3 years, it would expire on May 2, 2012. We are proposing to modify § 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 § 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 § 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 § 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 § 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 
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                        proposed new § 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 § 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 
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                        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 title0307
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 
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                        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 
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                        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: 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.
                    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.
                    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, 
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                        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
CY 2009 HCPCS code
CY 2009 long descriptor
Proposed CY 2010 SIJ0530
Injection, penicillin g benzathine and penicillin g procaine, up to 600,000 units
NJ0540
Injection, penicillin g benzathine and penicillin g procaine, up to 1,200,000 units
NJ0550
Injection, penicillin g benzathine and penicillin g procaine, up to 2,400,000 units
NJ0560
Injection, penicillin g benzathine, up to 600,000 units
NJ0570
Injection, penicillin g benzathine, up to 1,200,000 units
NJ0580
Injection, penicillin g benzathine, up to 2,400,000 units
N( print page 35322)J1380
Injection, estradiol valerate, up to 10 mg
NJ0970
Injection, estradiol valerate, up to 40 mg
NJ1390
Injection, estradiol valerate, up to 20 mg
NJ1020
Injection, methylprednisolone acetate, 20 mg
NJ1030
Injection, methylprednisolone acetate, 40 mg
NJ1040
Injection, methylprednisolone acetate, 80 mg
NJ1070
Injection, testosterone cypionate, up to 100 mg
NJ1080
Injection, testosterone cypionate, 1 cc, 200 mg
NJ1440
Injection, filgrastim (g-csf), 300 mcg
KJ1441
Injection, filgrastim (g-csf), 480 mcg
KJ1460
Injection, gamma globulin, intramuscular, 1 cc
KJ1470
Injection, gamma globulin, intramuscular, 2 cc
KJ1480
Injection, gamma globulin, intramuscular, 3 cc
KJ1490
Injection, gamma globulin, intramuscular, 4 cc
KJ1500
Injection, gamma globulin, intramuscular, 5 cc
KJ1510
Injection, gamma globulin, intramuscular, 6 cc
KJ1520
Injection, gamma globulin, intramuscular, 7 cc
KJ1530
Injection, gamma globulin, intramuscular, 8 cc
KJ1540
Injection, gamma globulin, intramuscular, 9 cc
KJ1550
Injection, gamma globulin, intramuscular, 10 cc
KJ1560
Injection, gamma globulin, intramuscular, over 10 cc
KJ1642
Injection, heparin sodium, (heparin lock flush), per 10 units
NJ1644
Injection, heparin sodium, per 1000 units
NJ1850
Injection, kanamycin sulfate, up to 75 mg
NJ1840
Injection, kanamycin sulfate, up to 500 mg
NJ2270
Injection, morphine sulfate, up to 10 mg
NJ2271
Injection, morphine sulfate, 100mg
NJ2320
Injection, nandrolone decanoate, up to 50 mg
KJ2321
Injection, nandrolone decanoate, up to 100 mg
KJ2322
Injection, nandrolone decanoate, up to 200 mg
KJ2788
Injection, rho d immune globulin, human, minidose, 50 micrograms (250 i.u.)
KJ2790
Injection, rho d immune globulin, human, full dose, 300 micrograms (1500 i.u.)
KJ2920
Injection, methylprednisolone sodium succinate, up to 40 mg
NJ2930
Injection, methylprednisolone sodium succinate, up to 125 mg
NJ3120
Injection, testosterone enanthate, up to 100 mg
NJ3130
Injection, testosterone enanthate, up to 200 mg
NJ3471
Injection, hyaluronidase, ovine, preservative free, per 1 usp unit (up to 999 usp units)
NJ3472
Injection, hyaluronidase, ovine, preservative free, per 1000 usp units
NJ7050
Infusion, normal saline solution, 250 cc
NJ7040
Infusion, normal saline solution, sterile (500 ml=1 unit)
NJ7030
Infusion, normal saline solution, 1000 cc
NJ7515
Cyclosporine, oral, 25 mg
NJ7502
Cyclosporine, oral, 100 mg
NJ8520
Capecitabine, oral, 150 mg
KJ8521
Capecitabine, oral, 500 mg
KJ9060
Injection, cisplatin, powder or solution, per 10 mg
NJ9062
Cisplatin, 50 mg
NJ9070
Injection, cyclophosphamide, 100 mg
NJ9080
Cyclophosphamide, 200 mg
NJ9090
Cyclophosphamide, 500 mg
NJ9091
Injection, cyclophosphamide, 1.0 gram
NJ9092
Cyclophosphamide, 2.0 gram
NJ9093
Injection, cyclophosphamide, lyophilized, 100 mg
NJ9094
Cyclophosphamide, lyophilized, 200 mg
NJ9095
Cyclophosphamide, lyophilized, 500 mg
NJ9096
Injection, cyclophosphamide, lyophilized, 1.0 gram
NJ9097
Cyclophosphamide, lyophilized, 2.0 gram
NJ9100
Injection, cytarabine, 100 mg
NJ9110
Injection, cytarabine, 500 mg
NJ9130
Injection, dacarbazine, 100 mg
NJ9140
Injection, dacarbazine, 200 mg
NJ9250
Injection, methotrexate sodium, 5 mg
NJ9260
Methotrexate sodium, 50 mg
NJ9280
Injection, mitomycin, 5 mg
KJ9290
Mitomycin, 20 mg
KJ9291
Mitomycin, 40 mg
KJ9370
Injection, vincristine sulfate, 1 mg
NJ9375
Vincristine sulfate, 2 mg
NJ9380
Vincristine sulfate, 5 mg
N( print page 35323)Q0164
Prochlorperazine maleate, 5 mg, oral, fda approved prescription anti-emetic, for use as a complete therapeutic substitute for an iv anti-emetic at the time of chemotherapy treatment, not to exceed a 48 hour dosage regimen
NQ0165
Prochlorperazine maleate, 10 mg, oral, fda approved prescription anti-emetic, for use as a complete therapeutic substitute for an iv anti-emetic at the time of chemotherapy treatment, not to exceed a 48 hour dosage regimen
NQ0167
Dronabinol, 2.5 mg, oral, fda approved prescription anti-emetic, for use as a complete therapeutic substitute for an iv anti-emetic at the time of chemotherapy treatment, not to exceed a 48 hour dosage regimen
NQ0168
Dronabinol, 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
NQ0169
Promethazine hydrochloride, 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
NQ0170
Promethazine 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
NQ0171
Chlorpromazine 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
NQ0172
Chlorpromazine hydrochloride, 25 mg, oral, fda approved prescription anti-emetic, for use as a complete therapeutic substitute for an iv anti-emetic at the time of chemotherapy treatment, not to exceed a 48 hour dosage regimen
NQ0175
Perphenazine, 4 mg, oral, fda approved prescription anti-emetic, for use as a complete therapeutic substitute for an iv anti-emetic at the time of chemotherapy treatment, not to exceed a 48 hour dosage regimen
NQ0176
Perphenazine, 8 mg, oral, fda approved prescription anti-emetic, for use as a complete therapeutic substitute for an iv anti-emetic at the time of chemotherapy treatment, not to exceed a 48 hour dosage regimen
NQ0177
Hydroxyzine pamoate, 25 mg, oral, fda approved prescription anti-emetic, for use as a complete therapeutic substitute for an iv anti-emetic at the time of chemotherapy treatment, not to exceed a 48 hour dosage regimen
NQ0178
Hydroxyzine pamoate, 50 mg, oral, fda approved prescription anti-emetic, for use as a complete therapeutic substitute for an iv anti-emetic at the time of chemotherapy treatment, not to exceed a 48 hour dosage regimen
N
 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 § 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 
                        ( print 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— A drug or biological for which payment is first made on or after January 1, 2003, under the transitional pass-through payment provision in section 1833(t)(6) of the Act.
                    A drug or biological for which a temporary HCPCS code has not been assigned.
                    During CYs 2004 and 2005, an orphan drug (as designated by the Secretary). Section 1833(t)(14)(A)(iii) of the Act requires that payment for SCODs in CY 2006 and subsequent years be equal to the average acquisition cost for the drug for that year as determined by the Secretary, subject to any adjustment for overhead costs and taking into account the hospital acquisition cost survey data collected by the Government Accountability Office (GAO) in CYs 2004 and 2005. 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:
                        ( print page 35325) Handling costs for drugs, biologicals, and radiopharmaceuticals administered in the HOPD are not insignificant;
                    Little information is available about the magnitude of pharmacy overhead costs;
                    Hospitals set charges for drugs, biologicals, and radiopharmaceuticals at levels that reflect their respective handling costs; and
                    Hospitals vary considerably in their likelihood of providing services 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 
                        ( print 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 
                        ( print 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 drugs and biologicals in claims data (in millions) *
Total cost of drugs and biologicals in claims data 
                                 (in millions) **
Ratio of cost to ASP
ASP+X 
                                 percentPackaged Drugs and Biologicals
$160
$555
3.47
ASP+247Separately  Payable Drugs and Biologicals
2,589
2,539
0.98
ASP-2All 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 
                        ( print 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 ASP dollars for drugs and biologicals in claims data (in millions) *
Total cost of drugs and biologicals in claims data 
                                *after adjustment* (in millions) **
Ratio of cost to ASP 
                                 (column C/ 
                                 column B)
ASP+X 
                                 percentPackaged Drugs and Biologicals
$160
$405
2.53
ASP+153Separately Payable Drugs and Biologicals
2,589
2,689
1.04
ASP+4All 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 
                        ( print 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 
                        ( print 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: 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;
                    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
                    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 dollars for drugs and biologicals in claims data
                                 (in millions) *
Total cost of drugs and biologicals in claims data 
                                *after adjustment* (in millions) **
Ratio of cost to ASP 
                                 (column C/ 
                                 column B)
ASP+X 
                                 percentPackaged Drugs and Biologicals
$160
$390
2.44
ASP+144Separately Payable Drugs and Biologicals
2,589
2,704
1.04
ASP+4All 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.
                            ( print 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 dollars for drugs and biologicals in claims data
                                 (in millions) *
Total cost of drugs and biologicals in claims data 
                                *after adjustment* (in millions) **
Ratio of cost to ASP 
                                 (column C/ 
                                 column B)
ASP+X 
                                 percentPackaged Drugs and Biologicals
$160
$402
2.51
ASP+151Separately Payable Drugs and Biologicals
2,589
2,692
1.04
ASP+4All 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 
                        ( print 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 
                        ( print 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 
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                        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 
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                        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 HCPCS Code
CY 2009 short descriptor
Proposed CY 2010 APC
Proposed CY 2010 SIA9517
I131 iodide cap, rx
1064
KA9530
I131 iodide sol, rx
1150
KA9543
Y90 ibritumomab, rx
1643
KA9545
I131 tositumomab, rx
1645
KA9563
P32 Na phosphate
1675
KA9564
P32 chromic phosphate
1676
K( print page 35336)A9600
Sr89 strontium
0701
KA9605
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 
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                        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
CY 2009 HCPCS code
CY 2009 long descriptor
Estimated average number of units per administration
Proposed CY 2010 SI
Proposed CY 2010 APC90681
Rotavirus vaccine, human, attenuated, 2 dose schedule, live, for oral use
1
K
123990696
Diphtheria, tetanus toxoids, acellular pertussis vaccine and poliovirus vaccine, inactivated (DTaP-IPV), when administered to children 4 through 6 years of age, for intramuscular use
1
NJ0364
Injection, apomorphine hydrochloride, 1 mg
12
NJ2724
Injection, protein c concentrate, intravenous, human, 10 iu
2240
K
1139J3355
Injection, urofollitropin, 75 IU
2
K
1741J9215
Injection, interferon, alfa-n3, (human leukocyte derived), 250,000 iu
5
K
0865
 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 SI90296
Diphtheria antitoxin
E90581
Anthrax vaccine, sc
E90727
Plague vaccine, im
EJ0128
Abarelix injection
EJ0350
Injection anistreplase 30 u
EJ0395
Arbutamine hcl injection
EJ1452
Intraocular Fomivirsen na
EJ2460
Oxytetracycline injection
E
 
 
 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 
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                        “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 
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                        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 
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                        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 I
                        *I.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 
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                        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 I
                        *I.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 2009 HCPCS code
CY 2009 long descriptor
Proposed CY 2010 APC
Proposed CY 2010 SI
CY 2010 
                                 approximate median costA9527
Iodine I-125, sodium iodide solution, therapeutic, per millicurie
2632
U
$38C1716
Brachytherapy source, non-stranded, Gold-198, per source
1716
U
42C1717
Brachytherapy source, non-stranded, High Dose Rate Iridium-192, per source
1717
U
220C1719
Brachytherapy source, non-stranded, Non-High Dose Rate Iridium-192, per source
1719
U
35C2616
Brachytherapy source, non-stranded, Yttrium-90, per source
2616
U
15,599C2634
Brachytherapy source, non-stranded, High Activity, Iodine-125, greater than 1.01 mCi (NIST), per source
2634
U
60C2635
Brachytherapy source, non-stranded, High Activity, Palladium-103, greater than 2.2 mCi (NIST), per source
2635
U
28C2636
Brachytherapy linear source, non-stranded, Palladium-103, per 1 MM
2636
U
19C2638
Brachytherapy source, stranded, Iodine-125, per source
2638
U
43C2639
Brachytherapy source, non-stranded, Iodine-125, per source
2639
U
36( print page 35343)C2640
Brachytherapy source, stranded, Palladium-103, per source
2640
U
58C2641
Brachytherapy source, non-stranded, Palladium-103, per source
2641
U
58C2642
Brachytherapy source, stranded, Cesium-131, per source
2642
U
100C2643
Brachytherapy source, non-stranded, Cesium-131, per source
2643
U
66C2698
Brachytherapy source, stranded, not otherwise specified, per source
2698
U
*43C2699
Brachytherapy source, non-stranded, not otherwise specified, per source
2699
U
*28* 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 
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                        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. 
 
  
 
  
 
  
 
  
 
  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).( print 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; each additional 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 
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                        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
Visit level
Proposed CY 2010 clinic visit approximate APC 
                                 median cost
Proposed CY 2010 type B emergency 
                                 department  
                                 approximate HCPCS code median cost
Proposed CY 2010 type A emergency visit approximate HCPCS code median costLevel 1
$55
$46
$54Level 2
71
65
89Level 3
87
95
141Level 4
112
132
227Level 5
164
251
334
 
 
 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 
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                        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
Type B emergency department level
Proposed CY 2010 APC 
                                 assignment
Proposed CY 2010 approximate APC 
                                 median costLevel 1
0626
$46Level 2
0627
65Level 3
0628
95Level 4
0629
132Level 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 
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                        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 § 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 
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                        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 § 410.43 to codify existing basic PHP patient eligibility criteria and added a reference to current physician certification requirements at § 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 § 410.43 to add a reference to existing regulations at § 424.24(e) that require that PHP services be furnished pursuant to a physician certification and plan of care. While the requirements at § 424.24(e) are not new, we included the reference in § 410.43 to provide a more complete description of our expectations for PHP programs in one regulatory section. We also revised § 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.
                        ( print 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: CMHCs
Hospital-based PHPs
CombinedAll Days
$140
$200
$144Days with 3 units of service
129
149
131Days with 4 units or more units of service
173
213
175
 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 APC
Group title
Proposed 
                                 median  
                                 Per diem  
                                 rate0172
Level I Partial Hospitalization (3 services)
$1490173
Level II Partial Hospitalization (4 or more services)
213
 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 
                        ( print 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. Year
Outlier target amount 
                                 percentage
Portion of 
                                 target amount  
                                 allocated to CMHCs for PHP outliers  
                                 (in Percent)CY 2004
2.0
0.5CY 2005
2.0
0.6CY 2006
1.0
0.6CY 2007
1.0
0.15CY 2008
1.0
0.02CY 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: Most outpatient departments are equipped to provide the services to the Medicare population.
                    The simplest procedure described by the code may be performed in most outpatient departments.
                    The procedure is related to codes that we have already removed from the inpatient list.( print 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: A determination is made that the procedure is being performed in numerous hospitals on an outpatient basis; or
                    A determination is made that the procedure can be appropriately and safely performed in an ASC, and is on the list of approved ASC procedures or has been proposed by us for addition to the ASC list. The list of codes that we are proposing to be paid by Medicare in CY 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
HCPCS code
Long descriptor
Proposed CY 2010 APC 
                                 assignment
Proposed CY 2010 status 
                                 indicator21256
Reconstruction of orbit with osteotomies (extracranial) and with bone grafts (includes obtaining autografts) (eg, micro-ophthalmia)
0256
T27179
Open treatment of slipped femoral epiphysis; osteoplasty of femoral neck (Heyman type procedure)
0052
T51060
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 
                        ( print 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 § 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 § 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 § 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 § 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 § 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 § 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 
                        ( print 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 
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                        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 § 410.26(a)(2) (defined through cross reference to § 410.32(b)(3)(ii)) and § 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 § 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 § 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 
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                        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 § 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 §§ 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 
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                        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 §§ 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 §§ 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 § 410.27 of our regulations. More specifically, § 410.27(f) states: “Services furnished at a department of a provider, as defined in § 413.65(a)(2) of this subchapter, that has provider-based status in relation to a hospital under § 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 § 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 § 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 
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                        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 § 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 § 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, § 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 § 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 § 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, § 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 
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                        assistants to be responsible for the care of Medicare patients in CAHs. Some stakeholders specifically questioned whether § 410.27(f) applied to CAHs because the term “CAH” is not in the heading of § 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 §§ 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 § 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 
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                        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 §§ 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 §§ 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 § 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 §§ 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, § 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 § 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 § 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 § 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 §§ 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, § 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 § 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 § 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 
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                        nonphysician practitioner must be present on the same campus, in the hospital or the on-campus PBD of the hospital as defined in § 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 § 410.27(a)(1)(iv)(A) to reflect this requirement. We also are proposing to define “in the hospital” in new paragraph § 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 § 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 §§ 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 § 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 § 410.27(f) by redesignating it as § 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 § 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 
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                        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 § 413.65(e) and our emphasis on direct physician supervision under § 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 § 410.27(f) and redesignate it as a new paragraph (a)(1)(iv) of § 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 § 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 § 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 § 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 § 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 § 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 §§ 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 § 410.27. In addition, we are proposing to add a new paragraph (f) to § 410.27 to define a nonphysician practitioner for purposes of § 410.27 as a clinical psychologist, a physician assistant, a nurse practitioner, a clinical nurse specialist, or a certified nurse-midwife. Proposed new § 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 §§ 410.71, 410.74, 410.75, 410.76, and 410.77, respectively. We also are proposing to define “in the hospital” in new paragraph § 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 § 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 § 410.27 wherever the text currently refers just to “hospital.” The omission of the term “CAH” from § 410.27 was a drafting oversight. However, we have applied the requirements of § 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 § 410.28 and § 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 §§ 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 § 413.65, and immediately available to furnish 
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                        assistance and direction throughout the performance of the procedure. In addition, the definition of “in the hospital” as defined in proposed § 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 § 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 § 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 § 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 § 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 § 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 §§ 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 § 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 § 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 § 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 § 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 § 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 § 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 § 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 § 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 § 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 § 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 § 410.27(g) of the regulations. In addition, we are proposing to add new paragraph (e)(2) to § 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 § 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 § 410.32(b)(3)(ii) applies.
                        ( print 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 § 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 §§ 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 §§ 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 § 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 § 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 § 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 § 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 § 410.32(b)(3)(ii) would apply. We are proposing to revise §§ 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,” 
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                        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 
 
  
 
  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 statusA
Services furnished to a hospital outpatient that are paid under a fee schedule or payment system other than OPPS, for example:
Not paid under OPPS. Paid by fiscal intermediaries/MACs under a fee schedule or payment system other than OPPS.( print page 35374)• Ambulance Services• Clinical Diagnostic Laboratory Services
Not subject to deductible or coinsurance.• Non-Implantable Prosthetic and Orthotic Devices• EPO for ESRD Patients• Physical, Occupational, and Speech Therapy• Routine Dialysis Services for ESRD Patients Provided in a Certified Dialysis Unit of a Hospital• Diagnostic Mammography• Screening Mammography
Not subject to deductible.C
Inpatient Procedures
Not paid under OPPS. Admit patient. Bill as inpatient.F
Corneal Tissue Acquisition; Certain CRNA Services; and Hepatitis B Vaccines
Not paid under OPPS. Paid at reasonable cost.L
Influenza Vaccine; Pneumococcal Pneumonia Vaccine
Not paid under OPPS. Paid at reasonable cost; not subject to deductible or coinsurance.M
Items and Services Not Billable to the Fiscal Intermediary/MAC
Not paid under OPPS.Y
Non-Implantable Durable Medical Equipment
Not paid under OPPS. All institutional 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 statusB
Codes that are not recognized by OPPS when submitted on an outpatient hospital Part B bill type (12x and 13x)
Not paid under OPPS.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 statusD
Discontinued Codes
Not paid under OPPS or any other Medicare payment system.E
Items, Codes, and Services:
Not paid by Medicare when submitted on outpatient claims (any outpatient bill type).• That are not covered by any Medicare outpatient benefit based on statutory exclusion• That are not covered by any Medicare outpatient benefit for reasons other than statutory exclusion• That are not recognized by Medicare for outpatient claims; alternate code for the same item or service may be available• For which separate payment is not provided on outpatient claims
 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. “CH”—Active HCPCS codes in current and next calendar year; status indicator and/or APC assignment have changed or active HCPCS code that will be discontinued at the end of the current calendar year.
                    “NI”—New code, interim APC assignment; comments will be accepted( print 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 
                        ( print 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 §§ 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 
                        ( print 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 § 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 (§ 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 
                        ( print 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
CY 2009 HCPCS code
CY 2009 long descriptor
Proposed CY 2010 ASC payment 
                                 indicator
Proposed CY 2010 ASC payment rate0200T
Percutaneous sacral augmentation (sacroplasty), unilateral injection(s), including the use of a balloon or mechanical device (if utilized), one or more needles
G2
$879.130201T
Percutaneous sacral augmentation (sacroplasty), bilateral injections, including the use of a balloon or mechanical device (if utilized), two or more needles
G2
1,206.09
 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
CY 2009 HCPCS code
CY 2009 long descriptor
Proposed CY 2010 ASC payment 
                                 indicatorC9247
Iobenguane, I-123, diagnostic, per study dose, up to 10 millicuries
K2C9249
Injection, certolizumab pegol, 1 mg
K2
 
 
 Table 40—New Level II HCPCS Codes for Covered Ancillary Services Implemented in July 2009
CY 2009 HCPCS code
CY 2009 long descriptor
Proposed CY 2010 ASC payment indicator
Proposed CY 2010 ASC payment rate *C9250
Human plasma fibrin sealant, vapor-heated, solvent-detergent (Artiss), 2 ml
K2
$155.00C9251
Injection, C1 esterase inhibitor (human), 10 units
K2
41.34C9252
Injection, plerixafor, 1 mg
K2
276.04C9253
Injection, temozolomide, 1 mg
K2
5.00C9360
Dermal substitute, native, non-denatured collagen, neonatal bovine origin (SurgiMend Collagen Matrix), per 0.5 square centimeters
K2
14.31C9361
Collagen matrix nerve wrap (NeuroMend Collagen Nerve Wrap), per 0.5 centimeter length
K2
124.55C9362
Porous purified collagen matrix bone void filler (Integra Mozaik Osteoconductive Scaffold Strip), per 0.5 cc
K2
56.71C9363
Skin substitute, Integra Meshed Bilayer Wound Matrix, per square centimeter
K2
11.13C9364
Porcine implant, Permacol, per square centimeter
K2
18.57Q2023
Injection, factor viii (antihemophilic factor, recombinant) (Xyntha), per i.u.
K2
1.15Q4116
Skin substitute, Alloderm, per square centimeter
K2
32.42Based 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
CY 2009 HCPCS code
CY 2009 short descriptor
Proposed CY 2010 ASC payment 
                                 indicator26037
Decompress fingers/hand
G227475
Surgery to stop leg growth
G227479
Surgery to stop leg growth
G227720
Repair of tibia
G235460
Repair venous blockage
G235475
Repair arterial blockage
G241512
Tongue suspension
G242225
Reconstruct cleft palate
G242227
Lengthening of palate
G2( print page 35380)43130
Removal of esophagus pouch
G243752
Nasal/orogastric w/stent
G245541
Correct rectal prolapse
G249435
Insert subq exten to ip cath
G249436
Embedded ip cath exit-site
G249442
Place cecostomy tube perc
G250080
Removal of kidney stone
G250081
Removal of kidney stone
G250727
Revise ureter
G251535
Repair of ureter lesion
G257295
Revise vag graft via vagina
G260210
Partial thyroid excision
G260212
Partial thyroid excision
G260220
Partial removal of thyroid
G260225
Partial removal of thyroid
G261770
Incise skull for treatment
G20193T
Rf bladder neck microremodel
G20200T *
Perq sacral augmt unilat inj
G20201T *
Perq sacral augmt bilat inj
G2* 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 HCPCS code
CY 2009 short descriptor
CY 2009 ASC payment indicatorG0392
AV fistula or graft arterial
A2G0393
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 
                        ( print 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
CY 2009 HCPCS code
CY 2009 short descriptor
CY 2009 ASC payment indicator
Proposed CY 2010 ASC payment 
                                 indicator *15852
Dressing change not for burn
G2
R219105
Cryosurg ablate fa, each
G2
P320555
Place ndl musc/tis for rt
G2
R236420
Vein access cutdown <1 yr
G2
R250386
Remove stent via transureth
G2
P257022
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 
                        ( print 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
CY 2009 HCPCS code
CY 2009 short descriptor
CY 2009 ASC payment indicator
Proposed CY 2010 ASC payment indicator**0084T
Temp prostate urethral stent
R2*
R221073
Mnpj of tmj w/anesth
P3*
P355876
Place rt device/marker, pros
P3*
P3C9728
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
CY 2009 HCPCS code
CY 2009 short descriptor
Proposed CY 2010 ASC payment indicator**0099T
Implant corneal ring
R2*0124T
Conjunctival drug placement
R2*46930
Destroy internal hemorrhoids
P3*64455
N block inj, plantar digit
P3*64632
N block inj, common digit
P3*67229
Tr retinal les preterm inf
R2** 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 
                        ( print 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
CY 2009 HCPCS code
CY 2009 short descriptor
Proposed CY 2010 ASC 
                                 payment  
                                 indicator
Proposed CY 2010 OPPS APC
OPPS APC title
Proposed CY 2010 device-dependent APC offset percentage24361
Reconstruct elbow joint
H8
0425
Level II Arthroplasty or Implantation with Prosthesis
5724363
Replace elbow joint
H8
0425
Level II Arthroplasty or Implantation with Prosthesis
5724366
Reconstruct head of radius
H8
0425
Level II Arthroplasty or Implantation with Prosthesis
5725441
Reconstruct wrist joint
H8
0425
Level II Arthroplasty or Implantation with Prosthesis
5725442
Reconstruct wrist joint
H8
0425
Level II Arthroplasty or Implantation with Prosthesis
5725446
Wrist replacement
H8
0425
Level II Arthroplasty or Implantation with Prosthesis
5727446
Revision of knee joint
J8
0425
Level II Arthroplasty or Implantation with Prosthesis
5733206
Insertion of heart pacemaker
J8
0089
Insertion/Replacement of Permanent Pacemaker and Electrodes
7133207
Insertion of heart pacemaker
J8
0089
Insertion/Replacement of Permanent Pacemaker and Electrodes
7133208
Insertion of heart pacemaker
J8
0655
Insertion/Replacement/Conversion of a permanent dual chamber pacemaker
7533212
Insertion of pulse generator
H8
0090
Insertion/Replacement of Pacemaker Pulse Generator
7333213
Insertion of pulse generator
H8
0654
Insertion/Replacement of a permanent dual chamber pacemaker
7433214
Upgrade of pacemaker system
J8
0655
Insertion/Replacement/Conversion of a permanent dual chamber pacemaker
7533224
Insert pacing lead & connect
J8
0418
Insertion of Left Ventricular Pacing Elect.
8133225
Lventric pacing lead add-on
J8
0418
Insertion of Left Ventricular Pacing Elect.
8133240
Insert pulse generator
J8
0107
Insertion of Cardioverter-Defibrillator
8833249
Eltrd/insert pace-defib
J8
0108
Insertion/Replacement/Repair of Cardioverter-Defibrillator Leads
8833282
Implant pat-active ht record
J8
0680
Insertion of Patient Activated Event Recorders
7353440
Male sling procedure
H8
0385
Level I Prosthetic Urological Procedures
5853444
Insert tandem cuff
H8
0385
Level I Prosthetic Urological Procedures
5853445
Insert uro/ves nck sphincter
H8
0386
Level II Prosthetic Urological Procedures
7053447
Remove/replace ur sphincter
H8
0386
Level II Prosthetic Urological Procedures
7054400
Insert semi-rigid prosthesis
H8
0385
Level I Prosthetic Urological Procedures
5854401
Insert self-contd prosthesis
H8
0386
Level II Prosthetic Urological Procedures
7054405
Insert multi-comp penis pros
H8
0386
Level II Prosthetic Urological Procedures
7054410
Remove/replace penis prosth
H8
0386
Level II Prosthetic Urological Procedures
7054416
Remv/repl penis contain pros
H8
0386
Level II Prosthetic Urological Procedures
7055873
Cryoablate prostate
H8
0674
Prostate Cryoablation
5661885
Insrt/redo neurostim 1 array
H8
0039
Level I Implantation of Neurostimulator Generator
8561886
Implant neurostim arrays
H8
0315
Level II Implantation of Neurostimulator Generator
8862361
Implant spine infusion pump
H8
0227
Implantation of Drug Infusion Device
8262362
Implant spine infusion pump
H8
0227
Implantation of Drug Infusion Device
8263650
Implant neuroelectrodes
H8
0040
Percutaneous Implantation of Neurostimulator Electrodes
5863655
Implant neuroelectrodes
J8
0061
Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr
6363685
Insrt/redo spine n generator
H8
0039
Level I Implantation of Neurostimulator Generator
8564553
Implant neuroelectrodes
H8
0040
Percutaneous Implantation of Neurostimulator Electrodes
5864555
Implant neuroelectrodes
J8
0040
Percutaneous Implantation of Neurostimulator Electrodes
58( print page 35384)64560
Implant neuroelectrodes
J8
0040
Percutaneous Implantation of Neurostimulator Electrodes
5864561
Implant neuroelectrodes
H8
0040
Percutaneous Implantation of Neurostimulator Electrodes
5864565
Implant neuroelectrodes
J8
0040
Percutaneous Implantation of Neurostimulator Electrodes
5864573
Implant neuroelectrodes
H8
0225
Implantation of Neurostimulator Electrodes, Cranial Nerve
7364575
Implant neuroelectrodes
H8
0061
Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr
6364577
Implant neuroelectrodes
H8
0061
Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr
6364580
Implant neuroelectrodes
H8
0061
Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr
6364581
Implant neuroelectrodes
H8
0061
Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr
6364590
Insrt/redo pn/gastr stimul
H8
0039
Level I Implantation of Neurostimulator Generator
8565770
Revise cornea with implant
H8
0293
Level V Anterior Segment Eye Procedures
5969714
Implant temple bone w/stimul
H8
0425
Level II Arthroplasty or Implantation with Prosthesis
5769715
Temple bne implnt w/stimulat
H8
0425
Level II Arthroplasty or Implantation with Prosthesis
5769717
Temple bone implant revision
H8
0425
Level II Arthroplasty or Implantation with Prosthesis
5769718
Revise temple bone implant
H8
0425
Level II Arthroplasty or Implantation with Prosthesis
5769930
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 descriptor21256
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 
                        ( print 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 § 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 § 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 § 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 
                        ( print 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
CY 2009 HCPCS code
CY 2009 short descriptor
Proposed 
                                 CY 2010 ASC  
                                 payment  
                                 indicator
Proposed 
                                 CY 2010 OPPS  
                                 APC
OPPS APC title
Proposed 
                                 CY 2010  
                                 OPPS full  
                                 APC offset  
                                 percentage
Proposed 
                                 CY 2010 OPPS  
                                 partial APC  
                                 offset  
                                 percentage24361
Reconstruct elbow joint
H8
0425
Level II Arthroplasty or Implantation with Prosthesis
57
2824363
Replace elbow joint
H8
0425
Level II Arthroplasty or Implantation with Prosthesis
57
2824366
Reconstruct head of radius
H8
0425
Level II Arthroplasty or Implantation with Prosthesis
57
2825441
Reconstruct wrist joint
H8
0425
Level II Arthroplasty or Implantation with Prosthesis
57
2825442
Reconstruct wrist joint
H8
0425
Level II Arthroplasty or Implantation with Prosthesis
57
2825446
Wrist replacement
H8
0425
Level II Arthroplasty or Implantation with Prosthesis
57
2827446
Revision of knee joint
J8
0425
Level II Arthroplasty or Implantation with Prosthesis
57
2833206
Insertion of heart pacemaker
J8
0089
Insertion/Replacement of Permanent Pacemaker and Electrodes
71
3533207
Insertion of heart pacemaker
J8
0089
Insertion/Replacement of Permanent Pacemaker and Electrodes
71
3533208
Insertion of heart pacemaker
J8
0655
Insertion/Replacement/Conversion of a permanent dual chamber pacemaker
75
3733212
Insertion of pulse generator
H8
0090
Insertion/Replacement of Pacemaker Pulse Generator
73
3733213
Insertion of pulse generator
H8
0654
Insertion/Replacement of a permanent dual chamber pacemaker
74
3733214
Upgrade of pacemaker system
J8
0655
Insertion/Replacement/Conversion of a permanent dual chamber pacemaker
75
3733224
Insert pacing lead & connect
J8
0418
Insertion of Left Ventricular Pacing Elect
81
4033225
Lventric pacing lead add-on
J8
0418
Insertion of Left Ventricular Pacing Elect
81
4033240
Insert pulse generator
J8
0107
Insertion of Cardioverter-Defibrillator
88
4433249
Eltrd/insert pace-defib
J8
0108
Insertion/Replacement/Repair of Cardioverter-Defibrillator Leads
88
4433282
Implant pat-active ht record
J8
0680
Insertion of Patient Activated Event Recorders
73
3653440
Male sling procedure
H8
0385
Level I Prosthetic Urological Procedures
58
2953444
Insert tandem cuff
H8
0385
Level I Prosthetic Urological Procedures
58
2953445
Insert uro/ves nck sphincter
H8
0386
Level II Prosthetic Urological Procedures
70
3553447
Remove/replace ur sphincter
H8
0386
Level II Prosthetic Urological Procedures
70
3554400
Insert semi-rigid prosthesis
H8
0385
Level I Prosthetic Urological Procedures
58
2954401
Insert self-contd prosthesis
H8
0386
Level II Prosthetic Urological Procedures
70
3554405
Insert multi-comp penis pros
H8
0386
Level II Prosthetic Urological Procedures
70
3554410
Remove/replace penis prosth
H8
0386
Level II Prosthetic Urological Procedures
70
3554416
Remv/repl penis contain pros
H8
0386
Level II Prosthetic Urological Procedures
70
3561885
Insrt/redo neurostim 1 array
H8
0039
Level I Implantation of Neurostimulator Generator
85
4361886
Implant neurostim arrays
H8
0315
Level II Implantation of Neurostimulator Generator
88
4462361
Implant spine infusion pump
H8
0227
Implantation of Drug Infusion Device
82
4162362
Implant spine infusion pump
H8
0227
Implantation of Drug Infusion Device
82
41( print page 35387)63650
Implant neuroelectrodes
H8
0040
Percutaneous Implantation of Neurostimulator Electrodes
58
2963655
Implant neuroelectrodes
J8
0061
Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr
63
3163685
Insrt/redo spine n generator
H8
0039
Level I Implantation of Neurostimulator Generator
85
4364553
Implant neuroelectrodes
H8
0040
Percutaneous Implantation of Neurostimulator Electrodes
58
2964555
Implant neuroelectrodes
J8
0040
Percutaneous Implantation of Neurostimulator Electrodes
58
2964560
Implant neuroelectrodes
J8
0040
Percutaneous Implantation of Neurostimulator Electrodes
58
2964561
Implant neuroelectrodes
H8
0040
Percutaneous Implantation of Neurostimulator Electrodes
58
2964565
Implant neuroelectrodes
J8
0040
Percutaneous Implantation of Neurostimulator Electrodes
58
2964573
Implant neuroelectrodes
H8
0225
Implantation of Neurostimulator Electrodes, Cranial Nerve
73
3764575
Implant neuroelectrodes
H8
0061
Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr
63
3164577
Implant neuroelectrodes
H8
0061
Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr
63
3164580
Implant neuroelectrodes
H8
0061
Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr
63
3164581
Implant neuroelectrodes
H8
0061
Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr
63
3164590
Insrt/redo pn/gastr stimul
H8
0039
Level I Implantation of Neurostimulator Generator
85
4369714
Implant temple bone w/stimul
H8
0425
Level II Arthroplasty or Implantation with Prosthesis
57
2869715
Temple bne implnt w/stimulat
H8
0425
Level II Arthroplasty or Implantation with Prosthesis
57
2869717
Temple bone implant revision
H8
0425
Level II Arthroplasty or Implantation with Prosthesis
57
2869718
Revise temple bone implant
H8
0425
Level II Arthroplasty or Implantation with Prosthesis
57
2869930
Implant cochlear device
H8
0259
Level VII ENT Procedures
85
42
 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 descriptorC1721
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 
                        ( print 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: 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 § 416.185(b), the deadline for receipt of public comments is 30 days following publication of the list of requests.
                    In the**Federal Register**
                         document that finalizes the update of ASC payment rates for the following calendar year, we— ○ Provide a list of determinations made as a result of our review of all new class requests and public comments; and ○ Announce the deadline for submitting requests for review of an application for a new NTIOL class for the following calendar year.
                        ( print 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 § 416.195: The IOL must have been approved by the FDA and claims of specific clinical benefits and/or lens characteristics with established clinical relevance in comparison with currently available IOLs must have been approved by the FDA for use in labeling and advertising;
                    The 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
                    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: ○ Reduced risk of intraoperative or postoperative complication or trauma; ○ Accelerated postoperative recovery; ○ Reduced induced astigmatism; ○ Improved postoperative visual acuity; ○ More stable postoperative vision; and/or ○ Other comparable clinical advantages, such as— □ Reduced dependence on other eyewear (for example, spectacles, contact lenses, and reading glasses); □ Decreased rate of subsequent diagnostic or therapeutic interventions, such as the need for YAG laser treatment; □ Decreased incidence of subsequent IOL exchange; and □ 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: 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;
                    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
                    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:
                        ( print page 35390) NTIOL class
HCPCS code
$50 Approved for services furnished on or after
NTIOL characteristic
IOLs eligible for adjustment1
Q1001
May 18, 2000, through May 18, 2005
Multifocal
Allergan AMO Array Multifocal lens, model SA40N2
Q1002
May 18, 2000, through May 18, 2005
Reduction in Preexisting Astigmatism
STAAR Surgical Elastic Ultraviolet-Absorbing Silicone Posterior Chamber IOL with Toric Optic, models AA4203T, AA4203TF, and AA4203TL3
Q1003
February 27, 2006, through February 26, 2011
Reduced Spherical Aberration
Advanced Medical Optics (AMO) Tecnis® IOL models Z9000, Z9001, Z9002, ZA9003, and AR40xEM and Tecnis® 1-Piece model ZCB00; Alcon Acrysof® 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 § 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 § 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 descriptor66983
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 
                        ( print 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 § 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 § 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— The agreement is made effective on the first day of the next Medicare cost reporting period of the hospital that operates the ASC;
                    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
                    Costs incurred by the ASC are treated as a nonreimbursable cost center on the hospital's Medicare cost report. In addition, § 416.35 provides guidance regarding the termination of ASC agreements with CMS. Voluntary terminations are those initiated by an ASC and as specified in § 416.35, an ASC may terminate its agreement either by sending written notice to CMS or by 
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                        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, §§ 416.30(a) through 416.30(g) have not been changed or updated. At the time §§ 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 § 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 § 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 § 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 § 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 § 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 § 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 § 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 § 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 § 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 
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                        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 § 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 
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                        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 § 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 
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                        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 #20: Perioperative Care—Timing of Antibiotic Prophylaxis; and (7) PQRI #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 
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                        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
                                 designationOP-1: Median Time to Fibrinolysis
ED-AMI-2OP-2: Fibrinolytic Therapy Received Within 30 Minutes
ED-AMI-3OP-3: Median Time to Transfer to Another Facility for Acute Coronary Intervention
ED-AMI-5OP-4: Aspirin at Arrival
ED-AMI-1OP-5: Median Time to ECG
ED-AMI-4OP-6: Timing of Antibiotic Prophylaxis
PQRI #20OP-7: Prophylactic Antibiotic Selection for Surgical Patients
PQRI #21OP-8: MRI Lumbar Spine for Low Back Pain
NAOP-9: Mammography Follow-up Rates
NAOP-10: Abdomen CT—Use of Contrast Material
NAOP-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 
                        ( print 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. 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 determinationOP-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.
                        ( print page 35398) Quality Measures Under Consideration for CY 2012 and Subsequent Years' Payment Determinations
Topic

Measure
Potential data sourcesCancer
1
Adjuvant Chemotherapy is Considered or Administered within 4 Months of Surgery to Patients Under Age 80 with AJCC III Colon Cancer
Registry.This measure specifications are similar to PQRI #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 with Breast Cancer
Claims, Registry.The measure specifications are similar to PQRI #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 Cancer Precedes Surgical Excision/Resection
Claims, Registry.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 Departure for Discharged ED Patients
Chart, EHR.Measure specifications can be found at 
                                *http://qualitynet.org/​*
                                 under Hospital—OutpatientDiabetes
5
Low Density Lipoprotein Control in Type 1 or 2 Diabetes Mellitus
Claims, EHR.The measure specifications are similar to PQRI #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 attention for nephrology during at least one office visit within last year for patient with diabetes mellitus
Claims, EHR.The measure specifications are similar to PQRI #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 documentation of an eye exam or referral for an eye exam within the last 24 months
Claims, EHR.The measure specifications are similar to PQRI #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 complete foot exam (visual inspection, sensory exam with monofilament and pulse exam within the last 12 months)
Claims, EHR.The measure specifications are similar to PQRI #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 #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 Rate
Chart. EHR.Measure specifications are available at 
                                *http://www.qualityforum.org/​pdf/​reports/​Immunization/​4%2029%20Immunizations_​Nonmembers.pdf*11
Influenza Vaccination Status—Overall Rate
Chart. EHR.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 for Preoperative Evaluation for Low-Risk Non-Cardiac Surgery Risk Assessment
Claims.The measure specifications can be found at 
                                *http://www.imagingmeasures.com/​*13
Use of Stress Echocardiography or SPECT MPI Post-Revascularization Coronary Artery Bypass Graft
Claims.The measure specifications can be found at 
                                *http://www.imagingmeasures.com/​*14
Use of Computed Tomography in Emergency Department for Headache
Claims.The measure specifications can be found at 
                                *http://www.imagingmeasures.com/​*15
Simultaneous Use of Brain Computed Tomography and Sinus Computed Tomography
Claims.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
 
 
 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 § 419.41 of the regulations, prior to any adjustment for hospitals' failure to meet the quality reporting standards according to § 419.43(h). Beneficiaries and secondary payers thereby share in the reduction of payments to these hospitals. In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68772), we established the policy that all other applicable adjustments to the OPPS national unadjusted payment rates apply in those cases when the OPD fee schedule increase factor is reduced for hospitals that fail to meet the requirements of the 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 
                        ( print 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: 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. Register with QualityNet regardless of the method used for data submission.
                    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 
                        ( print 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: 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 
                        ( print 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: Hospital CCN;
                    Hospital Name;
                    CEO and any other designated personnel contact information, including name, e-mail address, telephone number, and mailing address (must include a physical address, a post office box address is not acceptable);
                    Identified reason for requesting an extension or waiver;
                    Hospital's reason for requesting an extension or waiver;
                    Evidence of the impact of the extraordinary circumstances, including but not limited to photographs, newspaper and other media articles; and
                    A date when the hospital 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 
                        ( print 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 
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                        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: Abnormal data patterns identified such as consistently high HOP QDRP measure denominator exclusion rates resulting in unexpectedly low denominator counts.
                    Whether a hospital had previously failed validation; and/or
                    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: Hospital CCN.
                    Hospital Name.
                    CMS-identified reason for failure (as provided in any CMS notification of failure to the hospital).
                    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.
                    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).
                    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— Provide an e-mail acknowledgement, using the contact information provided in the reconsideration request, to the CEO and any additional designated hospital personnel notifying them that the hospital's request has been received.
                    Provide a formal response to the hospital CEO and any additional designated hospital personnel, using the contact information provided in the reconsideration request, notifying the hospital of the outcome of the reconsideration process. 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. 
                        ( print 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. 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.)
                        ( print 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. 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: Criteria for possible candidate OPPS conditions;
                    Collaboration process;
                    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
                    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 
                        ( print 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 
                        ( print 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: The need for the information collection and its usefulness in carrying out the proper functions of our agency.
                    The accuracy of our estimate of the information collection burden.
                    The quality, utility, and clarity of the information to be collected.
                    Recommendations to minimize the information collection burden on the affected public, including automated collection techniques. 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 determinationOP-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.( print 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) × (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:**OIRA_submission@omb.eop.gov*. 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).
                        ( print 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 
                        ( print 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.
                        ( print 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 
                        ( print 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 
                        ( print 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 
                        ( print 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 
                        ( print 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
Number of 
                                 hospitals
APC 
                                 recalibration
New wage index and rural adjustment
Comb (cols 2, 3) with market basket update
All changes(1)
(2)
(3)
(4)
(5)ALL PROVIDERS *
4,137
0.0
0.0
2.1
1.9ALL HOSPITALS (excludes hospitals held harmless and CMHCs)
3,870
0.1
0.0
2.2
1.9URBAN HOSPITALS
2,888
0.1
0.0
2.2
2.0LARGE URBAN (GT 1 MILL.)
1,575
0.1
0.1
2.2
2.0OTHER URBAN (LE 1 MILL.)
1,313
0.1
0.0
2.1
1.9RURAL HOSPITALS
982
0.0
−0.1
2.0
1.7SOLE COMMUNITY ***
389
0.0
0.0
2.1
1.6OTHER RURAL
593
0.0
−0.2
1.9
1.8BEDS (URBAN):0-99 BEDS
952
0.2
0.1
2.4
2.2100-199 BEDS
882
0.1
0.0
2.2
1.9200-299 BEDS
455
0.1
0.1
2.3
2.1300-499 BEDS
411
0.1
−0.1
2.0
1.8500 + BEDS
188
0.0
0.1
2.2
1.9BEDS (RURAL):0-49 BEDS
349
−0.1
0.1
2.1
1.850-100 BEDS
372
0.0
−0.1
2.0
1.7101-149 BEDS
156
0.0
−0.3
1.9
1.8150-199 BEDS
62
0.0
−0.2
1.9
1.5200 + BEDS
43
0.0
0.0
2.0
1.5VOLUME (URBAN):( print page 35417)LT 5,000 Lines
571
−0.2
0.1
1.9
1.95,000-10,999 Lines
176
0.2
0.0
2.3
2.111,000-20,999 Lines
272
0.3
0.1
2.4
2.321,000-42,999 Lines
532
0.2
0.1
2.3
2.2GT 42,999 Lines
1,337
0.1
0.0
2.2
1.9VOLUME (RURAL):LT 5,000 Lines
84
0.1
0.0
2.2
1.95,000-10,999 Lines
99
0.1
0.2
2.3
2.111,000-20,999 Lines
207
−0.1
0.1
2.1
1.821,000-42,999 Lines
312
0.1
−0.2
2.0
1.8GT 42,999 Lines
280
0.0
−0.1
1.9
1.6REGION (URBAN):NEW ENGLAND
148
0.0
0.4
2.5
2.1MIDDLE ATLANTIC
366
0.0
0.3
2.4
1.8SOUTH ATLANTIC
449
0.1
−0.2
2.0
1.9EAST NORTH CENT
464
0.1
−0.1
2.1
1.7EAST SOUTH CENT
186
0.1
−0.1
2.1
2.0WEST NORTH CENT
193
0.2
0.0
2.4
2.2WEST SOUTH CENT
457
0.1
−0.1
2.1
2.0MOUNTAIN
187
0.1
0.8
3.0
2.9PACIFIC
390
0.0
−0.1
2.0
1.9PUERTO RICO
48
0.1
−0.1
2.1
2.3REGION (RURAL):NEW ENGLAND
24
−0.2
−1.2
0.7
0.6MIDDLE ATLANTIC
68
0.0
0.5
2.6
2.2SOUTH ATLANTIC
167
0.0
−0.3
1.8
1.7EAST NORTH CENT
128
0.1
0.0
2.2
1.8EAST SOUTH CENT
177
0.0
0.0
2.1
2.0WEST NORTH CENT
106
0.0
0.2
2.3
1.6WEST SOUTH CENT
210
−0.1
−0.8
1.2
1.2MOUNTAIN
71
0.0
0.7
2.8
2.4PACIFIC
31
0.0
0.1
2.2
1.8TEACHING STATUS:NON-TEACHING
2,879
0.1
−0.1
2.1
2.0MINOR
707
0.1
0.0
2.2
1.9MAJOR
284
0.0
0.1
2.1
1.7DSH PATIENT PERCENT:0
7
1.1
0.1
3.2
3.1GT 0-0.10
396
0.2
0.1
2.5
2.20.10-0.16
407
0.1
−0.2
2.1
1.80.16-0.23
769
0.1
0.0
2.2
1.80.23-0.35
980
0.1
0.0
2.1
1.9GE 0.35
755
0.0
0.1
2.1
2.0DSH NOT AVAILABLE **
556
−1.5
0.0
0.6
0.6URBAN TEACHING/DSH:TEACHING & DSH
889
0.0
0.0
2.2
1.9TEACHING/NO DSH
0
0.0
0.0
0.0
0.0NO TEACHING/DSH
1,464
0.2
0.0
2.2
2.1NO TEACHING/NO DSH
6
1.2
0.1
3.4
3.3DSH NOT AVAILABLE **
529
−1.3
0.0
0.8
0.7TYPE OF OWNERSHIP:VOLUNTARY
2,085
0.1
0.0
2.2
1.9PROPRIETARY
1,215
0.2
−0.1
2.2
2.1GOVERNMENT
570
0.0
−0.1
1.9
1.8CMHCs
211
−5.9
0.9
−2.9
−2.9Column (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.
 
 
 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
TransfersAnnualized 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 
                        ( print 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 
                        ( print 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. Column 1—*Surgical Specialty or Ancillary Items and Services Group*
                         indicates the surgical specialty into which ASC procedures are grouped or the ancillary items and services group which includes all HCPCS codes for covered ancillary items and services. To group surgical procedures by surgical specialty, we used the CPT code range definitions and Level II HCPCS codes and Category III CPT codes, as appropriate, to account for all surgical procedures to which the Medicare program payments are attributed.
                    Column 2—*Estimated 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.
                    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.
                    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 
                        ( print 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
Surgical specialty group
Estimated 
                                 CY 2009 ASC  
                                 payments  
                                 (in millions)
Estimated 
                                 CY 2010  
                                 percent change  
                                 with transition 
                                 (25/75 blend)
Estimated 
                                 CY 2010  
                                 percent change  
                                 without  
                                 transition  
                                 (fully  
                                 implemented)(1)
(2)
(3)
(4)Total
3,051
1
1Eye and ocular adnexa
1,399
−1
−2Digestive system
727
−5
−11Nervous system
361
−2
−5Musculoskeletal system
282
15
29Genitourinary system
112
8
16Integumentary system
105
6
12Respiratory system
26
22
36Cardiovascular system
18
14
24Ancillary items and services
14
−2
−2Auditory system
7
7
16Hemic & 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. Column 1—*HCPCS code.*
                    Column 2—*Short Descriptor*
                         of the HCPCS code.
                    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.
                    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.
                    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 
                        ( print 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
HCPCS code
Short descriptor
Allowed 
                                 charges  
                                 (in mil)
Estimated 
                                 CY 2010  
                                 percent change  
                                 (25/75 blend)
Estimated 
                                 CY 2010  
                                 percent change  
                                 without  
                                 transition  
                                 (fully  
                                 implemented)(1)
(2)
(3)
(4)
(5)66984
Cataract surg w/iol, 1 stage
1,059
−1
−343239
Upper gi endoscopy, biopsy
163
−7
−1445380
Colonoscopy and biopsy
133
−5
−1145378
Diagnostic colonoscopy
123
−6
−1145385
Lesion removal colonoscopy
95
−5
−1166821
After cataract laser surgery
71
−9
−1862311
Inject spine l/s (cd)
69
−3
−666982
Cataract surgery, complex
62
−1
−364483
Inj foramen epidural l/s
57
−2
−615823
Revision of upper eyelid
35
3
645384
Lesion remove colonoscopy
33
−6
−12G0105
Colorectal scrn; hi risk ind
33
−8
−17G0121
Colon ca scrn not hi rsk ind
32
−8
−1764475
Inj paravertebral l/s
29
−2
−629881
Knee arthroscopy/surgery
25
15
2963650
Implant neuroelectrodes
24
9
1443235
Uppr gi endoscopy, diagnosis
24
1
164721
Carpal tunnel surgery
22
12
2352000
Cystoscopy
22
−6
−1029880
Knee arthroscopy/surgery
20
15
2964476
Inj paravertebral l/s add-on
19
−25
−5163685
Insrt/redo spine n generator
18
−9
−829826
Shoulder arthroscopy/surgery
17
26
5262310
Inject spine c/t
15
−2
−667904
Repair eyelid defect
15
4
728285
Repair hammertoe
14
12
2429827
Arthroscop rotator cuff repr
14
20
4164622
Destr paravertebrl nerve l/s
14
20
3564484
Inj foramen epidural add-on
13
−19
−3943248
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 
                        ( print 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
TransfersAnnualized 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 
                        ( print 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: § 410.27
  (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 § 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 § 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 §§ 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 § 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 §§ 410.47 and 410.49, respectively. (B) For services furnished in an off-campus outpatient department of the hospital or CAH, as defined in § 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 
                                ( print 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 §§ 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 § 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:
 § 410.28
  
 (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 § 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 § 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 § 410.27(g). (2) For services furnished directly or under arrangement in an off-campus outpatient department of the hospital, as defined in § 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 § 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: § 416.30
  
 (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: § 419.64
  (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:
 § 419.66
  
 (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:
 § 419.70
  
 (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.


# Footnotes

1.
    
                             A registry is a collection of clinical data for purposes of assessing clinical performance, quality of care, and opportunities for quality improvement. Back to Citation
 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*. Back to Citation
 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*. Back to Citation


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